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Investing.com -- Hitachi Ltd (OTC:HTHIY). has released its adjusted operating profit forecast of ¥1 trillion ($8.3 billion) for the fiscal year ending March 2026 (FY3/26).
The forecast, which also includes an adjusted EBITA (Earnings Before Interest, Taxes, and Amortization) of ¥1.11 trillion ($9.2 billion) aligns with consensus estimates.
In the previous fiscal year (FY3/25), Hitachi saw an 8% year-on-year growth in orders for its Digital Systems & Services segment, which includes IT and cloud services, totaling ¥3 trillion ($25 billion). The company’s Green Energy & Mobility segment orders, encompassing power grids, railway, and nuclear power, grew by 35% year-on-year, reaching ¥6.5 trillion ($54 billion). Hitachi also reported a record-high profit-margin level and improving profitability of the backlogs.
The company’s FY3/26 forecast takes into account a ¥30 billion ($250 million) tariff impact, primarily affecting its power grids business, semiconductor manufacturing equipment business, air compressor products, and automotive component business. The forecast also considers the potential impact of a setback in customer sentiment for its cloud services business, particularly in the U.S.
Hitachi also announced its new medium-term business plan (MTP) for FY3/26-28. The plan focuses on five key measures: a 7-9% compound annual growth rate (CAGR) for sales over the three years, an adjusted EBITA margin of 13-15% in FY3/28, a cash flow conversion of over 90% in FY3/28, a Return on Invested Capital (ROIC) of 12-13% in FY3/28, and a 50% LUMADA sales contribution with an adjusted EBITA margin of 18% in FY3/28.
Global investment banking firm Jefferies commented on Hitachi’s new MTP, stating that it did not surprise them. They noted that while Hitachi’s management claims the plan reflects reasonable business growth, the guidance aligns with forecasts by market researchers and industry peers.
Jefferies also indicated a possibility of Hitachi accelerating its divestiture of equity-method affiliates in FY3/26. This is due to management’s adoption of core cash flow conversion rather than Earnings Per Share (EPS) for FY3/26-28, and the redefinition of adjusted EBITA from FY3/26 by excluding contribution from equity-method affiliates.
Hitachi’s share price has outperformed the TOPIX index by 9% month to date. Jefferies attributes this performance to Hitachi’s cash-generating business model, which helps it mitigate tariff risks. However, they suggested that the company’s MTP, in line with industry forecasts, and a smaller share buyback than expected, may lead to a neutral market reaction post-results.
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