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Morgan Stanley (NYSE:MS) highlighted Suzuki Motor Corporation as a new catalyst-driven idea, anticipating the company’s announcement of its medium-term plan on February 20th.
Despite uncertainties regarding the duration of the plan, Morgan Stanley predicts that Suzuki will likely reveal operating profit (OP) guidance, sales and operating profit margin (OPM) targets, along with dividend payout ratios.
Suzuki is expected to release its December quarter results on February 6th, with market attention focused on any commentary about the medium-term plan, particularly indications of enhancing shareholder returns.
Morgan Stanley outlined three potential scenarios for Suzuki’s announcement: a base case with a 40% probability where F3/28 OP guidance is set at ¥650 billion and the dividend payout ratio increases from 30% to 35%, a bull case also with a 40% probability where OP guidance surpasses market expectations alongside aggressive dividend and buyback plans, and a bear case with a 20% probability where OP guidance is conservative without changes to current return targets.
The base case scenario, considered likely within market expectations, could lead to a slight positive reaction in Suzuki’s share price if the dividend payout ratio is raised. In the bull case scenario, the share price is expected to react positively as it may prompt higher expectations for growth potential and profitability, especially in India.
Conversely, the bear case could negatively impact the share price if profitability expectations decline due to significant investments in electric vehicles and related technologies.
Morgan Stanley’s base case expectation for the event includes an OP guidance of approximately ¥650 billion and growth in India’s auto sales volume in the upper single digits. The firm also anticipates an increase in the dividend payout ratio to 35% and a buyback of ¥20 billion, addressing cross-shareholdings.
The forecast for F3/28 OP stands at around ¥725 billion, indicating a potential uplift in shareholder returns if these predictions materialize.
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