Kubota’s FY18 Results and FY19 Guidance Below Expectations on Higher Costs; FVE Cut to JPY 1,670
After rolling forward our model and factoring in the higher-than-expected costs, we lower our fair value estimate for Kubota to JPY 1,670 from JPY 1,750. Our narrow moat and stable moat trend ratings remain intact. We think the shares are fairly valued at the current price as prospect of higher demand for the company’s products has been factored in. Kubota’s fullyear 2018 EBIT was below our expectations and company guidance of JPY 204 billion, where EBIT decreased by 5.3% year over year to JPY 1...Kubota and subsidiaries are engaged in the manufacture of a comprehensive range of machinery and other industrial and consumer products, including farm equipment, engines, construction machinery, pipe-related products, environment-related products, and industrial castings. Farm equipment, construction machinery, ductile iron pipe, and certain other products are sold both in Japan and in overseas markets which consist mainly of North America, Europe, and Asia. Co. also provides water and sewage treatment plants, submerged membrane systems and biogas production systems for water treatment, as well as pulverizing facilities for solid waste treatment.
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