Initiating Coverage of Kubota With JPY 1,700 FVE and Narrow Moat Rating
We initiate coverage of Kubota Corporation with a fair value estimate of JPY 1,700, implying a forward P/E of 17 times, an enterprise value/EBITDA multiple of 13 times, and free cash flow yield of 5.6% to estimated 2018 earnings and cash flow. We assume Kubota’s top-line growth in local-currency terms, including the acquisition of Great Plains, will accelerate to around 6% on average over the next five years from around 4% over the past 10 years as upbeat housing demand in the U.S., agricultural...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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