6525: Deferred Shipments And Margin Execution Will Shape Future Earnings Stability

Analysts have modestly raised their price target on Kokusai Electric to approximately 4,775 yen from about 4,765 yen, reflecting slightly higher long term growth and margin assumptions, even as they expect earnings to broadly track consensus.

Analyst Commentary

Bullish Takeaways

• Bullish analysts view the modestly higher price target and neutral rating framework as consistent with a company that can deliver solid, if not spectacular, growth in line with market expectations.
• They see the current valuation as reasonably supported by stable earnings visibility and a balanced risk reward profile, particularly if execution on margin initiatives continues.
• Incremental confidence in long term demand for Kokusai Electric's core technologies underpins the view that earnings can at least track, and potentially modestly exceed, consensus over time.
• The neutral stance is interpreted by some as leaving room for upside re rating if management demonstrates better than expected operating leverage or capital allocation discipline.

Bearish Takeaways

• Bearish analysts highlight that the neutral rating and 4,300 yen price target imply limited upside from current levels, suggesting that much of the anticipated growth is already priced in.
• They remain cautious that earnings growth is unlikely to top consensus forecasts in the near term, constraining the scope for multiple expansion and share price outperformance.
• Concerns persist around the company’s ability to differentiate its growth trajectory versus peers, which could weigh on valuation if industry conditions soften.
• Execution risks around sustaining margins through potential cycles are seen as a key factor that could lead to downside to both earnings estimates and the current price target range.

What's in the News

• Kokusai Electric lowered its consolidated earnings guidance for the fiscal year ending March 31, 2026. The company cut revenue, operating profit, and net income forecasts due to delayed equipment sales into the year ending March 2027 (company guidance).
• The company now expects revenue of JPY 230 billion and operating profit of JPY 38.8 billion, down from prior guidance of JPY 244 billion and JPY 49.2 billion respectively. EPS is projected to fall from JPY 154.28 to JPY 119.52 (company guidance).
• Management attributed the downgrade mainly to deferred shipments of certain NAND equipment for global manufacturers and DRAM equipment for local Chinese customers. All delayed units are expected to be sold by the fiscal year ending March 2027 (company guidance).
• Despite the temporary revenue and margin impact, Kokusai Electric left its dividend forecast unchanged, indicating management’s view that profitability will improve as sales volumes recover (company guidance).
• The board scheduled a meeting for November 11, 2025, with an agenda to consider dividends of surplus based on a record date of September 30, 2025 (board meeting disclosure).

Valuation Changes

• The fair value estimate has risen slightly to approximately ¥4,775 from about ¥4,765, reflecting marginally more optimistic long term assumptions.
• The discount rate has increased slightly to about 9.00 percent from roughly 8.93 percent, implying a modestly higher required return for investors.
• The revenue growth assumption has edged up slightly to around 12.63 percent from about 12.62 percent, indicating a very small upgrade to top line expectations.
• The net profit margin forecast has risen marginally to roughly 19.32 percent from about 19.31 percent, suggesting a minimal improvement in long term profitability assumptions.
• The future P/E multiple has increased slightly to about 22.07 times from approximately 21.99 times, signaling a modestly higher valuation applied to forward earnings.