JGC Holdings (TSE:1963) Valuation in Focus After Profit Collapse and Major Operational Overhaul

JGC Holdings (TSE:1963) delivered flat revenue for the nine-month period but reported a steep 90% decline in gross profit along with an operating loss, prompting a significant downward revision to its full-year guidance. Management is rolling out a comprehensive overhaul to address costly project overruns and delayed investments.

See our latest analysis for JGC Holdings.

Amid headline-making challenges, JGC Holdings’ share price has actually climbed 21% year-to-date, with the total shareholder return over the past 12 months hitting nearly 31%. This signals renewed optimism despite recent project setbacks and guidance cuts. Partnerships like the new alliance with Energy Dome may be helping to shift sentiment, but with long-term returns still flat over three years, momentum is building off a low base.

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With shares rallying despite significant profit declines and downward guidance, the key question is whether JGC Holdings is now undervalued based on potential turnaround, or if the recent optimism already reflects all the expected upside.

Most Popular Narrative: 19.3% Overvalued

With JGC Holdings trading at ¥1,611 after a recent rally, the narrative consensus fair value stands notably lower at ¥1,350. This puts the current price 19% above where the most-followed outlook expects it to settle, sparking debate on whether recent optimism has gone too far.

Ongoing strong pipeline of international capital investment projects, especially in LNG, hydrogen, and decarbonization sectors, leverages JGC's engineering expertise and establishes long-term visibility for recurring revenue and higher-value contracts. Corporate governance and senior management restructuring are focused on stricter risk management and project execution discipline, which should reduce future cost overruns and improve predictability and stability of net margins and bottom-line earnings.

Read the complete narrative.

Want to know the numbers behind this bold fair value call? This narrative takes into account turnaround factors, detailed project wins, and a margin rebound rarely seen outside recovery stories. Curious what financial leap forward analysts are betting on? Dive in for the projections that shape this consensus view.

Result: Fair Value of ¥1,350 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent project execution failures and overreliance on volatile EPC markets could quickly undermine JGC Holdings’ turnaround momentum if these issues are not managed effectively.

Find out about the key risks to this JGC Holdings narrative.

Another Perspective: Discounted Cash Flow Says Undervalued

While analyst targets suggest JGC Holdings is overvalued, our SWS DCF model provides a very different perspective. This approach estimates the company's fair value at ¥2,094. Based on this, the current price is approximately 23% below its long-term intrinsic value. Which view will the market favor?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out JGC Holdings for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own JGC Holdings Narrative

If you see things differently or want to follow your own trail through the numbers, you can put together a personal take in just a few minutes. Do it your way

A great starting point for your JGC Holdings research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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