Valuation & Risks ( 7259 )

Disclosure / Price Chart(s) / Valuation & Risk

Fundamental Equity Research

We set our target price for Aisin using PER. We derive fair value PER from profit growth potential, profitability (RoIC levels and RoIC-WACC spreads, etc.), historical PER levels, market and sector PER levels, and global comparisons, etc.

We set our Aisin target price at ¥2,400, which we derive by applying a PER of 10x to our FY3/27 EPS forecast of ¥242. Our target PER is the high end of the range (5x-10x) over the past five years, during which concerns of a decline for existing businesses mounted due to BEV growth. We also factor in the emergence of a growth story via increased AT/HEV orders.

We believe risks to our target price include the following: 1) demands for lower prices from automakers; 2) production volumes at the Toyota group, on which Aisin depends for c70% of sales; 3) raw material prices, including aluminum and steel scrap; 4) reductions in powertrain value-added on moves by automakers to bring production in-house, competition with DCTs, competition with overseas manufacturers, and the swift spread of EVs; 5) a fall in the average price of parts supplied per vehicle as a result of model mix deterioration; 6) forex (we estimate each ¥1 change in the dollar rate affects OP by c¥1.7bn); 7) geopolitical risks; 8) trends in the Chinese market, and 9) commercial issues like tarrifs. If these factors manifest themselves differently than we have anticipated, the share price may vary from our target price.



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