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 ¥2,200, which we derive by applying a PER of 10x to our FY3/26 EPS forecast of ¥225. A PER of 10x is the average for Japanese auto parts makers. With the market consensus coalescing around a more gradual BEV shift, we value Aisin as a name that can enjoy survivor benefits in ICE/HEVs anlongside new e-Axle orders. We feel an excessive discount is unwarranted.

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 c65% 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¥1.6bn); 7) geopolitical risks; and 8) trends in the Chinese market. If these factors manifest themselves differently than we have anticipated, the share price may vary from our target price.