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Our ¥3,300 target price is based on a DCF model, assuming a beta of 0.7, terminal growth rate of 1.0%, risk free rate of 2.0%, risk premium of 6%, and after-tax WACC of 6.18%. We set our terminal growth rate at a high level because we like the stable growth potential driven by the firm's technical excellence.
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Risks to our target price include 1) forex (the company is an exporter but is reducing its forex risk by increasing the overseas production ratio), 2) global guidewire growth being lower than anticipated, and 3) a long-term impact from various factors on the global supply chain.
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