Quick Take: Denso/Aisin FY3/26 – Both Factor in Middle East Risks, But Earnings Impressions Diverge
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Bernstein analyzes the FY3/26 results and FY3/27 guidance for Japanese auto parts suppliers Denso and Aisin, noting that while both incorporated Middle East risks into their outlooks, market impressions diverged significantly.
Denso reported FY3/26 operating profit of ¥553 billion, slightly beating consensus and company guidance. However, its FY3/27 operating profit guidance of ¥500 billion disappointed, falling 22% below expectations. Even adjusting for ¥45 billion in potential risks tied to Middle East disruptions and rare earth supplies, the guidance remains weak. Denso attributed this to front-loaded investments targeting 2030 goals, including custom SoCs, SiC expansion, and AI projects. The company also announced a ¥314 billion stock buyback and temporarily withdrew its acquisition proposal for Rohm.
Conversely, Aisin delivered a stronger impression. FY3/26 operating profit exceeded guidance at ¥229 billion, and while FY3/27 guidance of ¥235 billion missed consensus by 9%, the shortfall was largely explained by conservative FX assumptions and a ¥15 billion Middle East downside assumption. Furthermore, Aisin announced an additional ¥54 billion stock buyback, representing a positive surprise.
Bernstein maintains Market-Perform ratings on both stocks, with target prices of ¥2,050 for Denso and ¥2,750 for Aisin.