Goldman Sachs: Japan Tech Hardware & Industrial Electronics — Rating and Target Price Review; Downgrade Daihen to Neutral
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Goldman Sachs has revisited ratings, earnings estimates, and target prices across its Japanese industrial electronics coverage. Daihen was downgraded from Buy to Neutral, as its share price has surged 99% since its March 2024 addition to the Buy list, leaving valuations no longer attractive. The largest target price increase went to Panasonic HD, raised from 4,220 to 5,000 yen. While operating profit forecasts for FY3/27 through FY3/29 were trimmed by an average of 0.3%, twelve-month target prices were lifted by an average of 3%, with average upside of 26% across the 11 covered stocks.
The report highlights a significant valuation gap between Japanese and US optical stocks. Fukokawa trades at 36x FY3/28E P/E, Furukawa Electric at 28x, and Sumitomo Electric at 24x, versus Corning at 53x and both Lumentum and Coherent at 40x. Goldman expects this gap to narrow, given shared North American data center end-customers. Preference among Buy-rated optical names is Sumitomo Electric, Anritsu, Fukokawa, Furukawa Electric, and SWCC.
Panasonic HD's 80% global market share in battery backup units, vertical integration from cell to system, and positioning for US-produced batteries differentiate the company. AI-related profit contributions should exceed 40% by FY3/29. Despite these strengths, it trades at just 22x FY3/28E P/E.
Sumitomo Electric is Buy with a 3,400 yen target. Anritsu is Buy at 5,300 yen. Panasonic HD remains Buy at 5,000 yen. Mitsubishi Electric stays Buy at 7,400 yen. Hitachi is Buy at 6,300 yen. Fuji Electric is rated Sell with a 12,000 yen target.
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