On Tuesday, Morgan Stanley (NYSE:MS) adjusted its outlook on Unipres Corp. (5949:JP), a manufacturer specializing in pressed auto body parts, by reducing its price target. The new target is set at ¥1,100, down from the previous ¥1,300, while the firm continues to hold an Underweight rating on the stock.
The revision follows the company's first-quarter operating profit, which surpassed targets due to a one-time recovery of cost burdens from customers at Unipres' Mexico facility. However, excluding this exceptional profit, the company's performance was negatively impacted by Nissan (OTC:NSANY)'s weak production in China. Despite efforts to manage fixed costs, including staff adjustments, Morgan Stanley has decreased its operating profit forecasts for Unipres from ¥14 billion to ¥12.5 billion for the fiscal year ending March 2025, and from ¥17 billion to ¥16 billion for the fiscal year ending March 2026.
The firm has also adjusted its target price-to-earnings ratio for the fiscal year ending March 2026 from 7.0 times to 6.5 times. The analyst cited Unipres' heavy reliance on Nissan for sales and the resulting volatility in profits as reasons for the lower valuation.
The report also acknowledges the potential for increased demand for high-value-added parts from Unipres, given the industry's shift towards making battery electric vehicles (BEVs) lighter with the use of high-tensile materials and hot stamping technology. However, it notes that the company faces challenges in adapting to a multi-material approach, such as aluminum casting. These factors contribute to the rationale behind the revised price target and the ongoing Underweight rating.
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