On Tuesday, Morgan Stanley (NYSE:MS) maintained its Overweight rating on NHK Spring Co Ltd (5991:JP), while increasing the price target to ¥2,200 from ¥2,000. The firm cited strong first-quarter results for the fiscal year ending March 2025, with NHK Spring reporting a significant year-over-year increase in sales and operating profit.
NHK Spring's sales rose by 8.1% year-over-year to ¥193.8 billion, and operating profit surged to ¥12.2 billion, marking a 2.5-fold increase from the same period last year. The company's automotive suspension spring segment turned around from a ¥1.4 billion loss in the first quarter of the previous fiscal year to a ¥100 million profit, attributed to successful price adjustments in response to cost inflation.
However, the automotive seating operating profit experienced a slight decline, falling from ¥4.1 billion to ¥3.9 billion. The reduction was more pronounced when considering a one-time profit of approximately ¥2 billion, with the decrease primarily due to lower domestic production by Subaru (OTC:FUJHY), Toyota (NYSE:TM), and other original equipment manufacturers (OEMs), as well as reduced output at Japanese OEMs in Thailand.
The precision springs and components sector of NHK Spring saw a recovery, moving from a ¥400 million operating loss to a ¥1.0 billion profit. The analyst suggested that this improvement was likely driven by increased sales of components related to hybrid electric vehicles (HEVs).
Additionally, the data storage device (DDS) segment of the company significantly expanded its operating profit from ¥900 million, with a 5.9% operating profit margin, to ¥5.3 billion and a 23.6% margin. This was mainly due to a sharp rise in suspension demand following a recovery in nearline hard disk drive (HDD) demand, as well as benefits from the weakening yen.
In the industrial equipment sector, NHK Spring saw its operating profit improve from ¥1.7 billion to ¥1.9 billion, buoyed by a rebound in semiconductor process parts.
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