On Tuesday, Morgan Stanley (NYSE:MS) revised its price target for Stanley Electric Co., Ltd (6923:JP) (OTC: STAEF), reducing it to ¥3,400 from the previous ¥3,400, while still maintaining an Overweight rating on the stock.
The firm's analysis highlighted several positive factors for the company, including growth in its motorcycle business and improved automotive costs.
Stanley Electric has reported a significant year-over-year (YoY) increase in sales and operating profit (OP) for the first quarter of fiscal year 2025, which ends in March 2025. The sales figures showed an 8.7% increase to ¥121.4 billion, while the OP saw a more than twofold rise to ¥9.5 billion. This substantial profit growth is attributed to a recovery from the prior year when the company faced quality costs.
Despite these gains, when adjusted for a ¥8.1 billion conversion benefit from the weaker yen and an ¥8.7 billion contribution from making Thai Stanley Electric a consolidated subsidiary, sales actually saw a decline of approximately 6% YoY.
However, the company's performance in the Americas was noteworthy, with a significant increase in OP as a result of production innovation activities, even though sales only increased slightly in local currency terms.
In Asia, the motorcycle parts business showed robust performance, particularly in Indonesia, Vietnam, and the Philippines. Additionally, the company's operations in China experienced a modest improvement in income year-over-year.
This was despite a steep 30% drop in local-currency sales, which was offset by reductions in labor costs and other expenses. Stanley Electric's ability to streamline and innovate in production has contributed to its financial improvements, even in the face of currency and sales challenges.
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