On Tuesday, UBS analyst Shingo Hirata upgraded Hirose Electric stock, a Japanese manufacturer of electronic connectors, from Neutral to Buy. The new price target set by UBS is JPY24,400, raised significantly from the previous JPY16,600. This upgrade reflects a positive outlook on the company's recovery and growth prospects.
Hirata's decision is based on several factors indicating an upturn for Hirose Electric. Recent improvements in the company's orders for January through March have been a key indicator of recovery.
Additionally, related metrics such as machine tool orders and client company orders have also shown signs of improvement. These trends have contributed to the analyst's expectation of a likely recovery for Hirose.
Another factor contributing to the upgrade is Hirose's performance in the smartphone connector market. The company is poised to increase its market share, particularly with the rise of foldable smartphones, which are expected to provide medium-term growth opportunities.
Hirose's financial position, characterized by a net cash value equivalent to 20% of its market cap and strong free cash flow generation, supports a potential for flexible capital allocation. Moreover, the company has recently set a 5% dividend payout target.
Despite these positive developments, Hirose's forward price-to-earnings ratio for the fiscal year ending March 2026 is 19 times, which UBS views as undervalued relative to the company's historical performance. The analyst highlights upcoming quarterly results as potential catalysts for the stock, which may reflect the anticipated order recovery.
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