Jefferies upgraded the stock rating for Nabtesco Corp. (TYO:6268) to Buy from Hold on Thursday and lifted its price target to ¥5,000 from ¥3,200, a change that implies roughly a 26% upside from prevailing market levels.
The research house said the recommendation comes as Nabtesco prepares to disclose its profit outlook for fiscal year 2026 on February 12. Jefferies pointed to stronger-than-expected gains in the company's reduction gear operations, noting that order flows from leading Japanese robot manufacturers have been robust in recent quarters and underpinning the improved view.
On margins, Jefferies said it now expects Nabtesco to set an operating profit margin target of at least 11% for its Component Solution unit, a threshold higher than the market's current expectation of around 10%. The firm also flagged potential upside to consensus forecasts for the Transport Solution segment, where aircraft and marine vessel equipment are anticipated to contribute to better-than-expected results.
Reflecting these views, Jefferies raised its operating profit projections for Nabtesco for fiscal years 2025 through 2027 to ¥23.3 billion, ¥31.5 billion and ¥36.5 billion, respectively. Those revised forecasts are higher than consensus by about 5% for fiscal 2025, 17% for fiscal 2026 and 20% for fiscal 2027, according to Jefferies.
Jefferies attributed the forecast upgrades to stronger performance across both the Component Solution and Transport Solution operations. The research firm also said it expects Nabtesco to update its business reform execution plan in light of recent divestitures, which include the sale of its hydraulic equipment business and the disposal of its stake in an Italian rolling stock door systems subsidiary.
As part of further corporate action, Jefferies indicated management might consider consolidating business units by reducing their number and could potentially announce a share buyback around July.
Context and outlook
Jefferies' upgrade and higher profit forecasts place emphasis on operational improvements in automation-related components and on demand from aerospace and marine markets for transport equipment. The timing of the analyst action ahead of Nabtesco's formal profit outlook highlights expectations for management to set more ambitious margin targets and to provide clarity on execution of recent structural changes.