Komatsu Limited
Fundamental analysis
Komatsu Ltd. is a Japanese multinational company that manufactures construction, mining, forestry, and military equipment, machinery, and facilities. It also manufactures and develops diesel engines, transmissions, lasers, generators and other complex and heavy machinery.
It was founded in 1921 in Komatsu, but is now headquartered in Minato, Tokyo. In total, the Komatsu Group comprises about 250 companies.
The company is the second largest manufacturer of mining and construction equipment after Caterpillar of the US. It has the largest market share in its main markets in Asia (Japan, China).
Komatsu is primarily traded on the Tokyo Stock Exchange under ticker 6301, but other shares are traded on exchanges in the US and Europe.
The company divides its operations into three segments. The share and amount of total sales is in billions of Japanese yen for 2023:
– Construction, mining and utility equipment (3,615; 93.5%)
– Retail banking (103; 2.6%)
– Industrial machinery and other (195; 5.4%)
The company said it benefited from an increase in sales and selling prices in the Construction, Mining and Municipal Equipment segment and the positive impact of foreign exchange rates. The other two segments also grew.
For 2023, the largest market for Komatsu is North America (sales of 992 billion yen).
The company pays a regular dividend.
Results
The company’s performance in 2024 is less than in 2023. Although sales in the Construction, Mining and Municipal Equipment segment grew 8.7% in 2Q 2024, profit from this segment fell 4.7% to ¥135 billion.
In the Retail Banking segment, sales grew 27% and profit rose 8% to ¥7.2 billion.
Industrial machinery and other grew 14.9% in sales, profit rose 12.7% to ¥2.8 billion.
Technical analysis
According to the moving averages, the company has been in a downtrend since September 2024. This is the impact of the July 2024 market downturn. Since the lows, the stock has been slowly but slowly rising, the spread between the moving averages is closing. However, it is still a long way from crossing over to an uptrend.
The RSI is in the neutral zone.
Volume is above 2,000,000 shares traded per day.
Conclusion
Komatsu primarily makes large machinery. Mining, construction and forestry are low margin, low value-added industries. But every participant needs machines, so it’s a big market. As the company’s turnover shows. Although it has three segments, the focus is mainly on machinery, The other two segments represent only about 7% of turnover.
In the last quarter, profits fell even though turnover grew. If Komatsu manages to increase turnover even with profit, the stock may rise. However, if it repeats the situation that despite rising turnover, profits are falling, the stock may continue to decline. This is what the technical analysis is currently pointing to.