Japan Specialist

Mark Chadwick

Equity Bottom-Up

<ul>
<li>Komatsu reported above Consensus 2Q OP; lifted OP guidance; and raised dividends.  Outlook for next FY3/24 looks bright</li>
<li>Share price is pricing in a severe recession. A PBR of 1.1x is implies a significant OP decline. We see no evidence of an earnings contraction next year</li>
<li>We expect the share price to re-rate as the market prices in resilient earnings outlook. Our back test still suggests over 45% upside </li>
</ul>


Komatsu reported above Consensus 2Q OP; lifted OP guidance; and raised dividends.  Outlook for next FY3/24 looks bright
Share price is pricing in a severe recession. A PBR of 1.1x is implies a significant OP decline. We see no evidence of an earnings contraction next year
We expect the share price to re-rate as the market prices in resilient earnings outlook. Our back test still suggests over 45% upside 


Komatsu(6301) | Post 2Q Earnings – BACKTEST STILL Says over 45% Upside

Independent research on the U.S. markets, Baptista Research

Baptista Research

Independent research on the U.S. markets

Baptista Research is an independent financial research house focused on the U.S. markets. We provide equity research as well as credit research reports on the top-listed U.S. companies with most of our focus on technology, consumer goods and services, automobiles, industrials, oil and gas, pharma, and healthcare. Our research has served more than 3000 institutional investors including mutual funds, hedge funds, banks, family offices, and various buy-side firms. We operate a research subscription service where institutions, as well as retail investors, can have priority access to all our research. We also have a wide distribution of our research reports across some of the top global financial platforms. Apart from equity research and credit research, we also provide advisory services with respect to mergers & acquisitions (M&A), private equity/ venture capital fundraising, valuation reports, and investment management services for corporates.
Baptista Research is owned and managed by Ishan Majumdar, an ex-Venture Capitalist/ Investment Banker, a Chartered Accountant, and a Masters’ degree holder in Management from HEC Paris. Ishan has nearly a decade of experience in Mergers and Acquisitions, Leveraged Buyouts (LBOs), Venture Capital Investing, Corporate Strategy, and Valuation in front-office roles at the likes of BNP Paribas CIB, Credit Agricole CIB, Groupe Danone, and TIW Private Equity. He has worked on and closed multiple acquisition deals, leveraged buyouts, and start-up investment transactions.

<ul><li>Despite persistent supply chain difficulties, Caterpillar delivered another strong quarter with a double-digit top line growth though it did fail to meet Wall Street expectations on the revenue front.</li><li>Most of its end markets are experiencing strong demand and its strong margin profile did help deliver an earnings beat.</li><li>The management achieved stronger services revenue and better-than-anticipated price revenue, which were offset by lower-than-anticipated user sales.</li></ul>

Despite persistent supply chain difficulties, Caterpillar delivered another strong quarter with a double-digit top line growth though it did fail to meet Wall Street expectations on the revenue front.Most of its end markets are experiencing strong demand and its strong margin profile did help deliver an earnings beat.The management achieved stronger services revenue and better-than-anticipated price revenue, which were offset by lower-than-anticipated user sales.

Caterpillar Inc: Cat MineStar Developments & Other Drivers

<ul>
<li>At 1.1x PB, Komatsu’s stock price has already discounted a severe recession </li>
<li>Our back test suggests a 56% return over 12-months from this level (100% hit rate) </li>
<li>We see little risk of balance sheet impairment and believe the stock is trading at attractive valuations for long-term investors  </li>
</ul>


At 1.1x PB, Komatsu’s stock price has already discounted a severe recession 
Our back test suggests a 56% return over 12-months from this level (100% hit rate) 
We see little risk of balance sheet impairment and believe the stock is trading at attractive valuations for long-term investors  


Komatsu (6301) | Back Test Suggests 56% Upside from Here

Equity Capital Markets

<ul><li>Caterpillar had a decent quarter, performing quite well in a challenging environment.</li><li>The company’s sales, earnings, and revenues have declined in the current quarter mainly because of lower end-user demand.</li><li>Caterpillar maintains a strong balance sheet, has been introducing various innovative products and is increasing its digital capabilities.</li></ul>

Caterpillar had a decent quarter, performing quite well in a challenging environment.The company’s sales, earnings, and revenues have declined in the current quarter mainly because of lower end-user demand.Caterpillar maintains a strong balance sheet, has been introducing various innovative products and is increasing its digital capabilities.

Caterpillar Inc.: Market Positioning & Macro-Economic Outlook

Credit

<ul><li>Caterpillar had a fairly good 2021 as a result of volume gains and favorable pricing, sales and revenues increased in all regions and in all three primary segments.</li><li>Increasing oil prices, a rise in U.S. infrastructure budgets, potential housing demand, and rising mining activity should benefit the company.</li><li>Based on our credit analysis, the company merits a Credit Evaluation Score of A with a stable outlook and as per our Financial Strength Indicator, its performance is 3.36/ 5.</li></ul>

Caterpillar had a fairly good 2021 as a result of volume gains and favorable pricing, sales and revenues increased in all regions and in all three primary segments.Increasing oil prices, a rise in U.S. infrastructure budgets, potential housing demand, and rising mining activity should benefit the company.Based on our credit analysis, the company merits a Credit Evaluation Score of A with a stable outlook and as per our Financial Strength Indicator, its performance is 3.36/ 5.

Caterpillar Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

United States

Caterpillar Inc. designs, manufactures and markets construction, mining and forestry machinery. The Company also manufactures engines  and other related parts for its equipment, and offers financing and insurance. Caterpillar distributes its products through a worldwide organization of dealers.

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Caterpillar Inc (CAT US)

Komatsu(6301) | Post 2Q Earnings – BACKTEST STILL Says over 45% Upside

Komatsu is severely undervalued vs fundamentals. 2Q results should go a far way to ally fears of a significant earnings contraction. This is a top...

Mark Chadwick

Caterpillar Inc: Cat MineStar Developments & Other Drivers

Despite persistent supply chain difficulties, Caterpillar delivered another strong quarter with a double-digit top line growth though it did fail...

Baptista Research

Komatsu (6301) | Back Test Suggests 56% Upside from Here

Our back test suggests that Komatsu is significantly undervalued, despite risks of a global recession. Our model suggests a 56% return over the...

Mark Chadwick

Caterpillar Inc.: Market Positioning & Macro-Economic Outlook

Caterpillar had a decent quarter, performing quite well in a challenging environment. The company’s sales, earnings, and revenues have declined in...

Baptista Research

Caterpillar Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

Caterpillar had a fairly good 2021 as a result of volume gains and favorable pricing, sales and revenues increased in all regions and in all three...

Baptista Research

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