Company Reports

Komatsu’s competitive strength is built on deep vertical integration, a global production footprint, and a growing digital and electrified solutions ecosystem. It is a global leader in hydraulic excavators, bulldozers, and autonomous mining trucks, offering customers performance, reliability, and increasing maintainability.

Komatsu and Hitachi Construction Machinery, or HCM, reported fiscal 2026 (ending March 2027) first-quarter sales growth of 14.7% and 7.5%, respectively. Operating profit rose 8% at Komatsu and adjusted operating profit jumped 56% at HCM. Shares trade 4% below preannouncement levels.

Komatsu’s competitive strength is built on deep vertical integration, a global production footprint, and a growing digital and electrified solutions ecosystem. It is a global leader in hydraulic excavators, bulldozers, and autonomous mining trucks, offering customers performance, reliability, and increasing sustainability.

Komatsu and Hitachi Construction Machinery posted fiscal 2025 (ended March 2026) sales growth of 0.7% and 2.5%, respectively. For fiscal 2026, Komatsu guides for a 0.4% sales decline while HCM guides for 1.7% growth. HCM's shares rose 4%, while Komatsu's fell 3% on April 29 after the results.

Komatsu's third-quarter sales rose 4% year on year, while Hitachi Construction Machinery posted flat sales. HCM raised fiscal 2025 (ending March 2026) sales guidance by 4%, close to the initial figure it announced, implying flat sales. Meanwhile, Komatsu's guidance is still a 5% decline.

Komatsu’s competitive strength is built on deep vertical integration, a global production footprint, and a growing digital and electrified solutions ecosystem. It is a global leader in hydraulic excavators, bulldozers, and autonomous mining trucks, offering customers performance, reliability, and increasing sustainability.

Komatsu's September-quarter sales fell 3% year on year, while Hitachi Construction Machinery reported a 3% year-on-year rise. Both raised their fiscal 2025 (ending March 2026) sales guidance, with Komatsu up 4% and HCM up 2%. HCM shares rose 2% on Oct. 29 while Komatsu fell 6% on Oct. 30.

Komatsu’s competitive strength is built on deep vertical integration, a global production footprint, and a growing digital and electrified solutions ecosystem. It is a global leader in hydraulic excavators, bulldozers, and autonomous mining trucks, offering customers performance, reliability, and increasing sustainability.

Komatsu and Hitachi Construction Machinery, or HCM, posted respective June-quarter sales declines of 5.2% and 6.7% on weaker Americas demand amid US tariff uncertainty. Komatsu kept its full-year guidance, while HCM cut sales and operating profit outlooks by 5.5% and 14.1% on tariff concerns.

Komatsu’s competitive strength is built on deep vertical integration, a global production footprint, and a growing digital and electrified solutions ecosystem. It is a global leader in hydraulic excavators, bulldozers, and autonomous mining trucks, offering customers performance, reliability, and increasing sustainability.

Komatsu provides mainly construction, mining, and forestry equipment for heavy-duty applications. Its end users include global mining operators and construction contractors, who demand reliable machines that can withstand harsh environments. Despite advancements in technology, the unforgiving conditions inevitably cause wear and tear on the equipment, making aftermarket service crucial to avoid disruptions in operations and to reduce the product lifecycle cost. We expect Komatsu to not only continue refining its product quality but also use its accumulated know-how as well as new technologies to improve the speed and accuracy of aftermarket services.

We cut our fair value estimate for narrow-moat Komatsu by 6% to JPY 5,060, as we trimmed our companywide sales estimate by 5.4% and lowered the companywide operating margin assumption to 13.5% from 16% for fiscal 2025. Sales grew strongly in regions with high exposure to mining equipment, such as Asia and Oceania, in fiscal 2024, at 14.1% and 24.2%, respectively, surpassing our previous estimates of 4.4% and 20.2%. However, given the uncertainty brought by undecided US tariff policies and the recent softening price movement for resources such as coal, a reactionary sales fall is more likely to happen in fiscal 2025, especially in the regions with a high portion of mining equipment sales. Hence, we cut our sales estimates by 6% and 14% for Asia and Oceania, assuming sales will drop year on year by 10% and 12%, respectively, in fiscal 2025.

Komatsu provides mainly construction, mining, and forestry equipment for heavy-duty applications. Its end users include global mining operators and construction contractors, who demand reliable machines that can withstand harsh environments. Despite advancements in technology, the unforgiving conditions inevitably cause wear and tear on the equipment, making aftermarket service crucial to avoid disruptions in operations and to reduce the product lifecycle cost. We expect Komatsu to not only continue refining its product quality but also use its accumulated know-how as well as new technologies to improve the speed and accuracy of aftermarket services.

We raise our fair value estimate for narrow-moat Komatsu to JPY 5,370 per share from JPY 5,140, reflecting the company’s stronger-than-expected performance in the December quarter. Quarterly revenue grew 1.8% year on year compared with our estimate of a 6.8% year-on-year decline.

We think both Komatsu and Hitachi Construction Machinery are undervalued as the market is overly pessimistic about the near-term recovery of construction demand and underestimates the companies' midterm revenue growth.

Komatsu provides mainly construction, mining, and forestry equipment for heavy-duty applications. Its end users include global mining operators and construction contractors, who demand reliable machines that can withstand harsh environments. Despite advancements in technology, the unforgiving conditions inevitably cause wear and tear on the equipment, making aftermarket service crucial to avoid disruptions in operations and to reduce the product lifecycle cost. We expect Komatsu to not only continue refining its product quality but also use its accumulated know-how as well as new technologies to improve the speed and accuracy of aftermarket services.

Komatsu’s June quarter operating income of JPY 157 billion surpassed our previous estimate, due to price increases of aftermarket parts and higher sales of mining equipment. Quarterly revenue grew 7% year on year, with mining equipment sales growing 15%, while construction equipment sales declined 2% due to weak demand in Europe and Asia. We continue to project flat revenue growth for fiscal 2024, ending March 2025, based on higher mining equipment sales offsetting weaker construction equipment sales; however, we raised our operating margin assumption to 15.3% from 14.8% due to the stronger product mix. Our medium-term outlook remains unchanged, and therefore, we maintain our fair value estimate at JPY 5,000. We believe Komatsu is undervalued, as the market is underestimating its long-term prospects. As mining operators extract critical minerals that support renewable energy and electric vehicle-related demand, equipment maintenance will continue to be required, leading to aftermarket parts and service sales.

The market reaction to Komatsu’s fiscal 2023 results, ending March 2024, was strong partly due to the announcement of a record JPY 100 billion (or 3.5% of outstanding shares) share buyback, which was surprising given that the previous major one of about JPY 30 billion was in fiscal 2014. Moreover, considering the massive amount to be repurchased despite the operating income guidance of an 8% decline and a record capital expenditure plan of JPY 205 billion for fiscal 2024, we expect the company to improve free cash flow generation by managing its working capital. As a result of the market reaction, Komatsu’s shares are now trading near our fair value estimate of JPY 5,000, which is unchanged as we maintain our operating income estimate for fiscal 2024 at similar levels to guidance.

We raise Komatsu’s revenue assumption for fiscal 2023 (ending March 2024) and 2024 to 6% growth and 1% decline, respectively, from 5% growth and 2.5% decline previously, based on stronger mining machinery sales and a smaller top-line decline in North America. While construction machinery sales in Europe and Asia remain weak due to macroeconomic headwinds, demand for mining machinery appears to be robust. We retain our fair value estimate of JPY 5,000 and believe Komatsu’s shares are undervalued, as the market is overly pessimistic about a recovery from the second half of fiscal 2024. In the medium term, we expect robust demand for mining equipment for critical minerals required for clean energy technologies—such as copper, nickel, and lithium—to drive Komatsu’s revenue growth.

We are initiating coverage of Komatsu with a JPY 5,000 fair value estimate and a narrow economic moat rating, supported by the company's established record of providing construction, mining, and utility equipment and its aftermarket support structure. Our projection assumes macroeconomic headwinds will lead to a slowdown in construction machinery demand until at least the end of the first half of fiscal 2024 (year ending March 2025), followed by a medium-term recovery. We expect mining equipment sales to be driven by demand for critical minerals (such as copper, nickel, and lithium) required for clean energy technologies as well as electric vehicle batteries. Further, global trends like infrastructure spending and factory construction due to reshoring should support top-line growth for construction equipment. We believe the shares are undervalued as the weakness in the next few quarters is already priced in and the market is overly pessimistic about recovery prospects from the second half of fiscal 2024 on.