Company Reports

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.

As a construction and mining machinery manufacturer, Hitachi Construction Machinery’s lifeline will be from sales of its mainstay hydraulic excavators, mining dump trucks, and wheel loaders. However, the company’s core strategy will focus on growing its value chain business, which includes services like the supply and maintenance of spare parts. As its product sales increase through both direct channels and dealers, the company can provide more aftermarket services. Further, more of HCM’s machines will be included in its ConSite system, which allows the monitoring of the equipment’s operational status, and if issues are detected, HCM can provide preventive or corrective measures. These services provide significant value to end users and are highly profitable.

As a construction and mining machinery manufacturer, Hitachi Construction Machinery’s lifeline will be from sales of its mainstay hydraulic excavators, mining dump trucks, and wheel loaders. However, the company’s core strategy will focus on growing its value chain business, which includes services like the supply and maintenance of spare parts. As its product sales increase through both direct channels and dealers, the company can provide more aftermarket services. Further, more of HCM’s machines will be included in its ConSite system, which allows the monitoring of the equipment’s operational status, and if issues are detected, HCM can provide preventative or corrective measures. These services provide significant value to end users and are highly profitable.

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 a 0.4% sales decline while HCM guides 1.7% growth. HCM's shares rose 4% while Komatsu's fell 3% on April 29.

As a construction/mining machinery manufacturer, Hitachi Construction Machinery’s lifeline will be from sales of its mainstay hydraulic excavators, mining dump trucks, and wheel loaders. However, the company’s core strategy will focus on growing its value chain business, which includes services like spare-parts supply and maintenance. As its product sales increase through both direct channels and dealers, the company can provide more aftermarket services. Further, more of HCM’s machines will be included in its ConSite system, which allows the monitoring of the equipment’s operational status, and if issues are detected, HCM can provide preventative/corrective measures. These services provide significant value for the end-users and are highly profitable.

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 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.

As a construction/mining machinery manufacturer, Hitachi Construction Machinery’s lifeline will be from sales of its mainstay hydraulic excavators, mining dump trucks, and wheel loaders. However, the company’s core strategy will focus on growing its value chain business, which includes services like spare-parts supply and maintenance. As its product sales increase through both direct channels and dealers, the company can provide more aftermarket services. Further, more of HCM’s machines will be included in its ConSite system, which allows the monitoring of the equipment’s operational status, and if issues are detected, HCM can provide preventative/corrective measures. These services provide significant value for the end-users and are highly profitable.

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.

As a construction/mining machinery manufacturer, Hitachi Construction Machinery’s, or HCM’s, lifeline will be from sales of its mainstay hydraulic excavators, mining dump trucks, and wheel loaders. However, the company’s core strategy will focus on growing its “value chain” business, which includes services like spare parts supply and maintenance. As its product sales increase through both direct channels and dealers, the company can provide more aftermarket services. Further, more of HCM’s machines will be included its ConSite system, which allows the monitoring of the equipment’s operational status and if issues are detected, HCM can provide preventative/corrective measures. These services provide significant value for the end-users and are highly profitable.

Narrow-moat Hitachi Construction Machinery reported JPY 1.3 trillion in revenue and JPY 145 billion in operating profit for fiscal 2024 (ending March 2025), which aligns with our previous estimates. As for fiscal 2025, the company sees revenue remaining flat and operating profit dropping by 4% year on year due to the peeling-off of one-off compensation income recognized in fiscal 2024, which implies that operating profit to grow by 8% year on year if excluding the one-off impact. Recovery is expected in Europe and China, as the interest rate started to decrease in Europe, and the Chinese government is enhancing stimulus policy to boost the sluggish housing market. This positive impact is expected to be fully offset by the declining sales in Oceania and the Middle East, as a deterioration in demand for resources brought by a potential aggressive trade war will result in a decrease in mining equipment.

As a construction/mining machinery manufacturer, Hitachi Construction Machinery’s, or HCM’s, lifeline will be from sales of its mainstay hydraulic excavators, mining dump trucks, and wheel loaders. However, the company’s core strategy will focus on growing its “value chain” business, which includes services like spare parts supply and maintenance. As its product sales increase through both direct channels and dealers, the company can provide more aftermarket services. Further, more of HCM’s machines will be included its ConSite system, which allows the monitoring of the equipment’s operational status and if issues are detected, HCM can provide preventative/corrective measures. These services provide significant value for the end-users and are highly profitable.

We maintain our fair value estimate for narrow-moat Hitachi Construction Machinery at JPY 5,450. HCM reported quarterly revenue of JPY 325 billion, down 5% year over year, largely in line with our previous forecast of a 7.5% decline. Sales in North America and Europe declined 17% and 16% year over year, respectively, as new machine (truck and excavator) sales remain low due to ongoing high interest rates, which dampened investment enthusiasm.

As a construction/mining machinery manufacturer, Hitachi Construction Machinery’s, or HCM’s, lifeline will be from sales of its mainstay hydraulic excavators, mining dump trucks, and wheel loaders. However, the company’s core strategy will focus on growing its “value chain” business, which includes services like spare parts supply and maintenance. As its product sales increase through both direct channels and dealers, the company can provide more aftermarket services. Further, more of HCM’s machines will be included its ConSite system, which allows the monitoring of the equipment’s operational status and if issues are detected, HCM can provide preventative/corrective measures. These services provide significant value for the end-users and are highly profitable.

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.

As a construction/mining machinery manufacturer, Hitachi Construction Machinery’s, or HCM’s, lifeline will be from sales of its mainstay hydraulic excavators, mining dump trucks, and wheel loaders. However, the company’s core strategy will focus on growing its “value chain” business, which includes services like spare parts supply and maintenance. As its product sales increase through both direct channels and dealers, the company can provide more aftermarket services. Further, more of HCM’s machines will be included its ConSite system, which allows the monitoring of the equipment’s operational status and if issues are detected, HCM can provide preventative/corrective measures. These services provide significant value for the end-users and are highly profitable.

Although Hitachi Construction Machinery’s, or HCM’s, June quarter revenue growth of 2.6% year on year was largely in line with expectations, its operating margin decline of 1.9 percentage points to 9.9% was below our previous estimate. We attribute the shortfall of HCM’s profitability to a negative mix from weaker value chain sales in the Americas and a worse-than-expected impact from weak capacity utilization in Europe and Asia (excluding Japan, India, China). Based on the sluggish results, we lower our operating margin assumption for fiscal 2024 (ending March 2025) to 11.0% from 12.0%, while maintaining our 2% year-on-year revenue decline assumption, with downward sales revisions in the Americas/Asia offset by upward revisions in other regions such as Oceania. We maintain our fair value estimate for HCM at JPY 5,450 as our medium-term forecasts remain unchanged.

We slightly lower our revenue estimate for Hitachi Construction Machinery, or HCM, for fiscal-year 2024 (ending March 2025) to a 2% decline from a 0.5% decline, as the full-year guidance suggests worse-than-expected demand in Europe and Asia. We expect the high interest rate environment and weaker coal mining activity in Asia to weaken construction and small-sized mining machinery sales in these regions. However, we think this will be temporary and maintain our fair value estimate at JPY 5,450, as our projection of a medium-term recovery from fiscal 2025 remains largely unchanged. We forecast 6% growth in fiscal 2025, followed by a 4.5% CAGR between 2025 and 2028, supported by aftermarket sales (the main part of the Value Chain business) as services like preventive maintenance will increase due to a higher supply of machinery with its Internet of Things platform over the past three years. We believe this revenue growth is underestimated by the market.

We maintain our fair value estimate for Hitachi Construction Machinery, or HCM, at JPY 5,450, but slightly raise our near-term sales forecast for North America. While we assume a short-term oversupply of multifamily houses in the U.S. to lead to a slowdown in construction, we do not expect this to materially affect HCM’s sales. We expect the impact to be mitigated by its dealers stocking up from having low inventories, partly caused by a temporary year-end adjustment to withhold procurement. We revise our revenue assumptions for fiscal 2023 and 2024 (ending March 2024 and 2025, respectively) to 10% growth and 0.5% decline, up from 7% growth and 1% decline before. Despite the brief headwind in 2024, we think the strong new equipment sales over the past three years will drive value chain sales (such as service and parts) over the longer term, which the market is underestimating. With risks of near-term headwinds priced in, we believe HCM’s shares are undervalued.

As a construction/mining machinery manufacturer, Hitachi Construction Machinery’s, or HCM’s, lifeline will be from sales of its mainstay hydraulic excavators, mining dump trucks, and wheel loaders. However, the company’s core strategy will focus on growing its “value chain” business, which includes services like spare parts supply and maintenance. As its product sales increase through both direct channels and dealers, the company can provide more aftermarket services. Further, more of HCM’s machines will be included its ConSite system, which allows the monitoring of the equipment’s operational status and if issues are detected, HCM can provide preventative/corrective measures. These services provide significant value for the end-users and are highly profitable.