Suzuden Corporation engages in purchasing and selling products related to electrical and electronic components in Japan. It offers FA equipment, including RFID equipment, relay equipment, sensors, control equipment, etc.; information and communication equipment, such as CPUs, personal computers for industrial use, routers, network equipment, etc.; electronics and devices comprising connectors, switching power supplies, noise filters, etc.; and materials for electric facilities, including terminal blocks, cable accessories, boxes, etc. The company was founded in 1948 and is headquartered in Tokyo, Japan. Suzuden Corporation is a subsidiary of Yamato Corporation.

Japan

Suzuden Corporation

Industrials

The company has a track record of regular dividend payments. It has paid dividends in each of the past ten years. Dividend per share (DPS) has grown yearly, and there is a clear trend. In the past 12 months, the dividend yield has been outstanding and can be rated excellent compared to its peers. At the same time, the average five-year yield has been significantly higher and exceeded nearly all its peers. The company distributes most of its profit as dividends (payout ratio above 75%, a negative factor). It will not be easy to sustain such a high payout ratio. It may also indicate a company’s lack of profitable growth opportunities, which suggests doubtful prospects. On average, the company pays dividends twice a year. 

7480.T reported revenue of JPY 45 713mn in the last 12 months, down 19% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 32% from FY23 to JPY 125.80. Market expects EPS to reach JPY 141.49 in FY25.

The stock has been falling steadily in the past six months, losing 5% in total. The stock has lagged its global peers from the same sector and industry (as shown above), underperforming then by 4ppts in total. At the same time, the stock's performance relative to its the peers from the same country and sector is different. It underperformed these peers by 8ppts over six months and grew 17ppts slower in the past month. With respect to the stock's valuation against its peers, its overall price performance is 'fair'.

The company has reported weak EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 6.0% in the last 12 months, a decline from 6.9% in FY23. 

Historically, 7480.T has reported modest net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 3.9%, down from 4.6% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to 6.0% in the last 12 months, a decrease from 8.3% in FY23. The market analysts predict that RoA will be 7.0% in FY24, again stronger than its peers. 

Suzuden Corporation reported a return on equity (RoE) of 9.7% in the last 12 months, down from 14.4% in FY23. The market consensus projects an RoE of 11.9% in FY24, again behind its peers. 

In the last 12 months, the return on capital employed (RoCE) declined to 8.9%, above the peers. The consensus estimate for FY24 for RoCE is 15.4%, again ahead of the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 3.3 in the past several years. This ratio implies a excellent shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

7480.T has poor trading liquidity. It will take at least a day or two for the average private investor to sell a common position under normal market conditions. Liquidity is usually quite stable and is somewhat unfavourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. The stock has a very small market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is moderate. We note low margin volatility, strong debt servicing capacity, adequate interest coverage, solid cash flow generation, and an favourable capital structure, among the positive credit factors. Among the negative credit factors, we point to weak positions in its industry, slow historical revenue growth, and bleak profitability.

In highly turbulent market conditions, 7480.T is not overly volatile. In other words, the stock will fall less than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be low. 

In normal market circumstances, 7480.T is not overly volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will remain relatively stable. The stock's losses on its worst days (less than 1-5% of the time) will range from very low to negligible. 

Based on key historical and expected multiples, the stock is undervalued relative to its peers. In particular, the stock is reasonably priced on P/E, 'cheap' on EV/EBITDA, undervalued on P/FCF. 

Suzuden Corporation

¥ 1689

6

Suzuden Corporation

¥ 1689

6

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

¥ 1689

About

About

About

About