HITACHI, LTD. (ADR)
TIMELINESS
SAFETY
TECHNICAL
4
3
3
High:
Low:
Raised 7/15/16
RECENT
PRICE
PNK-HTHIY
70.1
57.4
76.6
55.7
79.8
59.0
77.3
36.7
10.0 RELATIVE
DIV’D
Median: NMF) P/E RATIO 0.57 YLD 2.6%
42.13 P/ERATIO 10.7(Trailing:
42.7
23.8
53.6
30.5
65.3
45.0
67.0
50.4
76.7
54.9
83.0
65.9
78.3
49.4
56.7
38.2
Target Price Range
2019 2020 2021
LEGENDS
4.0 x ″Cash Flow″p ADR
. . . . Relative Price Strength
Options: No
Shaded area indicates recession
Lowered 5/15/98
Raised 7/15/16
BETA 1.00 (1.00 = Market)
VALUE
LINE
160
120
100
80
60
50
40
30
2019-21 PROJECTIONS
Ann’l Total
Price
Gain
Return
High
80 (+90%) 19%
Low
55 (+30%) 10%
Insider Decisions
to Buy
Options
to Sell
S
0
0
0
O
0
0
0
N
0
0
0
D
0
0
0
J
0
0
0
F
0
0
0
M
0
0
0
A
0
0
0
M
0
0
0
% TOT. RETURN 6/16
Institutional Decisions
to Buy
to Sell
Hld’s(000)
3Q2015
7
5
307
4Q2015
10
7
725
1Q2016
3
11
048
Percent
shares
traded
0.6
0.4
0.2
1 yr.
3 yr.
5 yr.
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
124
133
120
106
107
117
118
203.36 180.03 202.68 241.79 250.48 240.18 257.85
14.74
1.03 12.57 12.66
5.10 15.92 14.83
2.45 d10.90
.68
.45
1.42
.92
d.84
.89
.23
.50
.75
1.03
.94
.51
11.20
9.68
8.01
8.12 10.24
9.70 23.64
69.13 51.89 45.85 60.73 64.04 63.64 61.46
333.79 333.85 336.81 336.81 336.81 336.81 336.81
44.7
-NMF
NMF
45.9
NMF
-2.91
-NMF
NMF
2.42
NMF
-.8%
.3%
1.0%
1.4%
1.6%
1.5%
.8%
CAPITAL STRUCTURE as of 3/31/16
86847
Total Debt $31899 mill. Due in 5 Yrs $13605 mill.
7.9%
LT Debt $18421 mill. LT Interest $1100 mill.
5271.2
(43% of Cap’l) d278.0
NMF
Pension Assets-3/16 $14714 mill.
NMF
Oblig. $21389 mill.
6496.5
Pfd Stock None
12626
Common Stock 4,828 mill. shs. (equivalent to
20702
482.8 mill. American Depositary Receipts)
NMF
NMF
MARKET CAP: $20.3 billion (Large Cap)
NMF
CURRENT POSITION 2013
2014 3/31/16
NMF
($MILL.)
Cash Assets
Receivables
Inventory (Avg Cst)
Other
Current Assets
Accts Payable
Debt Due
Other
Current Liab.
ANNUAL RATES
of change (per ADR)
Sales
‘‘Cash Flow’’
Earnings
Dividends
Book Value
Fiscal
Year
Begins
2013
2014
2015
2016
2017
Fiscal
Year
Begins
2013
2014
2015
2016
2017
Calendar
2012
2013
2014
2015
2016
5509
27164
13661
9043
55377
12925
10975
17758
41658
Past
10 Yrs.
-3.0%
2.0%
17.0%
1.0%
-2.0%
5963
27330
12687
8186
54166
11736
10759
17370
39865
6189
26485
11503
7793
51970
12849
13478
17870
44197
Past Est’d ’13-’15
5 Yrs.
to ’19-’21
-6.5%
1.0%
8.5%
4.0%
-3.5%
20.5%
5.0%
9.0%
3.0%
QUARTERLY SALES ($ mill.) B
Jun.30 Sep.30 Dec.31 Mar.31
21040 24365 21941 26015
21152 21655 19184 19359
18967 21090 19697 29045
18500 20500 18700 22300
19000 21200 20300 23500
EARNINGS PER ADR B C
Jun.30 Sep.30 Dec.31 Mar.31
.20
.50
1.21
2.80
.60
1.20
.78
1.90
.90
.80
1.30
1.20
.80
.75
1.20
1.25
.85
.90
1.25
1.40
GROSS QUARTERLY DIV’DS PAIDD
Mar.31 Jun.30 Sep.30 Dec.31
-.628
-.608
-.488
-.492
-.537
-.509
-.480
-.488
-.546
Full
Fiscal
Year
93361
81350
88799
80000
84000
Full
Fiscal
Year
(A) At fiscal yearend.
(B) Fiscal year ends Mar. 31 of following year.
(C) Diluted egs., based on U.S. accounting thru
’14, IFRS thereafter. Excludes nonrecur. gains:
4.71
4.48
4.20
4.00
4.40
Full
Year
1.24
.98
1.05
.97
99
335.69
18.82
d1.78
.53
14.18
64.90
336.81
--.8%
113064
9.2%
6924.9
d585.4
NMF
NMF
6534.7
14317
21860
NMF
NMF
NMF
NMF
97
305.20
d3.98
d24.17
.60
12.88
32.04
336.81
--1.1%
102794
7.8%
6752.5
d8093
NMF
NMF
4558.6
13256
10792
NMF
NMF
NMF
NMF
93
213.44
10.73
d3.14
-6.81
30.57
451.81
---96436
8.5%
5997.4
d1150
NMF
NMF
9075.2
17333
13814
NMF
NMF
NMF
NMF
83
248.30
19.63
5.95
.59
6.78
38.38
452.01
7.7
.49
1.3%
112237
10.1%
5997.1
2877.9
29.9%
2.6%
9773.4
15666
17347
9.1%
16.6%
15.1%
9%
82
254.31
17.41
4.59
.75
8.88
46.62
463.50
12.0
.75
1.4%
117875
9.2%
5849.5
2219.7
26.0%
1.9%
12821
15230
21607
6.5%
10.3%
8.7%
16%
94
198.58
13.03
3.85
1.24
8.38
45.74
483.06
15.1
.96
2.1%
95926
9.3%
4435.2
1860.2
31.0%
1.9%
13008
13865
22096
5.2%
8.4%
5.7%
32%
103
193.33
13.87
4.71
.98
7.74
53.30
482.91
14.8
.83
1.4%
93361
10.3%
4421.2
2275.5
36.1%
2.4%
13719
14687
25740
5.9%
8.8%
7.0%
21%
120
168.48
12.75
4.48
1.05
6.31
50.57
482.86
16.4
.86
1.4%
81350
11.1%
4006.0
2150.1
22.4%
2.6%
14301
15660
24419
5.6%
8.8%
6.7%
24%
THIS
STOCK
VL ARITH.*
INDEX
-36.9
-35.6
-29.8
-1.9
26.6
54.4
© VALUE LINE PUB. LLC
20
15
19-21
113
105
105 Translation Rate (Yen/$) A 105
193.90
183.92 165.65 173.90 Sales per ADR B
13.51 13.20 13.70 ‘‘Cash Flow’’ per ADR
16.80
5.55
4.20
4.00
4.40 Earnings per ADR B C
D
1.35
.97
1.09
1.14 Gross Div’ds Decl’d/ADR
6.77
6.65
6.75 Cap’l Spending per ADR
8.00
50.13 49.70 50.70 Book Value per ADR
61.20
490.00
482.82 483.00 483.00 Equiv ADRs Outst’g E
12.0
13.7 Bold figures are Avg Ann’l P/E Ratio
Value Line
.69
Relative P/E Ratio
.75
estimates
1.7%
Avg Ann’l Div’d Yield
2.0%
95000
88799 80000 84000 Sales ($mill) B
11.4% 11.5% 12.0% Operating Margin
14.5%
4494.0
4450
4500 Depreciation ($mill)
5500
2028.0
1930
2125 Net Profit ($mill)
2720
32.0% 30.0% 32.0% Income Tax Rate
35.0%
2.3%
2.4%
2.5% Net Profit Margin
2.9%
7773.0
7500
8400 Working Cap’l ($mill)
10600
18421 18475 18530 Long-Term Debt ($mill)
18700
24204 24000 24500 Shr. Equity ($mill)
30000
5.0%
6.0%
6.0% Return on Total Capital
6.5%
8.4%
8.0%
8.5% Return on Shr. Equity
9.0%
6.4%
6.0%
6.5% Retained to Com Eq
7.0%
23%
27%
26% All Div’ds to Net Prof
24%
BUSINESS: Hitachi, Ltd. is Japan’s largest electronic and electrical
manufacturer. Has a strong position in Japan in mainframe computers, and is a world leader in the dynamic random access memory
(DRAM) market. Produces nuclear, hydroelectric, and thermal
power plants, as well as environmental protection equipment. Also
makes automotive systems. Has plants in Japan, U.S., Canada,
Mexico, South America, Europe, Southeast Asia. Foreign sales:
48% of fiscal ’15 total. Has around 335,000 employees. Chairman:
Hiroaki Nakanishi. CEO: Toshiaki Higashihara. Incorporated: Japan. Address: 6-6, Marunouchi 1-chome, Chiyoda-ku, Tokyo 101,
Japan. U.S. Address: 50 Prospect Avenue, Tarrytown, New York
10591. Telephone: 914-332-5800. Internet: www.hitachi.com.
Fiscal 2016 (began April 1st) might be
a down year for Hitachi. Growth of the
Chinese economy, an important market,
has been decelerating, and the business
climate in other emerging regions (such as
those in Oceania) is less than optimal. Too,
restructuring expenses are being incurred
to improve the performance of lessprofitable operations, so sales in the short
term will probably be constrained. But it
appears that the economic situation will
brighten somewhat in Japan, the United
States, and Europe. Still, we believe that
the bottom line may decrease around 5%,
to $4.00 per ADR, relative to the fiscal
2015 total of $4.20.
An earnings turnaround seems plausible next year, nevertheless. That’s
based partially on our assumption of a
generally better operating environment
around the globe. Product introductions
should also benefit the company. Moreover, the above-mentioned streamlining
initiatives ought to start producing fruit.
Under these conditions, share net might
advance to $4.40.
Prospects out to the beginning of the
next decade look decent. Hitachi boasts
leading positions across a variety of
promising industries, including automotive systems, information & telecommunication solutions, and electronic equipment. Too, with adequate spending on research and development, more innovations
are a strong possibility. Another positive is
partnerships, like those established over
the past several months with The Japan
Atomic Power Company and JP Media
Direct Co. Lastly, business combinations
are probable, thanks to a sufficient balance sheet, but many uncertainties prevent us from including future transactions
in our projections.
The ADRs have tumbled around 20%
in value during the past six months.
We think that movement stems, to a large
extent, from Hitachi’s not-so-grand nearterm profit picture. As a consequence, the
stock now holds our Below Average (4)
rank for Timeliness.
Price-rebound potential is appealing,
however. The dividend (plus prospects for
more hikes in the payout) adds to the appeal. All told, we suggest patient investors
take a look.
Frederick L. Harris, III
July 22, 2016
’11, $4.17; ’13, $0.62; ’14, $0.62. Excludes
losses from discontinued operations: ’14,
$0.90; ’15, $1.00. Next egs. report late July.
(D) Before 7% Japanese withholding tax.
Dividends have historically been paid in June
and Dec. (E) In millions of American Depositary
Receipts, adjusted for stock dividends. Each
ADR represents 10 common shares.
© 2016 Value Line, Inc. All rights reserved. Factual material is obtained from sources believed to be reliable and is provided without warranties of any kind.
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Company’s Financial Strength
Stock’s Price Stability
Price Growth Persistence
Earnings Predictability
B++
65
30
5
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