Auto Parts_Tire Sectors_ Earnings outlook (Apr-Jun)_ Auto parts mixed, but earnings progress slightly slow; penetration of tire makers‘ US price hikes needs watching

Summary of Earnings Outlook for Auto Parts and Tire Sectors Industry Overview - The report focuses on the Auto Parts and Tire sectors, particularly in relation to Japanese OEMs and their operations in China and overseas markets [1][5]. Key Points on Auto Parts Sector - Earnings Outlook: Earnings for auto parts companies are expected to be mixed for April to June, with some companies benefiting from Toyota Motor's solid production while others face risks from weak sales to Japanese OEMs in China and low production volumes in Europe and the US [1][5]. - Tariff Impact: Many auto parts companies have not included the impact of tariffs in their earnings guidance, raising the risk of downward revisions to their full-year plans depending on how tariffs affect their operations [1][5]. - Company Performance: - Denso and Koito Manufacturing have not factored tariffs into their full-year guidance, necessitating close monitoring of their performance [5]. - Aisin and Nifco are preferred in relative terms, with expected operating profits of ¥40.2 billion and ¥13.0 billion respectively for the first quarter [5]. Key Points on Tire Sector - Price Hikes: Tire companies, particularly those with high import ratios to the US like Sumitomo Rubber Industries and Hankook Tire, have announced price hikes due to tariffs. However, companies with significant local production in the US, such as Bridgestone and Goodyear, have been hesitant to follow suit [5]. - Earnings Risks: If the penetration of US price hikes remains insufficient, there is a heightened risk of earnings misses, especially for Sumitomo Rubber Industries due to its high import ratio [5]. Financial Data and Forecasts - Company Ratings and Price Targets: - Toyota Industries (¥4,912.8 billion) - Price Target: ¥16,300 - Denso (¥5,495.2 billion) - Price Target: ¥2,300 - Aisin (¥1,382.7 billion) - Price Target: ¥2,200 - Bridgestone (¥3,667.1 billion) - Price Target: ¥6,400 [3]. - Quarterly Earnings Forecasts: - Toyota Boshoku: Revenue expected to be ¥1,025.8 billion in Q1 [7]. - Denso: Revenue expected to be ¥1,753.8 billion in Q1 [7]. - Aisin: Revenue expected to be ¥1,184.1 billion in Q1 [7]. Additional Insights - Market Dynamics: The report highlights the importance of monitoring the impact of tariffs and price adjustments on earnings, as well as the varying performance across different companies within the auto parts and tire sectors [1][5]. - Analyst Recommendations: The report suggests a cautious approach to investments in the auto parts sector due to the mixed earnings outlook and potential tariff impacts, while also identifying specific companies that may perform better than others [5].