Bloomberg News

Komatsu Rises in Tokyo as Investors Bet Stock’s Decline Overdone

October 19, 2011

Oct. 19 (Bloomberg) -- Komatsu Ltd., the world’s second- biggest maker of construction and mining machinery, rose in Tokyo trading as investors bet the stock’s largest drop in two weeks was overdone.

The shares gained as much as 4.2 percent to 1,813 yen, the highest since Sept. 8, and were at 1,790 yen as of 12:39 p.m. local time, up 2.9 percent. Tokyo-based Komatsu slumped 2.4 percent to 1,740 yen yesterday, the most since Oct. 5.

“The stock has priced in negatives such as a hard landing for the Chinese economy, downward revisions to guidance, and the emergence of local competitors in China, and has been oversold,” Shinji Kuroda, a Tokyo-based analyst at Credit Suisse Securities Japan Ltd., wrote in a report today. “We maintain our outperform rating” on the stock.

Komatsu may miss its annual operating profit forecast of 305 billion yen ($4 billion) because of declining Chinese sales and a stronger yen, the Nikkei newspaper reported today, without saying where it got the information. The economy of China, which overtook Japan as the company’s largest market in 2009, grew 9.1 percent in the third quarter from a year earlier, the least since 2009.

Chinese demand will probably decline as much as 10 percent in the year ending March 2012, compared with an April estimate of a 15 percent increase, Komatsu spokesman Hiroshi Sunada said on July 28 after the maker of excavators, wheel loaders and dump trucks posted an 82 percent gain in first-quarter profit.

The company, scheduled to release its first-half earnings and full-year outlook on Oct. 27, said it wasn’t the source of the Nikkei report.

Full-year sales are likely to reach 2.1 trillion yen, compared with Komatsu’s forecast of 2.15 trillion yen, the Nikkei reported, without saying where it obtained the information.

--Editors: Ryan Woo, John Chacko.

To contact the reporter on this story: Masumi Suga in Tokyo at msuga@bloomberg.net

To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net.


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