On Thursday, Goldman Sachs (NYSE:GS) adjusted its stance on SCSK Corporation (9719:JP) (OTC: SCSKF) stock, elevating the rating from Neutral to Buy and increasing the price target to ¥3,240 from the previous ¥2,900. The revision follows the firm's analysis of the company's financial outlook and market position, particularly in the automotive systems sector.
The investment firm modified its operating profit forecast for SCSK Corporation for the fiscal year ending March 2025, decreasing it by 1% due to anticipated upfront expenditures. These costs are expected to be incurred as the company invests in enhancing the functionality of its Enterprise Resource Planning (ERP) systems.
Despite this, Goldman Sachs anticipates a profit increase of 1% and 2% for the fiscal years 2026 and 2027, respectively, driven by robust demand for automotive systems.
Goldman Sachs has also adjusted the price-to-earnings (P/E) multiple used to calculate SCSK's price target, increasing it to 21 times from 19 times. This change is justified by a sector-wide increase in the average P/E ratio to 20 times, up from 19 times, and a 5% premium assigned to SCSK to reflect the firm's forecast of the company's profit growth outpacing the sector average starting in the second half of the fiscal year 2025.
The revised price target suggests a potential upside of 14% for SCSK's shares, which is considered favorable compared to the sector average of 6%. Goldman Sachs' updated outlook indicates confidence in SCSK's growth trajectory, particularly in its automotive systems business, which is expected to contribute significantly to the company's performance in the coming years.
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