Kubota Corporation (6326.T) fair value

ACCE thesis

Kubota makes compact and mid-size tractors, combine harvesters, engines, and water and sewer pipe systems, with its agricultural machinery the core of the business. The moat rests on a dense dealer network and a reputation for reliability in Japan, North America and Europe, which keeps pricing power intact through the cycle. The near-term driver is the rebound in farm equipment demand after the post-pandemic destocking, with revenue growing 18.6% and operating margin at 15.6% on a 30.2% gross margin. At 11.1 times trailing and 13.3 times forward earnings, the shares trade at a discount to where a business with this margin profile is often valued, though a 10.0% ROE says the capital base is heavy and returns are modest. The question for a deeper look is whether the recovery in margins holds as farm incomes normalise.