Mitsubishi Heavy Industries, Ltd. – Value Analysis (FRANKFURT:MIH) : November 3, 2017

Capitalcube gives Mitsubishi Heavy Industries, Ltd. a score of 56.

Our analysis is based on comparing Mitsubishi Heavy Industries, Ltd. with the following peers – IHI Corporation, Hitachi,Ltd. and Honeywell International Inc. (IWJ-DE, HIA1-DE and HON-GB).

Investment Outlook

Mitsubishi Heavy Industries, Ltd. has a fundamental score of 56 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • Considering peers, relative underperformance over the last year and the last month suggest a lagging position.
  • It trades at a lower Price/Book multiple (0.67) than its peer median (1.30).
  • The market expects MIH-DE to grow more slowly than its peers and for its median ROE to decline.
  • MIH-DE‘s relative asset efficiency and net profit margins are both around the median level.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • MIH-DE‘s return on assets currently and over the past five years is around the peer median and suggest that it does not have any particular operational advantages versus peers.
  • The company’s margins are around the peer medians and do not suggest any benefit from a pricing or an operating cost advantage versus peers.
  • While MIH-DE‘s revenue growth in recent years has been above the peer median, the stock’s P/E ratio is less than the peer median suggesting that the company’s earnings may be peaking and the market expects a decline in its growth expectations.
  • The company is likely overinvesting in a business with only median returns.
  • MIH-DE might have enough interest coverage to take-on additional debt prudently.

Access our research and ratings on Mitsubishi Heavy Industries, Ltd.

Leverage & Liquidity

MIH-DE might have enough interest coverage to take-on additional debt.

  • While MIH-DE‘s debt to enterprise ratio of 40.85% is on the high side compared to an overall benchmark of 25% (Note: The peer median is currently 32.48%), it also enjoys a relatively high interest coverage level of 14.48x which may give the company enough financial strength to support additional debt. Thus, the company is classified as having Some Capacity to raise more debt.
  • All 3 peers for the company have an outstanding debt balance.

MIH-DE has maintained its Some Capacity profile from the recent year-end.

  • MIH-DE‘s interest coverage is less than (but within one standard deviation of) its five-year average interest coverage of 15.66x.
  • The increase in its interest coverage to 14.48x from 13.14x (in 2017) was also accompanied by an increase in its peer median during this period to 23.16x from 20.28x.
  • Interest coverage fell 1.54 points relative to peers.
  • MIH-DE‘s debt-EV is greater than (but within one standard deviation of) its five-year average debt-EV of 37.28%.
  • While its debt-EV increased to 40.85% from 37.30% (in 2017), its peer median decreased during this period to 32.48% from 37.30%.
  • Relative to peers, debt-EV rose 8.36 percentage points.

Access the detailed analysis for Mitsubishi Heavy Industries, Ltd.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
IHI Corporation 38.53 1.25 23.28 18.68
Hitachi,Ltd. 26.44 1.33 33.13 65.52
Honeywell International Inc. 14.63 1.35 23.05 35.8
Mitsubishi Heavy Industries, Ltd. 40.85 1.4 14.48 28.12
Peer Median 32.48 1.34 23.16 31.96
Best In Class 14.63 1.4 33.13 65.52

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Company Profile

Mitsubishi Heavy Industries, Ltd. engages in the manufacture and sale of ships, industrial machinery, and aircrafts. Its operations are carried out through the following segments: Energy & Environmental; Commercial Aviation & Transportation Systems; Integrated Defense & Space Systems; Machinery Equipment & Infrastructure; and Others. The Energy & Environmental segment provides solutions in social infrastructure in the areas of energy including thermal, nuclear, and renewable energies; as well as the environment including the environmental and chemical plants. The Commercial Aviation & Transportation Systems segment encompasses land, sea, and air transportation systems such as light rail transit networks, commercial vessels and civilian aircraft. The Integrated Defense & Space Systems segment provides land, sea, air and space defense systems including warships, military aircraft, rockets, special vehicles, and its related equipment and services. The Machinery Equipment & Infrastructure segment capitalizes on synergy benefits between business areas applied to a broad lineup of products including machine tools, handling and distribution systems, air-conditioning and refrigeration systems, bridges, and others. The Others segment offers real estate leasing and sales; printing, and information services. The company was founded by Yataro Iwasaki on July 7, 1884 and is headquartered in Tokyo, Japan.

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