TDK target price raised to ¥3,200, under short-term pressure but still favored in the medium to long term

Overview

This report is JPMorgan's earnings model update for TDK(6762.T). After incorporating 3q fy2025 results, new foreign exchange assumptions, and the current market environment, the report raises multi-year operating profit forecasts and lifts the December 2026 target price from ¥2,700 to ¥3,200, while maintaining an Overweight rating.

Core views

The core view is that the share price may remain weak until fy2026 guidance is confirmed, but this mainly reflects short-term demand and guidance risks; over the medium to long term, earnings improvements from magnetic applications, sensors, passive components, and portfolio management beyond rechargeable batteries are likely to offset part of the pressure from declining demand for batteries in smartphones and notebooks in China. The report recommends looking for buying opportunities after the fy2025 results are announced.

Analysis framework

The analysis mainly updates earnings forecasts, breaks down business-line drivers, compares company guidance with market consensus, and uses a ROIC valuation framework to derive the target price. The forecast revisions take into account 3q fy2025 results, the exchange-rate assumption changed from ¥152/$ to ¥155/$, market demand shifts, raw material and bom costs, pricing power, HDD share recovery, mlcc supply-demand improvement, and higher sensor share.

Methodology notes

• Valuation methodsZero-growth ROIC model

  ev/ic = roic/wacc

  The ¥3,200 target price is based on a zero-growth ROIC model using fy2027 forecasts, with key assumptions including a risk-free rate of 2.2%, a risk premium of 5.15%, beta of 1.2, and wacc of 5.48%; this target price is roughly equivalent to 21x fy2027 forecast P/E.

• Earnings forecastSegment-by-segment earnings forecast update

  Adjust operating profit by business line

  The report evaluates changes in demand, share, pricing, and margins across rechargeable batteries, energy applications, magnetic applications, sensors, and passive components, and updates fy2025 to fy2027 operating profit forecasts accordingly.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• TDK (6762.T)

  Core coverage name

  Strengths

  Maintained Overweight rating; target price raised; medium- to long-term earnings growth comes from rechargeable batteries, HDD-related products, sensors, passive components, and improved portfolio management.

  Weaknesses

  Near-term pressure from declining demand for rechargeable batteries for smartphones and notebooks in China, memory shortages, rising bom costs, and the risk of a cautious fy2026 guidance.

  Comparison

  The ¥3,200 target price implies about 64.4% upside from the current price of ¥1,946; the fy2026 operating profit forecast is above the Bloomberg consensus of ¥303.0bn.

  Risks

  If rechargeable battery demand falls short of expectations, portfolio management stalls, automotive and industrial demand recovery is delayed, or the yen strengthens, there is downside risk to the target price and rating.

Key data

• Current price¥1,946As of 2026-04-02.
• Target price¥3,200December 2026 target price, previous ¥2,700.
• RatingOverweightRating unchanged.
• fy2025 operating profit forecast¥270.0bnPrevious ¥262.6bn, company guidance ¥265.0bn, Bloomberg consensus ¥263.8bn.
• fy2026 operating profit forecast¥343.2bnPrevious ¥317.9bn, Bloomberg consensus ¥303.0bn.
• fy2027 operating profit forecast¥408.7bnPrevious ¥368.6bn, with a comparison value of ¥341.1bn mentioned in the report.
• HDD head share forecast13% / 16% / 18%Corresponding to fy2025, fy2026, and fy2027, respectively.
• wacc assumption5.48%Used in the zero-growth ROIC target price model.

Impact & implications

The implications of the report for TDK are mildly positive: although the market may continue to worry about fy2026 guidance and weakening demand in some end markets in the short term, the upward revisions to earnings forecasts, the higher target price, and diversified business growth suggest that the medium- to long-term investment case remains intact. If fy2026 guidance does not deteriorate further after the fy2025 results are announced, the stock may have room for a re-rating.

Risks

• FY2026 company guidance may be cautious, keeping short-term pressure on the share price.
• Demand for rechargeable batteries used in smartphones and notebooks in China may be weaker than expected.
• A stagnant memory market and rising bom costs may weigh on end-demand.
• Profitability deterioration in unprofitable businesses or stalled portfolio management progress.
• A longer-than-expected inventory adjustment period for automotive and industrial machinery applications.
• Increased downward pricing pressure.
• A stronger yen may hurt earnings and valuation.

What to watch

• Management's official fy2026 guidance after the fy2025 results are announced.
• Changes in demand for batteries for smartphones and notebooks in China.
• Demand for premium smartphone metal-case batteries, small batteries for AR glasses, and medium-sized LFP batteries for data center UPS and BBU.
• Market share changes after HDD heads resume shipments to the two captive manufacturers.
• Demand for HDD suspensions, MEMS microphone share, TMR sensors, and the mlcc pricing environment.
• Changes in the yen exchange rate, especially whether the ¥155/$ assumption holds.
• Progress in portfolio management and exiting unprofitable businesses.