JPMorgan Raises Terumo Target Price to 2700 Yen, Maintains Overweight

Overview

JPMorgan releases research report updating Terumo (Terumo, 4543.T) earnings forecast model. Institution maintains 'Overweight' (Overweight) rating on Terumo, and raises year-end 2026 target price from 2500 yen to 2700 yen. Core logic: Despite facing raw material cost pressures, company's ability to raise prices on competitive products will continue in FY2026, and actual impact of rising resin raw material costs is weaker than previous expectations. Additionally, profit guidance for new businesses such as Organ Tech revised slightly upward. Institution believes, as next medium-term plan (expected release Dec 15) approaches, and new business catalysts emerge, stock price expected to gradually rebound.

Core views

Earnings forecast upward revision mainly based on three factors: First, price hike strategy continues to take effect. Following price hikes implemented in Q4 FY2025, positive impact will begin reflecting in FY2026 Q1, institution therefore raised sales and operating profit margin forecasts for Cardiac & Vascular Company. Secondly, cost pressure easing. Institution judges impact of resin raw material costs in FY2026 will be less than prior estimates, thereby upgrading gross margin forecasts for Cardiac & Vascular Company and Medical Care Solutions Company. Finally, new business performance better than expected. Organ Technologies (Organ Technologies) FY2026 adjusted operating profit guidance slightly higher than institution's prior forecast, thus slightly upgraded sales and profit expectations for the segment. Regarding valuation and stock price outlook, institution believes Terumo current valuation undervalued, stock price recent consolidation mainly influenced by market factors. Target price 2700 yen based on FY2026 EPS forecast and 24x P/E. This valuation multiple considered reasonable, because Terumo during April 2015 (US cardiovascular business expansion period) to June 2018 (Aichi plant issues and pre-pandemic) period, average PE was 29x, range 27-31x. Considering company future five years overseas sales high growth, profit growth prospects and potential to mitigate tariff impact via price hikes, 24x PE falls within acceptable range. Mid-term growth drivers shifting from traditional businesses to new fields. Institution points out, next medium-term plan focus will be European CDMO and plasma innovation business customer acquisition, and Organ Technology segment sales sustainability. Specific stock price catalysts include: profitability expansion from price hikes exceeding market expectations in FY2026 Q1 report, and announcement of CDMO German factory obtaining outsourcing contracts. Long term, stock price will heavily influence by sustainability of Cardiac & Vascular existing business sales growth, increase in plasma innovation business customers, CDMO German factory project acquisition progress and maximum capacity, and impact of Organ Technology business sales and margin improvement.

Analysis framework

Institution adopted typical 'top-down' and 'bottom-up' combined analysis approach. First, identified inflation and raw material cost increase pressures at macro and industry levels, then delved into company micro level through breaking down revenue and cost structures of each business segment (Cardiovascular, Medical Care, Blood Cells, Organ Tech, etc.), quantifying specific contribution of 'price hikes' to hedging cost pressure. Secondly, applied historical valuation comparison method, reviewed company PE intervals in different development stages, combined with current growth prospects and overseas business proportion, determined reasonable target valuation multiple. Finally, through event-driven analysis, locked mid-term plan release, new factory order acquisition, etc., key time nodes as stock price catalysts, built investment logic chain from mid-short term to long term.

Methodology notes

• Valuation MethodPE/PEG valuation

  Determine target price based on historical PE interval and target EPS

  Institution referenced Terumo's average PE (29x) and interval (27-31x) during high growth period 2015-2018, combined with current high overseas growth expectations, assigned 24x PE multiple for FY2026 to derive target price. This is a common relative valuation method, anchoring current valuation rationality through historical comparable intervals.

• Industry/Industrial Analysis FrameworkVolume-Price Breakdown

  Distinguish revenue contribution from volume growth vs price increase

  Report explicitly analyzed contribution of 'Price hikes' (Price hikes) to sales revenue and operating profit margins, considering separately from volume growth. This is particularly important in inflationary environment, helping investors judge whether company transfers cost via price increases or relies on actual demand pull growth.

• Company Fundamentals and Financial FrameworkOperating/Financial Leverage Analysis

  Analysis of impact of raw material cost changes on gross margin

  Institution focused analysis on impact of rising resin raw material costs on gross margin, judged actual impact smaller than prior expectation. This analysis helps understand company's profitability resilience and operating leverage effect under cost fluctuations.

Asset mapping & comparison

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

• Terumo (4543.T)

  Beneficiary Target: Offsets cost pressure via price hikes, new businesses (CDMO, Plasma, Organ Tech) provide mid-term growth momentum.

  Strengths

  Existing business fundamentals strong; Capable of price hikes on competitive products; High overseas sales growth rate.

  Weaknesses

  Organ Technology segment is new business, no historical performance records, existence of sales growth and seasonal uncertainty.

  Risks

  Increased competition in Cardiac & Vascular segment; Chinese government policy leads to reduced China business revenue; Sharp rise in raw material costs leads to margin deterioration.

Key data

• Target Price2,700 YenRaised compared to previous target price 2,500 yen, based on FY2026 EPS and 24x P/E
• RatingOverweight (Overweight)Maintained unchanged
• FY2026 EPS Forecast AdjustmentRaisedSpecific value not directly listed, but mentions Adj.EPS-27E raised from 100.68 to 113.89 yen (increase 13.1%)
• Historical Average PE29xApril 2015 to June 2018 period
• Target PE24xApplied to FY2026 EPS

Impact & implications

Report believes Terumo fundamentals remain strong in existing businesses, but market focus shifting gradually to new business growth and profitability. For investors, recent stock price trend depends on execution effect of price hike strategy under inflation context, and medium-to-long term investment value tied to success/failure of these three new engines: CDMO, Plasma Innovation, and Organ Tech. If company can clearly demonstrate customer acquisition progress and capacity utilization of these new businesses in upcoming medium-term plan release, will constitute significant positive impact on stock price. Conversely, if new business growth lags expectations or seasonal volatility occurs, may trigger market concerns.

Risks

• Risk that Cardiac & Vascular Company faces increased competition.
• Chinese government policy may lead to reduced China business revenue.
• Sharp rise in raw material costs may lead to margin deterioration.
• Organ Technology segment as new business, exists sales growth and seasonal uncertainty.

What to watch

• Whether contribution of price hikes to operating margin expansion in FY2026 Q1 report exceeds market expectations.
• Announcement regarding acquisition status of CDMO business German factory outsourcing contracts.
• Strategy regarding CDMO and plasma innovation business customer acquisition in next medium-term plan released on Dec 15.
• Quarterly sales trend of Organ Technology segment.