Wednesday, October 21, 2020

An International Equity holding: Hitachi Ltd. Sponsored ADR (HTHIY, $68.10): “Jack of All Trades, but Master of None” by: Bob Thelen, AIM Student at Marquette University

Hitachi Ltd. Sponsored ADR (HTHIY, $68.10): “Jack of All Trades, but Master of None”

By: Bob Thelen, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.


·      Hitachi Ltd. (OTCMKTS: HTHIY) is headquartered Tokyo, Japan and produces and sells electronic equipment. They operate globally in numerous segments including Energy, Industry, IT, and Mobility.

·      The firm’s OCF has been shrinking, although ROIC has averaged 12.58% over the past 5 years. 

·      HTHIY is currently taking on many new global projects such as building new hybrid railway vehicles and energy storage solutions throughout Europe. 

·      I would recommend holding Hitachi as overall it has not performed well, but its financials are healthy and analysis shows that it is still undervalued.

Key points: Hitachi Ltd. provides innovative products and services across numerous different industries. HTHIY can benefit from development new industries such as storage of renewable energy, high speed rail vehicle development, and automotive technology. As most global industries move toward renewable energy, Hitachi is positioned to be an innovator and provider for these new technologies.

The effect of COVID-19 has both hindered and assisted Hitachi’s presence in different industries. While there has been less development in new rail technologies, the IT sector of Hitachi has seen growth during this volatile year according to its most recent earnings call in August 2020.

What has the stock done lately?

As with most securities, HTHIY took a sharp dive from January to March and has not fully recovered from this downfall. Compared to its competitors such as NEC Corp., Canon, and Hewlett Packard Enterprises, Hitachi has the lowest EV/EBITDA of 4.67 compared 7.46, 7.84, and 5.68 of its respective competitors. 

Past Year Performance: Hitachi has fell 10.65% over the past year, but still has lots of room for growth. According to the most recent earnings call, HTHIY projected that negating the COVID-19 crisis, their revenue and operating income remained similar to 2019. As seen in August 2020 in the AIM portfolio, HTHIY had a YTD return of -25.12%, but a MTD return of 4.57%.

Source: FactSet

My Takeaway

Overall, HTHIY has seen mediocre performance and stagnating growth. I would recommend holding Hitachi as analysis still shows that they are undervalued according to ratios such as EV/EBITDA and Price/Sales. With a current price of $68.10 and past long term returns showing that the firm had an annualized 3 year return of -0.23% there is room for the firm to grow as the impact of COVID-19 lessens and the industry recovers as a whole.

Source: FactSet