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1. Stock Performance
Kubota Corporation (TSE: 6326), a global leader in agricultural machinery, water systems, and environmental solutions, has seen notable fluctuations in its share price over the past 18 months. After reaching a high in early 2024, the stock entered a sustained downward trajectory. However, as of July 28, 2025, the share price has rebounded to approximately ¥1,700, recovering significantly from its 2024 trough. This movement reflects evolving investor sentiment—from optimism fueled by post-COVID recovery, to caution amid structural challenges, and now a tentative return of confidence.

Despite a solid long-term vision, short-term execution risks have weighed on investor sentiment. The volatility occurred during a period of robust infrastructure investment and demand in select segments, suggesting the root of investor concern lies within operational execution and regional exposure.

2. Possible Reasons for Stock Decline
The decline and subsequent recovery in Kubota’s stock price from spring 2024 can be attributed to several interrelated factors:

• North American Weakness: North America, which accounts for over 40% of Kubota’s consolidated revenue, experienced a slowdown in both the construction equipment and compact tractor segments. This was largely due to weakening U.S. housing starts and agricultural income compression.

• Inventory Normalization: Elevated inventory levels in FY2023 and early FY2024 were addressed through sales incentives and production adjustments. These actions, while necessary, weighed on operating margins.

• Foreign Exchange Losses: Despite a weaker yen generally favoring Japanese exporters, Kubota recorded a significant foreign exchange loss (¥11.2 billion) in Q1 FY2025, attributed to hedging mismatches and transactional exposures.

• Declining Profitability: Operating profit for Q1 FY2025 dropped to ¥61.6 billion (down 40.2% YoY), and net income attributable to owners fell to ¥41.3 billion (down 43.3% YoY). This margin compression has raised concerns about the sustainability of the company’s earnings power.

• Perceived Execution Risk in Mid-Term Plan: Investors remain skeptical about the timely realization of Kubota’s “Global Major Brand 2030” (GMB2030) initiatives, particularly its ability to evolve from a product-based to a solution-based business model.

3. Key Financial and Operational Metrics

Segment and Regional Breakdown:

• Revenue by Segment (FY2025 Q1):

  • Machinery: ¥6099 billion (▼10.3%)

  • Water & Environment: ¥987 billion (▲9.3%)

• Revenue by Region (FY2024):

  • North America: 43.9%

  • Japan: 19.4%

  • Asia (ex-Japan): 21.8%

  • Europe: 11.6%

4. Strategic Outlook
Kubota’s long-term vision, GMB2030, outlines its goal of transforming into a comprehensive life infrastructure platform serving the fields of food, water, and the environment. The strategic focus includes:

• Expansion of Solutions Business: Increasing recurring revenue through O&M (Operation & Maintenance) services in water infrastructure and smart agriculture platforms.

• Geographic Growth Drivers:

  • India: Strengthening presence via Escorts Kubota Ltd. and targeting affordable tractors for mass markets.

  • North America: Investing in new models of Compact Track Loaders (CTLs) to regain momentum.

  • ASEAN & Africa: Exploring new demand in emerging markets through affordable mechanization solutions.

• Technological Innovation:

  • Emphasis on AI-based diagnostics for water pipes and autonomous agricultural equipment.

  • Introduction of electric construction machinery and climate-resilient infrastructure products.

• Business Portfolio Optimization:

  • Rationalizing or exiting unprofitable units (e.g., specific foundry operations).

  • Prioritizing capital allocation towards R&D and high-margin domains.

While these initiatives signal strong strategic intent, market confidence hinges on Kubota’s ability to deliver tangible results within the next two fiscal years.

5. Investment Consideration
Kubota presents a compelling mix of defensive and growth-oriented characteristics. Its leadership in agricultural and compact construction equipment provides a resilient base, while the expansion into infrastructure solutions and digital farming offers long-term optionality.

Bull Case:

• Rebound in U.S. housing and agriculture

• Execution of GMB2030 with visible KPI improvements

• Improvement in FX and cost structure

Bear Case:

• Persistent margin pressures and sales stagnation

• Limited progress on recurring revenue shift

• Structural over-reliance on North America

From a valuation perspective, Kubota trades at a reasonable multiple given its stable balance sheet and consistent dividend payout. However, unlocking upside potential will require visible execution against strategic priorities and clearer evidence of earnings normalization.

Conclusion: Kubota remains a high-quality industrial name with a credible long-term vision but faces near-term challenges in execution and market positioning. For long-term investors, current levels could offer an attractive entry point, contingent on improved operational delivery and regional diversification.

Disclaimer

This report is intended for informational purposes only and does not constitute investment advice. The analysis contains forward-looking statements and interpretations based on publicly available information as of the date of writing. Readers should conduct their own research and consult with a licensed financial advisor before making any investment decisions. Wasabi-info.com is not liable for any loss or damage arising from the use of this report or reliance on its contents.