Friday's earthquake and tsunami in Japan will likely result in higher prices for Japanese cars, which will affect Mazda importer Delek Automotive Systems Ltd. (TASE: DLEA), warns Leader Capital Markets analyst Eran Younger.
"The earthquake and subsequent tsunami in Japan are liable to shake the ground beneath the feet of importers of Japanese cars," he says, with a focus on Delek Auto. Although the company is about to publish its financial report for the fourth quarter and full year of 2010, Younger says that the earthquake has rendered it irrelevant.
"Delek Auto told me today that the Mazda factory was undamaged in the earthquake, but the situation at Mazda subcontractors is unknown," Younger adds. "Production lines of vehicles depend on just-in-time deliveries from hundreds of subcontractors. In addition, the earthquake damaged infrastructures, transport networks, roads, railways, electricity, and water, which will result in logistics delays whose effect is not yet known. The rise in the value of the yen will also increase Delek Auto's debt and reduce its financial soundness, as well as lead to higher prices for Mazda cars."
Younger reiterated his "Hold" recommendation for Delek Auto and target price at NIS 54 per share, but said that both could be revised as a result of the earthquake.
Delek Auto's share price fell 1.9% by midday to NIS 45.05, giving a market cap of NIS 4.23 billion.
Israeli importers of other Japanese carmakers, including Toyota, Honda, Subaru, Isuzu, Nissan, and Mistubishi are private companies.
Published by Globes [online], Israel business news - www.globes-online.com - on March 13, 2011
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