---
endpoint: analytics
pattern: Technology
status: done
latency_ms: 177814
conversation_id: 28677d0b-8ffe-41fa-bae1-5a6c10e9687d
citations: 10
created: 2026-05-31 20:34:50Z
---

# How does Hitachi’s valuation compare to peers, and what justifies its premium/discount?

# Hitachi (6501 JP) — Valuation vs Peers and Premium/Discount Justification

**Source vintage**: CLSA covers Hitachi with O-PF (Outperform) rating and ¥5,000 SOTP-based target price (raised from ¥4,600 at the 11-Jun-2025 IR Day) [1][6]. Latest CLSA peer-comp set is dated 11-Jun-2025; figures below are CLSA-CL forecasts.

---

## 1. Where Hitachi Trades

| Metric | FY3/26E | FY3/27E | FY3/28E |
|---|---|---|---|
| PE (x) | 24.7 | 21.3 | 19.2 |
| EV/EBITDA (x) | 11.7 | 10.3 | 9.4 |
| ROE (%) | 12.8 | 14.3 | 15.1 |
| Dividend yield (%) | 1.1 | 1.3 | 1.5 |

Source: CLSA 11-Jun-2025 [4]. Market cap ~US$130bn at ¥4,112/share [3].

CLSA's snapshot peer-comp table (June 2025) places Hitachi at **23.6x FY26 PE / 12.1x EV/EBITDA / 13.2% ROE / 15.2% EBITDA margin** vs trailing prices [3]. (Two slightly different multiples appear in the same June note because the financials and peer-comp tables use different price points — both are valid; the peer-comp price is ¥4,112 [3].)

---

## 2. Peer Valuation Grid (CLSA, 11-Jun-2025)

Below are CLSA's organized peer clusters with FY1 (E) consensus multiples [3]:

### Japanese Electric Conglomerates / Heavies

| Company | Ticker | Mkt cap (US$bn) | PE (E) | EV/EBITDA (E) | ROE (E) | EBITDA mgn (E) |
|---|---|---|---|---|---|---|
| **Hitachi** | 6501 JP | 129.9 | **23.6** | **12.1** | 13.2 | 15.2 |
| Mitsubishi Electric | 6503 JP | 43.0 | 18.0 | 9.1 | 8.7 | 12.0 |
| NEC | 6701 JP | 36.4 | 24.7 | 11.9 | 10.6 | 13.8 |
| Fujitsu | 6702 JP | 42.6 | 19.9 | 15.2 | 20.8 | 13.5 |
| Fuji Electric | 6504 JP | 6.7 | 11.6 | 6.1 | 11.7 | 15.1 |
| MHI | 7011 JP | 80.4 | 38.7 | 20.3 | 12.2 | 11.1 |
| IHI | 7013 JP | 16.3 | 21.4 | 12.3 | 21.4 | 13.7 |
| *Sub-group avg* | — | — | *22.6* | *12.4* | *14.1* | *13.5* |

### Electric Conglomerate / Energy Equipment (global power-grid peers)

| Company | Ticker | PE (E) | EV/EBITDA (E) | ROE (E) | EBITDA mgn (E) |
|---|---|---|---|---|---|
| Siemens | SIEGn.DE | 18.4 | 15.2 | 16.3 | 17.8 |
| Schneider Electric | SCHN.PA | 24.8 | 16.0 | 16.4 | 21.3 |
| Quanta Services | PWR | 34.4 | 20.8 | 16.2 | 10.1 |
| GE | GE | 45.2 | 29.2 | 31.6 | 23.7 |
| Eaton | ETN | 27.2 | 20.9 | 23.9 | 23.8 |
| Siemens Energy | ENR1n.DE | 62.5 | 18.1 | 11.8 | 9.1 |
| GE Vernova | GEV | 71.2 | 39.8 | 20.1 | 8.4 |
| *Sub-group avg* | — | *42.7* | *23.2* | *18.7* | *15.1* |

### Digital Consulting Peers (DSS reference set)

| Company | Ticker | PE (E) | EV/EBITDA (E) |
|---|---|---|---|
| IBM | IBM | 24.9 | 16.6 |
| Accenture | ACN | 24.9 | 15.1 |
| EPAM | EPAM | 16.3 | 10.2 |
| Cognizant | CTSH | 15.9 | 10.0 |
| Capgemini | CAPP | 13.1 | 8.4 |
| *Sub-group avg* | — | *17.5* | *11.0* |

### Other reference clusters

- **Railway systems**: Alstom 11.3x / Siemens 18.4x → avg 14.9x PE, 10.5x EV/EBITDA [3]
- **Industrial products**: Atlas Copco 27.2x, Ingersoll Rand 24.9x → avg 26.1x PE [3]
- **Electric products (HVAC/Cons.)**: Panasonic 10.5x, Daikin 17.4x → avg 14.0x PE [3]

**Group medians / averages (June 2025)**: Average PE 25.1x, Median PE 21.4x; Average EV/EBITDA 14.2x, Median 15.1x [3]. Hitachi at 23.6x PE / 12.1x EV/EBITDA sits **near the cross-group average on PE but below average on EV/EBITDA** because of its lower-margin profile and minority interest mix.

---

## 3. Where Hitachi Sits — Premium and Discount by Cluster

| Comparison cluster | Hitachi PE 23.6x vs cluster | Hitachi EV/EBITDA 12.1x vs cluster | Net read |
|---|---|---|---|
| Japan electric conglomerates/heavies (avg 22.6x / 12.4x) | **+4% premium** | ~in line | **Premium** to Japan industrial peers |
| Mitsubishi Electric (closest Japan comp) | +31% premium | +33% premium | **Clear premium** |
| Global electric conglomerate/energy equip (avg 42.7x / 23.2x) | -45% discount | -48% discount | **Material discount** to US/EU peers |
| Schneider Electric | -5% | -24% | Discount |
| Siemens | +28% premium | -20% | Mixed |
| GE / GE Vernova / Siemens Energy | -48% to -67% | -53% to -70% | **Deep discount** |
| Digital consulting peers (avg 17.5x / 11.0x) | +35% premium | +10% | **Premium** to IT services peers |

So Hitachi simultaneously trades at a **premium to Japan domestic peers and digital-consulting peers**, but at a **discount to pure-play global power-grid and energy-equipment peers** (Siemens Energy, GE Vernova, GE, Eaton). The April-2025 comp table tells the same story with slightly lower absolute multiples (Hitachi 20.8x / 11.3x vs sector avg 23.1x / 12.7x at ¥3,747) [5].

---

## 4. CLSA's SOTP — Implied Justification of the Premium (June 2025)

Target price ¥5,000 is built bottom-up from segment EV/EBITDA multiples [2]:

| Segment | FY3/27E EBITDA (¥bn) | EV/EBITDA (x) | Implied EV (¥bn) | Peer benchmark |
|---|---|---|---|---|
| DSS (Digital Systems & Services) | 537 | **12.0** | 6,400 | SI / software / IT consulting average |
| Energy total | 661 | **15.0** | 9,900 | — |
| └ Power grid (Hitachi Energy) | 517 | **19.0** | 9,817 | Siemens Energy, GE Vernova, Schneider, HD Hyundai Electric |
| └ Nuclear + adj. | 12 | 10.0 | 121 | MHI, IHI, GE |
| └ Mobility (Rail) | 128 | 9.0 | 1,152 | Alstom, Siemens |
| CI (Connective Industries) | 434 | 12.2 | 5,300 | — |
| └ Building system | 113 | 10.0 | 1,128 | Mitsubishi Electric, Fujitec |
| └ Hitachi GLS (white goods) | 45 | 5.0 | 227 | Panasonic, Daikin |
| └ Hitachi High-Tech | 144 | 13.0 | 1,868 | SPE average |
| └ Industrial digital | 55 | 12.0 | 660 | IT/software avg, Fanuc |
| └ Water/Environment | 27 | 8.0 | 213 | Takasago Thermal, Taikisha, Meta Water |
| └ Industrial products | 86 | 16.0 | 1,376 | Atlas Copco, Ingersoll Rand |
| **Total implied EV** | — | — | **22,752** | — |
| Per share | — | — | **¥4,936** → **TP ¥5,000** | Upside 21.6% from ¥4,126 |

Source: CLSA SOTP [2]. The TP of ¥5,000 implies 18.2x FY3/28E PE — a small discount to the global power-grid peer cluster but a premium to Japanese heavies.

The **19x EV/EBITDA for Hitachi Energy** is the single biggest premium lever — pulling its EBITDA above the Japanese heavies' ~12x weighted average and into the range of pure-play grid names. The previous April-2025 SOTP version had 17x for Hitachi Energy at a ¥4,600 TP [8] — the June IR Day takeaway was higher confidence on Hitachi Energy service revenue, prompting CLSA to raise the segment multiple to 19x and TP to ¥5,000 [1][6].

---

## 5. What Justifies the Premium (vs Japan / IT services peers)

CLSA's stated thesis for paying a multiple **above Japanese heavies**:

1. **Diminishing conglomerate discount via Lumada/HMAX integration.** "We anticipate a diminishing conglomerate discount going forward thanks to the integration of Lumada IoT solutions into each segment. CEO Toshiaki Tokunaga has positioned the Lumada platform as Hitachi's core value driver" [1]. Same framing in April 2025 [7].

2. **Linear EBITA growth and continued portfolio rotation.** "The company reviews its business portfolio and margins on a regular basis, deconsolidating businesses if they do not meet its criteria. Thus, going forward, we expect to see a linear growth trend in its adjusted Ebita and margins, which should continue to justify a premium versus its peers" [1].

3. **Hitachi Energy operating leverage.** New CEO Toshiaki Tokunaga's FY3/28 medium-term plan targets 12%+ adjusted EBITA margin for Hitachi Energy and 12-13% ROIC — implying earnings mix shifting toward higher-multiple grid exposure [10]. CLSA "sees a lot of potential upside in the service business at Hitachi Energy in the medium term" [9].

4. **Capital return optionality.** Hitachi announced a ¥300bn buyback for FY3/26, with CFO Tomomi Kato reiterating intent to return >50% of core FCF or net income [10][6].

5. **ROE/ROIC trajectory.** Hitachi ROE rises from 11.1% in FY24 to 15.1% in FY28E, ROIC from 10.1% → 19.5% [4] — supporting multiple expansion vs static-ROE peers like Mitsubishi Electric (8.7% ROE) [3].

---

## 6. What Justifies the Discount (vs US/EU power-grid pure-plays)

The 45-65% PE discount to GE / GE Vernova / Siemens Energy / Eaton is structural, not specific to Hitachi:

1. **Mix dilution.** Hitachi's blended EBITDA margin is 15.2% [3] vs Eaton 23.8%, Schneider 21.3%, GE 23.7% [3] — because DSS, CI, GLS (white goods at 5x EV/EBITDA) [2], and railway dilute the high-margin grid contribution. Only ~43% of FY3/27E implied EV sits in Energy/Power grid [2].

2. **Conglomerate discount remains.** CLSA explicitly frames the premium-to-peers thesis as a discount that is "diminishing" — i.e., not gone [1][7]. The market still applies a holding-company haircut even as Lumada cross-pollination proceeds.

3. **Japanese cost of equity / ownership overhang.** Although Hitachi has aggressively cleaned up its portfolio, it still carries the Japanese conglomerate de-rating that does not apply to Siemens Energy or GE Vernova post-spin.

4. **Conservative guidance optics.** Hitachi's FY3/26 company guidance was ~17% below CLSA on adjusted OP and 20% below on adjusted EBITA, partly reflecting Trump tariff impact assumed in CoE — viewed by CLSA as conservative but a near-term anchor for the multiple [10].

5. **Slower EPS growth than US peers.** Hitachi EPS CAGR FY25-28E is ~14% [4] versus much higher implied trajectories priced into GE Vernova (FY1 PE 71.2x compressing to FY3 29.9x — i.e., >50% CAGR earnings ramp embedded) [3].

---

## 7. Net View

CLSA's read: Hitachi is fairly valued at a **modest premium to Japanese heavies and IT-services comps**, justified by Lumada-driven margin convergence, Hitachi Energy operating leverage, and portfolio discipline. The **discount to global grid pure-plays remains structural** and only partially closes — which is why CLSA's TP of ¥5,000 implies a still-significant FY28E PE of ~19x, well below the 30-40x band for GE/GEV/ENR. The rating is Outperform (O-PF), not Buy [1][6][9].

---

**Sources**
[1] Hitachi - O-PF (Digitalising assets) — CLSA (11 Jun 2025) — 607961791LinqAlpha.PDF
[2] Hitachi - O-PF (Digitalising assets) — CLSA (11 Jun 2025) — SOTP table, 607961791LinqAlpha.PDF
[3] Hitachi - O-PF (Digitalising assets) — CLSA (11 Jun 2025) — Peer valuations Figure, 607961791LinqAlpha.PDF
[4] Hitachi - O-PF (Digitalising assets) — CLSA (11 Jun 2025) — Financials at a Glance, 607961791LinqAlpha.PDF
[5] Hitachi - O-PF (Hitting higher target) — CLSA (28 Apr 2025) — Peer valuations Figure 6, 607957304LinqAlpha.PDF
[6] Hitachi - O-PF (Digitalising assets) — CLSA (11 Jun 2025) — TP/buyback paragraph, 607961791LinqAlpha.PDF
[7] Hitachi - O-PF (Hitting higher target) — CLSA (28 Apr 2025) — Valuation details paragraph, 607957304LinqAlpha.PDF
[8] Hitachi - O-PF (Hitting higher target) — CLSA (28 Apr 2025) — SOTP table, 607957304LinqAlpha.PDF
[9] Hitachi - O-PF (Digitalising assets) — CLSA (11 Jun 2025) — IR Day takeaways, 607961791LinqAlpha.PDF
[10] Hitachi - O-PF (Hitting higher target) — CLSA (28 Apr 2025) — New CEO guidance summary, 607957304LinqAlpha.PDF

**Coverage note**: CLSA Hitachi analyst is Hideo Noda (@clsa.com), based on the April-2025 note signature [10]. CLSA's coverage is recent (latest 11 Jun 2025) so "latest" reads here are as of mid-2025, ~11 months pre-dating today (31 May 2026). No newer CLSA Hitachi note exists in the internal corpus. The public-data (Manticore/news) cross-check was not invoked because the internal RMS coverage is the authoritative source for the user's explicit premium/discount-vs-peers question — CLSA published a fully built peer-comp table and SOTP. If a fresher (post-Jun-2025) peer-multiple snapshot is needed, please request and I'll pull FactSet/transcript data.

## Citations

- [1] **607961791LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607961791LinqAlpha.PDF>
- [2] **607961791LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607961791LinqAlpha.PDF>
- [3] **607961791LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607961791LinqAlpha.PDF>
- [4] **607961791LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607961791LinqAlpha.PDF>
- [5] **607957304LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607957304LinqAlpha.PDF>
- [6] **607961791LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607961791LinqAlpha.PDF>
- [7] **607957304LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607957304LinqAlpha.PDF>
- [8] **607957304LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607957304LinqAlpha.PDF>
- [9] **607961791LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/06/607961791LinqAlpha.PDF>
- [10] **607957304LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/04/607957304LinqAlpha.PDF>

