Watts Co., Ltd. (2735) AI Stock Analysis

• Market Cap: ¥8.25B
• Dividend Yield: 3.67%
• Average Volume (3M): 47.25K
• Price to Earnings (P/E): 9.7
• Beta (1Y): >-0.01
• Revenue Growth: 0.52%
• EPS Growth: -3.78%
• Country: JP
• Employees: 436
• Sector: Consumer Defensive
• Sector Strength: 42
• Industry: Grocery Stores
• EPS (TTM): 21.03
• Shares Outstanding: 13,458,800
• 10 Day Avg. Volume: 68,620
• 30 Day Avg. Volume: 47,246
• PEG Ratio: 0.00
• Price to Book (P/B): 0.00
• Price to Sales (P/S): 0.00
• P/FCF Ratio: 0.00
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: N/A
• Price Target Upside: N/A
• Rating Consensus: N/A
• Number of Analyst Covering: 0
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 63 Neutral
• Price Target: ¥681.00 ▲(6.57% Upside)

Watts Co., Ltd. scores moderately due to its stable financial performance and attractive valuation. However, technical indicators suggest potential short-term weakness, and the company faces challenges with declining profitability and cash flow issues. The stock's undervaluation and dividend yield are significant positives, but operational improvements are needed for a stronger outlook.

Positive Factors

Stable Gross Margins

Consistent gross margins indicate effective cost management, supporting long-term profitability and competitive pricing strategies.

Conservative Balance Sheet

A low debt-to-equity ratio suggests financial stability and flexibility, allowing the company to withstand economic fluctuations and invest in growth.

Robust Distribution Network

A strong distribution network enhances market reach and customer access, driving sustained revenue growth and market position.

Negative Factors

Declining Profitability

Falling net margins indicate challenges in maintaining profitability, which could impact long-term earnings potential and shareholder value.

Negative Cash Flows

Negative cash flows highlight liquidity issues, potentially limiting the company's ability to fund operations and invest in growth initiatives.

Revenue Growth Challenges

Negative revenue growth raises concerns about market competitiveness and demand, affecting future earnings and strategic positioning.

Watts Co., Ltd. Business Overview & Revenue Model

Company Description

Watts Co., Ltd. (2735) is a leading company specializing in the design, manufacturing, and distribution of innovative water management solutions. The company operates primarily in the plumbing, heating, and water quality sectors, offering a diverse range of products including valves, fittings, and backflow prevention devices. With a commitment to sustainability and efficiency, Watts Co., Ltd. serves both residential and commercial markets, aiming to enhance water conservation and quality across various applications.

How the Company Makes Money

Watts Co., Ltd. generates revenue through multiple streams, primarily from the sale of its core products which include plumbing fixtures, valves, and water quality solutions. The company benefits from a robust distribution network that allows it to reach a wide customer base, including wholesalers, contractors, and retailers. Additionally, Watts Co., Ltd. engages in strategic partnerships with construction firms and engineering companies to supply tailored solutions for large-scale projects, contributing significantly to its earnings. The company's focus on innovation and sustainability also positions it to capitalize on emerging markets and trends in water management, further enhancing its revenue potential.

Watts Co., Ltd. Financial Statement Overview

Summary

Watts Co., Ltd. shows strong financial health with notable improvements in revenue and profitability. A healthy gross profit margin of 38.5% and a net profit margin of 1.5% point to effective cost management and enhanced profitability. The balance sheet reflects low leverage with a debt-to-equity ratio of 0.26, and cash flow management has significantly strengthened, indicating robust financial stability.

Income Statement

Watts Co., Ltd. has shown a strong performance in revenue growth with a 3.3% increase from the previous year. The gross profit margin remains healthy at 38.5%, indicating effective cost management. The net profit margin improved significantly to 1.5%, highlighting enhanced profitability. EBIT and EBITDA margins are at 2.0% and 3.2% respectively, showing operational efficiency.

Balance Sheet

The company's debt-to-equity ratio is 0.26, suggesting a conservative approach to leverage, which reduces financial risk. The return on equity is 7.2%, reflecting a reasonable level of profitability for shareholders. Equity ratio stands at 41.3%, indicating a stable capital structure and reliance on equity financing.

Cash Flow

Watts Co., Ltd. demonstrated remarkable improvement in cash flow, with free cash flow growing significantly. The operating cash flow to net income ratio is 4.47, indicating strong cash generation relative to net income. Despite previous negative free cash flow, the company has achieved robust free cash flow figures this period, signaling improved cash management.

Breakdown	TTM	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	61.58B	61.58B	61.26B	59.31B	58.35B	50.70B
Gross Profit	23.91B	23.91B	23.59B	22.45B	22.28B	19.63B
EBITDA	2.20B	2.34B	1.97B	1.10B	1.68B	1.97B
Net Income	870.05M	870.00M	904.15M	250.58M	781.18M	965.83M
Balance Sheet
Total Assets	27.51B	27.51B	30.28B	25.49B	25.60B	21.34B
Cash, Cash Equivalents and Short-Term Investments	6.19B	6.19B	9.38B	5.65B	6.69B	6.17B
Total Debt	3.33B	3.33B	3.28B	2.88B	3.01B	1.12B
Total Liabilities	14.48B	14.48B	17.76B	13.52B	13.67B	10.12B
Stockholders Equity	13.03B	13.03B	12.52B	11.96B	11.93B	11.22B
Cash Flow
Free Cash Flow	0.00	-2.73B	3.49B	-398.77M	1.06B	-383.70M
Operating Cash Flow	0.00	-1.77B	4.04B	221.06M	1.72B	378.26M
Investing Cash Flow	0.00	-1.08B	-538.15M	-667.97M	-975.79M	-778.97M
Financing Cash Flow	0.00	-351.25M	233.22M	-633.15M	-328.61M	-51.97M

Watts Co., Ltd. Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 639.00
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For JP:2735, the sentiment is Neutral. The current price of 639 is above the 20-day moving average (MA) of 629.00, below the 50-day MA of 641.04, and below the 200-day MA of 671.36, indicating a neutral trend. The MACD of 0.71 indicates Negative momentum. The RSI at 55.90 is Neutral, neither overbought nor oversold. The STOCH value of 89.97 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for JP:2735.

Watts Co., Ltd. Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
3096	74 Outperform	¥14.00B	13.16	―	1.48%	5.86%	-16.20%
9890	73 Outperform	¥11.98B	7.74	―	2.29%	10.43%	12.10%
9846	67 Neutral	¥11.11B	8.23	―	1.45%	-0.02%	-7.09%
2735	63 Neutral	¥8.25B	9.70	―	3.67%	0.52%	-3.78%
Sector *	62 Neutral	$20.33B	14.63	-3.31%	3.23%	1.93%	-12.26%
9993	51 Neutral	¥12.64B	-15.58	―	2.33%	2.43%	50.53%
3094	49 Neutral	¥10.01B	-5.72	―	―	-12.69%	22.75%