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FILE PHOTO: A consortium of around 20 banks is providing a project finance loan of about $18 billion to support the construction of a data center campus linked to Oracle in New Mexico.
| Photo Credit: Reuters

BEIJING – China has moved to promote the integrated development of its coal and new energy sectors to support the green, low-carbon transition of its energy mix.

In a new guideline, the National Energy Administration (NEA) has called on coal-mining regions to accelerate their development of wind and solar energy projects, promote clean energy substitution through the adoption of electric and hydrogen-powered mining trucks, use renewable energy for heating and cooling, and build smart microgrids for the supply and trade of green electricity.

By the end of the 15th Five-Year Plan period (2026-2030), the new energy development model in mining areas will have matured in basic terms, according to the NEA.

ALSO READ: Green projects power up China-ASEAN ties

The move is the latest step in China’s new energy development. By the end of September, China’s total installed renewable energy capacity stood at nearly 2.2 billion kilowatts, accounting for 59.1 percent of the nation’s total power capacity. In the first three quarters of the year, renewables generated about 40 percent of China’s total electricity. 

TOTO (TSE:5332) has just issued an updated full-year earnings forecast, lowering its outlook for the fiscal year ending March 2026. The revision follows interim results that outperformed expectations, supported by solid business in Asia and semiconductor-related demand.

See our latest analysis for TOTO.

TOTO’s announcement comes on the heels of modest year-to-date share price gains, up 3.38%. Even as the one-year total shareholder return remains in negative territory at -8.27%, upbeat interim performance and steady dividends caught some market attention. However, the muted longer-term returns suggest that sentiment is still cautious and momentum has not yet truly turned around.

If this shift in outlook has you thinking about new opportunities, now’s the perfect moment to broaden your radar and discover fast growing stocks with high insider ownership

With the guidance now reset and shares still trading at a modest discount to analyst targets, is TOTO an undervalued opportunity for patient investors, or are markets already accounting for any brighter prospects ahead?

TOTO is trading at a price-to-sales (P/S) ratio of 0.9x, which positions its valuation above the broader Japanese building industry. With the last close at ¥3,859, the market appears to be assigning a richer multiple to TOTO relative to peers.

The price-to-sales ratio assesses how much investors are paying for each unit of revenue. For industrial companies like TOTO, it’s a helpful indicator, especially when net earnings are volatile or impacted by one-off events. Unlike earnings, revenue generally remains less distorted by non-recurring items. This makes the P/S ratio useful for comparing similar firms within this sector.

Despite this higher multiple, TOTO’s valuation is considered good when measured against the average of its listed peers, which share the same 0.9x P/S ratio. However, it stands expensive compared to the broader industry P/S average of 0.5x. Factoring in the estimated fair price-to-sales ratio of 1.6x, there is an argument the market could eventually price the stock higher if revenue and market sentiment improve.

Explore the SWS fair ratio for TOTO

Result: Price-to-Sales of 0.9x (ABOUT RIGHT)

However, sluggish long-term returns and decelerating near-term momentum could challenge the valuation case if revenue growth does not accelerate as anticipated.

Find out about the key risks to this TOTO narrative.

While the price-to-sales ratio points to fair value, our DCF model takes a different stance. According to this approach, TOTO’s current share price of ¥3,859 stands above our calculated fair value of ¥3,338.87. This suggests the market may be overestimating the company’s future cash flows. Does this mean investors are paying too much for TOTO’s growth potential?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out TOTO for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 870 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match – so you never miss a potential opportunity.

If you see the story differently or want to explore the numbers on your own terms, you can quickly build your own view and Do it your way.

A great starting point for your TOTO research is our analysis highlighting 1 key reward and 3 important warning signs that could impact your investment decision.

Don’t limit your strategy to just one stock. Give yourself an edge by targeting investments with attributes that fit what you want for the future.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include 5332.T.

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