Halal Conglomerate Stock Hitachi and Its Business of Social Innovation
The Japanese company’s nature of business makes it tayyib too.
What used to be a single factory making mining equipment at the start of the last century, Hitachi Ltd today is a sprawling empire comprising over six hundred subsidiaries across industries as diverse as energy, railways, industrial machinery and digital systems. And that after intensive downsizing and restructuring for the past decade.
Despite the seeming complexity of the corporate structure, Hitachi is now mainly about these three businesses: Digital Systems & Services (DSS), Green Energy & Mobility (GEM) and Connective Industries (CI) — with the first two being the group’s key drivers of growth offering digital transformation and green transformation solutions respectively.
Muslim investors should consider Hitachi for its exposure to secular sustainability trends such as digitalisation across sectors, clean energy and low-carbon transport.
Looking up
Thanks to a healthy demand for digital and green transformation solutions, core sectors, DSS and GEM, have been growing briskly, lifting the group wide profitability and cash flow generation. At the same time, strategic asset disposals are strengthening the capital base and allowing the company to invest in strategic growth areas, primarily generative AI and green technologies.
Hitachi’s high-margin Lumada business, the heart of DSS, has been benefiting from sweeping digitalisation initiatives in Japan and surging data infrastructure needs internationally. Meanwhile, acquisitions like that of Thales’ Ground Transportation Systems (GTS) are expected to significantly broaden GEM’s overseas footprint.
Financials
The latest quarter 1 of fiscal 2024 delivered positive results, with Hitachi coming closer to fulfilling its mid-term management plan. The overarching goal of the latter has been to increase the enterprise value of the group. In the past five years, the Tokyo-listed stock returned 455% in total including dividends and 119% in the last 12 months, more than the local Japanese industry and market. At 1.0%, Hitachi’s dividend is not high but the payouts have been stable and are anticipated to keep growing.
Takeaway: A Halal Japanese Stock for Muslim Investors
Hitachi promises to continue refocusing its business portfolio as well as its governance system in an effort to become ever more agile at identifying and capturing new opportunities. The financials have picked up as a result. As has corporate value: at a P/E of more than 20x, the stock is not exactly cheap. But the price is expected to rise still further, by almost 10% in a year’s time based on the analysts’ consensus. Regardless of the entry price, Hitachi being both halal and tayyib shows long-term potential for Muslim investors.
Disclaimer: Nothing you read on Tayyib Finance constitutes financial advice. Nor is there a guarantee of Shariah compliance of any particular stock at any particular time, since ‘Shariah compliance’ is fluid depending on the provider of judicial opinion and must be regularly affirmed. Do your own research.