Komatsu - construction and mining trends in a global world

I last talked about the Japanese construction/mining equipment company Komatsu back in July (see the link here).  Given the caution from their peer Caterpillar (see here) recently, we should expect some downbeat thoughts. 

Here are the two key charts from their presentation document:

First, note that overall in Komatsu's fiscal Q2 (July-Sept 2013 year-on-year) sales actually went up but look at the big 27% decline in mining equipment sales (which is inline with what Caterpillar saw). 

So what is the major difference then?  Well Japan helps and HQ proximity to China has probably given the company a better experience than Caterpillar in Asia generally.  Certainly the stronger performing Asian markets have helped.  It is also interesting to note that all the 'traditional' markets were up year-on-year, although this also had something to do with easy comparisons from last year.

The other key chart is the positive pricing - and inevitably positive foreign exchange benefits due to the weaker Yen.  The former is certainly more high quality than the later...and also reflects what Caterpillar said. 

Essentially, the big differential with Caterpillar is that Asian focus, they are struggling too with that general mining sector decline...and that is not going to reverse soon.   

Last time I looked at the company I talked about Y1900 as a level for the shares (x8 ebit).  Applying similar multiples gets a lower target today. I would say though that the tone of the statement - including the positive pricing - gives a little more hope.

The chart below suggests Y2200 as a support but given all the above, around Y2000 seems better risk-reward to me all things considered and certainly a re-review level.  That level would also be closer to a 3% yield.