Rating Outlook Upgrade

S&P Global Ratings revised Hitachi Ltd (TSE:6501) outlook to positive from stable on 4 September 2026, while affirming the company’s ‘A’ long‑term and ‘A‑1’ short‑term issuer credit ratings.

Financial Expectations

The agency projects Hitachi’s EBITDA margin to improve to the mid‑upper 16 % range over the next one to two years, up from 15.6 % recorded in fiscal 2025, which ended on 31 March 2026. It also expects the debt‑to‑EBITDA ratio to remain around 1.0× during the same period. S&P indicated that a further upgrade could be triggered if the EBITDA margin stays sustainably above 16 % and the debt‑to‑EBITDA ratio stays below 1.5× under disciplined financial management.

Cash Position and Management Discipline

Hitachi achieved a net cash position in fiscal 2025, driven by higher earnings, stronger operating cash flow, asset divestitures, and significant customer advances. The rating agency highlighted the company’s ability to maintain key financial ratios at favorable levels through improved cash‑flow generation and disciplined financial management, even as it increases investments and returns to shareholders.

Strategic Focus and Business Portfolio

Hitachi is concentrating resources on social infrastructure and IT service domains, where it anticipates structural demand growth. The corporate strategy emphasizes creating high‑value‑added services by combining product lines with IT services and control technologies. S&P expects future deployment of advanced AI‑driven service solutions across businesses to sustain competitiveness and revenue growth.

Business Unit Highlights

  • Power Grids: Expected to solidify its leading global position by capturing robust demand through enhanced production capacity and project execution capabilities.
  • Rail: Integration of the signaling business acquired in 2024 is seen as strengthening the rail business foundation.

Recent Divestitures

Hitachi has divested its automotive parts business, sold its entire stake in the construction machinery business, and exited its overseas air‑conditioning business over the past couple of years, reflecting a shift toward higher‑margin, technology‑focused operations.

Outlook Conditions

S&P Global Ratings noted that sustained earnings improvement and disciplined financial management are essential to keep the debt‑to‑EBITDA ratio around 1.0×. Should the EBITDA margin remain above 16 % and leverage stay under 1.5×, the agency may consider an additional upgrade of Hitachi’s credit outlook.