Elliott flagged undervaluation despite strong growth and global scale.

Lawsuit and peer underperformance added pressure for strategic changes.

Shares of Daikin Industries surged as much as 13.9% on Thursday after activist investor Elliott Investment Management remarked it would work with the enterprise to improve performance and narrow its valuation gap with peers. The stock later pared gains and was up about 11% as of 10:40 a.m. local time.

“Elliott’s significant investment in Daikin reflects our belief that the Company’s market-leading businesses and impressive track record of long-term growth are materially undervalued by the market,” Elliot mentioned in a statement Thursday.

Elliott added that Daikin’s upcoming medium-term management plan presents an opportunity “to address the root causes of this undervaluation by announcing concrete measures to expand margins, improve shareholder returns and review its portfolio of non-core businesses.”

The U.S. investment firm did not disclose the size of its investment in Daikin Industries, but Japanese financial newspaper Nikkei reported Wednesday that Elliott Investment Management has acquired about a 3% stake.

Before Thursday’s rally, Daikin shares were little changed so far this year. Peers including Mitsubishi Electric and Hitachi have gained about 30% and 7.4%, respectively, while Panasonic has risen 46%. This also touches on aspects of wall street.

Elliott’s statement comes after Daikin remarked April 10 that a class action lawsuit had been filed in the U.S. against the Japanese corporation and others over allegations that they conspired to artificially boost prices for cooling equipment.

“In the complaint, the plaintiff seeks damages and other relief from the defendants, but no specific amount claimed by the plaintiff has been disclosed,” Daikin stated.

Demand for heating, ventilation and air conditioning, or HVAC systems, has surged as data center construction accelerates, while prolonged heatwaves have also boosted usage among households and commercial users.

Daikin, founded in 1924, is one of the largest Japanese companies focusing on heating, ventilation, and air conditioning and chemicals. The corporation operates in over 170 countries, including Japan, China and North America.