Increasing Material Costs Hit Panasonic’s Q3 Profitability; JPY 1,500 FVE Maintained

We refreshed Panasonic’s earnings forecasts under the new business segmentation and maintain our fair value estimate of JPY 1,500. Although Panasonic’s December quarter results were below our expectation as the company was not able to fully pass on the increasing material cost, we maintain our view that high revenue growth industry and energy segments will drive Panasonic’s solid margin expansion in the medium term. Our fair value estimate of JPY 1,500 corresponds to 14 times 2022 price/earnings and 4.7 times enterprise value/EBITDA. Although it lacks near-term catalysts, we believe the downside for Panasonic’s shares is limited as shares currently trade around 1 times price/book, as a result of the decline over the past few months.