Company Reports

We have fine-tuned Panasonic’s earnings forecasts and are lowering our operating income forecast for fiscal 2024 (ending March 2025) to JPY 470 billion from JPY 485 billion. The economic slowdown has been affecting several segments. Due to inventory adjustments in the air conditioner business in Europe, we lowered sales forecasts for the lifestyle segment, and due to continued sluggish demand for factory automation equipment, we lowered forecasts for the connect and industry segments.

We maintain our fair value estimate for Panasonic Holdings at JPY 1,700. While we are lowering our operating income forecasts for cyclical business segments due to the prolonged economic downturn, we are incorporating the continued impact of the Inflation Reduction Act from fiscal 2024 (ending March 2025) and beyond, making our earnings forecasts largely unchanged. While it was disappointing that Panasonic lowered its operating income guidance for fiscal 2023 to JPY 400 billion from JPY 430 billion, we believe that the weak fundamentals are largely factored into the current stock price. We view Panasonic's shares are currently slightly undervalued at around 4 times 2024 EV/EBITDA, which is at the lower end of the historical range.

Panasonic is a global electronics conglomerate with hundreds of subsidiaries that manufacture and sell items ranging from automotive products to home appliances. However, its core consumer electronics markets have come under assault as competitors with comparable technologies at lower price points have successfully muscled into Panasonic’s markets, reducing the industry’s profits.

In 2022, battery electric vehicles represented nearly 10% of global auto sales, up from a little less than 6% in 2021. Much of the growth occurred in China, which has been a leader in EV sales over the past decade. However, with national EV subsidies in China expiring in 2022 and far lower sales in the U.S. and Europe, the market questions if EV sales can continue to grow without subsides.

Panasonic’s operating income for the June quarter was JPY 90.4 billion, up 41% from the previous year, but was actually up 9% excluding the impact of the Inflation Reduction Act on the automotive rechargeable batteries. Overall, the reported numbers were generally in line with expectations, although there were some differences in the progress toward the full-year guidance by segment. While we maintain our sales and operating income forecasts, we slightly lift Panasonic’s fair value estimate to JPY 1,700 from JPY 1,650 mainly due to some minor adjustments on nonoperating items. We maintain our view that Panasonic will continue to achieve solid growth over the next few years due to expanding sales of automotive batteries and recovering demand for electronic devices and factory automation equipment, which we believe are mostly priced in.

Panasonic is a global electronics conglomerate with hundreds of subsidiaries that manufacture and sell items ranging from automotive products to home appliances. However, its core consumer electronics markets have come under assault as competitors with comparable technologies at lower price points have successfully muscled into Panasonic’s markets, reducing the industry’s profits.

We raise Panasonic’s fair value estimate to JPY 1,650 from JPY 1,400, mainly based on the more optimistic outlook for the automotive rechargeable battery business. At the company‘s strategy briefing held in early June, the company stated that it aims to increase its global production capacity for automotive rechargeable batteries to 200 gigawatt-hours by fiscal 2030 (ending March 2031). This is about four times the current capacity of over 50 GWh. Panasonic has been reluctant to build more plants as it has taken longer than expected to improve the profitability of the Nevada plant. We are therefore encouraged that Panasonic is now becoming more aggressive in capacity expansion. We believe that Panasonic’s shares are currently fairly valued.

Panasonic is a global electronics conglomerate with hundreds of subsidiaries that manufacture and sell items ranging from automotive products to solar panels. However, its core consumer electronics markets have come under assault as competitors with comparable technologies at lower price points have successfully muscled into Panasonic’s markets, reducing the industry’s profits.

Based on weaker demand and the change in currency assumptions, we have updated our earnings forecasts for three consumer electronics companies, revising Panasonic Holdings' fair value estimate to JPY 1,400 from JPY 1,450, and Casio Computer’s fair value estimate to JPY 1,650 from JPY 1,800. Sony Group’s fair value estimate per U.S. ADR is revised to $110 from $100 due to the stronger Japanese yen, while its fair value estimate per share is maintained at JPY 14,500. As indicated by the change in our fair value estimates, we believe that Casio is the most vulnerable to changes in the business environment, leading to the largest downward revision in its earnings forecast. On the other hand, Sony has been able to minimize the impact of the economic slowdown thanks to structural reforms implemented by current management. We believe that Sony is the most attractive of the three consumer electronics companies from a risk/reward perspective, although we believe that all three stocks are undervalued and have 20%-30% upside to their respective fair value estimates.

Panasonic is a global electronics conglomerate with hundreds of subsidiaries that manufacture and sell items ranging from automotive products to solar panels. However, its core consumer electronics markets have come under assault as competitors with comparable technologies at lower price points have successfully muscled into Panasonic’s markets, reducing the industry’s profits.

We have updated Panasonic’s earnings forecasts and maintained our fair value estimate of JPY 1,450, as positive and negative factors offset each other. Although we raise our revenue forecasts as a result of weaker Japanese yen assumptions, our operating income forecasts are lowered because of macro headwinds and upfront investments for rechargeable batteries. Meanwhile, we raise our long-term forecasts for the energy segment as the capacity ramp-up of rechargeable batteries is faster than we had anticipated. Our fair value estimate of JPY 1,450 corresponds to 5.4 times 2023 EV/EBITDA. Given the rally after the earnings announcement, we view Panasonic’s shares as currently slightly undervalued.

Panasonic is a global electronics conglomerate with hundreds of subsidiaries that manufacture and sell items ranging from automotive products to solar panels. However, its core consumer electronics markets have come under assault as competitors with comparable technologies at lower price points have successfully muscled into Panasonic’s markets, reducing the industry’s profits.

Panasonic is a global electronics conglomerate with hundreds of subsidiaries that manufacture and sell items ranging from automotive products to solar panels. However, its core consumer electronics markets have come under assault as competitors with comparable technologies at lower price points have successfully muscled into Panasonic’s markets, reducing the industry’s profits.

Panasonic Holdings’ June quarter results imply that the negative impact of ongoing headwinds, such as production constraints and increasing material and logistics costs, is larger than we had anticipated. Hence, we cut our fiscal 2022 (financial year ending March 2023) and 2023 (ending March 2024) operating income forecasts to JPY 365 billion and JPY 430 billion from JPY 420 billion and JPY 460 billion, respectively, and revise our fair value estimate to JPY 1,450 from JPY 1,500. Meanwhile, we reiterate our view that Panasonic’s shares are undervalued, as its margin expansion driven by the revenue growth of the industry and the energy segments is still underestimated by the market. Panasonic’s share price is currently trading at less than 0.8 times price/book, which is the lowest level in 10 years and thus we think the downside is limited. Our new fair value estimate of JPY 1,450 implies 11.4 times price/earnings and 5.2 times EV/EBITDA on a fiscal 2023 basis.

Panasonic is a global electronics conglomerate with hundreds of subsidiaries that manufacture and sell items ranging from automotive products to solar panels. However, its core consumer electronics markets have come under assault as competitors with comparable technologies at lower price points have successfully muscled into Panasonic’s markets, reducing the industry’s profits.

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.

Panasonic is a global electronics conglomerate with hundreds of subsidiaries that manufacture and sell items ranging from automotive products to solar panels. However, its core consumer electronics markets have come under assault as competitors with comparable technologies at lower price points have successfully muscled into Panasonic’s markets, reducing the industry’s profits.

Panasonic is a global electronics conglomerate with hundreds of subsidiaries that manufacture and sell items ranging from automotive products to solar panels. However, its core consumer electronics markets have come under assault as competitors with comparable technologies at lower price points have successfully muscled into Panasonic’s markets, reducing the industry’s profits.

Panasonic is a global electronics conglomerate with hundreds of subsidiaries that manufacture and sell items ranging from automotive products to solar panels. However, its core consumer electronics markets have come under assault as competitors with comparable technologies at lower price points have successfully muscled into Panasonic’s markets, reducing the industry’s profits.

We lift no-moat Panasonic’s earnings forecasts and raise our fair value estimate to JPY 1,500 from JPY 1,400, as a result of the stronger-than-expected demand for electronic components and devices, driven by the recovery in capital investment in a wide range of industries, such as autos, data centers, and semiconductors. Furthermore, as a result of its structural reforms, Panasonic succeeded in building up a more profitable corporate structure than before and recorded a 5.8% operating margin for the June quarter, which is higher than 0.3% of the previous year and 3.0% of the year before. While we view Panasonic’s shares as lacking near-term catalysts, we believe they are slightly undervalued.