Denso Showing Continued Progress With Electrification and ADAS Product Sales; Raising FVE

Denso’s fiscal 2021 third-quarter sales, ending in December 2021, declined 0.5% year on year, which was slightly better than our expectations as strong electrification, ADAS, and semiconductor/sensing product growth lessened the impact of sales for “traditional” components, like powertrain and thermal systems used for gasoline cars. We raise our fair value estimate to JPY 8,800 from JPY 8,000, as we are increasingly convinced that Denso is well-positioned to capitalize on CASE-related trends in the automotive industry. We think shares are fairly valued and with shares recovering after falling throughout most of January (likely from OEMs slowing down production amid the components crunch), we think the market also had a similar impression on Denso’s progress in building a track record with its newer value-added products.