Increasing Our Fair Value Estimate for Schneider Electric to EUR 160

We increase our fair value estimate for Schneider Electric to EUR 160 per share from EUR 150 per share, based on the time value of money and increasing our medium-term assumptions. Our 2023-27 average organic revenue growth forecast increases modestly to just over 6%, with a more favorable view on medium-term structural growth drivers. The company exited 2022 with a strong backlog of orders, which will support revenue growth in 2023. At the end of fourth-quarter 2022, the company had a backlog equivalent to six months of revenue. This is almost twice the size of its historic backlog rates, which means management has an unusually high level of visibility on 2023 revenue. As such, we have also increased our 2023 revenue growth forecast to nearly 10% on an organic basis, up from low single digits. We expect positive pricing on the backlog as well as some productivity gains to expand the adjusted EBITA margin by 20 basis points to 17.8% in 2023. We maintain our wide moat rating.