Makita Earnings: Expect Moderate Near-Term Sales Decline; Midterm Prospects Underestimated

Makita’s December quarter revenue decline of 4% year on year was not as bad as we had expected, in key regions like Europe, Japan, and North America. As a result, we now expect a more moderate decline in the second half of fiscal 2023, ending March 2024, and revise our revenue assumption for the full year to a 5% year-on-year decline, up from an 8.5% decline. However, we maintain our fair value estimate of Makita at JPY 4,600, as our medium-term projection remains largely unchanged. We continue to expect distributor inventories to become digested in the second half of 2024 and housing construction activity in key markets to pick up, leading to improved sales and profitability, which we think the market is underestimating. As such, we believe Makita’s shares are undervalued.