Keyence Earnings: Historically High Revenue and Gross Margin Amid Headwinds; Fair Value Increased

We raise our fair value estimate for wide-moat Keyence to JPY 63,700 from JPY 63,000, as we expect the company will weather the current headwinds better than our previous expectations. The company achieved a historically high gross margin of 84.1% in the September quarter, which has been improving since the September quarter of fiscal 2022 (ending March 2023), when the company revised its products to cover the higher logistics and component costs amid the supply chain disruptions caused by covid-19. We believe the company will maintain and further improve gross margin by continuously utilizing its specialization in the vision sensor/machine vision field to provide value-added solutions that address urgent issues such as rising wages and high energy costs.