Mitsubishi Electric Earnings: Record Revenue, Operating Profit; Fair Value Raised 3% to JPY 2,270

We raise our fair value estimate to JPY 2,270 per share from JPY 2,200 for Mitsubishi Electric, reflecting the company’s remarkable first-half performance across segments except for the factory automation, or FA, systems segment. We raise our forecast on companywide revenue growth in fiscal 2024 to 3.9% from 2.3% and nudge up operating margin to 7.5% from 6.6%, largely due to outperformance in the infrastructure business and the air conditioning systems segment. Meanwhile, we don’t think the company will maintain the current revenue growth trend over the longer term. As a result, we keep our revenue compound annual growth rate forecast of 1.9% between 2024 and 2028 and reiterate our midterm operating margin of 8.0% in fiscal 2028 companywide. We continue to expect FA and air conditioning systems to be the primary revenue drivers over the medium term, with their sales growing at CAGRs of 6.0% and 5.4%, respectively, between 2024 and 2028. The shares are currently fairly valued.