Negative Impact of Higher Material Costs To Be Alleviated; Panasonic’s FVE Trimmed to JPY 1,450

Panasonic Holdings’ June quarter results imply that the negative impact of ongoing headwinds, such as production constraints and increasing material and logistics costs, is larger than we had anticipated. Hence, we cut our fiscal 2022 (financial year ending March 2023) and 2023 (ending March 2024) operating income forecasts to JPY 365 billion and JPY 430 billion from JPY 420 billion and JPY 460 billion, respectively, and revise our fair value estimate to JPY 1,450 from JPY 1,500. Meanwhile, we reiterate our view that Panasonic’s shares are undervalued, as its margin expansion driven by the revenue growth of the industry and the energy segments is still underestimated by the market. Panasonic’s share price is currently trading at less than 0.8 times price/book, which is the lowest level in 10 years and thus we think the downside is limited. Our new fair value estimate of JPY 1,450 implies 11.4 times price/earnings and 5.2 times EV/EBITDA on a fiscal 2023 basis.