MEC Earnings: Strong Automotive Sales Offset by Weaker Air Conditioner and Factory Automation Demand

Mitsubishi Electric’s, or MEC’s, December quarter revenue grew 1.5% year on year, with stronger-than-expected automotive equipment sales growth offset by weaker air conditioner, or A/C, and factory automation, or FA, systems sales. December quarter automobile sales grew 20% year on year, due to a recovery in automobile production. On the other hand, A/C sales declined 8% year on year, compared with 4% growth in the September quarter, due to channel inventory adjustments and sluggish end-demand in Europe/Asia. We revise our fiscal 2023 and 2024 revenue assumptions (ending March 2024 and 2025) to 4% growth and 2% growth, respectively, from 1% growth and 4% growth, after reflecting stronger automobile equipment sales for 2023 and weaker recovery of A/C and FA sales in 2024. Nonetheless, our medium-term outlook is unchanged and we maintain our fair value estimate for MEC at JPY 2,200, implying its shares are fairly valued.