Mitsubishi Electric Earnings: Profit Guidance for 2024 Seems Aggressive Barring Drastic Changes

Mitsubishi Electric’s, or MEC’s, results for fiscal 2023 (ending March 2024), were met with a very strong market reaction, as its record high operating income of JPY 329 billion and full-year guidance of JPY 400 billion for fiscal 2024 exceeded market expectations. However, the company plans to improve its operating margin to 7.5% from 6.2% through restructuring initiatives, price hikes, and properties/assets sales, with flat sales growth for the current fiscal year, which seems overly bullish. While we expect further details on the restructuring to be disclosed in the investor relations day at the end of May, we think the market has overreacted to the aggressive guidance and market expectations for MEC’s margin expansion are too high.