Raising Daikin’s FVE to JPY 12,100 on Better Earnings Outlook; Shares Still Overvalued

While no-moat Daikin’s first-quarter fiscal 2021 (year ending March 2021) operating profit of JPY 54.5 billion was down 39% year over year, largely attributable to negative impact from the coronavirus outbreak, this was better than our expectation on the back of the firm’s efforts to capture recovery sales swiftly and continue focus on reducing fixed costs. As a result, first-quarter operating profit was 17% higher quarter over quarter with operating margin improving to 9.4% from 7.7%.