Japan Technology: Hardware - Industrial Electronics: CARR 2Q: Favorable implications for MELCO and Pana, cost rises bear watching

Research evidence excerpt

Japan Technology: Hardware - Industrial Electronics: CARR 2Q: Favorable implications for MELCO and Pana, cost rises bear watching

Goldman Sachs Japan Technology: Hardware - Industrial Electronics

competition in the generative AI-related battery backup unit (BBU) business. Panasonic

Industry: Weaker-than-expected factory automation-related demand, stiffer

competition in the generative AI-related hybrid capacitor and circuit board material

businesses, or a longer-than-expected downturn in demand for smartphones and other

consumer electronics.

Price Target Risks and Methodology - Mitsubishi Electric

Valuation methodology: We are Buy rated. Our 12-month target price of ¥7,400 is

based on an FY3/28E EV/EBITDA of 14X (based on the correlation between EV/EBITDA

and EBITDA margins of global competitors).

Key downside risks: Industrial automation systems (FA): Marginal profit growth on

top-line expansion failing to offset higher depreciation from the company’s new

production facilities if the slowdown in orders is prolonged. Industrial automation

systems (automotive equipment): A lack of progress exiting from the car multi-media

business, challenges finding partners in the CASE business, or a sharp slowdown in

production at client automakers. Home appliances (HVAC): Challenges achieving

production scale due to difficulties procuring components and other factors, or

deteriorating margins in the ATW business in a stronger competitive landscape. Power

semiconductors: Inability to secure sufficient sales/orders to cover new capex, or more

intense price competition on significant investment by Chinese companies and other

rivals. Elevator & escalator business: Stalled new construction demand in China and