Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

Securities analyst covering electronics, precision equipment & robotics, engineering, construction, transport and other sectors for more than 25 years in Japan and 3 years in Korea. Permanent resident of Japan.

Senior Technology Analyst, Japanese Equities

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

Equity Bottom-Up

Mitsubishi Electric has dropped almost 25% in five weeks, falling to the bottom of its recent trading range. A substantial downward revision to FY Mar-20 guidance - which does not incorporate the impact of COVID-19 on the company's operations in China or elsewhere - seems to be in the price. But uncertainty over next fiscal year may not be.The Chinese are already starting to go back to work, so the operating environment in China should start to improve. But the situation in Europe and America is deteriorating, pointing to additional weakness over the next several months. If sales start to recover in 2H of FY Mar-21, this plus cost cutting could result in single-digit profit growth in the year as a whole. And if the economy can adapt to COVID-19, operating profit could rise by close to 20% in FY Mar-22.This would bring the projected P/E ratio down to 12x, in our  estimation, EV/EBITDA to 5x and the PBR to just under 1.0x. Long-term investors should take another look at Mitsubishi Electric

Mitsubishi Electric has dropped almost 25% in five weeks, falling to the bottom of its recent trading range. A substantial downward revision to FY Mar-20 guidance - which does not incorporate the impact of COVID-19 on the company's operations in China or elsewhere - seems to be in the price. But uncertainty over next fiscal year may not be.The Chinese are already starting to go back to work, so the operating environment in China should start to improve. But the situation in Europe and America is deteriorating, pointing to additional weakness over the next several months. If sales start to recover in 2H of FY Mar-21, this plus cost cutting could result in single-digit profit growth in the year as a whole. And if the economy can adapt to COVID-19, operating profit could rise by close to 20% in FY Mar-22.This would bring the projected P/E ratio down to 12x, in our  estimation, EV/EBITDA to 5x and the PBR to just under 1.0x. Long-term investors should take another look at Mitsubishi Electric

Mitsubishi Electric (6503 JP): Start Looking to the Long Term