Results

• In line – 9MFY18 core PAT of RM99.6m (-9.6% YoY) accounted for 73.8% and 72.2% of our and streets’ full year estimates, respectively.

Deviations

• None.

Dividend

• None

Highlights

• QoQ: 3QFY18 core PAT mushroomed by 54.4% to RM37.1m from RM24.0m in 2QFY18. This was mainly due to increased shower sales to Vietnam, Philippines and Malaysia from the prolonged rainy season.
• YoY: PAT rose 26.9% to RM37.1m in 3QFY18 as a result of aggressive marketing activity domestically, better sales mix in the home appliances segment, increased ceiling fan sales as well as reason mentioned above.
• YTD: 9MFY18 core PAT contracted 9.6% to RM99.6m mainly due to reduced contribution from Panasonic’s associate trading partner (9MFY18: RM3.0m vs 9MFY17: RM8.3m) and poorer performance from the fan segment. This was in spite of better vacuum cleaner sales to the middle-east as a result of the improved economic environment in the region.
• Prospects: Improving economic environment in the Middle East bodes well for the group going forward (as they sell high-margin vacuum cleaner products to the region). Panasonic face significant headwinds ahead due to (1) Strengthening ringgit as majority of export sales are denominated in foreign currencies; and (2) Increasingly expensive key commodities (aluminum, steel and copper) putting pressure on margins. (figure 5)

Risks

• Significant rise in key commodity prices.
• Strengthening of the ringgit would slow down export sales growth.
• Economic uncertainty in the Middle East.

Forecasts

• Unchanged.

Rating

BUY (↔) TP: RM41.65

• Panasonic has shown robust growth, stable earnings track record, further room for growth (due to capacity expansion), healthy net cash position (RM10.20 / share) and a decent dividend yield.

Valuation

• We maintain BUY rating with an unchanged TP of RM41.65 based on 17x revised FY19 EPS RM2.45 (in line with its regional peers, see Figure 4).

Source: Hong Leong Investment Bank Research - 01 Mar 2018