KEY INVESTMENT HIGHLIGHTS

• FY20 earnings below expectation

• FY20 normalised net profit was marginally higher at RM111.2m

• 4QFY20 normalised earnings dipped by 1.4%yoy to RM25.2m

• FY21F/FY22F earnings revised in anticipation of potentially weaker demand ahead

• Maintain NEUTRAL with a revised TP of RM29.62

FY20 earnings below expectation as normalised net profit of RM111.2m made up 93% of our full year estimates but was largely within consensus’ forecast at 104%. We have excluded foreign exchange gain from our normalised PAT. A dividend of 183.0sen was declared, falling short of the 230.0sen we had anticipated.

FY20 normalised net profit was marginally higher at RM111.2m as revenue fell by 6.7%yoy to RM1052.0m. Panasonic Manufacturing Malaysia Bhd (Panasonic)’s net profit was largely unchanged albeit a dip in revenue mainly due to lower raw material cost and lower advertising and promotional costs. For the full year fan products and others saw PBT dropped by 15.1%yoy to RM67.3m although home appliances PBT rose 12.0%yoy to RM67.1m. Sales in Malaysia declined by 11.0%yoy to RM426.6m while it improved in Asia ex Malaysia and Japan by 2.0%yoy to RM356.5m.

4QFY20 normalised earnings dipped by 1.4%yoy to RM25.2m as revenue fell by 28.9%yoy to RM204.7m. Revenue fell due to weaker demand from home appliances (-12.4%yoy) and fan products (- 6.3%yoy). Geographically, local and exports to Asia ex Japan and Malaysia declined by 15.4% and 10.2% respectively. Net profit did not decline as sharply as revenue due to lower raw material cost and lower advertising and promotional expenses.

FY21F/FY22F earnings revised in anticipation of potentially weaker demand ahead. As we expect consumer sentiment to remain cautious amid the pandemic and in view of lockdowns that occurred in the various countries that Panasonic exports to, we think that sales may be sluggish in 1QFY21. Moreover, its factory has halted operations during the Movement Control Order (MCO). As such, we revise our FY21F and FY22F earnings forecasts downwards by -30.8% and -14.2% respectively. Cushioning the drop in sales will be lower raw material costs.

Target price. Our target price is revised to RM29.62 (previously RM30.66) which is based on pegging the FY22F EPS of RM2.11 per share to PER of 14.0x. The assigned PER multiple, which is the group’s three year average historical PER, is unchanged.

Source: MIDF Research - 30 Jun 2020