Panasonic’s 1Q earnings surge 44% y-o-y

by **Cals** Tue 26 Aug 2014, 09:25

Business & Markets 2014

Written by MIDF Research

Monday, 25 August 2014 09:36

Panasonic Manufacturing Malaysia Bhd
(Aug 22, RM21.42)
Maintain buy with target price of RM24.43: Panasonic’s earnings for the first quarter ended June 30 of financial year 2015 (1QFY15) surged 44% year-on-year (y-o-y) to RM23.2 million. This was within our expectations, accounting for 25% of our full-year forecasts. The company’s revenue for the quarter under review came to RM250.5 million, an increase of 14.0% y-o-y. The growth was led by stronger sales in the domestic and export markets for both its segments: home appliance products and fan products.
Sales of fan and home appliance products grew by 14.6% y-o-y and 13.8% y-o-y respectively. This was in tandem with the group’s revenue growth. The improvement in the sales of fan products was mainly attributed to the aggressive promotional activities in the domestic market for ceiling fans. This was supported by sales in the Middle East countries and also market expansions to Latin America.
In the home appliances segment, the growth in sales was due to higher exports of home showers to neighbouring countries such as Thailand, Vietnam and the Philippines.
1QFY15’s double-digit earnings growth of 44.8% y-o-y outpaced the group’s revenue growth. Pre-tax margins for the home appliances and fan segments expanded by 2.8 percentage points (ppts) and 2.7 ppts respectively. The growth was attributed to better cost management practices such as the adoption of a more efficient raw material management system. As a result, overall pre-tax margins and net profit margins expanded 2.7ppts and 2ppts to 12% and 9.3% respectively.
For FY14 ended March 31, Panasonic declared a net dividend of 69.3 sen per share, which was almost 50% lower than its FY13 dividends. The reduction in dividends came about after the group decided to follow the global Panasonic policy of a dividend payout ratio of 50% from its profit after tax, and an additional 10% if the group reaches its sales target.
We are maintaining our “buy” recommendation on Panasonic with an unchanged target price of RM24.43 per share. Our valuation is based on 2015 price-earnings ratio (PER) of 16 times on the group’s forecast 2015 earnings per share of 152.7 sen per share. The assigned multiple is derived from Panasonic’s five-year historical PER. Despite the normalisation in dividends, we still believe in Panasonic’s long-term growth as a leading manufacturer of home appliances and fans. — MIDF Research, Aug 22

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This article first appeared in The Edge Financial Daily, on August 25, 2014.[/size]