2025-06-12-花旗集团-三菱电机（6503）_三菱电机（6503.T）_重申买入——有大量机会重获市场信心_14页_569kb

Citigroup Research on Mitsubishi Electric (6503.T): Maintain Buy Rating, Raise Target Price

Summary

Citigroup Research reaffirms its "Buy" rating on Mitsubishi Electric (6503.T) and raises the target price from ¥3,500 to ¥3,800. This update is based on recent results, events like the IR Day and a roundtable meeting with executives. The outlook remains bullish due to restructuring efforts aimed at improving Return on Invested Capital (RoIC) and inventory cycles contributing to profit growth.

Market Confidence and Sentiment

• The announcement of a ¥1 trillion annual M&A budget over three years negatively impacted market sentiment, leading to concerns about prioritizing M&A over RoIC.
• At the IR Day, CEO Kei Uruma emphasized M&A but was interpreted as downplaying RoIC, though clarifications aimed to resolve misunderstandings. The market is now expected to have a better understanding of restructuring plans.

Financial Projections and Growth

• Citigroup forecasts operating profit growth for FY3/26 at +12% (adjusted for previous and guidance estimates).
• Despite competition in China and uncertainty in EV/smartphone industries, air conditioning systems and defense businesses are expected to drive revenue and profit growth.
• Financial metrics show improving gross margins, EBITDA margins, and net profit margins over the 2024-2028 period.

Valuation and Recommendation

• The target price of ¥3,800 is derived from a Sum of the Parts valuation model, using fair-value PER and EV/EBITDA multiples.
• Analysts believe the stock is undervalued, as current valuations do not fully account for restructuring expectations.
• Investment strategy involves targeting higher RoIC through restructuring, with a premium considered due to management's policies on RoIC and buyback potential.

Key Risks

• Costs could deviate from forecasts due to capital expenditure, power system demand, material costs, and currency fluctuations.
• RoIC remains a critical factor, and any underperformance could dampen investor confidence.

Prescriptions for Management

• Communicate M&A plans more integrally with RoIC and capital allocation strategies.

• Increase the visibility of restructuring candidates from ¥800 billion to ¥1 trillion.

• Highlight divestitures and personnel cuts to potentially increase investor tolerance for M&A.

• Overall, Citigroup maintains a "Buy" stance due to the company's structural reforms and expected double-digit profit growth, despite short-term market concerns.