Tag: Japan Market

Panasonic has implemented a huge restructuring several times, approximately for every 15 years, and recovered its profitability each time. On the other hand, we doubt Panasonic’s capability on strategic investment, as the company failed to address the changing environment in the global consumer electronics industry and consequently did not generate sufficient return from past investments. In fact, Panasonic’s revenue has been unchanged at around JPY 7 trillion-JPY 8 trillion, and its operating margin has ranged between 1% and 5% for more than two decades. 

Financial Strength 

Panasonic has a very strong financial position, with net cash of JPY 288 billion (USD 2.7 billion) at the end of March 2016, having improved its balance sheet from a net debt position of JPY 1 trillion (USD 9.5 billion) at the end of 2012. This improvement has been achieved through a combination of improved operating cash flow performance (the company produced an operating cash flow loss in 2012 but generated a combined JPY 1.80 trillion in operating cash flow over 2013-15), as well as sales of investments and property, plant, and equipment.

Panasonic’s June-quarter revenue was 29% up from the previous year exceeding our expectations. The automotive segment’s sales were 1.8 times as large as the previous year driving the revenue growth because of the lower base due to the pandemic. The appliance segment’s sales were 22% up from the previous year as demand for flat-panel TVs and digital cameras recovered. Revenue for the industrial solutions segment was 24% up from the previous year as a result of robust investment for semiconductors and data centers. Panasonic’s revenue and operating income forecast for fiscal 2021 to JPY 7.3 trillion and JPY 390 billion from JPY 7.15 trillion and JPY 360 billion, respectively. Our new operating income forecast is 51% up from the previous year, driven by automotive, connected solutions, and industrial solutions segments. 

Bulls Say’s 

• Panasonic has plenty of “one-off” earnings and cash flow upside available through exiting unprofitable products.
• If Panasonic can hit its fiscal 2019 corporate plan targets, it will generate earnings and cash flow growth that should support a higher valuation.
• Panasonic’s leading position in electric vehicle batteries puts it in a very strong position in a potentially revolutionary technology.

Company Profile 

Panasonic is a conglomerate that has diversified from its consumer electronics roots. It has five main business units: appliances (air conditioners, refrigerators, laundry machines, and TVs); life solutions (LED lighting, housing systems, and solar panels; connected solutions (PCs, factory automations, and in-flight entertainment systems); automotive (infotainment systems and rechargeable batteries); and industrial solutions (electronic devices). After the crisis in 2012, former president Kazuhiro Tsuga has focused on shifting the business portfolio to increase the proportion of B2B businesses to mitigate the tough competition in consumer electronics products.

(Source: Morningstar)

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Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.