Consumer electronics
UPGRADE RATING
Accelerating shakeup in rechargeable battery
industry: favor accumulating Sanyo Electric,
Panasonic, reducing GS Yuasa
■ Upgrade sector weight: We upgrade our stance for the consumer electronics
sector from Underweight to MARKET WEIGHT. A key reason for the sector’s
outperformance in Mar-Apr was the decline of credit risks. We believe the time is
approaching for full-fledged long-term investment based on a return to quality.
The dimensions for evaluating companies and guiding stock picks, in our view,
are: (1) whether there have been structural changes to deliver earnings over the
next five years that exceed the historical peak and (2) themes such as the
environment, low-end products and subsidies. For Sanyo Electric, we raise our
TP to ¥220 from ¥200 and maintain our OUTPERFORM rating. Additionally, on
15 May, we raised our TP to ¥1,600 from ¥1,400 for Panasonic, and on 13 May,
raised our TP to ¥4,000 from ¥2,800 for Funai Electric. On the other hand, while
we maintain our UNDERPERFORM ratings, we raise our TPs for Sony to ¥1,800
from ¥1,000 and for Casio to ¥600 from ¥400.
■ Shift to low-end, volume zone; will TV demand exceed 200mn sets on
diffusion of TV/LCDs, small TVs? Sales of large-size TV sets, which grew
more than 40% YoY in Jan-Mar, have fallen to the 10% range temporarily in the
US and Europe and we expect demand for LCD TVs to decline to 26mn units in
Apr-Jun (+10% YoY) from 29mn units in Jan-Mar (+30%). However, for both
large- and small/medium-sized TVs, low-end product sales continue to be brisk,
and we expect the LCD panel supply-demand tightness to continue into 2H 2009.
Panasonic has revealed a strategy to move aggressively into BRICs and Next 11
emerging markets. We also pay close attention to Sony, which is at risk of losing
market share.
■ Environment, hybrid vehicle batteries (nickel-metal hydride to be
mainstream EV battery for time being; favor companies supplying both
these and lithium-ion in the medium to long term): We are bullish on Sanyo
Electric and Panasonic, both of which supply automotive nickel-metal hydride
batteries. On the other hand, we are bearish on GS Yuasa, on which we initiated
coverage on 11 May, with a ¥330 TP, as it supplies only lithium-ion batteries for
automobiles. Rechargeable batteries fall into the category of equipment
manufacturing, and not only does Sanyo Electric supply small rechargeable
batteries, a cash cow, but they are also starting to earn profit from nickel-metal
hydride batteries for hybrid electric vehicles (HEV) and have prime mover
advantage.
■ Subsidies: Sector themes are government policies (for appliances, batteries etc)
in China, Japan, etc, and the download contents business, which is relatively
unsusceptible to economic fluctuations. The company we believe stands to
benefit the most in these areas is Panasonic. On the weekend after the 15 May
start of the domestic eco point program, major consumer electronics retailers
saw a 50% YoY increase in TV sales and 40% increase in sales of white goods,
so the program should serve as a tailwind to Panasonic, which generates a high
percentage of sales in the domestic market. In China, we note that TV sales are
strong and white goods sales are growing YoY.
Table of Contents
GS Yuasa (6674 / 6674 JP) 5
Panasonic Corporation (6752 / 6752 JP) 6
Sony (6758 / 6758 JP) 7
Sanyo Electric (6764 / 6764 JP) 17
Pioneer Corporation (6773 / 6773 JP) 22
Casio Computer Co Ltd (6952 / 6952 JP) 26