Analyst Note| Jason Kondo |
Keyence realized another record quarterly revenue for the first quarter (ending on June 20, 2021) of fiscal 2021, surpassing its previous peak in the last quarter by about 5% and increasing 54.5% year on year, while quarterly operating margin was also near peak levels, similar to the previous quarter at 55%. With favorable results beating our expectations, we raise our fair value estimate to JPY 46,000 from JPY 42,000 to account for higher revenue growth throughout the projection years. Despite our revised expectation that Keyence will maintain double-digit growth over the next five years, we believe the company’s shares are overvalued, as current market expectations seem to imply even higher top-line growth. However, we note that over the near term, Keyence is well-positioned to weather the current supply-side problems regarding procurement of materials and electronic components, compared to other factory automation, or FA, players, as a result of its inventory management.