Denso Earnings: Expecting Further Top-Line Growth in 2023; Guidance Is Conservative

We believe Denso's fiscal 2023 (ending March 2024) revenue guidance of JPY 6.3 trillion, which implies a 1.6% year-on-year decline, is too conservative. While the stronger Japanese yen and declining sales of non-battery electric vehicles, or BEVs, in China will be negative factors, we believe that the recovery in global auto production and increasing sales of BEV components (such as inverters) will continue to drive Denso's sales growth. Further, Toyota's plan to produce 10.1 million vehicles this fiscal year, which is a 10.6% year-on-year increase and in line with our expectations, is another reason we believe Denso's guidance is conservative. As a result, we maintain our 2023 revenue forecast of JPY 6.6 trillion, up 3.8% year on year, and our fair value estimate of JPY 9,100. We believe Denso's shares are currently fairly valued.