Mitsubishi Electric Corp.

The stable outlook reflects our view that Mitsubishi Electric will maintain its very sound financial position for the ratings, supported by conservative financial management, over the next one to two years. We also expect profitability to recover to levels commensurate with the rating as the impact of the parts shortage peters out in fiscal 2022 and thereafter. We could consider downgrading Mitsubishi Electric if we see an increased likelihood of either of the following scenarios: Mitsubishi Electric's EBITDA margin remaining below 11% in fiscal 2022 and thereafter due to a subdued global economy or weakening competitiveness of its mainstay businesses; or, The company being unable to maintain a net cash position due to growth investments, such as large acquisitions. We

...Mitsubishi Electric Corp.'s revenue is likely to grow solidly in the next one to two years. Orders are strong for its mainstay factory automation systems and power semiconductors as economies recover from the COVID-19 pandemic. Demand is also strong for air conditioners in the U.S. and Europe. Consolidated performance has so far suffered little from an ongoing parts shortage, which has delayed deliveries in some segments, such as energy and electric systems, automotive equipment, and air conditioners. Consolidated revenue is likely to recover in fiscal 2021 (ends March 31, 2022) to pre-pandemic levels. We expect revenue of nearly Ñ4.5 trillion in fiscal 2021, steadily increasing to about Ñ4.6 trillion-Ñ4.7 trillion in fiscal 2022. Pressure on our rating on the company may increase if profitability recovers slower than we assume. We expect the EBITDA margin to only inch up to 10.5%-10.9% in fiscal 2021. This is because the parts shortage and higher costs for materials and distribution have...

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