Keyence Maintains Margin Resilience Amid Headwinds With Another Quarter of Record Sales; Raising FVE

Keyence finished fiscal 2021, ending in March, with 40.3% revenue growth and operating margin improved to 55.4% from 51.4%, from previous year, suggesting strong margin resiliency amid rising components/logistics costs. We raise our fair value estimate to JPY 54,000 from JPY 51,000, to reflect higher operating margins over medium-term. Despite strong results, Keyence’s shares have fallen over recent months, as concerns over increasing uncertainties from the conflict in Ukraine and lockdowns in China have likely led investors to reconsider sales growth expectations that were previously too high. As a result, we think the company’s shares are now fairly valued.