Wide-Moat Schneider Electric Is Well-Positioned for Secular Growth; Lifting our Valuation

We raise our fair value estimate for Schneider Electric to EUR 168 from EUR 160 and maintain its wide moat rating after taking a fresh look at the business. Several acquisitions have expanded Schneider’s digital capabilities, leveraging its leading market share in electrical products to further integrate itself with end users’ operations and create more meaningful relationships with customers. The shift away from purely transactional sales toward stickier digital revenue and its continuous focus on productivity improvements have lowered the cyclicality of the business and support our five-year average 18.6% EBITA margin assumption, an increase from 18.2%. The market is correctly placing a premium multiple on Schneider due to its attractive outlook and its superior free cash flow generation to peers. Shares appear fairly valued.