Equity Analyst, LightStream Research

Aqila Ali

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

We previously mentioned that <a href="https://www.smartkarma.com/entities/nidec-corp" target="_blank" data-smartkarma-citation="entities:7245:1" rel="noopener">Nidec Corp (6594 JP)</a> is on the lookout for further acquisitions and that the company expects inorganic growth to be an important driver for achieving its JPY 2trn revenue target. Its recent acquisition was the compressor business of Whirlpool, while Omron is the latest deal (still in process) to drive the automotive parts business segment of Nidec.  As we mentioned in our previous insight, <a href="https://www.smartkarma.com/insights/our-first-look-at-nidec-too-good-to-short" target="_blank" data-smartkarma-citation="insights:30478" rel="noopener">Our First Look at Nidec: Too Good To Short</a>, early last year the Nikkei reported that Nidec is considering two to three small or medium-size acquisitions, worth up to JPY10bn each, aiming to expand its product line in the robotics and press machinery areas. As planned, the company did acquire two private companies in these areas of business since mid-2018:  Systeme + Steuerungen GMBH in Germany (Pressing machines) and CIMA S.p.A., in Italy (commercial and industrial motors) alongside around five acquisitions in the precision and gearbox motors product areas since then. However, Nidec did not specifically release any further details on the number of acquisitions it plans to make to reach its JPY 1trn revenue target in the Automotive segment, or how much funding it hopes to set aside for its M&amp;A deals in this area.
Nidec’s acquisitions include a decent number of private companies.  Looking into Nidec’s M&amp;A trend during the recent past, we have put forward a list of some large public companies and a few small companies based on certain key factors Nidec might consider when acquiring. However, it should be noted that the company may also acquire private companies who might prove to be key growth drivers for its business.  Moreover, we also looked into the product mix (making sure the companies selected had a presence in the automotive and industrial markets) and geographical coverage. We also carried out an analysis on the financial benefits that may possibly accrue to Nidec.  When combined, certain acquisitions may bring down Nidec’s profitability, as these companies’ have lower margins.  However, we believe that Nidec can still improve these companies’ performance post-acquisition, as it has done in the past.
We go through the details below.

We previously mentioned that Nidec Corp (6594 JP) is on the lookout for further acquisitions and that the company expects inorganic growth to be an important driver for achieving its JPY 2trn revenue target. Its recent acquisition was the compressor business of Whirlpool, while Omron is the latest deal (still in process) to drive the automotive parts business segment of Nidec.  As we mentioned in our previous insight, Our First Look at Nidec: Too Good To Short, early last year the Nikkei reported that Nidec is considering two to three small or medium-size acquisitions, worth up to JPY10bn each, aiming to expand its product line in the robotics and press machinery areas. As planned, the company did acquire two private companies in these areas of business since mid-2018:  Systeme + Steuerungen GMBH in Germany (Pressing machines) and CIMA S.p.A., in Italy (commercial and industrial motors) alongside around five acquisitions in the precision and gearbox motors product areas since then. However, Nidec did not specifically release any further details on the number of acquisitions it plans to make to reach its JPY 1trn revenue target in the Automotive segment, or how much funding it hopes to set aside for its M&amp;A deals in this area.
Nidec’s acquisitions include a decent number of private companies.  Looking into Nidec’s M&amp;A trend during the recent past, we have put forward a list of some large public companies and a few small companies based on certain key factors Nidec might consider when acquiring. However, it should be noted that the company may also acquire private companies who might prove to be key growth drivers for its business.  Moreover, we also looked into the product mix (making sure the companies selected had a presence in the automotive and industrial markets) and geographical coverage. We also carried out an analysis on the financial benefits that may possibly accrue to Nidec.  When combined, certain acquisitions may bring down Nidec’s profitability, as these companies’ have lower margins.  However, we believe that Nidec can still improve these companies’ performance post-acquisition, as it has done in the past.
We go through the details below.

United States

Franklin Electric Co., Inc. designs, manufactures, and distributes electric motors, electronic motor controls, and related equipment.  The Company sells its products around the world primarily to original equipment manufacturers of pumps, petroleum equipment, compressors, fans, heating and air conditioning equipment, swimming pool equipment, medical furniture, and business machines.

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Franklin Electric Co (FELE US)

M&As Will Continue For Nidec

We previously mentioned that Nidec Corp (6594 JP) is on the lookout for further acquisitions and that the company expects inorganic growth to be an...

Aqila Ali

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