Japan Specialist

Mark Chadwick

Equity Bottom-Up

<ul>
<li>Nidec is the best stock in Japan to play the rising adoption of EVs</li>
<li>The company is already dominating the largest E-Axle market in the world and will benefit from growing economies of scale</li>
<li>We think the company can hit its mid-term targets and see over 30% upside for the stock</li>
</ul>


Nidec is the best stock in Japan to play the rising adoption of EVs
The company is already dominating the largest E-Axle market in the world and will benefit from growing economies of scale
We think the company can hit its mid-term targets and see over 30% upside for the stock


Nidec (6594 JP) | The Second Coming of Nagamori

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

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.

<ul>
<li>Nidec earnings were worse than we feared as 4Q OP was just ¥36.9bn below even our ¥40bn estimate and far below consensus at ¥48.5bn. </li>
<li>This was despite a 4.9% top line beat and there were some signs of kitchen sinking in our view. </li>
<li>Nevertheless, guidance for ¥210bn in OP next year, while below consensus, still feels aggressive in our view.</li>
</ul>


Nidec earnings were worse than we feared as 4Q OP was just ¥36.9bn below even our ¥40bn estimate and far below consensus at ¥48.5bn. 
This was despite a 4.9% top line beat and there were some signs of kitchen sinking in our view. 
Nevertheless, guidance for ¥210bn in OP next year, while below consensus, still feels aggressive in our view.


Nidec – Small Precision Motors and Automotive Concerning

<ul>
<li>Consensus expectations for Nidec have drifted towards more reasonable levels in the last few months and a guidance miss is now baked in. </li>
<li>However, our data analysis suggests that while revenue may exceed consensus expectations OP could miss. </li>
<li>Guidance on the other hand could be strong, but with multiples elevated that does not mean there is upside risk here.</li>
</ul>


Consensus expectations for Nidec have drifted towards more reasonable levels in the last few months and a guidance miss is now baked in. 
However, our data analysis suggests that while revenue may exceed consensus expectations OP could miss. 
Guidance on the other hand could be strong, but with multiples elevated that does not mean there is upside risk here.


Nidec – Weakness Should Be Understood but Downside Risk at Earnings Remains

Independent Insight Provider, Japanese equities, LightStream Research

Scott Foster

Independent Insight Provider, Japanese equities

<ul>
<li>Nidec plans to nearly triple speed reduction gear capacity this fiscal year and aims to overtake market leader HDS by 2025. That would require another tripling of capacity.</li>
<li>The investments look manageable. The issues are price competition and profit margins, particularly for HDS.</li>
<li>Positive for Nidec, in the long term. Negative for HDS. More details expected when Nidec announces results on Thursday.</li>
</ul>


Nidec plans to nearly triple speed reduction gear capacity this fiscal year and aims to overtake market leader HDS by 2025. That would require another tripling of capacity.
The investments look manageable. The issues are price competition and profit margins, particularly for HDS.
Positive for Nidec, in the long term. Negative for HDS. More details expected when Nidec announces results on Thursday.


Nidec (6594 JP): Robot Gear Expansion to Put Pressure on HDS (6324 JP)

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

NTT (Nippon Telegraph & Telephone) / Event-Driven

<ul>
<li>On 7 April, the JPX announced the changes to the Free Float Weights (FFW) for the TOPIX Index. There are some big changes due to the updated FFW methodology.</li>
<li>From April to June, we see a one-way turnover of 2.87% and a one-way trade of ¥2,285bn. Some stocks have opposite way flows in different months.</li>
<li>Stocks with inflows outperformed stocks with outflows from Oct-Dec 2021 before giving up all the gains. These stocks have started to outperform and could continue outperforming over the next quarter.</li>
</ul>


On 7 April, the JPX announced the changes to the Free Float Weights (FFW) for the TOPIX Index. There are some big changes due to the updated FFW methodology.
From April to June, we see a one-way turnover of 2.87% and a one-way trade of ¥2,285bn. Some stocks have opposite way flows in different months.
Stocks with inflows outperformed stocks with outflows from Oct-Dec 2021 before giving up all the gains. These stocks have started to outperform and could continue outperforming over the next quarter.


TOPIX FFW Transition - Big Flows from April to June

Japan

NIDEC CORPORATION is the world's leading manufacturer of small precision motors mainly used in HDD and optical disk drives. The company has extended its focus to the home appliance and automotive markets. NIDEC is active in M&A and its subsidiaries include the world's leading manufacturers of LCD panel handling robots and camera shutters.

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Nidec Corp (6594 JP)

Nidec (6594 JP) | The Second Coming of Nagamori

Nidec is the best stock in Japan to play the rising adoption of EVs. The company already dominates the largest market in the world for e-Axles. We...

Mark Chadwick

Nidec – Small Precision Motors and Automotive Concerning

Nidec earnings were worse than we feared as 4Q OP was just ¥36.9bn below even our ¥40bn estimate and below consensus at ¥48.5bn. Guidance for...

Mio Kato

Nidec – Weakness Should Be Understood but Downside Risk at Earnings Remains

Our data analysis suggests that Nidec revenue may exceed consensus expectations while OP could miss. Guidance on the other hand could be strong,...

Mio Kato

Nidec (6594 JP): Robot Gear Expansion to Put Pressure on HDS (6324 JP)

Nidec planning to nearly triple output of speed reduction gears this year and overtake HDS by 2025. That would require another tripling of...

Scott Foster

TOPIX FFW Transition - Big Flows from April to June

Changes to the Topix FFW methodology will result in a turnover of 2.87% & trade of ¥2,285bn from April to June. There is a lot to trade on some...

Brian Freitas

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