In this briefing:
- Double-Digit Growth Continues; OP Growth of More than 4.9% Likely for FY03/19
- Robotics Earnings: Nabtesco and HDS Results Strong; Still No Reason to Own Fanuc
- Fanuc Bullish Trade Points off of Base Line Support
1. Double-Digit Growth Continues; OP Growth of More than 4.9% Likely for FY03/19
- Tsubakimoto Chain Co’s (6371 JP) 3QFY03/19 results were strong, with revenue continuing to witness double-digit growth at +13.1% YoY, although fell slightly below consensus estimates. On OP, Tsubakimoto witnessed only +5.2% YoY growth for 3Q. This was, however, above consensus and our estimates.
- Nine-months cumulative figures look attractive as well, with both revenue and OP witnessing double-digit growth rates at 13.2% YoY and 16.0% YoY respectively as of The company’s revenue continues to trend upwards in a healthy fashion, while margins managed to reach 10.1% this quarter slightly below the 10.8% OPM achieved in 3Q last year.
- A majority of revenue growth came from the company’s Materials Handling Equipment segment, which has witnessed strong recovery thanks to the recently acquired Central Conveyor Company in this segment. The growth was followed by the company’s steadily growing business segments, Chain segment and Power Transmission segment. This was true for the company’s OP as well. The Materials Handling Equipment segment continued to make operating profits this quarter, followed by the Chain segment and the Power Transmission segment. The Auto Parts segment, however, continued to witness slow growth in revenue and pressure in its margins this quarter as well.
- Despite strong results, post-release, Tsubakimoto opened -9.9% down on Friday from Thursday’s close. The stock, however, rallied 8% by Tuesday’s close.
2. Robotics Earnings: Nabtesco and HDS Results Strong; Still No Reason to Own Fanuc
Following a long period of weakness, robotics related stocks are displaying stronger performance recently as 3Q results have come in weak, but generally done so with management reassurances that this is the bottom.
Company | Peak to Trough Performance | Trough | Performance Since Trough |
-52.8% | 26 Dec | +18.6% | |
-58.5% | 4 Jan | +24.7% | |
-58.9% | 26 Dec | +35.4% | |
-65.8% | 4 Jan | +41.3% |
We had been negative on the sector for some time before turning more constructive in mid January following Yaskawa’s earnings. We concur with the general messaging that this is the bottom based on our analysis of order levels for the companies and regional trend breakdowns. We do not expect a particularly sharp rebound in orders and sales in the near future and believe there is still some risk of these stocks returning toward the lows over the course of the year. However, we believe that the next significant move should be upwards and longer term investors should be looking for entry timings.
3. Fanuc Bullish Trade Points off of Base Line Support
Fanuc Corp (6954 JP) shows increasing signs of a basing process and opportunities on weakness.
Macro retracements display clear synergy with the low at 15,570, suggesting this is a key low.
Use weakness back toward base line support to buy for a medium term rise to press on outlined resistance targets.
Risk lies with the signs of rally fatigue in the near term tactical cycle as the daily RSI fails to confirm recent highs that are knocking on pivotal resistance at 19,000 that acts as the immediate make or break level.
Pivot levels, action points and targets are outlined.
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