Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

Securities analyst covering electronics, precision equipment & robotics, engineering, construction, transport and other sectors for more than 25 years in Japan and 3 years in Korea. Permanent resident of Japan.

Senior Technology Analyst, Japanese Equities

Nidec – Machinery and Appliance, Commercial and Industry Segments Rolling Over

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

Nidec (6594 JP): Good 1Q, but EV Motors Face Tough Competition and Severe Pricing

Nidec – Early Results for the EV Business Look Terrible

Gravity Works As WeWork Doesn't; Now Plan B

Fanuc – Could There Be a Shock Downgrade?

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

1H results turned out to be conservative, as we had expected, but both year-on-year sales growth and the gross &amp; operating profit margins declined in 2Q. Gross profit itself was down slightly and operating profit up only 2.4% sequentially in the three months to September.The main reasons for this were the collapse of HDD spindle motor sales and the upfront cost of entering the EV motor business. Demand for the company's other products was generally strong.In <a href="https://www.smartkarma.com/insights/nidec-early-results-for-the-ev-business-look-terrible" target="_blank" data-smartkarma-citation="insights:59569" rel="noopener">Nidec – Early Results for the EV Business Look Terrible</a> , Mio Kato noted that Nidec faces the issue of a decline in volumes for HDD motors and appears to be betting the farm on capturing the top share for EV traction motors. We aren’t at all convinced that they can, but even if they do, the early signs are that that might not be as lucrative as they imagined.And it might take longer than some investors have thought. As  noted in <a href="https://www.smartkarma.com/insights/nidec-6594-jp-good-1q-but-ev-motors-face-tough-competition-and-severe-pricing" target="_blank" data-smartkarma-citation="insights:54923" rel="noopener">Nidec (6594 JP): Good 1Q, but EV Motors Face Tough Competition and Severe Pricing</a> , EV power trains are not expected to become cheaper than Internal Combustion Engine power trains until 2025, In the meantime, Nidec faces rapidly growing competition from Hitachi and demanding customers in China.Considering the risks, at 49x our EPS estimate for FY Mar-22 and 41x our estimate for FY Mar-24, the shares look Overvalued.

1H results turned out to be conservative, as we had expected, but both year-on-year sales growth and the gross &amp; operating profit margins declined in 2Q. Gross profit itself was down slightly and operating profit up only 2.4% sequentially in the three months to September.The main reasons for this were the collapse of HDD spindle motor sales and the upfront cost of entering the EV motor business. Demand for the company's other products was generally strong.In Nidec – Early Results for the EV Business Look Terrible , Mio Kato noted that Nidec faces the issue of a decline in volumes for HDD motors and appears to be betting the farm on capturing the top share for EV traction motors. We aren’t at all convinced that they can, but even if they do, the early signs are that that might not be as lucrative as they imagined.And it might take longer than some investors have thought. As  noted in Nidec (6594 JP): Good 1Q, but EV Motors Face Tough Competition and Severe Pricing , EV power trains are not expected to become cheaper than Internal Combustion Engine power trains until 2025, In the meantime, Nidec faces rapidly growing competition from Hitachi and demanding customers in China.Considering the risks, at 49x our EPS estimate for FY Mar-22 and 41x our estimate for FY Mar-24, the shares look Overvalued.

Nidec (6594 JP): HDD & EV Motors Drag Down Profit Margins

Nidec Corp

Nidec (6594 JP): HDD & EV Motors Drag Down Profit Margins