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 (6594 JP): Recovery to Take Time, Valuations Still High

Nidec (6594): Slowing Growth Undermines Valuations

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

Equity Bottom-Up

The acquisition of OMRON Automotive Electronics Co. Ltd., announced on April 16, should further Nidec's advance into vehicle electrification and augmented/autonomous driving, enhancing the growth potential that supports its relatively high valuations. The acquisition will also bring Nidec approximately 600 engineers, forestalling a looming shortage. Omron is reportedly selling because it cannot afford the investment required to remain competitive in automotive control equipment.OMRON Automotive Electronics makes electronic control units (ECUs) for auto body, chassis, transmission and motor control, power steering and other power control systems, remote keyless entry and other RF/LF products, switches and other components. These fit with Nidec's focus on electric power steering (EPS) motors, electric brake motors, electric vehicle (EV) traction motor systems, and electronic control units (ECU). The acquisition also offers synergies with Elesys, an ECU manufacturer acquired by Nidec in 2014, in Advanced Driver Assistance Systems (ADAS). Nidec Elesys makes wave radar and camera-related products, while OMRON Automotive Electronics makes laser radar and driver monitoring systems.In FY Mar-18, Nidec, OMRON Automotive Electronics reported sales of ¥36.3 billion, recurring profit of ¥1.1 billion and net profit of ¥3.6 billion. The acquisition price, yet to be finalized, is expected to be about ¥100 billion. Given Nidec CEO Nagamori's reputation for driving a hard bargain, this does not seem particularly cheap, but the potential synergies and addition of a large number of experienced engineers indicate that it is not unreasonable.Nidec plans to announced FY Mar-19 results on April 23.

The acquisition of OMRON Automotive Electronics Co. Ltd., announced on April 16, should further Nidec's advance into vehicle electrification and augmented/autonomous driving, enhancing the growth potential that supports its relatively high valuations. The acquisition will also bring Nidec approximately 600 engineers, forestalling a looming shortage. Omron is reportedly selling because it cannot afford the investment required to remain competitive in automotive control equipment.OMRON Automotive Electronics makes electronic control units (ECUs) for auto body, chassis, transmission and motor control, power steering and other power control systems, remote keyless entry and other RF/LF products, switches and other components. These fit with Nidec's focus on electric power steering (EPS) motors, electric brake motors, electric vehicle (EV) traction motor systems, and electronic control units (ECU). The acquisition also offers synergies with Elesys, an ECU manufacturer acquired by Nidec in 2014, in Advanced Driver Assistance Systems (ADAS). Nidec Elesys makes wave radar and camera-related products, while OMRON Automotive Electronics makes laser radar and driver monitoring systems.In FY Mar-18, Nidec, OMRON Automotive Electronics reported sales of ¥36.3 billion, recurring profit of ¥1.1 billion and net profit of ¥3.6 billion. The acquisition price, yet to be finalized, is expected to be about ¥100 billion. Given Nidec CEO Nagamori's reputation for driving a hard bargain, this does not seem particularly cheap, but the potential synergies and addition of a large number of experienced engineers indicate that it is not unreasonable.Nidec plans to announced FY Mar-19 results on April 23.

Nidec Corp

Nidec (6594 JP): More Strategic M&A