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

HDD Capacity Shipments Exceeded 1ZB in 2020, 3ZB by 2026

Nidec (6594 JP): Guidance Probably Conservative, but Still Overvalued

🇯🇵 JAPAN • Results & Revisions ​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​01/​​​​​​​​​25 - Koei-Tecmo & Nidec

Nidec (6594 JP): Good Results, Excessive Valuation

Gravity Works As WeWork Doesn't; Now Plan B

Koei Tecmo – A Beat as Hyrule Warriors, Sangokushi Hadou and the Market Rally All Chip In

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

<p>Nidec reported good 3Q results and raised FY Mar-21 guidance, as was widely expected. Key take-aways include:</p><ul>
<li>The new guidance implies a weak 4Q, with sales and operating profit both down about 15% from 3Q. This seems conservative, but reduced auto production due to the semiconductor shortage could explain it. </li>
<li>Sales of HDD motors were down, but sales of other small precision motors more than made up the decline and their combined operating profit was up 16.5% year-on-year. Nidec has gone beyond HDD motors. </li>
<li>Automotive sales were up 16% year-on-year and operating profit up 45%, lifting the division's operating margin to 7.2%. This is encouraging, but is still a long way to the quarterly peak of 16% reached in the three months to September 2018.</li>
<li>CEO Nagamori stated that the company's E-Axle traction motor systems for electric vehicles should turn profitable in FY Mar-24. Once an HDD high-tech start-up, Nidec is now an EV high-tech start-up.</li>
</ul><div>Valuations reflect this change. The shares have tripled from their 52-week low to an EV/Peak OP ratio of 54x and 71x management's new EPS guidance for FY Mar-21. Take profits.</div><div><p></p></div>

Nidec reported good 3Q results and raised FY Mar-21 guidance, as was widely expected. Key take-aways include:
The new guidance implies a weak 4Q, with sales and operating profit both down about 15% from 3Q. This seems conservative, but reduced auto production due to the semiconductor shortage could explain it. 
Sales of HDD motors were down, but sales of other small precision motors more than made up the decline and their combined operating profit was up 16.5% year-on-year. Nidec has gone beyond HDD motors. 
Automotive sales were up 16% year-on-year and operating profit up 45%, lifting the division's operating margin to 7.2%. This is encouraging, but is still a long way to the quarterly peak of 16% reached in the three months to September 2018.
CEO Nagamori stated that the company's E-Axle traction motor systems for electric vehicles should turn profitable in FY Mar-24. Once an HDD high-tech start-up, Nidec is now an EV high-tech start-up.
Valuations reflect this change. The shares have tripled from their 52-week low to an EV/Peak OP ratio of 54x and 71x management's new EPS guidance for FY Mar-21. Take profits.

Nidec (6594 JP): Takeaways from 3Q Results and New Guidance

Nidec Corp

Nidec (6594 JP): Takeaways from 3Q Results and New Guidance