Analyst Note| Jason Kondo |
Wide-moat Yaskawa Electric continued to show strong sales in the second quarter (ending in August), similar to the previous quarter, with about 26% year-on-year top-line growth. While this was slightly lower than our expectations, we attribute this to parts procurement issues, which have made it increasingly difficult to fulfill record orders over the past two quarters. Nevertheless, we raise our fair value estimate to JPY 5,200 from JPY 4,800, as we are more convinced that Yaskawa can realize stronger sales growth both near- and medium-term. We previously believed market expectations were too high but now believe its shares are fairly valued, as they have fallen over the past month, likely due to increased uncertainties from issues ranging from the components supply crunch to signs of potential slowdown in China--like the PMI falling to 49.6 in September. Despite these signs, we expect demand for servo motors, inverters, and robots to remain strong, backed by electric vehicle, semiconductor, and new infrastructure-related investments.