Yaskawa Earnings: Orders Better Than Expected Amid Headwinds; Revising Near-Term Outlook

We increase our fair value estimate for Yaskawa Electric to JPY 5,600 from JPY 5,200, mainly from raising our motion control (servo motors/inverters) and robot sales estimates for fiscal 2023, ending February 2024. November quarter orders were stronger than expected, with inverters and robots sequentially growing 10% and 19%, respectively, while servo motor orders only declined 9%. Weak factory automation, or FA, investments in Asia have especially affected servo motor orders, but inverter demand has been resilient, supported by applications related to the oil/gas industry as well as energy-saving. The strong robot order was mainly due to a large, one-time order from a Korean automobile manufacturer, which mitigated the impact of weaker demand in China and the United States. As macroeconomic headwinds in China/U.S. will persist in the near term, we expect order growth to be limited in the February quarter; however, we assume a stronger recovery in the first half of fiscal 2024, as customers complete inventory adjustments and FA demand picks up. We believe the company’s shares are fairly valued.