Japan Specialist

Mark Chadwick

Equity Bottom-Up

<ul>
<li>Fanuc reported a -7% decline in revenue for FY3/24 and 26% decline in operating profit. </li>
<li>The market will be disappointed by guidance for a further fall on the top line and 15% decline in profits as margins hit an all time low</li>
<li>The valuation of 30x EV / EBIT suggests the market was hoping for a turnaround in profits this year. That recovery has now been pushed back</li>
</ul>


Fanuc reported a -7% decline in revenue for FY3/24 and 26% decline in operating profit. 
The market will be disappointed by guidance for a further fall on the top line and 15% decline in profits as margins hit an all time low
The valuation of 30x EV / EBIT suggests the market was hoping for a turnaround in profits this year. That recovery has now been pushed back


Fanuc (6954) | Profitability Problems Persist

<ul>
<li>Q3 net sales: ¥197.8 billion, down 10.1% YoY; operating income: ¥40.9 billion, down 22.1%; operating margin: 20.7% (-320bps YoY)</li>
<li>Full-Year guidance revised: Net sales up 1.8% to ¥771.5 billion; operating profit up 8.4% to ¥132.2 billion.</li>
<li>Positive stock reaction post-Q2 report; FY3/25 outlook cautious, especially for the Robot Division given a -30.2% YoY decline in Q4 orders.</li>
</ul>


Q3 net sales: ¥197.8 billion, down 10.1% YoY; operating income: ¥40.9 billion, down 22.1%; operating margin: 20.7% (-320bps YoY)
Full-Year guidance revised: Net sales up 1.8% to ¥771.5 billion; operating profit up 8.4% to ¥132.2 billion.
Positive stock reaction post-Q2 report; FY3/25 outlook cautious, especially for the Robot Division given a -30.2% YoY decline in Q4 orders.


<ul>
<li>Q2 2023 results for FANUC Group showed a 3.7% decrease in consolidated net sales, a 24.5% drop in consolidated operating income, and mixed performance in its divisions.</li>
<li>Some positives: operating profit exceeding analyst expectations and an operating margin increase to 17.2%. However, declining robot orders, challenges in the US region, and high inventory remain concerns</li>
<li>We believe that the stock is currently trading around fair value (20x EV/EBIT). However, we still see risks to the downside given macro concerns</li>
</ul>


Q2 2023 results for FANUC Group showed a 3.7% decrease in consolidated net sales, a 24.5% drop in consolidated operating income, and mixed performance in its divisions.
Some positives: operating profit exceeding analyst expectations and an operating margin increase to 17.2%. However, declining robot orders, challenges in the US region, and high inventory remain concerns
We believe that the stock is currently trading around fair value (20x EV/EBIT). However, we still see risks to the downside given macro concerns


<ul>
<li>2Q earnings miss and full year guidance cut - negative surprise to the market</li>
<li>Core FA orders down sequentially QoQ; Weak FA negative for overall OPM</li>
<li>Maintain bearish stance as negative YoY Machine Tool orders yet to come. </li>
</ul>


2Q earnings miss and full year guidance cut - negative surprise to the market
Core FA orders down sequentially QoQ; Weak FA negative for overall OPM
Maintain bearish stance as negative YoY Machine Tool orders yet to come. 


Fanuc (6954 JP) – Let the Derating Begin

<ul>
<li>We are bearish on Fanuc. Yaskawa's robotics orders were strong but Fanuc is more correlated with machine tool orders</li>
<li>Machine Tool orders have already turned south and Fanuc is losing momentum in its order growth</li>
<li>If we are right on the cycle, we expect Fanuc to trade down to 2.3x book value, 20% downside risk from here</li>
</ul>


We are bearish on Fanuc. Yaskawa's robotics orders were strong but Fanuc is more correlated with machine tool orders
Machine Tool orders have already turned south and Fanuc is losing momentum in its order growth
If we are right on the cycle, we expect Fanuc to trade down to 2.3x book value, 20% downside risk from here


Fanuc (6954) - Forget Yaskawa...a Slowdown Is Coming

Japan

FANUC CORPORATION manufactures factory automation (FA) systems and equipments, and robots. The Company's products include computerized numerically-controlled (CNC) equipment, servo motors, laser systems, industrial robots, wire-cut electric discharge machines, and CNC drill.  Fanuc participates in a joint venture with General Electric in the FA field.

Fanuc Corp (6954 JP)

Fanuc (6954) | Profitability Problems Persist

The market will be disappointed by guidance for a further fall on the top line and 15% decline in profits as margins hit an all time low

Mark Chadwick

Fanuc (6954) | Robot Orders Remain Weak

Q3 net sales and operating income for the company decreased YoY, but full-year guidance revised higher. Expect a positive stock reaction, but...

Mark Chadwick

Fanuc (6954) | Not Out of the Woods Yet

FANUC Group's Q2 2023 results show a decrease in sales and operating income, mixed division performance.. Stock is trading at fair value but...

Mark Chadwick

Fanuc (6954 JP) – Let the Derating Begin

FA weakness to weigh down on Fanuc's earnings and valuations in the coming quarters. The YoY turn in Machine Tool orders is yet to come, ...

Mark Chadwick

Fanuc (6954) - Forget Yaskawa...a Slowdown Is Coming

The market should ignore the positive read-across from Yaskawa results. Fanuc is more correlated with machine tool orders. We see signs of a...

Mark Chadwick

Fanuc (6954) | Profitability Problems Persist

The market will be disappointed by guidance for a further fall on the top line and 15% decline in profits as margins hit an all time low

Mark Chadwick

Fanuc (6954) | Robot Orders Remain Weak

​Q3 net sales and operating income for the company decreased YoY, but full-year guidance revised higher. Expect a positive stock reaction, but...

Mark Chadwick

Fanuc (6954) | Not Out of the Woods Yet

​FANUC Group's Q2 2023 results show a decrease in sales and operating income, mixed division performance.. Stock is trading at fair value but...

Mark Chadwick

Fanuc (6954 JP) – Let the Derating Begin

FA weakness to weigh down on Fanuc's earnings and valuations in the coming quarters. The YoY turn in Machine Tool orders is yet to come, ...

Mark Chadwick

Fanuc (6954) - Forget Yaskawa...a Slowdown Is Coming

The market should ignore the positive read-across from Yaskawa results. Fanuc is more correlated with machine tool orders. We see signs of a...

Mark Chadwick

Q3 net sales and operating income for the company decreased YoY, but full-year guidance revised higher. Expect a positive stock reaction, but...

FANUC Group's Q2 2023 results show a decrease in sales and operating income, mixed division performance.. Stock is trading at fair value but...