Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

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

<ul>
<li>Despite a dead cat bounce in Robomachine coming through as we suggested Fanuc’s 4Q OP missed consensus estimates by 14%. </li>
<li>Guidance was strong however with revenue guidance of ¥825.5bn materially above consensus’ ¥797.7bn. </li>
<li>This continues a pattern of weak results and strong guidance in the FA sector going into a tightening cycle which is concerning.</li>
</ul>


Despite a dead cat bounce in Robomachine coming through as we suggested Fanuc’s 4Q OP missed consensus estimates by 14%. 
Guidance was strong however with revenue guidance of ¥825.5bn materially above consensus’ ¥797.7bn. 
This continues a pattern of weak results and strong guidance in the FA sector going into a tightening cycle which is concerning.


Fanuc – Frothy Current Conditions Set Up Big Potential Disappointment

Japan Specialist

Mark Chadwick

<ul>
<li>Machine tool orders are losing momentum given the geopolitical risks and shortage of materials</li>
<li>Margins are also order pressure given soaring materials and transportation costs</li>
<li>FY3/23 OP guidance misses consensus, but it is not conservative. We expect the share price to head lower</li>
</ul>


Machine tool orders are losing momentum given the geopolitical risks and shortage of materials
Margins are also order pressure given soaring materials and transportation costs
FY3/23 OP guidance misses consensus, but it is not conservative. We expect the share price to head lower


Fanuc (6954 JP) | Orders Slide as Automation Slows

Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

Senior Technology Analyst, Japanese Equities

<ul>
<li>Investing in factory automation, power semiconductors and electric vehicle motors on a long-term view while interest rates rise and the economy weakens.</li>
<li>Difficult operating environment now: Factory automation turning down; automotive hit by high materials costs and the semiconductor shortage.</li>
<li>Share price down 25% from its 52-week high. Selling at 14x FY Mar-22 EPS guidance after a downward revision, which compares with a 9x - 20x 5-year P/E range.</li>
</ul>


Investing in factory automation, power semiconductors and electric vehicle motors on a long-term view while interest rates rise and the economy weakens.
Difficult operating environment now: Factory automation turning down; automotive hit by high materials costs and the semiconductor shortage.
Share price down 25% from its 52-week high. Selling at 14x FY Mar-22 EPS guidance after a downward revision, which compares with a 9x - 20x 5-year P/E range.


Mitsubishi Electric (6503 JP): Buy on Weakness for the Long Term

<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

<ul>
<li>Yaskawa reported weak results as we expected (¥12.9bn OP vs. our ~¥14bn estimate and consensus at ¥16.7bn). </li>
<li>Despite this the company actually guided for a very punchy ¥72bn in OP next FY even above consensus’ ¥65.5bn and our expectation for OP to be flattish or even decline. </li>
<li>Nevertheless, there was nothing on the earnings call to suggest that guidance was anything more than overoptimism on the top line.</li>
</ul>


Yaskawa reported weak results as we expected (¥12.9bn OP vs. our ~¥14bn estimate and consensus at ¥16.7bn). 
Despite this the company actually guided for a very punchy ¥72bn in OP next FY even above consensus’ ¥65.5bn and our expectation for OP to be flattish or even decline. 
Nevertheless, there was nothing on the earnings call to suggest that guidance was anything more than overoptimism on the top line.


Yaskawa – Results as We Expected, Guidance Much Stronger

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.

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Fanuc Corp (6954 JP)

Fanuc – Frothy Current Conditions Set Up Big Potential Disappointment

Fanuc continues a pattern of weak results and strong guidance in the FA sector going into a tightening cycle which is concerning and we expect...

Mio Kato

Fanuc (6954 JP) | Orders Slide as Automation Slows

Machine tool orders are losing momentum given the geopolitical risks and shortage of materials. We expect conditions to remain weak for several...

Mark Chadwick

Mitsubishi Electric (6503 JP): Buy on Weakness for the Long Term

Investing in long-term growth in factory automation, power devices and EVs, current environment difficult. Share price down 25% from last peak,...

Scott Foster

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

Yaskawa – Results as We Expected, Guidance Much Stronger

Yaskawa reported weak results but guided very strongly for next FY. Nevertheless, there was nothing on the earnings call to suggest that guidance...

Mio Kato

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