Nidec’s share price jumped 2.4% to ¥1,300 on Wednesday, July 21 – the last trading day before Japan’s national holidays, when the company announced results for 1Q of FY Mar-22 – but fell back 3.2% to ¥12,580 today.
This reflects the positives and negatives facing the company as it ramps up production of EV motors and drive systems.
Results for the three months to June looked good, with operating profit up 60% year-on-year on a 33% increase in sales. 1Q sales, operating profit and net profit were all about 56% of 1H guidance.
On top of that, Nidec and Hon Hai announced plans to establish a joint venture to develop Nidec E-axle traction motor systems for EVs made by Hon Hai subsidiary Foxtron Vehicle Technologies.
However, competitor Hitachi (6501 JP) announced plans to build EV component factories in Japan China and the U.S. to expand capacity by about 6 times; and price competition in China is severe.
At 53x management’s EPS guidance and 50x our own EPS estimate for FY Mar-22, and 40x our estimate for FY Mar-24, a lot of potential growth is already in the price.
We reiterate our previous conclusion: Guidance is probably conservative, but the shares are still overvalued.