Maintaining Nidec’s JPY 13,000 FVE; Increasing Material Costs Can Be Mitigated in the Long Run

Our impression of Nidec’s December-quarter results is mixed. On the positive side, quarterly revenue of JPY 497 billion was 14.6% up from the same quarter of the previous year and was ahead of our JPY 473 billion forecast, mainly driven by the machinery segment and the appliance, commercial, and industrial segment. On the negative side, despite the robust revenue growth, its operating income of JPY 44.4 billion was below our expectation of JPY 52.1 billion, and the operating margin dropped to 8.9% from 10.7% in the previous year. The management explained that the company was not able to fully pass on the increasing material cost, which dragged down Nidec’s profits by approximately JPY 9 billion, which explains most of the discrepancy between the reported numbers and our forecasts.