Nidec Earnings: Will Achieve Margin Expansion Through Cost Improvement Amid Economic Slowdown

We are lowering our fair value estimate for Nidec to JPY 8,400 from JPY 10,500, as we have lowered our earnings forecasts due to the economic slowdown and have also taken into account the increasingly competitive environment for electric vehicle traction motors. We estimate that Nidec has lost some orders for the EV traction motors in the March quarter as a result of its focus on improving profitability, suggesting that tough competition from in-house production and local motor suppliers is intensifying. However, we believe that Nidec will be able to take market share and reignite the business by leveraging 1) its production capability of energy-efficient motors; 2) the peripheral technologies that Nidec has acquired through mergers and acquisitions; and 3) the cost competitiveness of being the world’s largest independent motor supplier. Although we have lowered our shipment and profit forecasts for the EV traction motors, we believe that the market is underestimating Nidec’s capabilities and commitment to the EV business.