Harmonic Drive Earnings: Headwinds To Continue in 2023, but Long-Term Outlook Is Intact

Harmonic Drive Systems', or HDS’, March-quarter orders declined 43.5% year over year due to weaker-than-expected demand for semiconductor production equipment, or SPE, and small-sized robots used in electronics manufacturing. As a result, we now expect HDS’ fiscal 2023 (ending March 2024) revenue to decline 18% year on year, down from our previous forecast of a 5% decline. However, we maintain its fair value estimate at JPY 6,100, as we continue to forecast midteens sales growth in the midterm, driven by growing demand for industrial robots/cobots in factories, surgical robots, and SPE, which the market underestimates. As the inventory correction in IT equipment is nearing an end, we believe that orders have already bottomed out and that further order recovery will be the catalyst for HDS’ shares.