Nidec Earnings: Profitability Improves, but Future of EV Motors Is Uncertain; Raise Fair Value 7%

We raise Nidec’s fair value estimate to JPY 9,000 from JPY 8,400 based on the better-than-expected June-quarter results. Nidec’s operating income of JPY 60.2 billion was up 35% from the previous year, exceeding our expectation. In addition to the lower fixed costs due to the restructuring implemented in the March quarter, a better-than-expected product mix in the appliance, commercial, and industrial products segment and the automotive products segment contributed to the highest operating profit on a quarterly basis. While we are impressed with the rapid margin recovery, we note that the outlook for electric vehicle traction motor shipments has been lowered for two consecutive quarters, and the revenue growth may temporarily slow down following the appointment of a new president next year. This increases the uncertainty in the longer term, and therefore, we believe Nidec’s shares are fairly valued.