OMRON Corp
Morningstar Rating for Stocks | Fair Value | Economic Moat | Capital Allocation |
---|---|---|---|
¥3,992.00 | Drnb | Bgqgqhjcy |
Omron Earnings: Negative Guidance Revision for 2023, but Semi/EV Investments to Recover in Late 2024
Although we lower our fair value estimate for wide-moat Omron to JPY 8,200 from JPY 8,900 mainly on a weaker near-term outlook for the industrial automation business, or IAB, we believe its shares are undervalued. Its share price fell significantly based on weaker-than-expected September-quarter results and a downward revision of its full-year guidance—Omron expects IAB orders to remain sluggish for the next two quarters from delays in investments related to semiconductors and electric vehicle, or EV, batteries. As a result, we lower our fiscal 2023 (ending March 2024) operating margin forecast to 5.0% from 9.0% previously, but we expect operating margin to increase to 10.3% in 2024 as these investments pick up from the second quarter. We believe that the market is overly pessimistic about the future recovery.