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

We are lowering our fair value estimate for Nidec 6594 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.

Nidec has lowered its EV traction motor shipment target for this fiscal year to 949,000 from 1.19 million, which we believe has disappointed the market. However, most of the reduction is not for shipments to the Chinese market, but for shipments to the European market through Emotors, the joint venture with Stellantis. As we believe that the orders to the Stellantis group are assured, the shipment reduction is mainly due to a delay in the production plan, rather than a loss of competitiveness. Overall, we believe that the revised shipment plan is more realistic.