Yaskawa Affected by China Lockdown but Robot Orders Remain Strong

Yaskawa’s latest results for the first quarter (ending May) of fiscal 2022 showed mixed signals related to demand in China, as quarterly robot orders in the region were up 67% year on year, but AC servo motor and inverter orders declined 36% and 19% year on year, respectively, notably due to customers in the latter businesses being more affected by the lockdown. With China being the largest overseas market for Yaskawa’s motion control segment (comprising servo motors and inverters) and the likelihood of related orders having already hit their near-term quarterly peak a year ago, we think these factors—coupled with the worse-than-expected lockdown impact as well as recession concerns—have contributed to the recent decline of Yaskawa’s share price. While consumer confidence may take time to recover, we think the market overreacted, as capital investments in electric vehicles and new infrastructure have stayed strong. Further, we expect trends like vehicle electrification and rising labor costs/shortage would contribute to factory automation demand. We, therefore, keep our fair value estimate of JPY 5,500.