Daifuku Earnings: Revising 2023 and 2024 Forecasts but Longer-Term Outlook Unchanged

Although Daifuku’s December-quarter operating margin of 11.5% was above our expectations, we estimate that it was largely in line with our forecast, excluding the impact of a one-time improvement in product mix from high-margin projects. Daifuku’s share price surged more than 10% after the earnings announcement, which we attribute to revised expectations of margin expansion. However, we believe the market was overly pessimistic about the margin recovery in the second half of fiscal 2023 (ending March 2024), driven by cost pass-through and structural reforms, which we had anticipated. Therefore, while we fine-tune our near-term earnings forecasts, our medium- to long-term outlook is largely intact, and we maintain our fair value estimate at JPY 3,500. As a result of the rally after earnings were announced, Daifuku’s share price has approached our fair value estimate; therefore, we believe the current stock price is fairly valued.