High Uncertainties Exist With Fanuc’s Robodrill Demand, but Expecting Stronger Robot and CNC Growth

Fanuc’s fiscal 2021 second quarter, ending in September, showed year-on-year revenue growth of 37% at the companywide level but results were mixed among its businesses, where robodrill orders/sales fell significantly from the previous quarter but on the other hand, the company maintained strong robot and CNC sales. While Fanuc’s latest earnings led to an unfavorable reaction by the market, we raise our fair value estimate to JPY 28,000 from JPY 27,000. Our revision focuses on two key points: 1) downward sales revision in the robomachine segment; and 2) higher growth expectations of the robot and factory automation, or FA, segments. Fanuc’s shares have been on a downward trend over the past month, likely due to increased uncertainties from the components shortage, signs of potential slowdown in China (like the PMI falling below the “50 threshold” in September), and market concerns from the quarterly decline in robomachine segment sales. However, we now see upside potential as we believe Fanuc is well-positioned for secular FA growth.