Fanuc Finishes Fiscal 2021 With Record Revenue and Orders Amid Headwinds; Maintain FVE

Fanuc achieved record companywide revenue for fiscal 2021, ending in March, as expected, with 33% year-on-year growth. We maintain our fair value estimate at JPY 28,000, implying that shares are undervalued. Despite strong sales/orders, Fanuc’s shares have been declining, likely from concerns over the potential impact of the ongoing components shortage, the conflict in Ukraine, and lockdowns in China. The latest fiscal 2022 guidance of a 1.1-percentage-point operating margin decline, from last year, suggests an impact of higher components/logistics costs, despite projecting a 12.6% year-on-year increase in revenue over the same period. While lockdowns in China can potentially affect near-term orders, we are not convinced that demand will be materially weakened, as we expect this will eventually be resolved and management commented that the quarterly decline in robot orders in China were due to temporary factors. The company has continued to receive inquiries despite the lockdown, and the book-to-bill ratio in China increased to 1.25 from 1.06, with factory automation, or FA, and robomachine segments driving the increase.