Fanuc Earnings: EV Investment Delays to Affect Robot Sales for 2024 but Midterm Outlook Unchanged

Fanuc’s robot orders, which have been resilient in recent quarters, fell 7% sequentially in the March quarter, which we believe reflects a slowdown in capital spending, contributed by sluggish electric vehicle, or EV, demand. As a result, we expect the inventory correction for robots to continue at least through the end of the year, and consequently lower our fiscal 2024 (ending March 2025) sales forecast by 2% as well as our operating income forecast by 9%. Meanwhile, we largely maintain our forecasts after fiscal 2025 as well as our fair value estimate for Fanuc of JPY 5,200 per share, as our medium-term outlook remains intact. We expect sales to grow 10% in fiscal 2025, driven by the recovery in robot sales, followed by a steady-state compound annual growth rate of about 6% through 2028. We think the market leader with industrial robots is strongly positioned for industrial automation demand to deal with rising wages/labor shortages as well as further EV/hybrid vehicle investments by its existing automobile original equipment manufacturer customers, which is underestimated by the market.