Daifuku Earnings: Profit Margin Improved Amid Capacity Expansion; Fair Value Raised 9% to JPY 4,000

Wide-moat Daifuku reported fiscal 2024 (a transitional period of nine months from April to December 2024 for its Japan business and 12 months from January to December 2024 for non-Japan business) companywide revenue of JPY 563 billion, above our previous estimate of JPY 555 billion, thanks to outperformance in the airport industry, with a record-high JPY 71 billion in sales despite being one quarter short for the Japan business. We continue to see the airport industry as being the most significant driver for fiscal 2025, given the solid orders of JPY 110 billion received in fiscal 2024. On the other hand, orders from the e-commerce industry dropped significantly by 35% year on year to JPY 91 billion in 2024, after a 26% decline in 2023. The e-commerce industry is experiencing a correction after the overheating investment activities in 2021 and 2022 driven by covid-19. Orders from the automobile and auto parts industry passed the peak and dropped by 10% to JPY 83 billion in 2024, reflecting the sluggish end-market needs and more cautious capital expenditure plan by original equipment manufacturers.