Analyst Note| Jason Kondo |
Fanuc showed stronger signs of recovery from the impact of the COVID-19 pandemic in the second quarter of fiscal 2020 (April 2020-March 2021). We revise our fair value estimate to JPY 21,000 from JPY 20,000, after considering signs of strong near-term demand with Fanuc’s industrial robots and robodrills (compact drill equipment used to shape products like smartphone casings) and management’s revised guidance. We now assume companywide revenue to decline only by 3% year on year for fiscal 2020, compared with 7% in our previous projection, and our operating margin assumption for the same year is now at 17% (implying a 0.4% year-on-year margin decline) compared with 14% in our previous projection. With Fanuc’s share prices above pre-COVID-19 levels, we believe the market has similar expectations and we therefore believe there is currently limited upside potential.