Analyst Note| Jason Kondo |
Strong e-commerce demand and sales from a large-scale order in the automotive automation business led to another positive year-on-year quarterly revenue growth in the third quarter ending December, for Daifuku. We maintain our fair value estimate at JPY 10,000, implying the company’s shares are slightly overvalued. We also continue to assign Daifuku’s ability to allocate capital as Exemplary, as we rename our stewardship rating to the Capital Allocation rating. Daifuku’s latest medium-term plan and results have led to its shares falling, thus narrowing the gap between the market’s expectation and ours; however, we still believe the market’s revised expectations are slightly higher. While we expect Daifuku will outperform its medium-term plan, we are not convinced that all its businesses possess high-growth drivers and sales related to electronics factory automation, or FA, as well as to industries that are impacted from the pandemic (such as transportation, capital goods) will likely face declining year-on-year sales for fiscal 2020.