Yaskawa Earnings: Expect Robotics To Drive 2023 Sales Growth as Servo Motor Demand Weakens

Wide-moat Yaskawa Electric’s 6506 revenue growth of 22.0% year on year in the fourth quarter of fiscal 2022, ending February, was largely in line with expectations, driven by strong robot sales. Quarterly orders for the motion control segment, comprising AC servo motors and inverters, were down 28% year on year due to sluggish capital investments in the semiconductor industry as well as weak demand in China, which was exacerbated by the lockdown. Meanwhile, robotics orders were down by only 8% year on year, from solid demand outside China (which declined 32%), supported by EV/battery investments and factory automation needs in general industries. Looking to 2023, we expect these trends to continue, leading to further sales growth for industrial robots, while servo motor demand remains stagnant. With our outlook remaining intact, we maintain our fair value estimate at JPY 5,200, implying shares are fairly valued.

We currently project companywide revenue growth of 2.9% year on year in 2023, after slightly raising our motion control revenue growth assumption to 2.5% growth (from 2.0% decline previously), based on the latest guidance and higher-than-expected backlog. Management expects AC servo motor orders have bottomed out in the February quarter, partly based on a rebound in March, and backlog to be digested over the first half for servo motors and the full year for inverters. However, our 2.5% revenue growth forecast for motion control is lower than the 5% growth guidance, as we expect orders related to semiconductors, electronics, and machine tools to remain weak throughout calendar 2023.

We maintain our robotics segment growth assumption of 10.0% year on year in 2023, which is largely in line with guidance. Yaskawa has been building its track record in newer customer industries (such as food, agriculture, and logistics) and we expect this trend to continue. Further, we expect EV and battery-related demand to be resilient.