Daifuku on Track to Capitalize on Semiconductor Growth and Realize Structural Improvements

Wide-moat Daifuku’s results for fiscal 2021's third quarter, ended September, showed another quarter of modest revenue growth at 8% year on year, in line with our expectations. We maintain our fair value estimate at JPY 10,000, implying that the shares are currently undervalued. The share price has declined year to date, likely due to increased concerns about the company's ability to deliver on projects, given the impact of the ongoing component supply crunch and labor shortage problems in the United States. However, the recent share price recovery suggests some of these concerns have been alleviated, as third-quarter sales were near record levels and operating margin improved to 10% (also in line with our projection) from 8.9% in the year-ago period and 8.0% last quarter. High cleanroom-related orders led to an upward revision in guidance (including dividends), which also likely contributed to the recovery.