Daifuku Affected by E-Commerce Slowdown but Expecting Continued Top-Line Growth Supported by Backlog

While a slowdown in Daifuku’s orders related to e-commerce and semiconductor production (especially memory) will temporarily affect top-line growth in 2023, we expect growth rates will increase to our midcycle trajectory in the following year, as demand picks up again. The upward revision in guidance orders for fiscal 2022 (ending March 2023) reaffirms our expectation that the company can still realize top-line growth in 2023, especially considering the record backlog. Management estimates total orders to be JPY 710 billion, up from JPY 630 billion previously, and well above the revenue guidance of JPY 580 billion. Over the longer term, secular factors like low warehouse automation penetration and need for advanced semiconductors will be tailwinds for the leading material handling company. Therefore, we think its shares are undervalued and retain our fair value estimate at JPY 10,500.