Omron’s Weaker Industrial Automation Segment Outlook Largely Reflected; Shares Attractive

We lower Omron’s fair value estimate to JPY 9,100 from JPY 9,300, after nudging our fiscal 2023 (ending March 2024) net profit forecast down on a weaker industrial automation business segment growth outlook. While fiscal third-quarter performance is in line with expectations, and IAB segment revenue growth remains strong rising 23.9% year on year, order book growth is easing, implying a softer outlook ahead. We think Omron’s share price already reflects the weaker outlook, and shares are attractive for investors willing to hold through the cycle. However, we note that Omron’s share price may lag companies showing growth in fiscal 2023. We currently prefer industrial robotic maker Fanuc, whose order books are buffeted by electric vehicle investments and increasing robotic applications in less-penetrated customer industries.