Daifuku Faces Near-Term Headwinds, but Longer-Term Outlook Intact; Maintain FVE at JPY 10,500

While companywide orders in the December quarter grew 14.6% year on year, supported by the weak yen, orders in the cleanroom business, or CR, declined 23.5% after seven consecutive quarters of annual growth. This was inevitable, given the record orders last year and the recent slowdown in capital spending for semiconductors. As chipmakers hold back on investments, we expect headwinds for Daifuku in 2023. However, we retain our fair value estimate of JPY 10,500, as our longer-term outlook remains intact. With a track record of supplying high-end semiconductor handling equipment (for 5 nm and below) to leading foundries, the wide-moat company is strongly positioned to grow along with secular demand for high performance computing, or HPC, and high-end mobile chips. We therefore expect CR orders bottoming out will serve as a catalyst for the stock.