Yaskawa Earnings: Weak Orders in China Suggest Slower Recovery for 2023

While Yaskawa’s weak order recovery in the May quarter was met with a poor market reaction, we believe its shares are still slightly overvalued. The company’s shares have outperformed its Japanese factory automation peers like Fanuc, which we mainly attribute to the market’s expectations that Yaskawa is less susceptible to the weak macroeconomic conditions in China. However, orders in China are down 27% year on year in the May quarter, suggesting otherwise, and we believe the recovery in Chinese consumption is to be slower than what the market is expecting. Based on our lower outlook in China (though partially offset by the weaker Japanese yen assumptions), we lower our fiscal 2023, ending February 2024, revenue growth assumption from 2.9% to 2.0%. Despite this, we maintain our fair value estimate of Yaskawa at JPY 5,200.