Nidec Earnings: Traction Motor’s Strategy Change Is Already Priced in; Shares Undervalued

Nidec revised its operating income guidance for fiscal 2023 (ending March 2024) from JPY 220 billion to JPY 180 billion, due to the JPY 45 billion restructuring charge related to its electric vehicle traction motor business, most of which is for the impairment of facilities and inventories for the China EV business. We believe it makes sense to withdraw its expansion strategy in the very price-competitive Chinese EV market and to focus on the business through the joint venture with Stellantis Group. This will ensure sufficient profitability and the company’s plan to make the business profitable in the second half of next fiscal year through the launch of Gen-3 motors and productivity improvement is reasonable.