Fanuc Earnings: Strong CNC Order Recovery Driven by Machine Tool Demand in Asia; Outlook Unchanged

Fanuc’s June-quarter orders for the factory automation, or FA, segment (which sells computer numerical controls, or CNCs) and robomachine segment grew 22% and 31%, respectively, which surpassed what we had anticipated. However, we think the stronger-than-expected order growth came from front-loaded orders in anticipation of the Chinese government’s financial support for industrial equipment upgrades. As such, our outlook remains unchanged, and we continue to forecast revenue to remain flat year on year for fiscal 2024 (ending March 2025) and maintain our fair value estimate at JPY 5,200 per share. Our projection for 2024 assumes both FA and robomachine sales to rise 12%, while robot sales decline 9%. Although the 11% sequential robot order increase in the June quarter suggests orders had bottomed in the March quarter, Fanuc’s book/bill ratio has been below 1.0 for the past five quarters, and we expect most of the electric vehicle investments in key markets like the US and Europe will be postponed to the first half of fiscal 2025.