Fanuc (6954) – Order Recovery Clear

With FY16 Q3 results announced on January 26th, analyst William Nestuk provides bullet points on Fanuc’s outlook for FY16 and what lies ahead from FY17.

Key Points

• FY16 company OP guidance raised by 4% but looks conservative given the rising order trend for Robotics and factory automation (FA), and management’s over-budgeting for Q4 FY16 costs. 
• However, costs are set to rise sharply due to expansion of production and R&D capacity. 
• By region: Japan and Asia – particularly China – are picking up; and Fanuc believes it is gaining market share in Europe. 
• Fanuc looks for Robotics and FA to steadily strengthen going into FY17 led by China demand; Q3 the bottom for FA, says management. 
• No indication of improvement for Robodrills, though Fanuc is maintaining 60% of its capacity for when smartphone demand rises. 
• Profit contribution from the FIELD system and cobots unlikely before FY18. 
• Near-term visibility is better for Yaskawa (6506), given Fanuc’s Robodrill outlook and overall cost trends are uncertain ahead of the FY16 results meeting in late April. 
• Our FY17 OP assumes modest Robodrill demand from Apple (APPL US) – and will be 10-12% too high, if this does not materialize as we expect. 
• We prefer Fanuc to Yaskawa on a 2-year view but think the market will favour Yaskawa over the next 3 months due to good visibility for FY17 earnings based on new product introductions.