The Euphoric Loop – 20th February 2015

FANUC (6954 JP) +15.4% YTD – QMG REMAINS POSITIVE ON JAPANESE ROBOTICS SECTOR (JA33.3) WITH FURTHER UPSIDE POTENTIAL

FANUC (6954 JP) +15.4% YTD – QMG REMAINS POSITIVE ON JAPANESE ROBOTICS SECTOR (JA33.3) WITH FURTHER UPSIDE POTENTIAL

QMG added LONG Fanuc to our Japanese Focus List (Link – The Japanese riddle – to buy or not to buy?) on 19/11/14. Despite the positive share price performance (+15.4% YTD), we see further upside given the positive read QMG data provides across the Japanese robotics sector (JA33.3). As detailed in the chart below, the key catalyst remains volume growth, with the most recent observation (for December) coming in at +22.9% across the product group. Additionally, valuation is compelling, with the stock trading at a significant discount to the trailing 3 & 5 year EV/sales & EV/EBITDA multiples, implying that the good news that QMG’s data highlights is not yet in the price.

The company remains under pressure from activist investors to improve its capital structure, which will serve to improve the outlook in the near term. In addition, the Japanese robotics sector will continue to benefit from the global corporate focus on increasing productivity through automation, further growth in automobile capex, and the recovery of high tech investment, while the weaker Yen will provide strong support to export sales. QMG will have further details on the performance of the Japanese robotics sector in our monthly update on 4th March.


Japanese Robotics (JA33.3) – Price, Cost & Volume

ja33.3

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