Fanuc Earnings: Robot Orders Lift as Expected, Suggesting the Start of a Recovery

Fanuc quarterly orders surpassed JPY 200 billion in the December quarter for the first time in seven quarters. Besides continuous firm FA and Robomachine orders, which grew 34% and 72% year on year, respectively, we are also encouraged by the robot orders that grew 8.6% year on year after six quarters of decline. We see that the Chinese market supports demands for robot products. Fanuc robot sales in China bottomed out and achieved 33% quarter-on-quarter growth. Amid weak sentiment on EV investment, the company grew its wide-moat robot business by expanding its zero downtime proven products to other industries such as electrical/electronic manufacturing, food manufacturing, and logistics in China. We believe Fanuc’s shares are undervalued as the market is still conservative about the midterm outlook for its robot business. We reiterate our fiscal 2025 growth forecast for the robot segment at 11% and reiterate a CAGR of 8% for the robot business between 2024 and 2028. We see operating margin gradually improving year by year from 19% to 24.5% in 2028 as demand for robot products picks up and the utilization rate recovers. We maintain our JPY 5,300 fair value estimate for Fanuc.