Hammered By Input And Launch Costs, Nidec Is Worth Another Look

The last year and a half has been a brutal one for Nidec (OTCPK:NJDCY) (6594.T), with the local shares down more than a third and the ADRs down closer to 50% since my last update. Nidec has been hit hard not only by a downturn in high-margin spindle motors for hard disk drives (or HDDs), but also much higher input costs and launch costs for its emerging EV auto business (e-axles). If that wasn’t bad enough, a weaker outlook for motors used in appliances and HVAC systems is also weighing on sentiment.

The investment case for Nidec used to be more of a battle about the right multiple to pay, as Nidec shares historically traded at rich multiples. While the sharp pullback has helped the longer-term valuation argument, the shares still remain pricey on more conventional short-term multiples-based approaches. While I do like Nidec’s leverage to vehicle electrification, a weaker market for consumer electronics could persist and Nidec has significant sentiment headwinds to overcome.

 

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Hammered By Input And Launch Costs, Nidec Is Worth Another Look