Nidec: Challenged By Margins, But Executing On Growth Opportunities

2025-02-22 09:09:29 ET

Summary

• Nidec has been applying its strong motor knowhow to growth markets like EVs, robotics, and data centers, but margin leverage has become an ongoing point of contention with investors.
• The unsolicited bid for Makino raises questions about management's focus, given the cyclical nature of the machine tool market and other promising opportunities like robotics.
• Revenue growth has been better than expected recently, but margin performance has been lacking, hurting investor confidence and the stock's valuation.
• Despite these frustrations, Nidec's valuation suggests significant upside if management can improve margin execution and remained focused on attractive growth opportunities.

I’ve liked Nidec ( OTCPK:NJDCY ) ( OTCPK:NNDNF ) (6594.T) for quite some time for the company’s strong knowhow in motors and the opportunity to leverage that knowhow into attractive markets like electric vehicles, robotics, and data centers. While that thesis has worked out (more or less) as far as product development and revenue goes, margin leverage has been underwhelming and a recent unsolicited bid for a rival machine tool company has me questioning the company’s strategic priorities....

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