Adding insult to injury! Japanese electronics giant Nidec downgraded by UBS, stock price plunges over 9% and approaches an 11-month low

According to Jinse Finance APP, shares of Japanese precision motor and industrial equipment manufacturer Nidec fell 9.3%, approaching the 11-month low set earlier this month. This follows UBS downgrading the stock rating from “Buy” to “Neutral” and lowering the target price from 2,800 yen to 2,400 yen, citing a more challenging market environment. UBS also cut its operating profit forecasts for the company for this fiscal year and the next, which are 16% and 22% lower than market consensus respectively.

UBS analysts Shingo Hirata and Kohei Takahashi stated in a report on October 8 that this downgrade reflects a more cautious view of the pace of recovery, due to factors such as overcapacity in the home appliance sector, intensifying competition, and the heavy burden of fixed costs in the industrial motor segment.

They also noted that although Nidec has continuously emphasized its efforts to improve corporate governance, massive impairment charges, management changes, and three consecutive audit reports with disclaimers mean that it may take time for the company to regain the confidence of the capital markets.

Since announcing a significant impairment charge at the end of September, Nidec’s share price has continued to plunge. The impairment has nearly wiped out all profits earned by the company over the past decade.

UBS analysts said that key issues to monitor include whether Nidec can secure an audit opinion by the end of October, submit its internal control report, file its half-year report in November, and publish its mid-term business plan in December.