I have been taking a look at some robot suppliers.
A couple of very interesting ones are harmonic drive systems (6324) and nabtesco (6268) in Japan.
HDS in particular seems to be really good at making critical small gearboxes. There is really no one else that makes these with the quality of HDS.
These gearboxes, plus a motor supplies by a company like Moog, make up an actuator, which is what makes a robot move in a precise way.
There is a Chinese competitor Leader Harmonious Drive Systems (aka Leaderdrive, traded in Shanghai) which trades at 72X trailing revenues (!!).
Leaderdrive has basically destroyed the economics of HDS. They make these gearboxes a lot cheaper than HDS.
HDS invested in capacity around 2019-2020, anticipating a robot boom that never materialized. Then Leaderdrive came in, and in typical Chinese company style, they were willing to reduce margins to take market share.
Gross margins at HDS pre-COVID used to be in the 45% range and operating margins were excellent in the 20-27% range.
Nowadays gross margins are sub 30%, and operating margins are flirting with breakeven.
EV/Sales was anywhere from 5-15X throughout company history but is currently closer to 5X. A reversion to mean would probably mean margins and improvement in the EV/Sales ratio.
The real question is if we do get some kind of robot boom. This could absorb the capacity of Leaderdrive, HDS, and Nabtesco.
Tesla trades at an absurd premium, and I guess at least some of that premium is for the Optimus robot.
The Optimus robot (along with most humanoid robots) uses gearboxes from HDS as well as Leaderdrive.
So if humanoid robots work out as Elon Musk hopes, I’d think the future for HDS will be pretty good.
Curious if anyone else has been looking at robots/robot suppliers?