© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Now we would like to start the presentation on Nidec Corporation's Fiscal 2023 Financial Results.
First, please turn off your mobile phones or put them on silent mode.
Nidec Corporation's representative who are presenting the financial results are as follows: Mr. Shigenobu Nagamori, Founder and Executive Chairman; Mr. Mitsuya Kishida, President and Chief Executive Officer; Mr. Akinobu Samura, Senior Vice President and Chief Financial Officer; and Mr. Teruaki Urago, General Manager of the Investor Relations Department. That is all.
In today's presentation, the executives will present you with an overview of the company's financial results for fiscal 2023 that will be presented by Mr. Samura, and strategic portion will be explained by Mr. Kishida, then the floor will be open for question-and-answer session. Please kindly wait to ask questions until the end.
The meeting is planned to end at 11:30 a.m. Now Mr. Samura, please start your presentation.
I would like to make some statements over first, please. Thank you. If I may, at the beginning of this conference, I'd like to give you some explanation here. From April 1, this fiscal year, we have a new President onboard, and he is also serving as CEO. He is yet to become the Board of Director member, that will be -- that won't be until the General Shareholders' Meeting in June. We have had so called a successor issue at our company. We have had this nomination committee has gone through the selection process. We have had the 5 members of the nomination committee, it's 3 of them from the outside members. And we -- they unanimously agreed Mr. Kishida to serve as the President of this company. This nomination committee is a very well-balanced committee. And they made a very good selection in a very balanced manner, in a very appropriate process. It was a very good person that we have selected in the nomination committee. Mr. Kishida is a former [ Sony ] Executive. He has spent time long -- spent a long time overseas. And also, he has worked in several different business projects.
We have the President and CEO over here, and he will be spending most of our time giving you an explanation. I didn't have to come here actually today, but I am here. But according to a strong records by our department, I'm here rather reluctantly. We made a financial announcement yesterday. And the details were already checked and written about by analysts. They seem to be interested in various new areas. And these analysts seems to be a lacking proper knowledge about these industries and many reports are not really accurate.
Our businesses are in very different areas from these people's interest. And the explanations in these areas -- on these areas are not really accurate enough. And I have instructed to [ Mr. Kishida ] [indiscernible] years or so technical time, so many technical times, but explain to everybody in a very easy and understandable way.
If you have any questions, please let us know. And please try to gain your knowledge as much as possible so that you can have a proper understanding about our businesses.
As far as I can see from the analyst reports, these reports are rather biased. That way, investors may make the wrong decision. Please keep that in mind, this is something that I'm saying, like the [indiscernible] to the converted. But as we given first, Mr. Samura, the CFO, will give you a presentation first, to be followed by Mr. Kishida. Thank you.
Thanks very much. This is Samura taking. I'd like to give you an update on the financial report for fiscal 2023. Please go to Slides 3 and 4.
First of all, net sales were up 4.7% to JPY 2,348,202 million. It was a record high last year, and now we have more than JPY 100 billion plus to that. And operating profit was up 63.1% to JPY 163,106 million. Operating profit ratio was [ 6.9% ]. This is due to the fact that we have made a strategic change in [indiscernible] traction motor business to be more of a profit forecast. According to that move, we -- JPY 59.8 billion was recorded as a part of our structural reform expenses. This is not included in our presentation material, but if you included this to -- it's at 9.5% in total. Therefore, in the actuality, the profitability has increased tremendously from the prior fiscal year.
Profit attributable to owners of the parent, as you can see, increased as well. In addition to our sales, the profit before income taxes also stand at a record high. Please go to Slide 5. This is about an overview by product group.
First of all, top left corner, Small Precision Motors, when it comes to the immediate [indiscernible], there are some seasonal issues. We have had some decline in our branch profit sales, but we have been eliminating a significant portion of fixed costs. And among other actions, they have increased and enhanced their [ productivity ] when it comes to how the [indiscernible] has bottomed out already.
We have had new businesses such as water cooling modules. These are emerging as our new businesses. We have these new spreads coming out. That's what the last fiscal year was about. Next top right portion, Automotive Products, and we have EV traction motor business. And we have a record structural reform for the EV traction motor business. And all in all, the business was in deficit, but the existing businesses were growing very smoothly, and we were voraciously obtaining opportunities for future business expansion.
When it comes to existing traction motor business, we are aiming for profitability, going into a positive territory to as early as possible as we try to improve the business' profitability.
Bottom left section, Appliance, Commercial and the Industrial business. When it comes to this segment, both sales and operating profit account for about [ 40% ] of the entire group's sales and operating profit. This is the largest portion of our business. And this has improved their profitability significantly from the prior fiscal year. They are -- we are aiming for a further improvement in the profitability of this business.
Lastly, Machinery business. The equipment investment is rather in a very harsh situation. But we have Takisawa, who joined our group very early, they are now fully consolidated in our group. When it comes to machine into our business, we have had [ OKK ] and the former portion of Mitsubishi Heavy Industry Machine to [ Coal Limited ]. They are all part of our Nidec Group now. And we are making a structural reform happening in these newly joined members, and we have been selling land. And all in all, we have a significant increase in profitability.
Please go to Slide 6. This is year-on-year changes. When it comes to exchange, with the exception of -- excluding the currency exchange rate, et cetera. If you take a look at this radically, Small Precision Motor, less sales, more running profit. Automotive, more sales and operating profit. Appliance, Commercial and Industrial Products, you can see a significant increase in operating profit despite the slight sales decline. We can see the sales were all in all very flat, but you can see the profitability has increased significantly.
Please go to Slide 8. You can see the situation on the free cash flow status. Go to the last section of the slide, you can see the quarter 2 and 3, we were rather low in the momentum in quarter 4. You can say, if you take -- we focus on inventory improvement, especially. There was a situation in Q4. Free cash flow JPY 92.5 billion. And our record was back in 2020, [ JPY 118.6 billion ]. And interest-bearing debt was down. On a net basis, we have been able to decrease our debt, which means a significant -- very positive factor for our future growth when it comes to cash.
Please go to Slide 9. For fiscal 2023, we have focused on improving efficiency here. In 2024, which is this fiscal year, we're going to continue to improve our efficiency. On the other hand, we are going to be making aggressive investment in growth for midterm and long-term growth.
Please go to Slide 10. This is our forecast for this fiscal year of 2024. Sales is projected to be JPY 2.4 trillion, operating profit, JPY 230 billion profit ratio to reach 9.6% exchange rates, U.S. dollars, JPY 145, euro, JPY 155 per euro, and all the other information as you can see on the slide. That is all for the overview of our financial performance.
This is Kishida speaking. I would like to give you important points about our individual businesses. I'd like to give you my thoughts on this company's future. If you go to Slide 11, you can see the all the products, the different groups. You can see Small Precision Motors, Automotive, among others.
First, I'd like to give an update on Automotive business. Over the past 2 years, we have gone through various structural reform in Europe and elsewhere, and we have had this attraction about business-related issues facing us. We need to have this large-scale aggressive structure reform. That's what we needed over the past 2 years. We are now at a very great turning point in our business. We need to exercise our strength so that we can have the Automotive business continue to be our major pillar or [ core ]. That's what we regard this business as over the past 2 years.
If we look back at the situation, especially in China, it's very unique, and no one -- no suppliers in the market was able to make a profit. That was a very unique situation there in China. And we made a structural change. Our business shift change and business shift that took place, and that's our part of our structural reform last year, last fiscal year.
And when it comes to this EV business, the industry structure itself has turned and making some changes. And I believe this confusion is going to continue. That's my expectations about this industry.
We have made a significant change in our strategy quickly. So we were able to -- we can, I believe, minimize the impact of the industry on our business. We can make electronics-related developments, and we are expected to have state-of-art technology to be included in our products. In that regard, we will continue to run a front line of the entire race in competition.
As far as ourselves are concerned, we have made significant personnel changes. In 2024 fiscal year, we are going to have this restart as a new automotive business.
Secondly, when it comes to traction motor business, among others, we need to decide who we sell our products to and what type of products we are going to develop. We have various different options. Now we are going to selectively choose when it comes to who are going to sell our products to. We have this joint venture, GAC, and GAC has another joint venture with Japanese companies, various different companies. It is to these companies we are going to sell our products to. We are going to be efficiency oriented as we try to develop our motors in these joint ventures. And that's the situation we like to update you with. When it comes to 2024, when it comes to our traction motor business, of course, this is a business, therefore, we will move down some projects in our business. These are not going to make any huge negative impact anymore. That's what I believe.
So let me explain about [ NPe ]. We will be consolidating this company from this fiscal year. So I want to introduce some elements of this company. Earlier, I said that we -- unlike the Nidec's traction business, where do we sell it to? What sort of technology do we develop? We have to work together with Stellantis, our customer, and we are 100% aligned with them. So there's no concern about it. I, myself last week, met Mr. Carlos Tavares, CEO of [indiscernible] Stellantis, and we took the entire day to confirm our commitments as parent companies.
In fiscal 2024, the numbers that we have published as items is unchanged from Q3. Now the orders is much more than the number we have disclosed. But with regards to who we are producing in for, there's no contemplation. So the production yield and the ability to produce and improve our technology, this is where we will be focusing on. So that's how we will operate this business in terms of production volume. There may be some fluctuations on a daily basis, however, the company does not believe that there will be any major changes that would impact the company. And we have already decided on the models.
So the [indiscernible], this is the rotating component. This is probably where the greatest hurdle is in terms of technology, and the parts supply from us will start from 2024 for NPe. So we, as a group, will bring our wisdom together from the parents so that we can lead to the success of NPe, and we have confirmed this with Stellantis and this is how we would like to promote our business in 2024.
So going forward, the 2 slides on Automotive business, nontraction business. So when we say traction business, at the peak time, this was less than 5% of Nidec's business as a whole. So the Automotive business in the company is more than 20% so I want to talk about nontraction business in automotive, which we have started from 2022. And we are not just going along with the wave of electrification, but we're also looking at the advancement of the telecommunication technology within the automotive.
There's a system called [indiscernible], which transmits the signal. That system is advancing more and more. And this is not just for EV, but the wave electrification is really affecting everything on the automotive. And here, you see drive-by-wire technology. This is using mechanical access -- where we were using mechanical access to transmit signals, we will now be using electric access. So this is how we are seeing advancement.
So if this is the case, up until now, we had power steering, as you can see at the bottom left, you have electric power steering. And on the right-hand side, you see -- excuse me, up above, feedback [indiscernible]. These two are linked and work together in conjunction. So when the signals will be transmitted by electricity, then you have the one that is sending the signal and the receptor of the signal. Actually, you need 2 motors, and we use motor and actuator in terms of names. But by using a signal, the requirements on the motors is accelerating more and more. And also even in the break, there are some advancements that we see.
So break, up until now, was used using hydraulic, using pump. But hydraulic itself will be electrified and the pump itself will be electrified as well. So we are now seeing technological innovation in this area, electronics, and we will work together with customers so that we can go along with this wave of electrification.
And I have one more on Automotive business. So you have telecommunications, entertainment and [ powertrain ] systems. If you break it down like that, and also, if you look at the front-end, the center and rear zone or if -- we are now seeing advancement in zoning of the car itself and ECU is what it supports. Now when we say we say ECU, this is engine control unit, so that's actually maybe an old word. So now we will replace this with the word electronics, perhaps. But control units, signal circuit design and also software designs, this is a motor control system business, and we see advancement there as well.
Here at the bottom, you see a seat strategy. As an example, there are more than 20 motors that's installed in the seat itself. For example, in addition to that, function to just adjust the seat, the assist function for users so that they can drive a long time or warning motors, so that's the user the driver will not fall asleep. So there are many components that are equipped here.
Now the car manufacturers have to deal with automotive driving and they are inputting engineering resources there. So for us, the manufacturers, we will be receiving orders as a system, as source. So here, the car seat is considered as a system, as one single ECU. But aside from that, there's door zone, so which we receive as an order or you had the hood in the front as one system or a cockpit navigation signals where it is displayed on the glass. This is a projection motor business and we have more than 90% market share here in that business. So what sort of signal should be sent to the user, the passenger? That sort of business is really increasing quite significantly. So we will take on these needs so that we can offer solutions. So automotive business will expand even going forward.
So next is on the Machinery and machinery tools. So this is looking at machinery and others. What we're introducing here is [indiscernible] robot and cobots. We have already announced this is a strain wave reducer called FLEXWAVE, which is equipped with sensors. And we also have a very powerful reducer, which supports the bottom, it's called [indiscernible] Cycloidal reducers.
So motors in robots and reducers, there are actually a couple of companies have been monopolized by a few players. However, we are now entering this space as well. So for example, we have low-price technology, which we have always been strong in, and we will use this as a trigger, and we are now selling this as a system. The investment in China in our production facility is actually decelerating slightly. But from second half of 2024, we're planning to expand this business quite significantly.
So I want to talk about the press machine above to the last, you have the press machine for car manufacturing. We have a very large market share globally. And the motor, which corresponds to this, you're using press machines in order to build layers for the core. And we are also producing motor cores for that as well and electronics, semiconductors, plates, electronic components.
This is the motor high-speed precision press for motor core. We also have a [ giga press ]. This is a very large model and giga means [ 10 tons ]. So there is machine that actually makes us a very large body for this [ 10 ton ] plus. And we have a production facility in Mexico, which would allow us to supply around the globe. And for the press machine, we have Asia, Europe and North America. We do have the production facilities there and as a result of that, we're able to the customers' needs, many automotive manufacturers and business operators. So our characteristic is that we have global structure in place and we're able to meet different models from small to large sized. We have a very full lineup of press machines.
So let's move on to the Machinery tools. As you can see from this table, we have -- the TAM is JPY 10 trillion in this market. So you have this processes called drilling the hole in the middle. This is machining center. We have a very large market share here. And in addition to that, the orange, this is [indiscernible], We have acquired Takisawa. They have this very strong technology in [indiscernible], and we believe that this will contribute to the global markets as well.
And although this area is very small in terms of market, we have gear cutting machine. We see the use for electric vehicles and hybrids. This is high-precision gear cutting machine. And there are customers who say that they're not able to live without us. And that's high level of technology we have in the gear cutting machines. So the fact that we have this machine tool itself is the ability that links to the product capability.
When it comes to this industry, we were late into this industry but we would like to regard ourselves as a new innovator for the development of this industry.
Going forward, I would like to explain this water cooling module systems. It was April 15 that we made this announcement to the public. It's called CDU, coolant distribution unit, is that's what it stands for. This is AI-based, very promising components for the [indiscernible] system for which demand will be significant.
And for the details of this, mostly production will be significantly increasing from 200 to significantly more going forward, and 3,000 units will be the production per month going forward. That's what I like -- we would like to reach as a company.
We have to drive our very initial business that we started our company with. We were very happy and very close to the revolution of IT and HDD. With the development of computers, we have developed our technologies as the revolution takes place for semiconductors. That's what this Nidec is about.
As of today when it comes to CDU and cooling business, we have a coolant distribution manifold. And we have CPU units and GPU units. They have to be cooled. We have LCM to cool these units, coolant module is that's what it's called.
And electronic processing machining is, well, they're one of the areas we have a huge, very sophisticated technology. We have a [indiscernible], a very small space year, quick cutting technologies and other technologies that we have, used as a cooling technology, water calling technology. We need to use water flowing inside the circuit. It's a very highly sophisticated, these computer systems must not be wet, but this water has to flow right next to this water-sensitive computer units component.
We have to combine these units based on our customers' requirements. We have to be able to do it as fairly as possible based on our customers' demands and requirements. And this is like a [indiscernible] conjoining above. We need to have a very super accurate machining technique. That's what we need to have as a company.
And we have to meet the ultimate contact, in which we have -- could possibly have a contamination inside the water because of the small pieces of metals that has to be provided at all costs. We need to utilize our quick topline technology for which we have been receiving a lot of inquiries. I have been getting excited about my own talk. That is all about the water cooling business.
And this is a continuation of digital transformation of business. And this is going to become a hugely promising business. ODM, OEM manufacturers and other manufacturers other companies, we are -- we will probably be contacting directly. This industry itself is going to go through a huge change. We're going to be extremely close to those changes so that we can achieve our technological success ahead of others.
When it comes to the server business, we have been involved in computer PC businesses, and we have a supercomputer business coming along. And as they develop, we have a GPU to take care of.
Automotive driving is coming up to become a reality. In order to make that happen, we have a super fast communications networks. We have 5G in place -- in place now. We have a [indiscernible] meter wave is now starting in China. We have a network slicing taking place as well, which is to make the personalized components, operations, and that has -- will become advanced as well. For that, data explosion will take place as well. And as such, in such a communication businesses, we are having various businesses taking place as Nidec AI service revolution and other industrial revolutions are what we are becoming. We continue to be very close.
This is my final segment. Appliance, Commercial and the Industrial segment. We have subsegments, as you can see on this slide. When it comes to air conditioners and home appliance components, we have a commercial and industrial companies. For industrial components, we are in various types of businesses. And we like to [indiscernible] energy business unit. We have 2 examples of their business. Please go to the next slide.
First of all, if you take a look at the left-hand side of the slide, this is about the AI service, we have data center business. We have emergency generators for auxiliary power supply units for data centers. And this business is growing significantly, surprisingly fast, 12% CAGR, as you can see on this slide. This is a sizable business as far as we can see.
When it comes to data centers, the power has to be on all the time and the water has to be running all the time to cool these components down all the time. And we need to have a second and third backup system. And for that, the power generators like this one are needed. We have been required to produce and supply a very highly sophisticated. We have more than 50% of the shares in the business, and we continue to steadily grow our shares in the market.
And solar default uptake and window of businesses, power generation business is growing. And these energies are naturally supplied resources are very stable. First of all, we need to make sure to secure a very stable supply by stabilizing the voltage. We have the best battery energy storage system. That's what we have to stabilize. And this is gaining a lot of attention. And this is a stand-alone unit. You can be -- you can install this anywhere in the world. CAGR is 28%. This is another very high market share or CAGR. I, myself, will be involved in this business, in promoting this business.
And that is all for my explanation. But when it comes to areas for fossil fuel energy, decarbonization is coming or taking place as well. This slide is about the infrastructure-related business. We have solutions that we are offering to our customers. If you take a look at the left-hand side, this is [indiscernible] Italy. It's Slovenia -- there are borders for Slovenia and other European countries there. It's about -- and if you go over the [indiscernible] -- this is about the transportation of oil, [ TranzAlpine ] business to Australia, Germany and the Czech Republic. We have this pump drive motors for which we have received order. In addition to the order intake, we need to have a good very maintenance for these recurring businesses are another area we have received our orders. And at the right-hand side, this is about the liquid natural gas system installed in Qatar. This is a compressors for liquifying the natural gas. And this has a huge compressors, as you can see on the slide. Liquid natural gas has to be transferred, that there's a fuel -- fossil fuel, but it has to be liquefied for transport. We are producing maintenance component services, what we are providing to our customers.
As you can see, Nidec has been providing -- producing Nidec, of course. But we are not just about the motor manufacturer. We are making products that spins and move. We are in a power generation business. We are making air compression business as well. The basics about the business technology is about the same, but in the various many industries, we have these industries are growing up despite -- regardless of the economic situations, we were making contributions in these areas.
As you can see, we are in the motor business, of course, but so many other businesses as well. And what we do as a company is to prevent global warming, and we are promoting the decarbonization. We are proud of that type of promotion that we are doing. We and I, together with so many others in our team, we are in the second generation of the management of this management of this company or the Nidec Group as a whole. We need people, technology and so many other elements for us to move forward and we need to beat the competition to be able to provide our customers with various solutions. That's what we are going to do. We will continue to do.
As you can see on this slide, Nidec [indiscernible] all for dreams, that's what we stand for. We have huge dreams in our service for the world in order for us to make these dreams even bigger than they are now, we need to be able to be, as a company, that will last for the next 100 or even 200 years. That's the type of all-out effort we are going to make.
On the short term, we may disappoint you about our financial performance, but I, myself, see the long-term situation. I'm on a long-term perspective. So that this company will become truly globally essential business in. And that's what I would like to have in mind as we go forward together with our team members. We're going to make a healthy and wonderful growth as a company. We don't have any time to go back.
I received a [indiscernible] to move forward. All for our dreams. Thank you very much.
Thanks very much, Mr. Nagamori, Mr. Kishida, Mr. Samura, thank you very much for your explanations.
Now we would like to open the floor for a question-and-answer session. [Operator Instructions]. Now does -- does anyone have any questions?
And first, please, the person who raised his hand ahead of others.
This is Takayama of Goldman Sachs. I have three questions. I'd like to give you these questions one by one. First of all, when it comes to this JPY 230 billion operating profit, can you elaborate on that?
I believe this could be higher in other circumstances. But this number, according to my calculations, it looks very or too conservative. Is this -- could this be a minimum number for you to try to achieve? Or as you've said, does this number contains some basis for your future growth? And you are seeing this year as a year of making not so much profit. Are you contemplating about taking time before you will be able to achieve the ideal stage from your perspective, Mr. Kishida? Or could this number just a number or just a conservative number? Can you elaborate on this number over here? This number looks a little different from the number that I usually see in this type of presentation.
I would like to give you my explanation here. This is Mr. Nagamori speaking. When it comes to new management, prior to the establishment of the new management, we have this decision-making process, new one, new business making -- decision-making process in place. We have a CEO decided, nominated in the nomination committee. I have never been involved in the establishment of these numbers here. But this new management's numbers are based on a very big other plans and they are -- have been part of all the data process when it comes to these numbers establishment.
Over the past 3 fiscal years, we have been in a [indiscernible] situation. We need to -- these people -- new people have had organized the situation to put everything back into normal. And they have been able to capture all of the issues in a short term and solve them.
What we need to do is as follows. And we need to -- we like to make the upward revision instead of the downward revisions we have had to do. Forget about the past. We would like to come up with a very solid figures and achieve those results as promised.
And prior to the 3-year period that I've mentioned, we have already been -- already always made very pretty much over achievement over the past 3 years, the situation has changed for the negative. Underachievement was not really in our dictionary. Underachievement did happen over the past 3 years. So we had say farewell to these [ wrong ] past, new management and the [ wrong ] past management, and we now have a new management in place.
When it comes to Q4, these numbers seem to me to be rather conservative, but these other numbers, they came up with the new management. As has been explained by Mr. Kishida, Mr. Kishida, the CEO, he has won over people in the company. To be honest -- to be honest, these numbers look to me to be very, very conservative, but these are the numbers they would like to stick to despite the temporary decline in the share price, this will be a small instance compared with the history to take place 20 to 30 years from now.
I sometimes feel -- I'm not going to feel [ disgusted ] it about your report, Mr. Takayama. I'm not really making any complaint at all about your reports, Mr. Takayama.
So succession is going very smoothly from me to Mr. Kishida. It's not just one person when it comes to candidates. And this information is shared by multiple people, and we have [indiscernible] overseas and business groups. These executives, the leaders of these business units are now for us, the Senior Vice President, and they are involved in decision-making process of these numbers.
So even though there may be slight changes, I don't think you will properly see what we have experienced in the previous years. So how should I say this? I believe that there's a completely new management structure in place. So I will quietly step back and disappear. And I want to make sure that when there's an administrative changes, there won't be any confusion.
So I believe that my role is to make sure that it's done smoothly. So no matter what kind of the question we get, we want to be able to explain well. And our business is a wide range. And I think it's important that the CEO is able to have a full understanding of all businesses. Sometimes only the business unit has -- are able to explain, but we don't want that to be the case. We want the CEO to be able to get a full understanding and explain for all the business units.
And of course, risk, it doesn't mean that we don't have any risk. In fact, we need to continue to minimize risk. So even in traction motors in automotive business, China business, maybe there was a little bit of a strategic error there, but we had a lot of lessons learned. And thanks to that, the domestic customers are placing many orders to us. So I think we have new very good products now and healthy profit. And in terms of number of customers and -- type of customers, excuse me, we have the world's top blue-chip customers. And Nidec has always won with technology, not pricing. We're not a company that pursues just sales with just pricing, but we want to be focused on profit of 15%.
So I think he has that leadership style, and I think he will probably carry on that legacy tradition. So all the members around the world, if there's an issue, we'll share that immediately. And the new members are fluent in English, so they can call the customers with just a mobile phone. And even in our businesses overseas, they can just call up and they can just discuss right on the phone. So I think we have a really good structure in place. There's a big renewal, new generations.
IR, we have a new staff. Even in PR, I think that the way they do it has really changed the way they think is very different. It's very much up to date most recent. And so you need to also change your mindset the image you have of us and Nagamori were old guys. It's too old. But you have a long history. We've been around for a long time, but I think it's a new management. So Kishida?
It seems as though this just being conservative? Or do you think it's something to do with not being able to achieve it?
Well, I think number one priority is to make sure that we restore confidence and trust. So we want to make sure that we are, for sure, able to meet the targets that we publish. And that is how Nidec should be. So that is why we are prioritizing this, and that's the reason why we have this number. But of course, internally, we have a bigger target.
The second question, I think you will be in the process of developing the midterm plan going forward. And I know that you will not be able to disclose any details today. But from the impression I have today is that the technology you have on hand today, if you look at the current situation, it seems as though there's much more opportunity and you want to maximize that, the opportunity. And it seems as though your strategy will be an extension of that.
So maybe it might be difficult to share the target, but what sort of company you want to be. I forgot to mentioned this. But when we announced our Q1 results, we will be able to give you guidance for our midterm plan for 2028 as of June 30. And we're actually in the middle of a discussion right now. So we have the organic growth, which we will focus on in 2024. But in addition to that, I'm sure there will be large M&As and perhaps we may be incorporating larger technologies as well.
So in Q1, the management team will discuss this. And we will also check the production basis there so that we can have a solid plan in place. And last question about the system, the module. So I understand that you have a lot of competitiveness here on the thermal module. So what is your winning strategy? So maybe you need to have the supply network first, what is it that you need to win? So not just on capacity, but also sales, share anything that you have in visibility today.
Before I share the number in the new management system, where there's one thing we are very, very cautious about, and I want to share about that, that is that this is an industry that is expected to grow quite significantly. But we don't want to read the kind of mistake we did in traction business. And what that is, is that when we talk about capacity, it's not just about production capacity but there's technology capacity, manning plan, software development capacity as well. And we don't want to overcommit to that. I don't think that's a good starting point.
Of course, we are promoting business because we know that we can enter the business. But when we do something new, we don't want to have quality or supply issues. And so that is why in the starting dawning age, we want to make sure that we have stable production and technology capacity so that we can meet the customers' demand. So the amount that we're projecting this year, as of today, it's still a very conservative plan. So I hope you will look forward to the progress that we will make.
[indiscernible] I have a question for EV traction motor. Previously you had the production plan. I think you had a bar graph on that, which you used to announce. And I think it was like 2030, you were planning 10 million units. And that plan is no longer valid because of the strategy change.
Well, we don't want to just go after the number, the volume target in China. We did change our strategy. But we want to be #1 in each -- every one of the categories, that is our mission. So when the timing will be, that would be cleared -- made clear in the midterm plan.
So in your company, you have the winning strategy, the [indiscernible], which you have built in the Precision Motor business. But in EV traction motor, so -- it's not about winning the cost competition and winning -- gaining the profitability and winning. It will be different from your conventional strategy.
Well, the winning formula will remain unchanged. We will take orders win with technology, and we will see the differentiator. We will continue to win with that gap. So we don't want to expand our battlefield without having that confidence that we will win with technology. I think we had that mistake in the past. So that's why we want to make sure that we are firm and solid on technology so that we can always win, no one will upbeat us. That is why I was trying not to talk too much today, but I need to answer that question.
Up until now, in each product, we want it to be #1. That's what we have aimed for. And in hard disk drive business at the starting point, we were making losses, but that's how we grew that business. And at that time, customers were, of course, making -- losing money and suppliers were losing money. That was only a short period of time. And at that time, it was like 3%, 5%. But now we're making losses at 30%, 40%, not just us, the suppliers, the competitors and the customers themselves as well. So it's not that kind of a competition.
When we talk about competition, so it's about -- okay, we're making losses, but competitor is making profit, then that's our problem, but it's not just about 3% to 5%, but we're looking about -- so when we initially send this quality and then we see we discount over and over, and we are now losing money after money, that's would disqualify the management. So if the customers are profitable and competitors are profitable, and we are the only ones that are unprofitable, then I think that's a disqualification. That's probably the right kind of competition. But when -- in a market where no one is winning, then of course, this is about, are you losing money JPY 1 billion, JPY 10 billion or JPY 100 billion? I mean that's different. But we're not doing business in order to make the company go backward.
So I think in that sense, he made a bold decision. I think it was good. If he were continuing with this business, amount of losses would have been too big. So why is it that we lost here? We analyze this, and it's not technology. Our technology, our motor is and everyone admits that. But what about pricing? How is that pricing determined? Well, when you manufacture those costs and there's SG&A, right? But the competitor when we look -- all the orders went to them and now they're increasing their losses. So it's not just exit. I think it's just resting.
Even in hard disc drive business, we had that experience. What we did was we paused for a little bit. We took a break. And so you take a break and you think about it and look at the market to see whether it will be competing in pricing or whether it's a performance. So in automotive industry, we engaged in price competition. And the biggest issue was that the battery prices are high. That's what's been said. So -- and we always only talk about battery. But if you want to increase a battery life, then you can actually reduce the quality of motors.
So if you want to reduce your cost by overall by entire car, then if you use high-quality motor, you can realize that. And then I think the European companies and the Japanese OEMs surely understand that they need to really increase quality in order to reduce the overall cost. But I think the Chinese do not understand that. That is why we decided to exit from that. But there are some companies that do understand. So that is how we will continue to have business with them.
So then that would -- so if quality of their motors continue to increase, then our competition will also -- we will also be more competitive. So I think once the competition is right in place, then we will be able to win the right kind of -- play the right kind of battle. So why do we lose? Well, no, we didn't lose. If you went to the Red Ocean and if they said 100 and we say 100 and they say 90, then we say 70, that's how we continue to reduce the price we lost.
When it comes to the car situation, EV is now losing its momentum now. There are quite a few auto manufacturers are developing EV models. And the competition is very aggressive. You may have a more -- it looks to me, you are developing more components for small EVs. Now we believe the prices will drop. Now it will become difficult for you to make profit. That's what I'd like to know the most
for example, when it comes to -- in the case of mobile phone, it used to be very big. You have to carry it over your shareholder in the past. Each unit, the telephone mobile phone cost of JPY 500 to JPY 1 million. And battery became smaller and smaller for the mobile phones and mobile phones themselves became smaller, cost became lower and lower, and the use of the mobile phone spread more and more. and profitability came to the suppliers as well as seller of the mobile phones.
And European businesses and Japanese businesses became very competitive against each other. Some left the market and some became very much winners, and that's a very healthy type of competition. But when it comes to China, BYD, for example, it has been receiving so much subsidy from the Chinese government. It's not really fair. When it comes to Tesla, their profitability is declining more and much significantly.
And if The company -- if the new company is emerge, and those companies that are working regardless of the profitability are now going If the current number of the companies in the market is down from 200 to 230, I believe we have healthy competition start taking place. You have to challenge really in the earnest and not so many people will be able to survive in such an environment. You have to have a very healthy type of services, products, et cetera, to survive in the market. If you win in the market, that's an ideal type of competition.
If you try to sell your products to inexpensively in order to just beat the competition, and that's not really healthy as a competition in the market. And in a healthy type or competition, only the healthy profit-making company will survive. Now the number of the companies in the market in China is down to 70. These companies are reducing their products prices and suppliers are being affected by that. And all the profitable companies so far now -- and with the exception of BYD, who has been receiving a lot of subsidy from the Chinese government, Tesla is now losing its profitability.
If the number reduces when it comes to the number of these companies in the market, a healthy competition will start taking place. We are not going to leave the market. That's not really an option. One thing that I may add over here is as follows. When it comes to this shifting toward the companies for compact models, this is just a normal product lineup. We're trying to be -- it's not -- we are not we have -- it's now we are dependent upon those compact products, where we are part of the line of -- product lineup for compact products. That's what this chart is about.
We're not reducing our profitability in market. In the conclusion, we will become the #1. We will be -- with a record statement, we can be the leading competitor.
This is [indiscernible] with TV Tokyo. I would like to ask you two questions here. First of all, Mr. Kishida, when it comes to this explanation that you gave us, they are very positive impression that I had about you. But when it comes to global market, uncertainty is growing larger and larger. What are your -- what would be your risks? What would be your areas of attention going forward?
When it comes to risks, in 2024, these risks are incorporated in our fiscal 2024 numbers here. We have regional risks, we have war-related risks. There are quite a few risks that what we are talking about. That -- those risks are included in this fiscal 2024 strategic plan that we have in place.
And my second question, this is about, you, to Mr. Nagamori. when it come to the quarterly business sales, China related numbers seem to have bottomed out. When it go to traction motor business, structural reform have already completed or taken place. What is your perspective in the Chinese market? It's a question for you, Mr. Nagamori.
You'd have to -- I don't want you to call on me. But when it comes to China, the situation has been very fierce. Competition has been very fierce, not just in auto market, but so many other different markets. And Japanese companies are struggling in these highly fierce competition. Those competition themselves, in my opinion, are creating risks in the Chinese market in China. When it comes to the auto market, China lost in a comparison for gasoline vehicles. They won't -- couldn't be able to be -- weren't able to become #1. Therefore, they shifted their focus on EVs.
And they are spending -- the Chinese government is spending money for these Chinese companies to become the world's #1 that is impacting various many different markets, and that is accelerating the current recession in the Chinese economy in my opinion. And many people are realizing the fact -- and currently, they are in the stage of restoring themselves. The situation won't be as bad as last year. It's a situation where prices continue to drop. I believe that situation has been rectified already. And the Chinese economy will make in my opinion.
But one issue is that foreign companies are leaving the Chinese market in growing numbers. That's one concern for the Chinese company -- Chinese economy, excuse me. There are some economic and political issues between China and the United States. We shouldn't -- we are not really involved in those issues. Well, if you have a declining number of investors in your country, that will mean that there will be a negative factor in a short-term basis.
But when it comes to market, market is large in China. We have no intention of leaving the Chinese market. We are continuing our investment in China. We have a large volume of transactions, of course, according to some reports. If you have been in the business for a long time, you are -- you have certain countries as the area of frequent investment. As a global company, you have to go through a foreign currency exchange issues. Sometimes dollars becomes very strong, sometimes weak. There are such fluctuations do occur.
Some people pointed out that we may possibly have been overly dependent upon China. That's not the way we think. Now if you think that way, you wouldn't be able to stably run your company. And of course, our next target is India for as a market. And I believe that's a very good choice -- right choice for us. The Indian market will expand or grow very significantly. We go to -- enter a certain country because there is a promising market there. Really worry about the cost or foreign exchange rate. Depending on those elements, the company's [indiscernible] change. We're not -- we don't have any intention of leaving the Chinese market. We are going to have a face-to-face competition, but we'll not be in a market where we will be subject to a significant loss.
We like to be in a healthy type of competition. You can see the company is a place where you generate the promise, we need to make a healthy profit to grow. And some people say that the Chinese market is going to shrink more and more. That's not the type of thinking that I have. I believe China will have another phase of growth, and there will be a market for us to be able to enter. As a global company, it's a principle for us to be able to be in the business in any country.
I'd like to give you some questions -- I'd like to give you one of the questions that I have. If you go to Slide 9, you have seen this capital expenditure, JPY 230 billion. You are going to make a very aggressive investment. And can you elaborate on that?
That is my next plan, JPY 130 billion for fiscal 2024, that's our focus. We're going to utilize our existing agreement as fully as possible. When it comes to developing factories in India, traction NP, which is a joint venture with our Stellantis, we have a water cooling module projects as well. We're going to have an aggressive investment in these areas.
When it comes to water calling modules, we have the technologies nurtured in our HDD business. We have been able to utilize those existing technologies. It's not going to be a huge investment, but we would like to enter -- have these investments in these new areas. That's part of the increase for our capital expenditure for this fiscal year 2024. When it comes to our capital expenditure, if you take a look at this situation, please keep in mind the following information. We are going to purchase new businesses or companies. And if those things do not go well, we're going to make investment ourselves.
If the M&A were successful, organic investment, organic growth won't be necessary. Otherwise, we are going to have a double investment, which will be redundant. For example, last year, we purchased TAKISAWA Machine Tool Co., Ltd. We were planning to make investment in company, but we were able to purchase TAKISAWA, so we do not have to make a new investment, but we need to have some money for purchasing TAKISAWA. So please make a distinction between the two.
In that regard, do you have any plan -- specific plan to build something as part of
So it all depends on M&A, I believe, when it comes to project or building new buildings. In that way, we will be spending money. So it's an M&A, we may not be able to purchase a company that we wanted to purchase. Otherwise, we need to be able to be entering into new business. Purchasing company will be more inexpensive.
Do you have any specific areas of investment when it comes to your strategy?
I cannot disclose any information that will be -- that will cause a problem. As has been explained by [indiscernible] we need to understand the technology that we are yet to have. We need to purchase people to work as engineers as well. We were able to purchase the manufacturer. And we have a multifunctional machines available for us. It will be very difficult for us to be able to start such a business from scratch. We were able to make these machines based on the technologies of various -- a few companies we have purchased. We are dependent upon organic growth and M&A. These are the two factors for our growth.
So the ratio between the two will be 50% and 50% going forward, 50% of organic growth and another 50% for M&A. JPY 10 trillion may seem easy for you, but we may -- we now are able to purchase companies that are worth JPY 500 billion or even JPY 1 trillion. We were able -- we can expect synergies with the existing companies with these new companies as well. Many people may be worried about has not been able to achieve the JPY 10 trillion sales target. And some of the companies we have purchased are now making sales of JPY 200 billion or so.
Akizuki from Nomura Securities. I have three questions. So first of all, Mr. Kishida, you're probably the right person to answer this. You have developed this -- formulated this plan. And putting aside the profit, your sales projection, even if you multiply Q1 4 times, and if you ask you should actually exceed full year projection and the impression is you're quite conservative here. And the question is a very straightforward one. Why is it so conservative?
And also, you -- I think the message here is that you want to improve profitability on a company-wide basis. So on the cost side and optimization, what are your plans? Or what is it for this year and also midterm plan?
Thank you for the question. So the sales plan, I have taken into account the current risk. I put all the risks on the table, and that's reflected here. But we think that we can actually exceed the sales despite the risks, we're confident about that. However, what is it that we want to accomplish on a minimum basis, we have to commit to the market. So that was our starting point. And we have decided we need to really mitigate some of the risks. And that is why we have come up with this plan.
And of course, NPE is added. It's included in here. And the traction business itself, we intentionally reduced the sales projection here. So that's reflected here. So what we plan to do going forward is that we're manufacturers. So the basics will remain unchanged. So materials underpinned by technology, we have to look at the efficiency, improvement in yield, percentage of material use. In addition to that, we need to review our global competitiveness. We have global human resources strategy committee. So we're looking at fixed costs and head count.
Where are the professionals located? And we want to make sure that we're coordinated globally. So we want to visualize fixed cost and have common understanding. It doesn't sound new when I say it like this, but we are very serious about this. We want to be serious about improving this global fight. So you're looking at consolidation of the factories. So for example, Mitsubishi Machinery you have collaboration, I think, that will be effective in improving the overall profitability.
Would that be included? Yes. That was part of the consideration and discussion. So I talked about new Asen [indiscernible] and you saw that chart earlier. So how do ourselves realized synergies from these businesses? We have discussed this with the management overseas. At this point in time, today, we don't have a specific plan on when we will integrate, but we want to be efficient in our operations by all over the world, by region, by country.
Even if we go to India, it's not going to be more on an individual basis, but it will be on an overall basis what do we want to do in India. So we want to have that kind of perspective.
The second question, Mr. Nagamori, your response for M&A. So I want to ask this question to you. If you look back the last 10 years, I think the driver was your midsized motor. Maybe from the latter half to year 2000, you have done a large M&A in middle-sized motor, and that was the reason why you have grown, and that was your strategy.
When you look at the next 10 years, you natural flow will be shift to larger motors -- from small to medium to large-sized motors that seems very natural. But if you look at it from a bigger picture, what is your 10-year plan, additional business that you want to add on through M&A?
So we had maybe 73 companies or so that we have acquired over the years. And I know that there were some companies in there that were you wondered why we purchased that company, not much synergy, not much add-ons. But if you look back on this, you can see all the synergies that were generated from all of these companies that were even questionable. So in principle, Nidec, we're #1 motor company. Putting aside if the market is saturated. But as long as it's not saturated and the market is growing, we -- there's no point in us going into different business type motor.
So -- but motors comes in different sizes from small to large and motors are used in different applications. And EV motors are electrified more and more in the world. So there are many motors that are really selling like the price machines. We have overwhelming share here, and we're selling all of these around the globe and we're still capturing a very large market share. So these are all interrelated. so what is it that we're missing in the area where the market is growing, maybe it's cheaper to do it organically or is it cheaper to do by M&A. So that would be our decision point.
And that's -- so then which company do we want to purchase? So that's how we would determine our M&A strategy. So we have this plan about where -- which area we want to go and what are the needs, what's missing? So we have that picture. Now in the past, hostile takeover was not easy. But we wanted to overcome that. So we have done a perfect acquisition. And I think this would be a textbook type of hostile takeover in Japan. So we have been very successful.
So I know that from that, we can buy any company we wish to buy. In that sense, our scope would expand as well. So I think we can buy almost any company. So based on that, we will look at which one to -- company want to go. In order, we have to look at the sequence. So maybe this is the nose, this is the ear, this is the eye. This is how we would look at it. So half of our 2030 sales will be by M&A. So it will be consistently. We have reinforced personnel in M&A, and we may do a very large M&A.
But if it's a competitive bid, we don't have to be -- we are not willing to buy at a high price. If there's 10, then we will only look at one. So we'll be cautious as well. Unfortunately, we have made no mistake. So we don't want to go because we really desire. But we think if it's a good supplement for our business and if we think we can aim for 15% with this company, they will buy it. We will not buy a company that is loss-making. Up until now, we have bought companies that were loss-making and we restructured and rebuilt it, but it takes time. So we will buy something that is already profitable so that it will contribute to our business immediately.
It was -- people say that it's easy to rebuild a small company, but actually larger companies, because they have personnel, especially in the overseas business, Japanese people can just go and take over. I think you have to look at utilize the local people. If the Japanese went, I know that they will fail. So as a global company, I guess, recently, if you say we want to buy your company, and they say, oh, Japanese company, they always say in Japanese. People, we don't know what they're saying. But I say that the companies we buy global, we have Americans, we have Italians and they say that we see your company and you don't send any Japanese people. So that's why they're willing to be bought.
So that is why if it's a very large company -- large target, they're willing to accept it. But the Japanese companies are very -- they interfere. So that's why they don't want to be bought by Japanese company. But the reason why we have been successful in M&As because we have been known to be a company that doesn't sent Japanese people. So that's why they're willing to talk with us, sits on the table with us. And we've done this over the decade. And they see that the companies we have bought like [indiscernible]. When they have improved, they work our competitors before.
So they were generating 5%, now it's 10%. So we're able to buy good companies. It's not easy, but that's the case.
And the third question, very briefly. In terms of thermal module, in order to improve efficiency, I think the kilowatt units will increase. But do you think the unit price will also increase with an increase in kilowatt? So maybe is it a higher price between 100-kilowatt and 250-kilowatt?
Yes, I think with increasing kilowatts, I think the prices will also increase -- unit price will increase. You should look at the inside of the machine. Have you ever seen the inside of the machine? No, you should. How can you write a report without looking at the content of our machine? If you can see what kind of components that we're using, you will be amazed with the precision of our components. And that's the process in the hard disk drive.
You all think that it's just a box. But if you look at inside, you know that it's not easy to produce something like that. We have many patents we've already filed and it's high margin as well.
So our time is up. So we'll take one last -- one question.
This is Naito of Citi Group company. I'd like to talk to you -- ask you about this fiscal year's report. If you go down to Slide 20, the sales forecast-- and from last -- this fiscal year, that the pace seems to be slowing down. And when it comes to automotive, the organic portion seems to be decreasing. And you are saying that these numbers are consecutive. I believe these conservativeness is incorporated -- reflected here as well. When it comes to for next year onward, the growth rate seems to be increasing after that. Can you elaborate on that?
When it comes to MOEN and ACIM businesses, in this first half of this fiscal year, we have some consolidation of businesses taking place. Beyond that, they are making or planning to make a profit. We have some collaboration and integration of our businesses. And after the process is over, they are planning to make progress. That's part of our plan already.
And one more thing that I'd like to say is that charging business when it comes to these huge equipment that port facilities or equipment for the ports -- Marine ports and our service contracts are as long as 20 to 30 years. And we have this contracted numbers or the figures amount of money charged on a monthly basis. That type of business is growing in numbers, 50 or so. So this sometimes contract periods. Contract periods are 20 or even 30 years. There is -- they purchase our systems that are like several billion yen and the margin will be 40% to 50%, and we can expect the money to be paid from these customers on a monthly basis. That's one of the areas of focus over the past few years.
And when it comes to these large equipment business, we're going to in case by efforts in this money charging business rapid increases based on this charging business, which is now expanding. We have not been thought about much about this type of business We have purchased 2 service providers in succession and it's not so easy to operate these companies. These are -- both businesses have a long history. We need to have a global network of our businesses.
When it comes to MOEN and others, they will be able to enjoy operating profit ratio of 30%. And that is my perspective about these businesses. When it comes to infrastructure-related businesses, their volume is an increase as well. Sometimes it takes 3 years before we can start shipping after receiving orders. And after that, we can expect the money to be paid to us for maintenance services on a monthly basis. It will be a long-term business. We have the constitute a very good base for sales and profit. For us to become a JPY 3 trillion or JPY 5 trillion company in the future, we need to be able to overcome -- face and overcome recessions by utilizing the profit from these businesses and others. These companies are leaving one after another, hardware companies, about 50 years from now, for. example. Infrastructure is now -- is in a pace of replacement in New York, London and elsewhere. Underwater sewage facilities are now in a phase of replacement. Motors are generating quite a few needs for replacement. That's the type of business we need to shift our focus to as the major source of our income. MOEN, for example, 13 plus 30%. And I believe within this fiscal year, MOEN, we're able to touch 15% operating profit ratio and that's how promising the business is. With regards to traction motor, we have suffered a damage, but still, we have a base of our business alive. And with this base, thanks to this base, we can make another try.
When it comes to auto market business, can you have your explanation on that? Do you have any -- when it comes to organic growth of automotive business, the sales are -- you're expecting sales to decline. Do you have any concerns or issues about the business?
We are including -- this is the minimum target we can confidently say we will be able to achieve. We -- this is the number we can achieve with a confidence. We must not be suffering from any underachievement, of course. I'm not involved in this process anymore, but I'm in charge of M&A. I'm in charge of purchasing very good companies. And Mr. Kishida is in charge of those operations. He must not overachieve any figure anymore. I believe these statements are very self-explanatory that may taken as a conservative statement or figures.
That is all for Nidec Corporation's explanation on fiscal financial performance for fiscal 2023. Thank you very much for your time. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]