Nidec's Buyback Dilemma: Strategic Shift or Missed Opportunity?

Nidec Corporation, a global leader in motors and precision manufacturing, has long been celebrated for its disciplined capital allocation. Yet its recent share buyback efforts have delivered a stark contrast to its historical vigor. Despite authorizing ¥70 billion in buybacks over the past 18 months, Nidec executed just 22% of its latest plan and bought zero shares in its most recent tranche. This raises critical questions: Is the pause in buybacks a sign of prudent strategy—or a red flag for investors?

The Buyback Backstory: From Aggressive to Anemic

Nidec's buyback history has been inconsistent. In late 2022, it spent ¥46.7 billion to repurchase 1% of its shares, a bold move signaling confidence in its valuation. Fast-forward to 2024, and the picture darkens. The July 2024 plan, which allowed up to ¥35 billion in repurchases, saw just ¥7.8 billion deployed by March 2025. The May 2025 plan, a near-identical ¥35 billion authorization, bought zero shares in its first month.

The immediate culprit is clear: Nidec's stock price remained within its internal valuation benchmarks. Management paused purchases to avoid overpaying, a disciplined approach. But deeper analysis reveals a strategic pivot.

Why Nidec Hit the Brakes on Buybacks

1. Stock Price Alignment: Nidec's valuation—reflected in its price-to-earnings ratio of 20x—has stayed within its internal targets. Unlike companies that buy shares indiscriminately, Nidec prioritizes price discipline.
2. Strategic Reinvestment: Capital is now flowing into high-growth sectors like EV motors (a $30 billion market by 2030) and robotics. Nidec's FY2024 R&D spend rose 15%, with 60% directed toward these areas.
3. Financial Caution: Debt-to-equity has risen from 0.7x in 2020 to nearly 1.0x today. While still manageable, the shift hints at a preference for reinvestment over dilution.

The 50% Total Return Target: A Moving Goalpost?

Nidec's stated goal of a 50% total shareholder return (TSR) ratio—split between dividends and buybacks—faces a test. With buybacks stalled, dividends (currently yielding 1.5%) will need to shoulder more of the burden. Yet dividends alone may not satisfy investors accustomed to buyback-fueled EPS growth.

Critics argue that Nidec risks underwhelming shareholders by deferring buybacks. Bulls counter that growth investments could amplify long-term returns. The key question: Will EV and robotics projects deliver outsized profits to justify the pause?

Investor Confidence: A Balancing Act

The buyback hiatus has two implications:
- Positive: It signals a focus on high-ROI projects. Nidec's 2025 guidance for robotics revenue to triple from 2020 levels offers tangible proof of progress.
- Negative: The lack of buybacks could erode confidence if growth projects underdeliver or debt continues rising.

Analysts are split. Morgan Stanley recently noted, “Nidec's shift to reinvestment aligns with industry tailwinds, but shareholders will demand clear execution milestones.” Meanwhile, Nomura warned that “prolonged underutilization of buybacks risks shareholder restlessness.”

Investment Thesis: Monitor the Metrics

Investors should track three indicators:
1. Growth Pipeline: Watch for revenue traction in EV and robotics segments. A 20%+ revenue jump in these areas by FY2026 would validate the strategy.
2. Balance Sheet Health: The debt-to-equity ratio should stabilize below 1.1x.
3. Buyback Triggers: If Nidec's stock dips to 15x P/E—a 20% discount to current levels—expect renewed buyback activity.

Final Verdict: Strategic Caution, Not Mismanagement

Nidec's pause in buybacks is a calculated move, not a misstep. The shift reflects a mature capital allocation framework: prioritize high-growth areas while avoiding overvaluation risks. Shareholders should be reassured if Nidec delivers on its tech bets and manages leverage.

However, patience is required. The company's success hinges on converting R&D spending into profitable revenue streams. Until then, investors should temper buyback expectations and focus on the long game. For now, Nidec's strategy isn't broken—just evolving.