Nisshinbo Holdings Inc. FY2026 Q2 Earnings Report

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Executive Summary

Operating income, ordinary income, and net income all recorded double-digit growth, resulting in higher revenue and earnings, with the results primarily driven by improvements in core operations. Revenue was ¥2724.6B (+7.0% YoY), operating income was ¥302.7B (+64.4%), ordinary income was ¥325.2B (+71.0%), and net income attributable to owners of the parent was ¥215.9B (+87.8%). The earnings growth rate significantly exceeded the revenue growth rate, primarily due to higher revenue and earnings in the core Wireless & Communications segment and improved profitability in Precision Instruments and Chemicals. Extraordinary gains and losses were almost entirely offset on a net basis, indicating that earnings growth was based on an improvement in recurring earning power rather than temporary factors.

Factors Affecting Results

【Revenue】Revenue was ¥2724.6B, representing a 7.0% YoY increase. Wireless & Communications, the largest segment, grew to ¥1453.9B (53.4% of total revenue, +15.1%), making it the primary driver of revenue growth. Microdevices at ¥331.6B (+10.2%), Brakes at ¥298.9B (+5.7%), and Precision Instruments at ¥275.1B (+0.9%) also contributed to higher revenue, while Real Estate declined to ¥97.8B (-41.1%) and Textiles declined to ¥154.2B (-7.2%).

【Profit and Loss】Operating income was ¥302.7B, representing a 64.4% YoY increase. Profit in Wireless & Communications doubled to ¥219.8B (¥103.4B in the previous year, +112.5%), accounting for 72.6% of consolidated operating income and serving as the central driver of earnings growth. Precision Instruments improved its profit margin to 7.1% (approximately 4.6% in the previous year) and increased profit by +56.0%, while Chemicals turned profitable at +¥3.4B from a loss of -¥1.7B in the previous year. In contrast, Textiles fell into the red, from a profit of ¥0.5B in the previous year to a loss of -¥7.9B. Extraordinary gains of ¥48.5B (including ¥33.5B in gains on the sale of investment securities) were almost offset by extraordinary losses of ¥52.1B (including ¥0.6B in impairment losses; no large impairment loss was recorded in the previous year). Accordingly, the impact on net income was limited. Profit before income taxes was ¥321.5B. After deducting income taxes and other taxes of ¥91.2B (effective tax rate of 28.4%) and profit attributable to non-controlling interests of ¥14.4B, net income attributable to owners of the parent was ¥215.9B (+87.8%). Revenue and earnings both increased.

Segment Analysis

By segment, Wireless & Communications accounted for 53.4% of revenue and 72.6% of operating income. Its profit margin also expanded to 15.1% (approximately 8.2% in the previous year), driving overall company performance. Although Real Estate revenue declined by 41.1%, the segment maintained a high profit margin of 78.5% and secured profit of ¥76.8B (25.4% of total operating income), supporting overall earnings. Precision Instruments achieved only marginal revenue growth but increased profit by +56.0% through an improvement in its profit margin to 7.1%, indicating progress in profitability improvement without an expansion in scale. Chemicals turned profitable at +¥3.4B from a loss of -¥1.7B in the previous year, while Textiles fell from a profit of ¥0.5B in the previous year to a loss of -¥7.9B. Microdevices also continued to post a loss of -¥4.2B, although the size of the loss narrowed. While profitability improvements are progressing across multiple segments, the deterioration in Textiles and the contraction in the scale of Real Estate are notable changes in the composition of company-wide earnings.

Key Financial Indicators

【Profitability】The operating margin improved to 11.1% from approximately 7.2% in the previous year, while the net profit margin, based on net income attributable to owners of the parent, was 7.9%, up +3.4pt from approximately 4.5% in the previous year. ROE was 6.6%. 【Cash Flow Quality】Operating cash flow (OCF) of ¥579.1B was 2.68 times net income attributable to owners of the parent of ¥215.9B, indicating a solid level of cash-generating capacity underpinning earnings. 【Investment Efficiency】Capital expenditures were ¥77.4B, equivalent to 0.62 times depreciation and amortization of ¥124.4B, keeping investment within the level of depreciation and amortization. 【Financial Soundness】The equity ratio improved to 53.9% from 47.4% in the previous year, an improvement of +6.5pt, while the current ratio was 209.6%, indicating ample liquidity. Long-term borrowings were significantly reduced from the previous year to ¥761.8B, indicating progress toward a more conservative financial structure.

Cash Flow Analysis

Operating cash flow was ¥579.1B (-2.9% YoY), remaining broadly flat relative to the growth in earnings. In terms of working capital, the decrease in trade receivables contributed a cash inflow of ¥349.9B, while the decrease in trade payables was a source of cash outflow of ¥128.9B, with the two factors largely offsetting each other. Investing cash flow was -¥12.1B, as capital expenditures of ¥77.4B were largely funded by proceeds from the sale of investment securities and other sources. Financing cash flow was -¥574.6B, primarily due to repayments of long-term borrowings of ¥414.6B, indicating that the company used strong OCF generated during the period to reduce interest-bearing debt. Free cash flow was ¥567.0B, well above capital expenditures and dividend payments, leaving substantial capacity for capital allocation.

Earnings Quality

Ordinary income of ¥325.2B consisted of operating income of ¥302.7B plus non-operating income of ¥46.1B (including foreign exchange gains of ¥14.3B and dividend income of ¥7.3B), less non-operating expenses of ¥23.7B (including interest expenses of ¥14.7B). Non-operating income and expenses were limited relative to revenue. Extraordinary gains of ¥48.5B (including gains on the sale of investment securities of ¥33.5B and gains on the sale of fixed assets of ¥15.0B) and extraordinary losses of ¥52.1B (including impairment losses of ¥0.6B) were almost entirely offset on a net basis, and no large impairment loss recorded in the previous year occurred during the current period. Accordingly, the +87.8% increase in net income attributable to owners of the parent to ¥215.9B was primarily attributable to improved core earning power rather than one-time items. The gap between ordinary income and net income was primarily attributable to income taxes and other taxes of ¥91.2B (effective tax rate of 28.4%) and profit attributable to non-controlling interests of ¥14.4B, remaining within the range of the tax burden. Comprehensive income was ¥353.1B (¥335.4B attributable to owners of the parent), and the difference from consolidated net income of ¥230.3B was primarily due to valuation differences on securities of ¥108.1B. This should be noted as including market-related factors.

Earnings Forecast and Guidance

The full-year forecasts are revenue of ¥5110.0B, operating income of ¥210.0B, ordinary income of ¥215.0B, and net income attributable to owners of the parent of ¥100.0B. While the interim-period progress rate for revenue was 53.3%, broadly on track, operating income was at 144.1%, ordinary income at 151.3%, and net income at 215.9% of their respective full-year forecasts, all substantially exceeding the full-year forecasts at the interim stage. In particular, progress in the earnings items significantly exceeded progress in revenue, suggesting that the full-year plan may have been maintained at a conservative level. No revision to the earnings forecast had been made as of the time of the interim results.

Shareholder Returns

The interim dividend was ¥18 per share, unchanged from the same period of the previous year, and the full-year dividend forecast is ¥36. The payout ratio, calculated by dividing the full-year dividend forecast of ¥36 by the full-year forecast EPS of ¥64.02, is 56.2%. Free cash flow of ¥567.0B is well above the annual dividend payment amount, leaving substantial cash capacity against the currently disclosed dividend plan. Share repurchases were negligible, and the company continues to pursue a shareholder return policy centered on dividends.

Risk Factors

1. Segment concentration risk: Wireless & Communications accounts for 53.4% of revenue and 72.6% of operating income, meaning that changes in supply and demand in the relevant market and in customers’ investment trends could have a significant impact on company-wide performance.

2. Deterioration in Textiles profitability: Textiles fell from a profit of ¥0.5B in the same period of the previous year to a loss of -¥7.9B in the current period, exhibiting a different earnings trend from the other segments with improved earnings.

3. Contraction in the scale of the Real Estate segment: Real Estate revenue declined by -41.1% YoY, while the segment maintained a high profit margin of 78.5% and accounted for 25.4% of total operating income. If the contraction in the scale of this business continues, its contribution to company-wide earnings is expected to decline.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Both the operating margin and net profit margin exceed the industry median, indicating that profitability is relatively high within the industry.

Growth and Capital Efficiency

The revenue growth rate is below the industry median, indicating that the company’s relative advantage within the industry is more evident in earnings growth than in revenue growth.

※Source: Compiled by the Company

Key Takeaways from the Results

1. Interim progress against the full-year forecasts was 144.1% for operating income, 151.3% for ordinary income, and 215.9% for net income, all substantially exceeding the 53.3% progress rate for revenue. This divergence is noteworthy as evidence suggesting that the full-year plan is conservative.

2. The primary driver of earnings growth was the increase in revenue and earnings in Wireless & Communications (revenue +15.1%, profit +112.5%). Since extraordinary gains and losses were almost entirely offset on a net basis, the quality of earnings can be interpreted as being based on improvements in core operations.

3. The equity ratio improved to 53.9% from 47.4% in the previous year due to a significant reduction in long-term borrowings (a substantial decrease YoY), indicating progress toward a more conservative financial structure.

Theoretical Share Price (Reference Value)

This is a reference range mechanically calculated solely from publicly available data using a residual income model (Ohlson-type model with an explicit five-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥1,817–¥1,920 at ±1% in the cost of equity, and ¥1,856–¥1,875 at ±0.1 in ω.

Notes:

• Amortization of goodwill of ¥1.7 per share has been added back to earnings (as a non-cash expense and to improve comparability with IFRS companies).
• Since the progress of net income against the full-year forecast (216%) exceeds the standard level (50%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies with progress ahead of schedule tend to exceed forecasts; adjustments may be excessive for businesses with strong seasonality).
• Net income is substantially compressed relative to operating income due to the tax burden, acquisition-related expenses, and non-controlling interests, among other factors (net income ÷ operating income 48%). This value reflects that compression at face value, and normalized earnings power may be higher if these factors are temporary.
• Since forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end have been used (there is a timing gap relative to the full-year forecast).
• Since net assets include non-controlling interests, the theoretical value may be calculated at a somewhat elevated level.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-07 / This value does not forecast or guarantee the future share price)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own responsibility, and you should consult a professional as necessary.

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