STELLA CHEMIFA (4109) FY2027 Q1 Earnings Report

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Executive Summary

Although Revenue continued to increase, the pace of Operating Income growth slowed due to a decline in the gross profit margin, while the substantial increase in Net Income was largely dependent on extraordinary income. Revenue was ¥9.75B (+10.9% YoY), Operating Income was ¥1.24B (+1.6%), Ordinary Income was ¥1.18B (+2.4%), and Net Income was ¥1.10B (+32.9%). Cost of sales increased by +13.4%, exceeding the +10.9% growth in Revenue and putting pressure on the gross profit margin, while the increase in Net Income was significantly supported by extraordinary income of ¥0.29B, including a ¥0.28B gain from changes in equity interests.

Factors Affecting Performance

【Revenue】Revenue increased by +10.9% YoY to ¥9.75B. The core High-Purity Chemicals segment recorded external Revenue of ¥8.38B (+10.2%) and accounted for approximately 86% of consolidated Revenue, while the Transportation segment achieved double-digit growth of +16.5% to ¥1.35B. Both segments posted higher Revenue, with the primary drivers being expanded demand in the core business and growth in the Transportation Business.

【Profit and Loss】Operating Income was limited to ¥1.24B (+1.6%), substantially below the Revenue growth rate. The gross profit margin was 23.2%, down 170bp from 24.9% in the same period of the previous year, as the +13.4% increase in cost of sales exceeded the +5.5% increase in SG&A expenses. Segment profit in High-Purity Chemicals was ¥0.90B, a -9.6% decline, resulting in higher Revenue but lower profit. Meanwhile, Transportation posted a substantial increase in Operating Income to ¥0.34B (+49.1%), supplementing consolidated profit. Ordinary Income increased by only +2.4%, partly due to the expansion of foreign exchange losses (¥0.07B, compared with ¥0.05B in the previous year), while Net Income increased by +32.9% due to extraordinary income of ¥0.29B, including a ¥0.28B gain from changes in equity interests. Overall, the consolidated company achieved higher Revenue and profit, but the growth rate at the operating level was limited, and the increase in Net Income was attributable to temporary factors.

Segment Analysis

The core High-Purity Chemicals segment posted external Revenue of ¥8.38B (+10.2% YoY) and segment profit of ¥0.90B (-9.6%), resulting in higher Revenue but lower profit. The external Revenue-to-segment-profit margin was 10.8%, down from 13.1% in the previous year, making it the primary factor behind the decline in the consolidated gross profit margin. Transportation achieved higher Revenue and profit, with external Revenue of ¥1.35B (+16.5%) and segment profit of ¥0.34B (+49.1%); its profit margin was 25.0%, exceeding that of High-Purity Chemicals. However, its contribution to total profit remained approximately 27%, insufficient to fully offset the deterioration in profitability of the core business.

Key Financial Indicators

【Profitability】The Operating Income margin was 12.7%, down 116bp from 13.9% in the same period of the previous year, while the gross profit margin also declined by 170bp to 23.2%. The Net Income margin improved by 181bp YoY to 11.2%, but this improvement was dependent on extraordinary income.【Cash Flow Quality】Cash and deposits were ¥12.93B, and the current ratio was 326.1%, indicating a high level of short-term payment capacity.【Investment Efficiency】ROE was 9.2% (annualized), suggesting some room for improvement in capital efficiency given the substantial capital base represented by an Equity Ratio of 75.5%. BPS was ¥3,910.85, remaining almost flat compared with ¥3,918.11 in the same period of the previous year.【Financial Soundness】The Equity Ratio improved to 75.5% from 74.6% in the previous year, while long-term borrowings decreased by 7.9% YoY to ¥2.64B, indicating a further strengthening of the company’s conservative financial position.

Cash Flow Analysis

Individual figures from the cash flow statement cannot be confirmed from the disclosed information; however, based on movements in the balance sheet, Cash and deposits declined to ¥12.93B from ¥14.82B in the same period of the previous year. Meanwhile, inventories increased to ¥2.92B from ¥2.40B, with finished goods in particular increasing by +21.5% YoY. Accounts receivable and notes receivable also increased to ¥7.60B from ¥7.33B, suggesting that the expansion of working capital accompanying higher Revenue affected the cash balance. Long-term borrowings declined to ¥2.64B, and total interest-bearing debt remained controlled, indicating that the use of funds was directed toward operating working capital and debt reduction.

Earnings Quality

Ordinary Income was ¥1.18B, ¥0.07B below Operating Income of ¥1.24B, because non-operating expenses of ¥0.11B exceeded non-operating income of ¥0.04B. The primary factors were foreign exchange losses of ¥0.07B and interest expenses of ¥0.02B, while non-operating income remained at only 0.4% of Revenue. Profit Before Tax was ¥1.46B, ¥0.29B above Ordinary Income, primarily due to extraordinary income of ¥0.29B, including a ¥0.28B gain from changes in equity interests. Extraordinary losses were negligible at ¥0.002B, resulting in net extraordinary income of ¥0.28B, equivalent to approximately 26% of Net Income attributable to owners of the parent. Accordingly, most of the high +32.9% YoY growth in Net Income was attributable to temporary extraordinary income, and the divergence from Operating Income growth (+1.6%) warrants attention from an earnings-quality perspective.

Earnings Forecast and Guidance

Q1 progress against the full-year company plan was 24.9% for Revenue (¥9.75B/¥39.10B), 25.9% for Operating Income (¥1.24B/¥4.80B), 24.0% for Ordinary Income (¥1.18B/¥4.90B), and 32.2% for Net Income (¥1.10B/¥3.40B). Progress for Revenue, Operating Income, and Ordinary Income was close to the standard Q1 level of 25%. The high progress rate for Net Income was due to the contribution of extraordinary income, including the gain from changes in equity interests, making it difficult to assess as a leading indicator of recurring earnings power. There were no revisions to the earnings forecast or dividend forecast.

Shareholder Returns

The full-year dividend forecast is ¥180.00 per share, and forecast EPS is ¥278.55, resulting in an estimated Payout Ratio of approximately 64.6% based solely on dividends. Whereas the dividend in the same period of the previous year was ¥85 (interim), the full-year dividend forecast is trending toward an increase. Although a 64.6% Payout Ratio is slightly above the general benchmark of 60%, the conservative capital structure, including an Equity Ratio of 75.5% and Cash and deposits of ¥12.93B, provides financial support for continued dividend payments. There has been no disclosure regarding share repurchases; the ratio presented here is the Payout Ratio based solely on dividends.

Risk Factors

1. Deterioration in the profitability of the core business: External Revenue in High-Purity Chemicals increased by +10.2% YoY, while segment profit declined by -9.6%. The external Revenue-to-segment-profit margin declined to 10.8% from 13.1% in the previous year, making profitability improvement in this segment key to recovering the consolidated Operating Income margin of 12.7%.

2. Fluctuations in raw material costs and product mix: Cost of sales increased by +13.4% YoY, exceeding the +10.9% growth in Revenue. The gross profit margin declined by 170bp, indicating sensitivity to cost increases and changes in the sales mix.

3. Expansion of foreign exchange losses: Foreign exchange losses increased to ¥0.07B from ¥0.05B in the same period of the previous year, weighing on Ordinary Income. Foreign exchange fluctuations arising from overseas transactions and foreign-currency-denominated assets and liabilities may continue to cause volatility in Ordinary Income.

Industry Benchmark (Reference; Company Analysis)

Profitability and Returns

Both the Company’s Operating Income margin and Net Income margin exceed the industry median, indicating that profitability is relatively high within the industry.

Growth and Capital Efficiency

The Revenue growth rate also exceeds the industry median, but has not reached the IQR upper limit of 14.6%; the Company ranks highly within the industry but is not at the very top.

※Source: Company analysis

Key Points from the Earnings Report

1. While maintaining Revenue growth, the 170bp decline in the gross profit margin limited Operating Income growth to only +1.6%. The core High-Purity Chemicals segment’s higher Revenue but lower profit weighed on consolidated profitability.

2. Extraordinary income of ¥0.29B, including a ¥0.28B gain from changes in equity interests, made a significant contribution to the +32.9% increase in Net Income attributable to owners of the parent. The divergence from Operating Income growth is an important point to consider when assessing earnings quality.

3. The Transportation segment achieved higher Revenue and profit while maintaining a high profit margin of 25.0%, serving as a supplementary factor in the profit portfolio. At the same time, ROE of 9.2% under the substantial capital base represented by an Equity Ratio of 75.5% warrants attention as a change in the earnings structure.

Theoretical Share Price (Reference Value)

Sensitivity: ¥3,590–¥3,790 at ±1% for the cost of equity, and ¥3,681–¥3,692 at ±0.1 for ω.

Notes:

• Because forecast ROE is below the cost of equity, the theoretical value is below Book Value per Share.
• Net assets as of the quarter-end are used (there is a timing difference relative to the full-year forecast).

(Calculation model: Residual Income Model (Ohlson type; explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated solely from publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not forecast or guarantee future share prices.)

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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 disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting with a professional as necessary.

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