NGK INSULATORS (5333) FY2026 Q3 Earnings Report

Quick View

Executive Summary

The cumulative results for Q3 of the fiscal year ending March 2026 were characterized by a limited spillover of the increase in operating income to net income. Revenue increased 7.1% year on year to ¥487.91B, Operating Income improved 17.0% to ¥73.05B, and Ordinary Income rose 20.0% to ¥73.72B, indicating improved profitability. However, Net Income attributable to owners of the parent was ¥41.52B, remaining nearly flat at +1.5% versus ¥40.91B in the previous year. The Operating Income margin improved to 15.0% from the previous year, and profit expanded at a faster pace than revenue growth. On the other hand, extraordinary losses of ¥19.63B substantially exceeded extraordinary income of ¥2.63B, restraining the growth of Net Income.

Factors Affecting Earnings

【Revenue】Revenue increased 7.1% year on year to ¥487.91B. Although segment-level details were not disclosed, progress against the full-year plan of ¥650.0B was 75.1%, broadly in line with the standard quarterly progress pace.

【Profit and Loss】Operating Income increased 17.0% year on year to ¥73.05B, while Ordinary Income rose 20.0% to ¥73.72B, with profit growth exceeding revenue growth against a backdrop of improvements in the cost-of-sales ratio and the SG&A ratio. The gross margin was 29.9%, the SG&A ratio was 14.9%, and the Operating Income margin reached 15.0%. Ordinary Income exceeded Operating Income due to improved non-operating income and expenses, including foreign exchange gains of ¥3.54B. Meanwhile, extraordinary losses of ¥19.63B, including impairment losses of ¥2.49B and derivative valuation losses, exceeded extraordinary income of ¥2.63B by ¥17.00B, limiting Net Income to ¥41.52B (+1.5% year on year). Although the company achieved both revenue and profit growth, the increase in Net Income was limited compared with the growth at the Operating Income and Ordinary Income levels.

Key Financial Indicators

【Profitability】The Operating Income margin improved to 15.0% from the previous year, and the Ordinary Income margin also rose to 15.1%. Meanwhile, the Net Income margin was 8.5%, slightly lower than the previous year due to the impact of extraordinary losses.【Cash Quality】Cash and deposits were ¥219.66B, inventories were ¥243.08B, and accounts receivable and notes receivable were ¥127.74B. The inventory-to-total-assets ratio was high at 20.1%.【Investment Efficiency】ROE was 5.3%; the low total asset turnover ratio structurally limits ROE relative to the high profit margin.【Financial Soundness】The Equity Ratio was 65.5%. Interest-bearing debt was primarily composed of long-term borrowings of ¥164.83B and bonds of ¥62.00B, while the ratio of short-term liabilities was low, indicating a stable financial base.

Cash Flow Analysis

Although individual line items in the statement of cash flows were not included in the disclosed data, funding trends can be inferred from changes in the balance sheet. Cash and deposits increased from ¥197.97B in the previous year to ¥219.66B, expanding on-hand liquidity. Meanwhile, inventories remained nearly flat at a high level, increasing from ¥241.94B to ¥243.08B, while property, plant and equipment increased from ¥356.64B to ¥369.39B, suggesting that capital investment has continued. Long-term borrowings increased from ¥138.77B to ¥164.83B, indicating a structure in which investment activities are being advanced alongside financing. Overall, profit growth and the accumulation of cash on hand have been achieved simultaneously; however, persistently high inventory levels represent a potential use of funds in terms of working capital.

Quality of Earnings

The divergence between Ordinary Income and Net Income was primarily attributable to extraordinary gains and losses. Extraordinary income of ¥2.63B consisted mainly of gains on the sale of investment securities of ¥2.46B, which represent non-recurring income. Extraordinary losses reached ¥19.63B and included impairment losses of ¥2.49B as well as derivative valuation losses and other items; these should be evaluated separately from recurring operating results. Of non-operating income of ¥9.26B, foreign exchange gains of ¥3.54B, dividend income of ¥2.17B, and interest income of ¥2.07B have a certain degree of recurrence, although foreign exchange gains are highly dependent on market conditions. Comprehensive income was ¥97.09B, substantially exceeding Net Income of ¥41.52B. The difference was attributable to foreign currency translation adjustments of ¥39.89B and valuation differences on securities of ¥16.07B, with fair-value fluctuations unrelated to operating results pushing up net assets. Based on the above, the increase in profit at the Operating Income and Ordinary Income levels reflects the strength of the core business, whereas Net Income was strongly affected by extraordinary gains and losses and should be viewed separately as a source of single-year volatility.

Earnings Forecasts and Guidance

Progress against the full-year company plan was 75.1% for Revenue, 85.9% for Operating Income, and 89.9% for Ordinary Income, all tracking above the standard quarterly progress rate of 75%. Meanwhile, the progress rate for Net Income attributable to owners of the parent was 74.8%, remaining around the standard level, with the occurrence of extraordinary losses acting as a downside factor. Annualizing the progress pace of Operating Income and Ordinary Income at face value would result in levels above the company’s plan; however, Net Income may fluctuate depending on the occurrence of extraordinary gains and losses relative to the full-year plan of ¥55.0B.

Shareholder Returns

The Q2 dividend was ¥38.00 per share, and the full-year company forecast for the annual dividend is ¥76.00 per share. Based on forecast EPS of ¥189.44, the forecast Payout Ratio is approximately 40.1%. Considering the 74.8% Net Income progress rate, the 65.5% Equity Ratio, and cash and deposits of ¥219.66B, the dividend level does not represent an excessive burden relative to earnings and financial strength. As the status of share buybacks was not included in the disclosed data, the ratio presented here is a dividend Payout Ratio based solely on dividends.

Risk Factors

1. Inventory accumulation risk: Inventories were ¥243.08B, accounting for 20.1% of total assets. In the event of demand fluctuations, this could affect the profit margin through valuation losses or production adjustments.

2. Volatility in extraordinary gains and losses: During the current period, extraordinary losses of ¥19.63B exceeded extraordinary income of ¥2.63B by ¥17.00B, restraining the growth of Net Income. The recurrence of non-recurring items such as impairment losses and derivative valuation losses could increase Net Income volatility.

3. Foreign exchange and securities valuation risk: While the company recorded foreign exchange gains of ¥3.54B, it held investment securities of ¥94.47B. In Comprehensive Income, foreign currency translation adjustments of ¥39.89B and valuation differences on securities of ¥16.07B affected net assets. Future fluctuations in foreign exchange rates and market conditions may continue to affect both profit and net assets.

Industry Benchmark (Reference; Company Analysis)

Industry Benchmark (manufacturing)

Profitability and Returns

Both the company’s Operating Income margin and Net Income margin exceeded the industry median, indicating that profitability is at a superior level within the industry.

Growth and Capital Efficiency

The Revenue growth rate also exceeded the industry median, placing the company’s revenue growth pace in the relatively strong category among peers.

※Source: Company analysis

Key Earnings Highlights

1. The Operating Income margin of 15.0% (improved year on year) and the Ordinary Income margin of 15.1% were above the industry median. The ongoing improvement in core business profitability is a key earnings highlight.

2. While progress through Ordinary Income was ahead of the planned pace, the occurrence of extraordinary losses of ¥19.63B limited the Net Income progress rate to 74.8%. The resulting divergence between operating performance and the final outcome requires monitoring.

3. Inventories remained at a level equivalent to 20.1% of total assets. Inventory trends should be monitored as a factor that may affect future profit margins and cash generation capacity.

Theoretical Share Price (Reference Value)

Sensitivity: ¥2,554–¥2,702 at Cost of Equity ±1%; ¥2,622–¥2,629 at ω ±0.1.

Notes:

• As forecast ROE is below the Cost of Equity, the theoretical value is below Book Value per Share.
• Net assets as of the end of the quarter are used (there is a timing difference relative to the full-year forecast).
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat on the high side.

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

---

This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary 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 discretion and responsibility, after consulting a professional as necessary.

---End of Report---