NICHIAS (5393) FY2027 Q1 Earnings Report

Quick View

Executive Summary

The quarter recorded profit growth exceeding revenue growth, with both profitability and cash-generation capacity improving. Revenue was ¥719.5B (+16.0% YoY), Operating Income was ¥111.4B (+20.7%), Ordinary Income was ¥118.5B (+28.3%), and Net Income attributable to owners of the parent was ¥82.3B (+25.3%). The Operating Income growth rate exceeded the revenue growth rate by 4.7pt, while the Operating Income margin improved to 15.5% from 14.9% in the same period of the previous year. Strong growth and margin expansion in the High-Performance Products segment drove company-wide earnings growth, while Automotive Parts and Building Materials recorded higher revenue but lower profit.

Factors Affecting Performance

【Revenue】Revenue was ¥719.5B (+16.0% YoY). By segment, Plant Construction and Sales was ¥222.2B (30.9% of total, +14.5%), Industrial Products was ¥189.9B (26.4% of total, +14.4%), High-Performance Products was ¥138.9B (19.3% of total, +42.3%), Automotive Parts was ¥132.6B (18.4% of total, +3.3%), and Building Materials was ¥69.3B (9.6% of total, +4.2%). The high growth of High-Performance Products lifted overall growth.

【Profit and Loss】Operating Income was ¥111.4B (+20.7%), and the gross profit margin improved to 28.7% from 27.8% in the same period of the previous year. SG&A expenses were ¥95.4B, up +18.7% YoY and exceeding revenue growth, but this was absorbed by the improvement in the gross profit margin. Ordinary Income increased 28.3% to ¥118.5B, exceeding Operating Income growth, owing to improved non-operating income and expenses, including a foreign exchange gain of ¥3.1B. Extraordinary gains and losses amounted to a net gain of ¥0.15B, having only a minor impact on Net Income. Net Income of ¥82.3B (+25.3%) therefore largely reflected the increase in core operating profit. Revenue and profit increased.

Segment Analysis

Among segment profits, High-Performance Products recorded the strongest growth at ¥31.9B (+78.3% YoY), with its profit margin expanding by approximately 4.7pt from 18.3% to 23.0%. Plant Construction and Sales generated ¥35.3B (+14.5%), representing 31.7% of company-wide Operating Income and remaining the core business, while maintaining a profit margin of 15.9%. Industrial Products generated ¥30.0B (+6.9%) with a high profit margin of 15.8%, although profit growth did not match revenue growth. Meanwhile, Automotive Parts generated ¥9.9B (-10.4% YoY), and Building Materials generated ¥4.3B (-4.2%), both recording lower profit despite higher revenue. Their respective profit margins declined from 8.6%→7.4% and 6.8%→6.2%. While expansion of high-margin businesses is raising the consolidated profit margin, the cost absorption capacity of Automotive Parts and Building Materials remains a challenge.

Key Financial Indicators

【Profitability】The Operating Income margin was 15.5%, improving from 14.9% in the same period of the previous year, while the Net Income margin was 11.4%, improving from 10.6%. ROE (annualized) was 13.5%, representing a favorable level.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥134.3B, reaching 1.63 times Net Income of ¥82.3B, demonstrating strong cash backing for earnings. Free cash flow was positive at ¥107.8B.【Investment Efficiency】Capital expenditures were ¥26.1B, exceeding depreciation and amortization of ¥18.9B, indicating continued maintenance and growth investment.【Financial Soundness】The Equity Ratio remained high at 77.0%, while cash and deposits of ¥617.1B substantially exceeded interest-bearing debt. With current assets of ¥1,982.8B against current liabilities of ¥555.5B, liquidity is ample.

Cash Flow Analysis

Operating Cash Flow was ¥134.3B, a substantial +254.0% YoY increase, confirming cash generation exceeding Net Income of ¥82.3B. The increase was attributable to factors including an increase in accrued expenses and a decrease in tax payments (¥79.1B in the previous year→¥23.3B in the current period), while the ¥25.1B increase in trade receivables absorbed funds. Investing Cash Flow represented an outflow of ¥26.5B, primarily consisting of ¥26.1B in capital expenditures. Financing Cash Flow represented an outflow of ¥76.9B, including share repurchases and dividend payments. Consequently, Free Cash Flow (Operating Cash Flow + Investing Cash Flow) was positive at ¥107.8B, indicating a structure in which cash generated from operating activities sufficiently covers investment and shareholder returns.

Earnings Quality

Of Ordinary Income of ¥118.5B, non-operating income was ¥8.8B, equivalent to only 1.2% of revenue and not large enough to materially distort the assessment of core profitability. Its breakdown consisted of dividend income of ¥2.0B, a foreign exchange gain of ¥3.1B, and other income of ¥1.6B. As the foreign exchange gain is temporary in nature, attention should be paid to the possibility of a reversal going forward. Extraordinary income of ¥0.6B and extraordinary losses of ¥0.4B were nearly offset, resulting in only a minor impact on Net Income. Operating Cash Flow reached 1.63 times Net Income, indicating little sign that earnings depend excessively on non-cash items or accrued income; earnings quality can therefore be assessed as favorable.

Earnings Forecast and Guidance

The full-year forecast is Revenue of ¥2,880.0B (+14.3% YoY), Operating Income of ¥490.0B (+32.4%), and Ordinary Income of ¥505.0B (+28.2%), and the earnings forecast was revised during the current quarter. Q1 progress rates were 25.0% for Revenue, 22.7% for Operating Income, 23.5% for Ordinary Income, and 23.5% for Net Income. While revenue progress was standard, profit progress was somewhat low. This suggests that the company’s plan incorporates a higher earnings contribution in the second half of the fiscal year.

Shareholder Returns

The full-year forecast for annual dividends is ¥65.0 per share (on a post-stock-split basis), representing a Payout Ratio of 34.9% against forecast EPS of ¥186.13. Q1 cash dividend payments amounted to ¥53.5B, exceeding both Operating Cash Flow of ¥134.3B and Free Cash Flow of ¥107.8B during the same period, indicating sufficient cash-generation capacity to support dividends. The company also conducted share repurchases, and the cash outflow for total shareholder returns, combining dividends and share repurchases, should be evaluated separately from the Payout Ratio. The strong Equity Ratio of 77.0% and low level of interest-bearing debt provide a foundation supporting dividend sustainability.

Risk Factors

1. Dependence on core segments: Plant Construction and Sales is the core business, generating Operating Income of ¥35.3B and accounting for 31.7% of the company total. Delays in project progress or cost overruns in construction could have a significant impact on company-wide performance.

2. Inventory levels: Inventories were ¥232.1B, with annualized inventory days of approximately 98 days, exceeding the generally cautious level. In the event of demand fluctuations or raw material price volatility, this could lead to inventory valuation losses or an increase in working capital requirements.

3. Declining profit margins in Automotive Parts and Building Materials: Automotive Parts recorded a 3.3% increase in revenue against a 10.4% decline in profit, while Building Materials recorded a 4.2% increase in revenue against a 4.2% decline in profit. Depending on cost increases and the status of price pass-through, there is a risk that margin deterioration may continue.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The company’s profitability is substantially above the industry median and ranks at a high level.

Growth and Capital Efficiency

Revenue growth also ranks in the upper tier of the industry, indicating an advantage in both profitability and growth.

※Source: Compiled by the Company

Key Earnings Highlights

1. The High-Performance Products segment profit margin expanded from 18.3% to 23.0%, becoming the primary factor behind improvements in the consolidated gross profit margin and Operating Income margin. The sustainability of this business’s growth will influence the earnings structure going forward.

2. Operating Cash Flow was 1.63 times Net Income, and Free Cash Flow was positive at ¥107.8B, demonstrating strong cash backing for earnings. Together with an Equity Ratio of 77.0%, the company has substantial financial capacity to balance investment and shareholder returns.

3. Q1 progress against the full-year profit plan was 22.7% for Operating Income, slightly below the 25.0% progress rate for Revenue. Profitability improvements in the second half and the continued contribution of High-Performance Products will be key to achieving the plan.

Theoretical Share Price (For Reference)

Sensitivity: ¥1,515–¥1,605 at Cost of Equity ±1%, and ¥1,553–¥1,569 at ω±0.1.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference from the full-year forecast).
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(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 predict or guarantee future share prices.)

---

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 a professional advisor as necessary.

---End of Report---