Nippon Yakin kogyo Co.,Ltd. FY2027 Q1 Earnings Report

Quick View

Executive Summary

Both revenue and profit exceeded the previous year, resulting in higher revenue and higher earnings. In particular, the operating leverage effect from the improvement in gross margin caused profit growth to significantly outpace revenue growth. Revenue was ¥422.8B (¥392.0B in the previous year, YoY +7.8%), Operating Income was ¥47.0B (¥32.5B, YoY +44.5%), and Ordinary Income was ¥44.0B (¥29.5B, YoY +49.2%). Net Income attributable to owners of the parent was ¥27.7B (¥19.9B, YoY +39.2%), securing earnings growth while absorbing the temporary downward impact of an extraordinary loss (loss from disaster of ¥3.5B). The primary drivers of earnings growth were an improvement in gross margin (19.6%, up +2.4pt from 17.2% in the previous year) and a decline in the SG&A ratio (8.5%, compared with 8.9%), with cost efficiencies driving improved profitability.

Factors Behind Performance Changes

【Revenue】Revenue was ¥422.8B, representing a year-on-year increase of +7.8% (+¥30.8B). The Company operates in a single segment, the stainless steel sheets and processed products business, and does not disclose a business-by-business breakdown. However, given that the gross margin improved from 17.2% to 19.6%, improved shipment prices or product mix is considered to have contributed to the revenue increase.

【Profit and Loss】Operating Income was ¥47.0B (YoY +44.5%), as positive operating leverage took effect with the SG&A ratio declining from 8.9% to 8.5%. Ordinary Income was ¥44.0B (YoY +49.2%); non-operating income and expenses made a negative net contribution, as expenses including ¥1.2B in dividend income were exceeded by ¥3.0B in interest expenses and other costs. Although Profit Before Tax remained at ¥40.5B due to the temporary factor of recognizing a ¥3.5B loss from disaster as an extraordinary loss, Net Income attributable to owners of the parent was secured at ¥27.7B (YoY +39.2%). In conclusion, the current period recorded higher revenue and higher earnings.

Key Financial Indicators

【Profitability】Profitability improved at each stage, with an operating margin of 11.1% (8.3% in the previous year, +2.8pt), gross margin of 19.6% (17.2%, +2.4pt), and net margin (based on income attributable to owners of the parent) of 6.5% (5.1%, +1.4pt). 【Cash Quality】Cash and deposits were ¥107.0B, down -5.1% year on year, while inventories (total including work in process) increased +10.7% year on year, and accounts payable expanded +79.6% to ¥132.5B, indicating increased use of supplier credit. 【Investment Efficiency】Quarterly ROE was 2.7%, and basic EPS was ¥199.80 (¥142.42 in the previous year, +40.3%). Total assets were ¥2279.1B (up +3.9% year on year) against quarterly revenue of ¥422.8B, leaving asset turnover at a relatively low level. 【Financial Soundness】The equity ratio was 45.1% (-1.0pt from 46.1% in the previous year), and the current ratio was 139.2%. Interest coverage, calculated as Operating Income divided by interest expenses, was 15.9x, indicating ample debt-servicing capacity. However, short-term borrowings of ¥403.9B accounted for 52.3% of current liabilities, indicating a somewhat high reliance on short-term financing.

Cash Flow Analysis

Cash and deposits were ¥107.0B, down 5.1% from ¥112.8B in the previous year. From a working capital perspective, inventories (total including ¥359.1B in work in process) increased +10.7% year on year, suggesting a tendency for funds to remain tied up in inventory. Meanwhile, accounts payable expanded +79.6% to ¥132.5B, with the use of supplier credit partially offsetting cash outflows. Short-term borrowings increased to ¥403.9B (+7.1% year on year), indicating the continuation of a structure in which the buildup of working capital is financed through short-term funding. Property, plant and equipment was ¥1084.1B, remaining almost flat from the previous year (-0.2%), suggesting that large-scale capital investment was limited. Overall, the cash position is balanced by a combination of increased inventory, trade payables, and borrowings, while the expansion of working capital is a factor requiring close monitoring in terms of future cash-generation capacity.

Earnings Quality

Against Ordinary Income of ¥44.0B, the recognition of a ¥3.5B loss from disaster as an extraordinary loss resulted in Profit Before Tax of ¥40.5B. This extraordinary loss is a one-off factor and should be distinguished from recurring earnings power. Non-operating income of ¥1.8B was mainly comprised of ¥1.2B in dividend income and was limited to 0.4% of revenue, while non-operating expenses of ¥4.8B were primarily comprised of ¥3.0B in interest expenses, representing a recurring cost rooted in the financial structure. The effective tax rate was 31.8% (income taxes of ¥12.9B / Profit Before Tax of ¥40.5B). The divergence between Ordinary Income and Net Income was primarily attributable to the tax burden and extraordinary loss and can be considered to be within an acceptable range. Comprehensive income was ¥30.8B, exceeding Net Income attributable to owners of the parent of ¥27.7B by +¥3.1B. The primary reason was the recognition of +¥3.5B in valuation difference on investment securities; therefore, it should be noted that this does not indicate the Company’s recurring operating earnings power.

Earnings Forecast and Guidance

Progress toward the full-year plan was 24.3% for revenue, 29.4% for Operating Income, 30.3% for Ordinary Income, and 30.8% for Net Income (attributable to owners of the parent), with the profit items progressing at a pace above the simple progress benchmark (25%). In particular, progress for Operating Income, Ordinary Income, and Net Income exceeded revenue progress, indicating that profitability improvements are ahead of plan. The full-year plan calls for revenue of ¥1740.0B (YoY +15.3%), Operating Income of ¥160.0B (+45.8%), and Ordinary Income of ¥145.0B (+50.1%), and the earnings forecast was revised during Q1. Meanwhile, there was no revision to the dividend forecast.

Shareholder Returns

The full-year dividend forecast is ¥220 per share, representing an expected doubling from the previous fiscal year’s actual dividend of ¥110. There was no revision to the dividend forecast for the current quarter, and the initial plan remains unchanged. Based on the full-year EPS forecast of ¥649.65, the payout ratio is approximately 33.9% (¥220 / ¥649.65), representing a relatively restrained level of shareholder distribution relative to earnings. Net Income progress is proceeding at 30.8%, above the pace required by the plan, indicating that an earnings base sufficient to achieve the current dividend plan has been secured.

Risk Factors

1. Working Capital Expansion Risk: Inventories (total including work in process) increased +10.7% year on year, indicating that funds are becoming increasingly tied up in inventory. Work in process accounts for approximately 52% of inventories, a high level, and attention should be paid to the risk of stalled production progress and inventory write-downs.

2. Reliance on Short-Term Financing: Short-term borrowings of ¥403.9B account for 52.3% of current liabilities. Compared with cash and deposits of ¥107.0B, the cash/short-term borrowings ratio remains at approximately 26.5%. Reliance on short-term liabilities is somewhat high, and the stability of cash management requires monitoring.

3. History of One-Off Losses: The Company recognized a ¥3.5B loss from disaster as an extraordinary loss during the current period, demonstrating that events affecting business continuity, such as damage to production facilities or the supply chain, have actually occurred.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

While the operating margin exceeds the industry median, the net margin is slightly below the median, reflecting the impact of extraordinary losses and non-operating expenses on the Company’s relative position at the net income stage.

Growth and Capital Efficiency

The revenue growth rate exceeds the industry median and is positioned toward the upper end of the IQR range.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. In addition to higher revenue and higher earnings, the clear improvement in gross margin (+2.4pt) and operating margin (+2.8pt), together with positive operating leverage from the decline in the SG&A ratio, suggests a structural improvement in profitability.

2. Full-year progress was 29.4% for Operating Income, 30.3% for Ordinary Income, and 30.8% for Net Income, exceeding revenue progress of 24.3% and indicating that the pace of profitability improvement is ahead of plan.

3. The buildup of inventories (+10.7%) and sharp increase in accounts payable (+79.6%) reflect changes in the working capital structure and will be key points when assessing future cash-generation trends.

Theoretical Share Price (Reference Value)

This is a reference range mechanically calculated solely from publicly disclosed data using the residual income model (Ohlson-type model with an explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥7,278–¥7,703 at cost of equity ±1%, and ¥7,484–¥7,488 at ω ±0.1.

Notes:

• Net assets as of the end of the quarter are used (there is a time lag relative to the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

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

---

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 responsibility, and you should consult a professional as necessary.

---End of Report---