NIHON SEIKO (5729) FY2026 Q3 Earnings Report

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Executive Summary

Against the backdrop of a sharp rise in antimony ingot prices following the Chinese authorities’ tightening of antimony export controls, the core Antimony Business posted record-high profit, resulting in substantial increases in revenue and earnings. Revenue was ¥31.49B (+81.7% YoY), Operating Income was ¥6.26B (+256.6%), Ordinary Income was ¥6.21B (+264.2%), and Net Income was ¥4.31B (¥1.19B in the same period of the previous year). The Operating Income margin improved significantly to 19.9% from 10.1% in the previous year; however, the primary driver of earnings growth was higher prices despite lower sales volumes, and the risk of inventory valuation losses due to a sharp decline in ingot prices is high in Q4.

Factors Affecting Earnings

【Revenue】Revenue was ¥31.49B (+81.7% YoY). The core Antimony Business recorded a record ¥23.65B (+138.0%), primarily due to an approximately 104% increase in ingot prices, while sales volume declined 15.5%, indicating that price effects were the main driver of revenue growth. The Metal Powder Business generated ¥7.86B (+6.0%), benefiting from higher prices due to a surge in silver prices, although sales volume declined 11.3%.

【Profit and Loss】Operating Income was ¥6.26B (+256.6%), while the Gross Profit margin improved significantly to 23.4% from 15.4% in the previous year. The SG&A expense ratio declined to 3.5%, and cost control exceeding the rate of revenue growth also contributed to profit expansion. Ordinary Income was ¥6.21B, with limited non-operating expenses (interest expense of ¥0.06B and foreign exchange losses of ¥0.02B). The only extraordinary loss was a ¥0.003B loss on disposal of fixed assets, indicating that temporary factors were immaterial. Net Income of ¥4.31B was supported by core operating earnings. In conclusion, the company achieved higher revenue and earnings.

Segment Analysis

The Antimony Business, the company’s core business, generated Revenue of ¥23.65B (75.1% of total revenue) and segment profit of ¥5.90B (25.0% margin). Inventory valuation gains and price pass-through resulting from soaring ingot prices boosted profit by 362.0%, making it the primary driver of company-wide earnings growth. The Metal Powder Business generated Revenue of ¥7.86B (24.9% of total revenue) and segment profit of ¥0.33B (4.3% margin); despite higher revenue due to rising silver prices, segment profit declined 26.0% because of lower orders and reduced capacity utilization. The difference in profit margins between the two businesses is substantial at 20.7pt, and the contribution to overall earnings is extremely concentrated in the Antimony Business.

Key Financial Indicators

Profitability: ROE (annualized) of 37.0%; Operating Income margin of 19.9% (10.1% in the previous year)
Cash flow quality: Inventories increased 35.1% YoY to ¥5.17B, indicating a lengthening inventory turnover period
Investment efficiency: No significant increase was observed against property, plant and equipment of ¥5.51B; investment remains limited
Financial soundness: Equity Ratio of 64.9% (57.0% in the previous year); current ratio of 275.0%

Cash Flow Analysis

As cash flow details are not included in the disclosed data, changes related to funds are assessed based on balance sheet trends. Cash and deposits increased 66.7% YoY to ¥3.55B, forming net cash exceeding interest-bearing debt of ¥2.99B. Short-term borrowings declined 40.6%, while long-term borrowings increased 68.7%, indicating a shift toward longer-term borrowing. Meanwhile, inventories increased by ¥1.34B, suggesting that working capital is tied up behind the expansion in Operating Income. Cash generation is assessed as standard, but the increase in inventories requires monitoring as a factor weighing on capital efficiency.

Quality of Earnings

The gap between Ordinary Income of ¥6.21B and Net Income of ¥4.31B was attributable to income taxes of ¥1.89B. The effective tax rate was approximately 30.5%, a normal level, and the gap was not caused by temporary factors. Non-operating income was ¥0.04B, or 0.1% of Revenue, and was immaterial. Non-operating expenses of ¥0.09B (interest expense of ¥0.06B and foreign exchange losses of ¥0.02B) were also limited. The only extraordinary loss was a ¥0.003B loss on disposal of fixed assets, and the majority of profit was derived from core operations. However, the sharp increase in inventories (+35.1% YoY) resulted from stockpiling during the surge in antimony ingot prices. Attention is warranted regarding earnings quality because a sharp decline in prices in Q4 could result in inventory valuation losses.

Earnings Forecast and Guidance

The Full-Year forecast remains unchanged at Revenue of ¥40.20B, Operating Income of ¥5.30B, and Ordinary Income of ¥5.20B. The Q3 cumulative progress rates were 78.3% for Revenue, 118.2% for Operating Income, and 119.5% for Ordinary Income, substantially exceeding the standard progress rate of 75%. This indicates that the full-year plan assumes a significant decline in profitability in Q4. For the Antimony Business in Q4, the company expects Revenue of ¥5.85B and a segment loss of ▲¥1.10B due to a sharp decline in ingot prices (assumed to fall from $44,200 to$27,000/ton), which is the primary reason for maintaining the full-year forecast.

Shareholder Returns

The annual dividend forecast is ¥340 (actual Q2 dividend of ¥170), implying a Payout Ratio of approximately 23.4% against forecast EPS of ¥1,450.59. As information regarding share repurchases is not included in the disclosed data, no assessment is made of the Total Return Ratio. The company’s financial base, supported by net cash, underpins the sustainability of its dividend.

Catalysts

【Short term】The direction of antimony ingot prices in Q4 and the realized amount of inventory valuation losses will have a direct impact on earnings. The company assumes a price of $27,000/ton, and movements above or below this level will determine Q4 profit and loss. 【Long term】If the Chinese authorities’ tighter export controls continue, changes in the antimony supply-demand structure and procurement framework could affect the business environment over the medium term.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Both the Operating Income margin and Net Income margin are substantially above the industry median, indicating a high level of profitability within the industry.

Growth and Capital Efficiency

The Revenue growth rate is substantially above the industry median, but this is largely attributable to the special factor of soaring ingot prices, an external factor.

※Source: Compiled by the company

Risk Factors

1. Inventory valuation loss risk: Antimony ingot prices declined from a peak of approximately $61,000 in July 2025 to approximately$35,000 at the end of December, and are expected to reach the low-$20,000s by the end of March 2026. Some portion of inventories of ¥5.17B (+35.1% YoY) may incur valuation losses.

2. Raw material and supply structure risk: The impact on procurement costs and supply stability may continue as a result of the Chinese authorities’ tighter antimony export controls. Difficulty in procuring OEM products could also affect sales volume.

3. Sales volume decline risk: Sales volumes declined YoY in both the Antimony Business and Metal Powder Business (down 15.5% and 11.3%, respectively), and the company’s revenue growth structure is dependent on higher prices, which requires monitoring.

Key Takeaways from the Earnings

1. The increase in earnings was primarily driven by price effects resulting from soaring ingot prices, while sales volumes declined in both businesses. The sustainability of the high Operating Income margin of 19.9% is highly dependent on ingot price trends.

2. Although the progress rate against the full-year forecast was high at 118.2% for Operating Income, the company expects a segment loss in the Antimony Business in Q4. The structural asymmetry between strong performance through Q3 and the risk of inventory valuation losses in Q4 is a key point of focus in the earnings results.

3. The Equity Ratio increased to 64.9% (57.0% in the previous year), and net cash was secured, indicating an improving trend in financial soundness.

Theoretical Share Price (Reference Value)

Sensitivity: ¥9,265–¥9,828 at ±1% for the cost of equity, and ¥9,456–¥9,667 at ±0.1 for ω.

Notes:

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

(Calculation model: Residual income model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated values based solely on publicly disclosed data; these are not forecasts of market prices or recommendations for any specific investment action, and do not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI through an integrated analysis of XBRL earnings summary data and PDF earnings presentation materials. 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. You should make investment decisions at your own responsibility and, where necessary, consult with a professional advisor.

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