| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥1368.2B | ¥1226.8B | +11.5% |
| Operating Income | ¥33.7B | ¥37.4B | -9.9% |
| Ordinary Income | ¥20.9B | ¥15.7B | +33.5% |
| Net Income | ¥5.9B | ¥-8.2B | +171.5% |
| ROE | 0.9% | -1.4% | - |
For the fiscal year ended March 2026, Nippon Chemi-Con reported revenue of ¥1,368.2B (YoY +¥141.4B +11.5%), operating income of ¥33.7B (YoY -¥3.7B -9.9%), ordinary income of ¥20.9B (YoY +¥5.2B +33.5%), and net income attributable to owners of parent of ¥23.7B (YoY +¥24.0B, more than +6,400%). Revenue achieved double-digit growth driven by demand recovery in China and other regions, but gross margin fell to 17.9% (down 1.5pt YoY) and SG&A ratio rose to 15.4% (up 0.8pt), compressing operating margin to 2.5% (down 0.5pt from 3.0% a year earlier). At the ordinary income level, non-operating expenses were reduced from ¥32.3B to ¥21.1B, turning to an increase in ordinary income, and net income returned to a large profit due to recognition of special gains of ¥16.5B (mainly grants). Operating Cash Flow was ¥76.2B (a significant improvement from ¥-4.9B prior year), Free Cash Flow was ¥23.3B, sufficiently covering the year-end dividend of ¥20 (total ¥4.9B equivalent).
[Revenue] Revenue was ¥1,368.2B (YoY +11.5%). By region, China was ¥458.1B (from ¥394.6B prior year, +16.1%) and Other regions were ¥364.9B (from ¥299.5B prior year, +21.8%), driven by volume recovery. By segment, the Capacitor Business generated ¥1,318.2B (+11.7%) accounting for 96.3% of total revenue; Other businesses amounted to ¥50.0B (+7.2%), indicating continued business concentration. The foreign currency translation adjustment increased by ¥29.4B, suggesting that yen weakness contributed to growth in foreign-currency sales to some extent.
[Profitability] Cost of sales rose to ¥1,123.8B (from ¥989.6B prior year, +13.6%), outpacing revenue growth, and gross margin declined to 17.9% from 19.3% a year earlier (down 1.4pt). This is primarily attributed to higher raw material and energy costs and an adverse product mix. SG&A was ¥210.7B (from ¥199.9B prior year, +5.4%), growing at a slower pace than revenue (+11.5%), but SG&A ratio slightly increased to 15.4% from 16.3% prior year, resulting in operating income of ¥33.7B (-9.9%). In non-operating items, interest expense of ¥15.1B and foreign exchange losses of ¥6.7B weighed on results; however, non-operating expenses were compressed from ¥32.3B to ¥21.1B, improving ordinary income to ¥20.9B (+33.5%). Special gains of ¥16.5B (mainly grants) and special losses of ¥2.2B (including impairment losses of ¥1.8B) were recorded, expanding profit before tax to ¥35.2B (from ¥5.6B prior year, +525%). After deducting corporate taxes of ¥10.9B, net income was ¥5.9B, and net income attributable to owners of parent was ¥23.7B after excluding ¥0.6B attributable to non-controlling interests. In summary, revenues increased while operating income decreased, but a reduction in non-operating expenses and one-off special gains materially boosted final net profitability.
The Capacitor Business posted revenue of ¥1,318.2B (YoY +11.7%), operating income of ¥32.2B (YoY -2.3%), and an operating margin of 2.4%, with declining gross margin and rising SG&A compressing profitability. Other businesses (CMOS camera modules, inductors, etc.) reported revenue of ¥50.0B (+7.2%) and operating income of ¥1.4B (-67.1%), yielding a margin of 2.9% and suffering a large decline in profit. Segment margins are generally low and similar across segments, and the sharp profit decline in Other businesses further weakened consolidated operating margin. Capacitors contribute 96.3% of revenue, highlighting a high concentration and skew in revenue sources.
[Profitability] Operating margin 2.5% (prior year 3.0%), ordinary profit margin 1.5% (prior year 1.3%), and net income margin 1.7% (prior year 0.0%). Operating-level profitability was pressured by worsening cost of goods sold and higher SG&A, but ordinary and net profit levels improved due to reduced non-operating expenses and recognition of special gains. Gross margin of 17.9% declined 1.4pt from 19.3% prior year, indicating adverse product mix and higher raw material and energy costs. ROE 0.9% (prior year 0.1%), ROA (on ordinary income basis) 1.3% (prior year 1.0%), showing capital efficiency remains low but slightly improved YoY. [Cash Quality] Operating Cash Flow / Net Income is high at 3.22x, mainly due to inventory reduction (CF contribution +¥31.0B), but OCF/EBITDA of 0.71x is below a typical >0.9x benchmark, with interest burden and working capital movements suppressing cash conversion. [Investment Efficiency] Total asset turnover 0.824x (prior year 0.754x) improved with revenue recovery. Inventory days (DIO) are high at 101 days (work-in-process ¥123.0B, finished goods ¥118.7B), indicating scope for inventory efficiency improvement. Capital expenditures of ¥43.7B were below depreciation of ¥72.9B, giving CapEx/Depreciation of 0.60x, indicating restrained investment and potential risk of deferred maintenance/growth spending. [Balance Sheet Health] Equity ratio improved to 38.0% (prior year 34.8%). Interest-bearing debt stands at ¥705.1B versus cash and deposits of ¥212.9B, producing net interest-bearing debt of ¥492.2B, Debt/Equity 1.63x, and Debt/EBITDA 6.61x, indicating continued high leverage. Interest coverage (EBIT / interest expense) is 2.23x, showing limited interest resilience. Short-term borrowings of ¥346.4B (short-term liabilities ratio 49%) present refinancing risk. Current ratio is 149.8% and quick ratio 129.5%, indicating generally adequate short-term liquidity, but cash on hand is only 0.61x of short-term borrowings, leaving limited buffer for refinancing risk.
Operating Cash Flow was ¥76.2B, about 13x net income (¥5.9B), indicating high quality, though this reflects a large reversal from ¥-4.9B in the prior year. Main increases were inventory reduction (+¥31.0B CF contribution), depreciation ¥72.9B, and adjustments for foreign exchange losses/gains ¥14.3B, while increases in trade receivables (-¥42.7B) and decreases in trade payables (-¥5.3B) pressured cash. Operating CF subtotal (before working capital changes) was ¥91.7B, and after corporate taxes paid ¥8.7B and interest paid ¥15.0B, OCF totaled ¥76.2B. Investing CF was -¥52.9B, driven by capital expenditures -¥43.7B and intangible asset investments -¥6.7B. Free Cash Flow was ¥23.3B (a large improvement from ¥-102.5B prior year), covering year-end dividends of ¥4.9B by 4.72x. Financing CF was -¥62.3B, with long-term debt repayments -¥185.5B and net decrease in short-term borrowings -¥26.0B, offset by long-term borrowings of +¥166.0B, resulting in an overall reduction in interest-bearing debt. Cash and cash equivalents at year-end were ¥212.9B, a decrease of ¥25.8B during the year; even after foreign currency translation adjustment +¥13.2B, tangible liquidity was compressed. OCF/EBITDA 0.71x indicates room for improvement in cash conversion relative to EBITDA (EBITDA ≒ operating income ¥33.7B + depreciation ¥72.9B ≒ ¥106.6B).
Recurring earnings were operating income ¥33.7B and ordinary income ¥20.9B, with interest expense ¥15.1B and foreign exchange losses ¥6.7B persistently weighing on earnings. Special gains of ¥16.5B (mainly grants) are one-off and account for roughly 47% of profit before tax of ¥35.2B, so sustainable earning power should be evaluated based on ordinary income of ¥20.9B. Non-operating income totaled ¥8.3B (foreign exchange gains ¥1.7B, equity-method investment income ¥1.9B, interest income ¥1.2B, etc.), small at 0.6% of revenue, while non-operating expenses of ¥21.1B (interest expense ¥15.1B, foreign exchange losses ¥6.7B) continue to erode profits. Comprehensive income was ¥70.3B, driven by foreign currency translation adjustment of ¥29.4B, actuarial adjustments related to retirement benefits of ¥12.6B, and OCI share of equity-method affiliates ¥4.0B, far exceeding net income of ¥5.9B. Accrual ratio is approximately -3.2% ((Operating CF ¥76.2B - Net Income ¥5.9B) / Total Assets ¥1,659.8B), and Operating CF / Net Income is 3.22x, indicating strong cash backing for profits, but OCF/EBITDA 0.71x shows cash conversion has not reached standard levels, with working capital movements and interest payments presenting areas for improvement.
Full-year guidance projects revenue ¥1,600.0B (YoY +16.9%), operating income ¥80.0B (YoY +137.4%), ordinary income ¥60.0B (YoY +186.4%), and net income attributable to owners of parent ¥40.0B (YoY +68.9%), implying a substantial improvement to an operating margin of 5.0% (up 2.5pt from current 2.5%). Given first-half results (revenue ¥1,368.2B, operating income ¥33.7B), achieving full-year targets requires additional revenue of ¥231.8B (+16.9%) and additional operating income of ¥46.3B (+137.5%) in the second half, which implies an assumed second-half operating margin of approximately 20.0%, an extremely high level. Key levers for realization include cost reductions, price revisions, increasing the ratio of high value-added products, utilization improvement, and absorbing fixed costs through inventory compression. EPS forecast is ¥142.17 versus achieved ¥106.29, indicating a progress rate of about 74.8%; however, given the one-off nature of special gains, structural improvements in profitability are essential for sustainable earnings growth in the second half.
A year-end dividend of ¥20 (no interim dividend) results in annual dividend ¥20, with a payout ratio of 18.8%, reflecting a conservative level. Free Cash Flow of ¥23.3B versus total dividends of approximately ¥4.9B yields an FCF coverage of 4.72x, indicating high sustainability. However, retained earnings are negative at -¥243.3B (accumulated deficit), and the dividend is planned to be funded from capital surplus, which is noteworthy. No share buybacks were implemented (Financing CF shows -¥0.0B for repurchases), so shareholder returns are concentrated on dividends only. Guidance for next fiscal year is no dividend (dividend forecast ¥0.00), suggesting a policy priority on eliminating accumulated deficit and rebuilding internal reserves. Dividend sustainability depends on stabilizing operating income and reducing interest burden to build internally generated cash.
Business concentration risk: The Capacitor Business accounts for 96.3% of revenue and 95.7% of operating income, making performance highly sensitive to cyclical fluctuations in specific products and customer demand. Other businesses have low margins (2.9%), limiting diversification benefits. Market deterioration or demand declines from key customers could cause substantial earnings volatility.
High leverage and interest rate risk: Interest-bearing debt ¥705.1B, Debt/EBITDA 6.61x, and interest coverage 2.23x indicate limited interest resilience. Short-term borrowings ¥346.4B (short-term liabilities ratio 49%) pose refinancing risk. In a rising interest rate or widening credit spread environment, interest expense will increase and could materially compress earnings. Cash on hand ¥212.9B is only 0.61x of short-term borrowings, leaving a limited liquidity buffer.
Inventory efficiency and profitability risk: Inventory days at 101 days are high, with finished goods ¥118.7B and work-in-process ¥123.0B accumulated. Gross margin declined 1.4pt YoY to 17.9%, and risks include inventory obsolescence and discount pressure eroding margins. Continued raw material and energy cost increases and adverse product mix could further deteriorate profitability.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 2.5% | 7.8% (4.6%–12.3%) | -5.3pt |
| Net Income Margin | 0.4% | 5.2% (2.3%–8.2%) | -4.8pt |
Profitability metrics are significantly below industry medians, driven by declining gross margin and rising SG&A, placing the company in the lower group within the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 11.5% | 3.7% (-0.4%–9.3%) | +7.8pt |
Revenue growth outperformed the industry median by 7.8pt, reflecting demand recovery and regional expansion, but low operating margin constrains monetization of growth.
※ Source: Company compilation
Revenue recovery vs. profitability gap: Revenue grew +11.5%, well above industry average, but operating margin at 2.5% is 5.3pt below the industry median of 7.8%, indicating revenue growth did not translate into proportionate profit growth. A 1.4pt decline in gross margin and 0.8pt rise in SG&A ratio are primary causes; cost reduction, price revision, and product mix improvement are key to restoring profitability. Achieving next-year operating margin target of 5.0% requires structural cost reforms and raising the share of high value-added products.
Cash flow improvement and sustainability of investment: Operating Cash Flow improved significantly from ¥-4.9B to ¥76.2B, securing Free Cash Flow of ¥23.3B. Inventory reduction (CF contribution +¥31.0B) was the main driver, but OCF/EBITDA 0.71x remains below standard, with interest payments ¥15.0B and working capital movements pressuring cash. CapEx/Depreciation 0.60x indicates continued investment restraint, and balancing mid-term competitiveness with growth investment is a monitoring point.
Management of leverage and interest rate risk: Debt/EBITDA 6.61x and interest coverage 2.23x reflect sustained high leverage, and a short-term liabilities ratio of 49% increases refinancing sensitivity. Interest rate increases would raise interest expenses and pressure earnings. Reducing interest-bearing debt, shifting short-term debt to longer-term financing, and strengthening cash on hand would support financial stability. Eliminating accumulated deficit of -¥243.3B and rebuilding retained earnings are prerequisites for sustainable shareholder returns.
This report is an earnings analysis document automatically generated by AI from XBRL financial statement data. It does not constitute investment advice for specific securities. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your own responsibility; consult a professional advisor as needed.