NIPPON CHEMI-CON CORPORATION FY2027 Q1 Earnings Report

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Executive Summary

In FY2027 Q1, the Company recorded higher revenue and earnings, demonstrating a clear recovery in profitability from the operating loss recorded in the same period of the previous year. Revenue was ¥379.9B (+23.0% YoY), Operating Income was ¥16.7B (+998.9% from ¥1.5B in the previous year), Ordinary Income was ¥10.9B (compared with ¥-1.8B in the previous year), and Net Income was ¥8.6B (compared with ¥-1.7B in the previous year), representing significant improvements across all metrics, including a return to profitability. The primary driver of the revenue increase was the recovery in demand for the core capacitor business, while the main drivers of earnings growth were operating leverage from expanded sales and a lower SG&A expense ratio.

Factors Affecting Performance

【Revenue】Revenue increased 23.0% YoY to ¥379.9B. By segment, the core CAPACITOR business drove overall performance with revenue of ¥367.2B (96.7% of total revenue, +22.5% YoY), while Other Businesses recorded strong growth of ¥12.6B (3.3% of total revenue, +37.7% YoY). By region, China was the largest market at ¥132.9B, up +26.7% YoY, followed by Europe at ¥41.2B (+28.3%), the Americas at ¥32.2B (+16.3%), and Japan at ¥67.6B (+10.1%), with revenue increasing in all regions.

【Profit and Loss】Operating Income recovered sharply to ¥16.7B (¥1.5B in the previous year), and the operating margin improved to 4.4% (0.5% in the previous year). The improvement in gross margin to 19.1% (approximately 17.3% in the previous year) and the decline in the SG&A expense ratio to 14.7% (approximately 16.8% in the previous year) contributed to the increase in earnings. Ordinary Income was ¥10.9B, after absorbing non-operating expenses including ¥4.2B in interest payments and ¥0.6B in foreign exchange losses. Extraordinary income of ¥1.0B, including ¥0.99B in gains on the sale of shares in a subsidiary, contributed partially to Net Income of ¥8.6B, indicating a contribution from temporary factors. In conclusion, the Company achieved higher revenue and earnings.

Segment Analysis

The Company has two segments: CAPACITOR and Other. CAPACITOR accounted for the majority of company-wide Operating Income, with revenue of ¥367.2B (+22.5% YoY) and Operating Income of ¥15.4B (+1114.2% YoY, 4.2% margin). Other recorded revenue of ¥12.6B (+37.7% YoY) and Operating Income of ¥1.3B (+424.0% YoY, 10.4% margin), achieving a higher margin than CAPACITOR and supporting the company-wide margin. CAPACITOR accounted for 96.7% of revenue, highlighting the high degree of business concentration as a structural characteristic.

Key Financial Indicators

【Profitability】The operating margin improved to 4.4% (0.5% in the previous year), while the net margin turned positive at 2.3% (loss-making in the previous year). ROE was 1.4%, reflecting the improvement in the net margin and the low total asset turnover ratio, with total assets of ¥1713.8B compared with revenue of ¥379.9B.【Cash Flow Quality】Extraordinary income of ¥1.0B constituted a portion of Net Income of ¥8.6B, while recurring Operating Income of ¥16.7B remained the core source of earnings.【Investment Efficiency】ROE was low at 1.4%, indicating room for improvement in capital efficiency.【Financial Soundness】The Equity Ratio declined to 35.7% (from 37.6% in the previous year). Total assets increased to ¥1713.8B (+3.2% from ¥1659.8B in the previous year), while net assets declined to ¥612.2B (from ¥631.4B in the previous year). Thus, capital contracted despite asset growth, indicating a moderate increase in leverage.

Cash Flow Analysis

Although explicit data from the cash flow statement are unavailable, analysis of funding trends based on balance sheet movements indicates that cash and deposits increased to ¥240.5B (+13.0% from ¥212.9B in the previous year), while inventories continued to build, reaching ¥137.2B (+15.6% from ¥118.7B in the previous year), which tied up working capital. Short-term borrowings increased to approximately ¥385.0B, suggesting that a portion of funding may have been obtained through short-term borrowings. Long-term borrowings were ¥354.2B, declining slightly from the previous year, indicating a tendency for the borrowing mix to shift toward the short-term side. The burden of ¥4.2B in interest payments continues, and the structure in which a portion of Operating Income is absorbed by financial expenses should be considered when assessing the quality of cash-generation capacity.

Earnings Quality

Current-period earnings were primarily driven by recurring operating performance improvements centered on Operating Income of ¥16.7B. However, extraordinary income of ¥1.0B, including ¥0.99B in gains on the sale of shares in a subsidiary and ¥0.03B in gains on the sale of fixed assets, accounted for a certain proportion of Net Income of ¥8.6B, indicating a non-negligible contribution from temporary factors. Non-operating expenses were substantial at ¥7.5B, compared with non-operating income of ¥1.7B, including ¥4.2B in interest payments and ¥0.6B in foreign exchange losses. Consequently, Ordinary Income remained just under ¥6B below Operating Income. Equity-method investment gains contributed ¥1.3B. Comprehensive income was ¥12.2B, exceeding Net Income of ¥8.6B, due to additional asset valuation factors such as ¥3.5B in foreign currency translation adjustments. The gap between comprehensive income and Net Income was primarily attributable to OCI items.

Earnings Forecast and Guidance

Progress against the full-year plan was 23.7% for revenue, based on ¥379.9B/¥1600.0B; 20.9% for Operating Income, based on ¥16.7B/¥80.0B; and 21.7% for Net Income, based on ¥8.6B/¥40.0B. Compared with the standard quarterly progress rate of 25%, revenue was broadly in line, while Operating Income and Net Income were somewhat behind. Potential factors include the operating margin of 4.4%, which is low relative to the full-year plan, and non-operating expenses such as interest payments and foreign exchange losses, which weighed on progress. There were no revisions to the earnings forecast or dividend forecast during the quarter.

Shareholder Returns

The Company’s annual dividend plan is ¥25 per share, unchanged from the previous quarter. The Payout Ratio, calculated using full-year Net Income attributable to owners of the parent of ¥40.0B as the denominator and the projected total dividend amount as the numerator, is approximately 17%. As of the end of the quarter, there had been no disclosure regarding share repurchases, and shareholder returns consisted solely of dividends.

Risk Factors

1. Product concentration risk: The CAPACITOR Business accounts for 96.7% of revenue, creating a structure in which demand cycles and pricing trends in that market directly affect performance.

2. Short-term funding risk: Short-term borrowings of approximately ¥385.0B account for more than half of interest-bearing debt. Compared with cash of ¥240.5B, the Company has limited resilience to changes in refinancing conditions. The burden of ¥4.2B in interest payments also continues.

3. Inventory and working capital risk: Inventories increased to ¥137.2B (+15.6% YoY), with work-in-process inventory of ¥141.6B accounting for the core of inventories. In the event of demand fluctuations, inventories could become a source of valuation losses or tied-up funds.

Industry Benchmark (Reference; Company Analysis)

Industry Benchmark (manufacturing)

Profitability and Returns

Both the operating margin and net margin are below the industry median, placing the Company at the lower end of the industry in terms of profitability.

Growth and Capital Efficiency

The revenue growth rate significantly exceeds the industry median, demonstrating a top-tier growth rate.

Source: Company analysis

Key Points from the Earnings Report

1. The operating margin recovered to 4.4% (0.5% in the previous year) and the Company returned to profitability, driven by double-digit revenue growth and a lower SG&A expense ratio. This represents an important turning point from an earnings-quality perspective.

2. Extraordinary income of ¥1.0B, including gains on the sale of shares in a subsidiary, accounted for a certain proportion of Net Income of ¥8.6B. The presence of this temporary factor should be considered when assessing the sustainability of current-period Net Income.

3. Progress against the full-year plan was somewhat slower on the earnings side, with revenue at 23.7% versus Operating Income at 20.9%. Non-operating expenses such as interest payments and foreign exchange losses weighed on progress.

Theoretical Stock Price (Reference Value)

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

Sensitivity: ¥1,994–¥2,112 at ±1% for the cost of equity, and ¥2,045–¥2,056 at ±0.1 for ω.

Notes:

• Net Income is significantly compressed relative to Operating Income due to tax burdens, acquisition-related expenses, non-controlling interests, and other factors (Net Income ÷ Operating Income 50%). This figure reflects that compression at face value; if the factors are temporary, normalized earnings could be higher.
• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end are used, creating a timing difference from 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 figure does not forecast or guarantee future stock prices)

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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 available earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting with a professional as necessary.

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