Showa Denko KK (4004) AI Stock Analysis

• Market Cap: ¥1.09T
• Dividend Yield: 1.08%
• Average Volume (3M): 1.58M
• Price to Earnings (P/E): 101.5
• Beta (1Y): 1.21
• Revenue Growth: -1.90%
• EPS Growth: -71.97%
• Country: JP
• Employees: 23,936
• Sector: Basic Materials
• Sector Strength: 58
• Industry: Chemicals
• EPS (TTM): -75.34
• Shares Outstanding: 184,901,290
• 10 Day Avg. Volume: 1,996,130
• 30 Day Avg. Volume: 1,582,476
• PEG Ratio: -0.02
• Price to Book (P/B): 1.09
• Price to Sales (P/S): 0.52
• P/FCF Ratio: 9.63
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: ¥6,500.00
• Price Target Upside: 8.21% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 1
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 72 Outperform
• Price Target: ¥7,017.00 ▲(16.81% Upside)

Showa Denko KK's stock score is driven primarily by strong financial performance and positive technical indicators. The company's robust cash flow and improved profitability metrics are significant strengths. Technical analysis supports a bullish outlook with strong price trends. However, the high P/E ratio suggests potential overvaluation, which could constrain future growth. Overall, the stock presents a solid investment opportunity with some valuation concerns.

Positive Factors

Cash Generation Ability

The substantial increase in free cash flow demonstrates improved cash management and operational efficiency, enhancing liquidity and financial stability.

Operational Efficiency

Improved EBIT margin reflects enhanced operational efficiency, which can lead to sustained profitability and competitive advantage in cost management.

Profitability Recovery

The turnaround in net profit margin indicates a successful recovery in profitability, suggesting effective management strategies and potential for future growth.

Negative Factors

Revenue Growth Challenges

Despite recent growth, the company faces challenges in sustaining high revenue growth rates, which may impact long-term market positioning.

High Leverage

While leverage is manageable, the high level of total liabilities compared to assets poses a risk if revenue or cash flow declines, affecting financial flexibility.

Past Volatility in Margins

Historical margin volatility indicates potential instability in cost management and pricing strategies, which could affect future profitability consistency.

Showa Denko KK Business Overview & Revenue Model

Company Description

Resonac Holdings Corp. engages in the manufacture and sale of chemical products. It operates through the following segments: Petrochemicals, Chemicals, Electronics, Inorganics, Aluminum, and Others. The Petrochemicals segment produces and merchandises olefins, organic chemicals, and synthetic resin products. The Chemicals segment manufactures and sells functional polymers, industrial gases, basic chemicals, information electronic chemicals, and coating materials. The Electronics segment covers hard disks, silicon carbide epitaxial wafer, compound semiconductors, and lithium ion battery materials. The Inorganics segment deals with graphite electrodes and ceramics. The Aluminum segment manufactures and sells high-purity aluminum foil for capacitors, cylinders for laser beam printers, extruded and forged products, heat exchanger, and beverage cans. The Others segment deals with wholesale and building materials. The company was founded by Nobuteru Mori on June 1, 1939 and is headquartered in Tokyo, Japan.

How the Company Makes Money

Showa Denko generates revenue through multiple streams, primarily by manufacturing and selling specialty chemicals and materials to various industries. Key revenue sources include the production of semiconductor materials, aluminum products, and petrochemical derivatives. The company leverages its technological expertise to create high-value products that meet the demands of rapidly evolving markets. Additionally, Showa Denko engages in strategic partnerships with leading companies in sectors like electronics and automotive, which helps to secure long-term contracts and steady income. The company's emphasis on R&D allows it to introduce innovative products, further enhancing its competitive edge and revenue potential.

Showa Denko KK Financial Statement Overview

Summary

Showa Denko KK's financial statements reflect a notable recovery and strong operational performance in 2024. The income statement shows improved profitability and growth, while the balance sheet suggests a stable financial structure with manageable leverage. The cash flow statement underscores strong cash generation capabilities. Despite past volatility, the company's current financial health appears robust, with positive trends across key metrics.

Income Statement

Showa Denko KK has demonstrated a strong recovery in its income statement over the past year. The gross profit margin for 2024 is approximately 24%, indicating efficient production and cost management. The net profit margin has improved significantly to 3.99% from a negative margin in 2023, showcasing a turnaround in profitability. Revenue growth from 2023 to 2024 was 7.8%, a positive trajectory indicating rising demand or effective pricing strategies. EBIT margin improved to 5.67%, indicating better operational efficiency. Overall, the income statement reflects a positive trend with strong recovery in profitability metrics, though past volatility in margins suggests the need for cautious optimism.

Balance Sheet

The balance sheet indicates a stable financial position with a debt-to-equity ratio of 1.59, which is moderate and suggests manageable leverage. Return on equity (ROE) improved significantly to 8.78% in 2024, reflecting better utilization of shareholder capital. The equity ratio stands at 29.72%, highlighting a stable capital structure with a reasonable portion of assets financed by equity. While the company has shown improvements in equity and leverage metrics, the high level of total liabilities compared to assets suggests some risk, especially if revenue or cash flow were to decline.

Cash Flow

The cash flow statement shows robust operational cash generation with an operating cash flow to net income ratio of 2.95 in 2024, indicating strong cash conversion. Free cash flow increased significantly by 138.56% from 2023 to 2024, demonstrating improved cash management and operational efficiency. The free cash flow to net income ratio of 1.36 suggests that the company is generating more cash than reported earnings, a positive indicator for liquidity. The overall cash flow position is strong, with efficient cash management practices leading to substantial free cash flow growth.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	1.36T	1.39T	1.29T	1.39T	1.42T	973.70B
Gross Profit	334.04B	333.98B	246.62B	302.98B	337.99B	159.32B
EBITDA	159.51B	198.62B	96.66B	175.50B	148.38B	33.16B
Net Income	36.63B	73.50B	-6.50B	32.42B	-12.09B	-76.30B
Balance Sheet
Total Assets	2.04T	2.17T	2.05T	2.10T	2.14T	2.20T
Cash, Cash Equivalents and Short-Term Investments	207.97B	295.76B	190.32B	187.13B	236.24B	198.98B
Total Debt	979.39B	1.02T	1.03T	1.06T	830.76B	1.04T
Total Liabilities	1.36T	1.48T	1.47T	1.53T	1.32T	1.49T
Stockholders Equity	647.64B	664.62B	560.13B	550.25B	513.99B	405.96B
Cash Flow
Free Cash Flow	0.00	75.34B	31.58B	12.49B	47.54B	44.79B
Operating Cash Flow	0.00	163.65B	118.69B	100.35B	115.28B	109.29B
Investing Cash Flow	0.00	-52.31B	-61.87B	-54.67B	28.61B	-930.05B
Financing Cash Flow	0.00	-20.47B	-62.88B	-103.96B	-121.74B	896.52B

Showa Denko KK Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 6007.00
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For JP:4004, the sentiment is Positive. The current price of 6007 is below the 20-day moving average (MA) of 6143.10, above the 50-day MA of 5982.72, and above the 200-day MA of 4100.67, indicating a neutral trend. The MACD of 41.63 indicates Positive momentum. The RSI at 48.58 is Neutral, neither overbought nor oversold. The STOCH value of 14.59 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for JP:4004.

Showa Denko KK Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
4021	78 Outperform	¥735.02B	16.33	19.69%	3.20%	10.06%	18.03%
4004	72 Outperform	¥1.09T	101.46	1.67%	1.08%	-1.90%	-71.97%
4042	71 Outperform	¥741.59B	18.35	4.79%	4.29%	-1.21%	-27.21%
4114	71 Outperform	¥285.18B	18.01	―	5.44%	-0.47%	25.41%
4005	66 Neutral	¥720.15B	8.49	8.79%	2.73%	-1.64%	―
3405	62 Neutral	¥484.86B	62.55	1.08%	3.42%	-1.94%	-84.08%
Sector *	61 Neutral	$10.43B	7.12	-0.05%	2.87%	2.86%	-36.73%

Showa Denko KK Corporate Events

Resonac Implements Rationalization Measures Amid Graphite Electrode Market Challenges

Resonac Holdings Corporation, through its subsidiary Resonac Corporation, is implementing rationalization measures in its graphite electrode business due to a challenging market environment characterized by sluggish demand and aggressive pricing by competitors. These measures include workforce reductions at their German site, aiming to reduce fixed costs and improve operational efficiency. The company plans to reduce its workforce by about 40% and expects to cut annual fixed costs by approximately JPY 11.7 billion compared to FY2024. The financial impact of these measures has been partially accounted for in the FY2025 earnings forecast, with further cost reductions anticipated in FY2026.

Resonac Transfers Automotive Molded Parts Business to Moriroku

Resonac Holdings Corporation has announced the transfer of its automotive molded parts business in Japan and Thailand to Moriroku Co., Ltd. This strategic move is part of Resonac’s long-term vision to optimize its business portfolio and ensure sustainable growth. By transferring the business to Moriroku, which has a global manufacturing footprint and expertise in resin-molded components, Resonac aims to overcome its operational constraints and enhance the competitiveness and growth potential of the business. The transaction is expected to create synergies and high added value through collaboration with Moriroku’s advanced technologies.