NANKAI CHEMICAL COMPANY LIMITED (4040) AI Stock Analysis

• Market Cap: ¥9.16B
• Dividend Yield: 1.96%
• Average Volume (3M): 8.89K
• Price to Earnings (P/E): 3.0
• Beta (1Y): 1.21
• Revenue Growth: 8.43%
• EPS Growth: 2.99%
• Country: JP
• Employees: 305
• Sector: Basic Materials
• Sector Strength: 58
• Industry: Chemicals
• EPS (TTM): 964.63
• Shares Outstanding: 2,330,330
• 10 Day Avg. Volume: 10,130
• 30 Day Avg. Volume: 8,893
• PEG Ratio: -0.37
• Price to Book (P/B): 0.62
• Price to Sales (P/S): 0.25
• P/FCF Ratio: -2.82
• 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: N/A
• Price Target Upside: N/A
• Rating Consensus: N/A
• Number of Analyst Covering: 0
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 77 Outperform
• Price Target: ¥4,302.00 ▲(38.55% Upside)
• Action: Upgraded Date: 11/14/25
• Date: Action: Upgraded 11/14/25

Nankai Chemical Company Limited's stock is supported by strong technical indicators and attractive valuation metrics. While financial performance shows growth, concerns about cash flow and net income need addressing. The absence of earnings call data and corporate events does not impact the score significantly.

Positive Factors

Consistent Revenue Growth

Sustained revenue growth (4.56% YoY recently) signals persistent product demand and market traction. Over a multi-month horizon this supports capacity utilisation, underpins recurring cash generation potential, and provides a foundation for reinvestment or margin recovery even if profits fluctuate.

Stable Operational Margins

Healthy gross and operating margins indicate efficient production and cost controls in core chemical operations. Margin resilience helps absorb raw-material volatility, sustain free-cash-flow potential once conversion improves, and preserves operational flexibility across the industry cycle.

Moderate Leverage with Solid ROE

A balanced debt-to-equity ratio and a 12.1% ROE reflect prudent capital structure and the company's ability to generate shareholder returns. Moderate leverage can amplify growth while keeping refinancing and solvency risk manageable over the medium term, supporting strategic investments.

Negative Factors

Negative Free Cash Flow

Free cash flow turned negative in 2025 and operating cash flow fell sharply, limiting internal funding for capex, debt reduction, or dividends. If weak cash conversion persists it constrains strategic flexibility and raises refinancing or external funding needs over the coming months.

Declining Net Profit Margin

A drop in net profit margin to ~4.9% reduces retained earnings and weakens the cushion against cost shocks. Persistent margin erosion limits capacity to rebuild cash balances, invest in growth initiatives, or sustain dividends, making future profit recovery more challenging.

Limited Scale and Liquidity

Relatively small workforce and low average trading volume indicate limited scale and market liquidity. Structural size constraints can restrict R&D resources, geographic expansion and make capital raises or strategic M&A more difficult, slowing growth potential over several months.

NANKAI CHEMICAL COMPANY LIMITED Business Overview & Revenue Model

Company Description

Nankai Chemical Company,Limited manufacturers and sells chemical in Japan and internationally. The company offers inorganic industrial chemicals, water treatment disinfectants, water treatment agents, healthy foods, organic fine chemicals, and pesticides, as well as salt. It is also involved in the sulfuric acid recycling business; collection, transportation, and intermediate treatment of industrial waste; distribution and recovery of precious metals, and non-ferrous metals; distribution and construction of air conditioning equipment; distribution of precision machinery, textile machinery, plating equipment, paint equipment, and building material; parking lot, and real estate management and warehousing; and research, development, production, and sale of agricultural, livestock, and marine products; freight transport and handling; power generation and operation; and non-life insurance business. The company was founded in 1906 and is headquartered in Osaka, Japan.

How the Company Makes Money

NANKAI CHEMICAL COMPANY LIMITED generates revenue primarily through the sale of its chemical products to various industries. The company's revenue model is based on a combination of direct sales to manufacturers, long-term contracts, and partnerships with distributors. Key revenue streams include the sale of specialty chemicals used in agricultural applications, polymers for the automotive sector, and industrial chemicals for general manufacturing. Additionally, NANKAI may benefit from strategic partnerships with other companies in the supply chain, enabling them to expand market reach and improve profitability. Ongoing investments in research and development also allow the company to innovate and introduce new products, further enhancing its revenue potential.

NANKAI CHEMICAL COMPANY LIMITED Financial Statement Overview

Summary

Nankai Chemical Company Limited demonstrates strong revenue growth and operational margins. However, declining net income and negative free cash flow pose risks to long-term sustainability. The balance sheet is stable, but cash flow management needs improvement.

Income Statement

Nankai Chemical Company Limited shows a consistent revenue growth over the years with a recent growth rate of 4.56% from 2024 to 2025. Gross profit margin is stable at approximately 26.38%, while the net profit margin has decreased slightly to 4.86% in 2025 due to a decrease in net income. The EBIT and EBITDA margins are generally healthy, indicating good operational efficiency.

Balance Sheet

The company's balance sheet reflects a moderate debt-to-equity ratio of 0.67, suggesting a balanced use of debt and equity financing. The return on equity (ROE) is 12.10%, indicating a solid ability to generate profits from shareholders' equity. The equity ratio of 37.37% shows a reasonable level of equity financing relative to total assets.

Cash Flow

Cash flow analysis reveals a significant decline in free cash flow, turning negative in 2025. Operating cash flow is positive but has decreased substantially compared to 2024. The operating cash flow to net income ratio is 0.18, indicating challenges in converting profits into cash, which could be a risk if sustained.

Breakdown	TTM	Mar 2025	Mar 2024	Mar 2023	Mar 2022	Mar 2021
Income Statement
Total Revenue	21.07B	20.90B	19.99B	19.60B	17.43B	16.46B
Gross Profit	5.52B	5.51B	5.50B	4.50B	4.13B	3.87B
EBITDA	2.38B	2.55B	2.73B	1.71B	1.49B	1.08B
Net Income	890.00M	1.02B	1.16B	504.00M	462.00M	155.00M
Balance Sheet
Total Assets	23.27B	22.47B	20.26B	18.35B	16.98B	16.12B
Cash, Cash Equivalents and Short-Term Investments	1.70B	1.70B	1.71B	1.30B	1.28B	1.11B
Total Debt	5.68B	5.64B	5.21B	6.07B	7.41B	8.24B
Total Liabilities	14.67B	13.96B	12.76B	13.16B	12.31B	12.09B
Stockholders Equity	8.49B	8.40B	7.42B	5.13B	4.62B	3.99B
Cash Flow
Free Cash Flow	0.00	-1.85B	570.00M	131.00M	383.00M	-321.00M
Operating Cash Flow	0.00	181.00M	2.65B	1.77B	1.59B	1.26B
Investing Cash Flow	0.00	-490.00M	-1.94B	-371.00M	-614.00M	-1.81B
Financing Cash Flow	0.00	243.00M	-327.00M	-1.40B	-858.00M	893.00M

NANKAI CHEMICAL COMPANY LIMITED Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 3105.00
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Negative
• STOCH: Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For JP:4040, the sentiment is Positive. The current price of 3105 is below the 20-day moving average (MA) of 3418.75, below the 50-day MA of 3270.50, and above the 200-day MA of 3062.25, indicating a bullish trend. The MACD of 149.71 indicates Negative momentum. The RSI at 74.56 is Negative, neither overbought nor oversold. The STOCH value of 87.15 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for JP:4040.

NANKAI CHEMICAL COMPANY LIMITED Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
4040	77 Outperform	¥9.16B	3.04	―	1.96%	8.43%	2.99%
4531	72 Outperform	¥10.59B	15.77	―	2.97%	9.92%	-27.64%
6568	69 Neutral	¥10.48B	20.66	―	2.98%	-9.60%	-38.34%
Sector *	61 Neutral	$10.43B	7.12	-0.05%	2.87%	2.86%	-36.73%
4960	60 Neutral	¥12.26B	93.74	―	1.06%	-9.63%	-1.71%
4360	56 Neutral	¥9.58B	-41.49	―	1.93%	13.64%	-151.98%
4080	48 Neutral	¥13.27B	-10.19	-7.76%	―	-19.70%	-159.15%