NANKAI CHEMICAL COMPANY LIMITED (4040) AI Stock Analysis

• Market Cap: ¥7.57B
• Dividend Yield: 1.96%
• Average Volume (3M): 8.89K
• Price to Earnings (P/E): 0.8
• Beta (1Y): 1.23
• 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: ¥3,853.00 ▲(24.09% 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

Modest but consistent revenue growth alongside a stable gross margin (~26.38%) signals sustained product demand and pricing power. Over 2-6 months this underpins predictable topline and supports reinvestment into R&D or capacity, aiding durable competitive positioning.

Balanced capital structure

A moderate debt-to-equity ratio (0.67) combined with a 12.10% ROE and a 37.37% equity ratio indicates prudent leverage and efficient use of shareholders' capital. This balance preserves financial flexibility for capex or downturns while maintaining return generation capacity.

Operational margin strength

Healthy EBIT/EBITDA margins and stable gross profitability reflect effective cost control and operational efficiency. Such margin durability supports cash generation potential (absent FCF issues), competitive resilience, and the ability to fund strategic investments over the medium term.

Negative Factors

Negative free cash flow

Free cash flow turning negative in 2025 creates a structural risk: it restricts the firm's ability to self-fund capex, pay dividends, or deleverage. If this persists beyond a few quarters, management will need external financing or asset sales, weakening long-term financial resilience.

Poor cash conversion

An operating cash flow to net income ratio of 0.18 signals weak conversion of accounting profits into cash. This raises concerns about earnings quality and liquidity: sustained poor conversion can force reliance on working capital lines and limit capacity for strategic investments.

Declining net profit margin

A decline in net profit margin to 4.86% indicates pressure on the bottom line, narrowing retained earnings and reducing buffers against shocks. Persisting margin compression can impede reinvestment, lower ROIC over time, and constrain long-term value creation for shareholders.

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

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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	2.44B	2.44B	2.59B	1.80B	1.72B	1.69B
Net Income	888.00M	1.02B	1.16B	504.00M	462.00M	155.00M
Balance Sheet
Total Assets	23.27B	22.47B	20.26B	18.35B	17.22B	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	12.75B	13.15B	12.54B	12.08B
Stockholders Equity	8.49B	8.40B	7.42B	5.13B	4.63B	3.99B
Cash Flow
Free Cash Flow	0.00	-1.85B	587.00M	152.00M	392.00M	-296.00M
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: Negative
• Last Price: 3105.00
• 50DMA: Negative
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For JP:4040, the sentiment is Negative. The current price of 3105 is below the 20-day moving average (MA) of 3529.00, below the 50-day MA of 3377.00, and above the 200-day MA of 3074.03, indicating a neutral trend. The MACD of -27.88 indicates Positive momentum. The RSI at 40.05 is Neutral, neither overbought nor oversold. The STOCH value of 21.93 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative 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	¥7.57B	0.81	―	1.96%	8.43%	2.99%
4531	72 Outperform	¥9.08B	23.47	―	2.97%	9.92%	-27.64%
6568	69 Neutral	¥9.18B	20.79	―	2.98%	-9.60%	-38.34%
Sector *	61 Neutral	$10.43B	7.12	-0.05%	2.87%	2.86%	-36.73%
4360	61 Neutral	¥8.57B	10.07	―	1.93%	13.64%	-151.98%
4960	60 Neutral	¥11.21B	15.26	―	1.06%	-9.63%	-1.71%
4080	48 Neutral	¥13.27B	13.41	-7.76%	―	-19.70%	-159.15%