Arakawa Chemical Industries,Ltd. (4968) AI Stock Analysis

• Market Cap: ¥30.87B
• Dividend Yield: 4.27%
• Average Volume (3M): 44.42K
• Price to Earnings (P/E): 18.1
• Beta (1Y): 0.93
• Revenue Growth: 5.72%
• EPS Growth: 28.92%
• Country: JP
• Employees: 1,668
• Sector: Basic Materials
• Sector Strength: 58
• Industry: Chemicals - Specialty
• EPS (TTM): 30.56
• Shares Outstanding: 20,652,400
• 10 Day Avg. Volume: 62,310
• 30 Day Avg. Volume: 44,420
• PEG Ratio: -0.02
• Price to Book (P/B): 0.37
• Price to Sales (P/S): 0.27
• P/FCF Ratio: 30.68
• 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): 95.8
• Revenue Forecast (FY): ¥84.10B

• Rating: 61 Neutral
• Price Target: ¥1,541.00 ▲(44.56% Upside)
• Action: Reiterated Date: 02/07/26
• Date: Action: Reiterated 02/07/26

The score is driven primarily by improving fundamentals (revenue and earnings recovery) but held back by weak cash conversion and negative free cash flow. Technically, the trend is strong versus key moving averages, though overbought readings raise near-term pullback risk. Valuation is supportive with a reasonable P/E and solid dividend yield.

Positive Factors

Diversified B2B Specialty Chemicals Model

Arakawa’s specialty-chemicals B2B model serves multiple industrial end-markets (paper, packaging, adhesives, rubber), creating diversified, recurring demand from manufacturers. Customized formulations and industrial inputs support stickier customer relationships and steady contract-driven revenue over the medium term.

Revenue and Earnings Recovery

A meaningful TTM revenue rebound and restored profitability show structural recovery in demand and pricing power versus the prior loss period. Sustained top-line momentum combined with regained operating profit provides a foundation for margin improvement and reinvestment over the next several quarters.

Moderate Leverage / Balance-Sheet Size

Debt-to-equity near 0.72 implies manageable leverage for a manufacturing specialist, and a sizable equity base supports solvency. This structural balance-sheet stability gives the company capacity to fund operations and necessary investments without immediate distress, assuming cash generation stabilizes.

Negative Factors

Negative Free Cash Flow

A swing to negative free cash flow and weak cash conversion versus reported net income points to working-capital stress or elevated capex. Persistently negative FCF erodes financial flexibility, may force external financing or cuts to dividends/capex, and limits ability to execute strategic investments.

Thin Profitability and Low ROE

Very low margins and ROE indicate the business converts only a small share of revenue into shareholder returns. Thin profitability increases vulnerability to raw-material cost inflation and price pressure from customers, constraining the company’s capacity to rebuild reserves or consistently fund growth initiatives.

Rising Debt Trend

An upward trend in debt raises structural risk when combined with weak cash conversion and modest margins. Higher leverage increases interest and refinancing exposure, potentially constraining operational flexibility and limiting the company’s ability to invest in higher-margin product development or M&A over the medium term.

Arakawa Chemical Industries,Ltd. Business Overview & Revenue Model

Company Description

Arakawa Chemical Industries, Ltd. (4968) is a leading Japanese manufacturer specializing in the production of chemical products and materials. The company operates primarily in the chemical sector, focusing on the development and distribution of specialty chemicals, including resins, adhesives, and coatings. Arakawa Chemical Industries is known for its commitment to innovation and quality, serving various industries such as automotive, electronics, and construction with tailored solutions to meet specific client needs.

How the Company Makes Money

The company generates revenue through the sale of its specialty chemical products, which are used across several industries. Key revenue streams include the production of resins, adhesives, and coatings, which are sold to manufacturers in sectors such as automotive, construction, and electronics. Arakawa Chemical Industries also engages in long-term contracts with major clients, providing a stable income source. Additionally, the company invests in research and development to create innovative products that meet emerging market demands, enhancing its competitive edge. Strategic partnerships with other firms in the chemical and manufacturing sectors further contribute to its revenue, as they often lead to collaborative projects and expanded market access.

Arakawa Chemical Industries,Ltd. Financial Statement Overview

Summary

Revenue and earnings recovered in TTM (revenue +15.7% with positive EBIT and net income), but profitability remains modest (about 2.1% net margin; 2.6% EBIT margin). The balance sheet is reasonably stable with moderate leverage (debt-to-equity ~0.72) but low ROE (~3.0%). The key drag is cash flow quality: free cash flow swung back to negative (TTM -1.49B), reducing near-term financial flexibility.

Income Statement

TTM (Trailing-Twelve-Months) revenue rebounded strongly (+15.7%), and profitability has recovered from the losses in 2023–2024 to positive EBIT and net income. That said, current profitability remains modest (about 2.1% net margin and 2.6% EBIT margin in TTM), and margins are still below the stronger levels seen in 2021–2022, indicating the recovery is real but not yet fully normalized.

Balance Sheet

Leverage is moderate with debt-to-equity around 0.72 in TTM, but debt has trended higher versus 2021–2022. Equity remains sizable relative to assets, supporting balance-sheet stability; however, returns are currently low (TTM return on equity ~3.0%), reflecting that the business is not generating strong profits on its capital base yet.

Cash Flow

Cash generation is the key weak spot: TTM operating cash flow is positive but relatively light versus profits, and free cash flow turned negative (TTM -1.49B) after being positive in FY2025. The swing back to negative free cash flow and weak cash conversion versus net income suggests either working-capital drag and/or elevated investment, which reduces near-term financial flexibility despite the earnings recovery.

Breakdown	TTM	Mar 2025	Mar 2024	Mar 2023	Mar 2022	Mar 2021
Income Statement
Total Revenue	81.40B	80.24B	72.22B	79.43B	80.52B	70.57B
Gross Profit	16.90B	16.09B	11.68B	11.57B	17.97B	16.69B
EBITDA	7.77B	9.00B	4.76B	49.00M	6.29B	7.14B
Net Income	1.71B	2.64B	-1.04B	-4.94B	1.50B	2.17B
Balance Sheet
Total Assets	126.62B	122.30B	125.42B	119.03B	117.74B	105.76B
Cash, Cash Equivalents and Short-Term Investments	9.40B	9.43B	11.58B	11.14B	10.37B	8.46B
Total Debt	42.72B	39.38B	42.68B	35.27B	26.76B	21.99B
Total Liabilities	69.73B	65.06B	68.50B	62.53B	55.16B	47.17B
Stockholders Equity	59.25B	58.47B	56.13B	54.08B	59.18B	57.23B
Cash Flow
Free Cash Flow	-1.49B	712.00M	-5.70B	-6.69B	-2.43B	-2.34B
Operating Cash Flow	2.99B	5.12B	1.16B	-575.00M	3.99B	3.69B
Investing Cash Flow	-3.31B	-3.24B	-7.14B	-6.05B	-7.40B	-7.30B
Financing Cash Flow	-84.00M	-4.70B	5.48B	6.67B	4.93B	1.35B

Arakawa Chemical Industries,Ltd. Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 1066.00
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For JP:4968, the sentiment is Positive. The current price of 1066 is below the 20-day moving average (MA) of 1458.40, below the 50-day MA of 1337.86, and below the 200-day MA of 1146.41, indicating a bullish trend. The MACD of 56.50 indicates Negative momentum. The RSI at 69.16 is Neutral, neither overbought nor oversold. The STOCH value of 78.34 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for JP:4968.

Arakawa Chemical Industries,Ltd. Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
4229	80 Outperform	¥36.79B	16.59	―	2.47%	3.53%	8.36%
4973	77 Outperform	¥29.87B	18.32	―	3.63%	18.02%	18.04%
4064	76 Outperform	¥29.74B	11.37	―	3.21%	9.61%	173.72%
4362	75 Outperform	¥62.08B	13.67	―	2.92%	3.03%	28.27%
4092	72 Outperform	¥31.64B	15.35	―	3.84%	-3.41%	-12.83%
Sector *	61 Neutral	$10.43B	7.12	-0.05%	2.87%	2.86%	-36.73%
4968	61 Neutral	¥30.87B	18.07	―	4.27%	5.72%	28.92%

Arakawa Chemical Industries,Ltd. Corporate Events

Arakawa Chemical Books ¥1.66 Billion Extraordinary Loss on Subsidiary Loans in Non-Consolidated Accounts

Arakawa Chemical Industries has decided to record an extraordinary loss of 1,659 million yen in its non-consolidated financial results for the third quarter of the fiscal year ending March 31, 2026, by setting up a provision for doubtful accounts related to loans to its consolidated subsidiary Chiba Arkon Production Limited, reflecting concerns over the subsidiary’s financial condition. The company emphasized that this loss will be eliminated at the consolidated level and therefore will not affect its consolidated financial results, limiting the impact primarily to the parent company’s standalone accounts and suggesting no immediate change to the group’s overall financial performance from a consolidated perspective.

The most recent analyst rating on (JP:4968) stock is a Hold with a Yen1435.00 price target. To see the full list of analyst forecasts on Arakawa Chemical Industries,Ltd. stock, see the JP:4968 Stock Forecast page.

Arakawa Chemical Lifts Sales and Operating Profit but Bottom Line Declines in First Nine Months of FY2025

Arakawa Chemical Industries reported consolidated net sales of ¥61.37 billion for the nine months ended December 31, 2025, up 1.9% year on year, with operating profit surging 80.4% to ¥1.83 billion and ordinary profit rising 76.9% to ¥1.67 billion, while profit attributable to owners of parent fell 41.3% to ¥1.33 billion, resulting in lower earnings per share of ¥67.09 and a slight decline in the equity ratio to 46.8%. The company maintained its dividend framework, paying an interim dividend of ¥25 per share and forecasting an unchanged full-year payout of ¥50, and it left its full-year guidance intact, projecting ¥85 billion in sales and a sharp rebound in operating and ordinary profit despite a year-on-year decline in full-year profit attributable to owners, signaling stable operations but compressed bottom-line profitability for shareholders.

The most recent analyst rating on (JP:4968) stock is a Hold with a Yen1435.00 price target. To see the full list of analyst forecasts on Arakawa Chemical Industries,Ltd. stock, see the JP:4968 Stock Forecast page.