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

• Market Cap: ¥26.09B
• Dividend Yield: 4.27%
• Average Volume (3M): 44.42K
• Price to Earnings (P/E): 15.0
• Beta (1Y): 0.88
• Revenue Growth: 5.72%
• EPS Growth: 28.92%
• Country: JP
• Employees: 1,668
• Sector: Basic Materials
• Sector Strength: 58
• Industry: Chemicals - Specialty
• EPS (TTM): 9.65
• 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): N/A
• Revenue Forecast (FY): N/A

• Rating: 64 Neutral
• Price Target: ¥1,400.00 ▲(31.33% Upside)

Arakawa Chemical Industries scores well due to its strong financial performance and stable valuation. Technical indicators support a positive trend, though MACD suggests caution. The absence of earnings call data and corporate events does not impact the score.

Positive Factors

Diversified specialty-chemicals B2B portfolio

Arakawa's product mix spans paper chemicals, coatings/adhesives, and rosin/hydrocarbon resins selling into multiple industrial end markets. This diversification reduces reliance on a single cyclical sector, supports recurring B2B contracts, and gives cross-market application opportunities for long-term stable demand and pricing leverage.

Improving profitability and margins

The company moved from negative margins to positive EBIT/EBITDA and double-digit revenue growth, signalling structural operational improvements. Sustained higher gross and EBITDA margins point to better cost control and pricing power in specialty formulations, enabling durable earnings uplift if maintained across cycles.

Stronger operating cash generation

A substantial swing to positive operating cash and FCF indicates higher quality earnings and improved working capital management. Persistent operating cash exceeding net income supports reinvestment in higher-margin specialties, debt servicing, and capital allocation flexibility over the medium term, strengthening financial resilience.

Negative Factors

Low net profit margin

Despite margin recovery, a sub-5% net margin leaves limited buffer against raw-material inflation or end-market downturns. Low net margins constrain retained earnings for R&D and capex, reducing the company's ability to consistently fund margin-enhancing product development and sustain returns through adverse cycles.

Modest return on equity

An ROE near 4.5% suggests the business currently generates limited profit per unit of shareholder capital. Over time this can pressure investor returns and implies room for more efficient capital allocation or higher-margin growth initiatives to improve shareholder value and justify reinvestment levels.

Weak free-cash-flow conversion

FCF conversion at ~27% and prior negative FCF indicate earnings are not fully translating into durable cash. This limits capacity to sustainably fund dividends, buybacks, or capex without relying on leverage, and makes the company more vulnerable to working-capital swings inherent in industrial B2B cycles.

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

Arakawa Chemical Industries has shown a recovery in profitability with improved margins and revenue growth. The balance sheet is stable with moderate leverage, and cash flow has improved, though there is room for better free cash flow conversion.

Income Statement

Arakawa Chemical Industries has shown a recovery in profitability. Current gross profit margin stands at 20.05%, and the net profit margin is 3.29%, indicating efficient cost management. Revenue has grown by 11.10% from the previous year, showcasing positive growth momentum. EBIT and EBITDA margins have significantly improved from negative to 1.32% and 11.22%, respectively, reflecting better operational efficiency and profitability.

Balance Sheet

The company's financial leverage is moderate with a debt-to-equity ratio of 0.67, indicating a balanced approach to financing. Return on equity is modest at 4.52%, reflecting moderate efficiency in generating profits from shareholders' equity. The equity ratio is 47.81%, suggesting a healthy capital structure with substantial equity funding relative to total assets. The balance sheet shows improvement in equity and asset management.

Cash Flow

The cash flow statement highlights a dramatic improvement in free cash flow, moving from a negative position in previous years to a free cash flow of ¥712 million. The operating cash flow to net income ratio is 1.94, indicating strong cash generation relative to reported earnings. However, the free cash flow to net income ratio remains low at 0.27, signaling some room for improvement in cash profitability.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	81.28B	80.24B	72.22B	79.43B	80.52B	70.57B
Gross Profit	16.94B	16.09B	11.68B	11.57B	17.97B	16.69B
EBITDA	7.49B	9.00B	4.76B	49.00M	6.29B	7.14B
Net Income	1.73B	2.64B	-1.04B	-4.94B	1.50B	2.17B
Balance Sheet
Total Assets	121.26B	122.30B	125.42B	119.03B	117.74B	105.76B
Cash, Cash Equivalents and Short-Term Investments	9.07B	9.43B	11.58B	11.14B	10.37B	8.46B
Total Debt	40.27B	39.38B	42.68B	35.27B	26.76B	21.99B
Total Liabilities	64.57B	65.06B	68.50B	62.53B	55.16B	47.17B
Stockholders Equity	58.57B	58.47B	56.13B	54.08B	59.18B	57.23B
Cash Flow
Free Cash Flow	-1.52B	712.00M	-5.70B	-6.69B	-2.43B	-2.34B
Operating Cash Flow	2.97B	5.12B	1.16B	-575.00M	3.99B	3.69B
Investing Cash Flow	-3.46B	-3.24B	-7.14B	-6.05B	-7.40B	-7.30B
Financing Cash Flow	-1.12B	-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: Positive
• 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 1294.00, below the 50-day MA of 1214.20, and below the 200-day MA of 1105.93, indicating a bullish trend. The MACD of 29.64 indicates Positive momentum. The RSI at 64.39 is Neutral, neither overbought nor oversold. The STOCH value of 71.71 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	81 Outperform	¥32.41B	14.61	―	2.47%	3.53%	8.36%
4275	75 Outperform	¥51.88B	19.10	―	1.92%	-0.86%	17.65%
4092	66 Neutral	¥28.74B	12.65	―	3.84%	-3.41%	-12.83%
4410	66 Neutral	¥24.76B	12.97	―	4.62%	7.19%	―
4112	65 Neutral	¥37.20B	19.44	―	2.37%	-11.70%	-54.82%
4968	64 Neutral	¥26.09B	15.04	―	4.27%	5.72%	28.92%
Sector *	61 Neutral	$10.43B	7.12	-0.05%	2.87%	2.86%	-36.73%

Arakawa Chemical Industries,Ltd. Corporate Events

Arakawa Chemical Industries Reports Mixed Financial Results for 2025

Arakawa Chemical Industries reported a 2.6% increase in net sales for the six months ending September 30, 2025, compared to the previous year. Despite the rise in sales, the profit attributable to owners of the parent decreased by 55.7%, indicating challenges in maintaining profitability. The company forecasts a 5.9% increase in net sales for the fiscal year ending March 31, 2026, with a significant expected rise in operating and ordinary profits, suggesting a strategic focus on improving operational efficiency.

The most recent analyst rating on (JP:4968) stock is a Hold with a Yen1207.00 price target. To see the full list of analyst forecasts on Arakawa Chemical Industries,Ltd. stock, see the JP:4968 Stock Forecast page.