Megachips (6875) AI Stock Analysis

• Market Cap: ¥148.52B
• Dividend Yield: 0.76%
• Average Volume (3M): 155.09K
• Price to Earnings (P/E): 11.1
• Beta (1Y): 0.72
• Revenue Growth: -16.19%
• EPS Growth: -50.21%
• Country: JP
• Employees: 339
• Sector: Technology
• Sector Strength: 88
• Industry: Semiconductors
• EPS (TTM): N/A
• Shares Outstanding: 19,046,900
• 10 Day Avg. Volume: 200,920
• 30 Day Avg. Volume: 155,093
• PEG Ratio: 0.54
• Price to Book (P/B): 0.65
• Price to Sales (P/S): 1.82
• P/FCF Ratio: -12.76
• 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: 70 Outperform
• Price Target: ¥9,768.00 ▲(21.64% Upside)
• Action: Upgraded Date: 02/08/26
• Date: Action: Upgraded 02/08/26

The score is driven primarily by strong solvency/low leverage but tempered by weak revenue momentum and volatile, less reliable cash flow. Technical signals are supportive and valuation is reasonable, helping offset the fundamental consistency concerns.

Positive Factors

Balance Sheet Strength

MegaChips' effectively debt-free balance sheet provides durable financial flexibility: it reduces interest burden, supports R&D and capital expenditure through cycles, and allows management to fund strategic design wins or absorb semiconductor industry downturns without immediate external financing.

High Profit Margins

Sustained high TTM margins indicate the company captures meaningful value from its products, consistent with specialized or value-added semiconductor offerings. Higher margins support reinvestment and buffer cyclicality, enabling long-term product development and customer-specific solutions that reinforce competitive positioning.

Product & Service Mix (Design Wins)

A business model combining standard IC product sales with custom ASIC/design services creates stickiness: design wins can translate into multi-year production runs and recurring revenue, strengthening customer relationships and creating higher switching costs that support stable mid-term revenue once designs scale.

Negative Factors

Revenue Contraction

Persistent revenue declines across recent periods reduce operational scale and limit margin resilience. Over 2–6 months, shrinking top-line undermines ability to invest in new designs, weakens bargaining power with suppliers and customers, and raises the risk that current product niches are losing competitiveness or share.

Volatile Cash Generation

Large swings in operating and free cash flow, including a recent sharp FCF decline and a negative operating year, indicate inconsistent cash conversion. This undermines durable funding for R&D, capex and working capital, increasing reliance on variability or external funding despite low debt.

Weak Returns on Capital

A markedly lower ROE suggests reduced efficiency in converting the capital base into profits. Over the medium term this questions the effectiveness of reinvestment and suggests that even with strong margins the company may struggle to generate attractive shareholder returns without stabilizing revenue or improving capital allocation.

Megachips Business Overview & Revenue Model

Company Description

MegaChips Corporation designs, develops, manufactures, and sells semiconductor related products in Japan and internationally. It offers application specific integrated circuits that are used in various electronic devices and automobiles, as well as in infrastructure systems, such as wired and wireless communication networks; automotive ethernet PHY; and wired communication networks for urban infrastructure, such as building and factories. The company was founded in 1990 and is headquartered in Osaka, Japan.

How the Company Makes Money

Megachips makes money primarily through the sale of its semiconductor products, including custom SoCs and ASICs. The company generates revenue by designing and manufacturing these chips, which are then sold to various electronics manufacturers across different industries. Key revenue streams include the consumer electronics market, where Megachips' solutions are integrated into products such as smartphones, gaming consoles, and wearable devices. Additionally, the company earns from its involvement in the automotive and industrial sectors, providing chips that enable advanced functionalities in vehicles and industrial equipment. Strategic partnerships with original equipment manufacturers (OEMs) and other technology firms also play a crucial role in expanding its market reach and driving sales.

Megachips Financial Statement Overview

Summary

Very strong balance sheet with effectively no debt (score 86) supports resilience, but business performance quality is mixed: profitability is strong but volatile and revenue is contracting (income statement score 62), while cash flow generation has been inconsistent with a sharp recent free-cash-flow decline (cash flow score 48).

Income Statement

Profitability is a clear strength: margins are strong in TTM (Trailing-Twelve-Months) (gross margin ~18.6%, net margin ~35.2%), and the business has shown periods of very high profitability in prior years. However, revenue momentum is weak, with revenue declining across multiple periods (TTM revenue growth -5.2% and negative growth in recent annual reports), and profitability has been volatile year-to-year (net margin ranging from ~7.7% to ~36.6%), suggesting earnings are not consistently repeatable.

Balance Sheet

Balance sheet strength is notable: the company is effectively debt-free in recent periods (total debt 0 and debt-to-equity 0.0 in TTM and the last several annual reports), providing significant financial flexibility. Equity has also grown meaningfully over time, supporting resilience. The main offset is that returns on shareholder capital are currently modest (TTM return on equity ~1.9%), down materially from prior peak levels, which points to weaker efficiency in converting the capital base into profits recently.

Cash Flow

Cash generation is mixed and volatile. TTM (Trailing-Twelve-Months) shows positive operating cash flow (~¥5.9B) and free cash flow (~¥4.0B), but free cash flow is down sharply versus the prior period (free cash flow growth -202.7%). Recent annual results also include a year with negative operating and free cash flow (2025 annual), indicating inconsistency. Overall, cash conversion versus reported earnings is not consistently strong, and the swings increase risk around earnings quality and funding predictability.

Breakdown	TTM	Mar 2024	Mar 2023	Mar 2022	Mar 2021	Mar 2020
Income Statement
Total Revenue	36.77B	42.33B	57.94B	70.72B	75.26B	83.81B
Gross Profit	6.85B	7.83B	11.44B	12.05B	13.61B	13.31B
EBITDA	20.02B	9.43B	9.51B	11.36B	37.38B	29.69B
Net Income	12.94B	5.37B	4.49B	7.09B	27.54B	20.92B
Balance Sheet
Total Assets	256.30B	149.94B	126.61B	89.02B	89.84B	74.63B
Cash, Cash Equivalents and Short-Term Investments	13.68B	20.83B	28.06B	20.72B	25.77B	21.41B
Total Debt	0.00	0.00	0.00	0.00	0.00	4.79B
Total Liabilities	66.77B	31.70B	23.94B	14.49B	22.41B	24.58B
Stockholders Equity	188.81B	117.81B	102.41B	74.54B	67.43B	50.04B
Cash Flow
Free Cash Flow	4.04B	-6.03B	7.05B	295.32M	-1.48B	4.49B
Operating Cash Flow	5.91B	-3.73B	8.16B	1.24B	-195.28M	5.51B
Investing Cash Flow	14.79B	3.59B	214.06M	-5.52B	20.02B	17.02B
Financing Cash Flow	-18.46B	-7.51B	-5.39B	-1.74B	-16.53B	-18.81B

Megachips Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 8030.00
• 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:6875, the sentiment is Positive. The current price of 8030 is below the 20-day moving average (MA) of 8862.00, below the 50-day MA of 8470.40, and above the 200-day MA of 6916.90, indicating a bullish trend. The MACD of 172.78 indicates Negative momentum. The RSI at 60.88 is Neutral, neither overbought nor oversold. The STOCH value of 72.22 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for JP:6875.

Megachips Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
6875	70 Outperform	¥148.52B	11.09	1.86%	0.76%	-16.19%	-50.21%
6723	63 Neutral	$5.28T	-102.21	-2.51%	1.31%	-10.97%	-118.87%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
6707	55 Neutral	¥154.27B	-42.55	―	―	-51.82%	-96.08%
6963	49 Neutral	$1.15T	-31.31	-4.26%	2.30%	0.04%	-323.26%
6769	49 Neutral	¥9.47B	-27.97	―	1.86%	-7.54%	―
6616	45 Neutral	¥19.23B	-12.69	―	3.98%	-6.84%	50.71%