Megachips (6875) AI Stock Analysis

• Market Cap: ¥138.12B
• Dividend Yield: 0.76%
• Average Volume (3M): 155.09K
• Price to Earnings (P/E): 52.7
• Beta (1Y): 0.68
• 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: 50 Neutral
• Price Target: ¥8,880.00 ▲(10.59% Upside)

The score is held back primarily by weakened financial performance (sharp TTM revenue decline and negative/volatile cash generation) despite a strong, low-leverage balance sheet. Technicals are mixed-to-neutral with price above key moving averages but subdued momentum signals. Valuation is the main additional risk, with a high P/E and low dividend yield.

Positive Factors

Conservative balance sheet / low leverage

Very low debt-to-equity (~0.05) and a sizable equity base provide a durable financial buffer. This conservatism supports continued R&D and development cycles, enables weathering cyclical demand downturns, and reduces refinancing risk over the next several quarters.

Product-based semiconductor business with design capabilities

A product and solution-focused semiconductor model (integrated circuits, ASICs, embedded designs) creates recurring production revenue when design-ins convert to mass production. Deep engineering/design capabilities support customer stickiness and higher-margin custom work over the medium term.

Positive unit-level profitability

Sustained positive gross and net margins indicate product-level profitability even amid weaker revenue. If volume or product mix recovers, these margins allow earnings to scale without full reworking of cost structure, supporting medium-term profit recovery potential.

Negative Factors

Sharp TTM revenue contraction

A dramatic TTM top-line collapse undermines revenue visibility and jeopardizes long-cycle design-win economics. Sustained declines reduce scale benefits, hurt supplier and customer confidence, and make funding new product development harder absent a credible demand recovery plan.

Negative and volatile cash generation

Negative and volatile operating and free cash flow constrain internal funding for capex and R&D, increasing reliance on cash reserves or external financing. Over several months a sustained cash drawdown raises execution risk for product roadmaps and customer support.

Weakening returns on equity and efficiency

A sharp decline in ROE to ~1.9% signals reduced capital efficiency and weaker earnings quality relative to prior years. Persistently low ROE can limit reinvestment returns, make it harder to attract capital, and indicate structural demand or margin pressures that hinder long-term shareholder value creation.

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

Overall fundamentals are pressured: despite a strong balance sheet (low leverage and solid equity base), the income statement shows a steep TTM revenue contraction and margin compression, and cash flow is weak with negative TTM operating cash flow and free cash flow plus volatility across recent years.

Income Statement

TTM (Trailing-Twelve-Months) profitability remains positive (about 18% gross margin and ~7% net margin), but the trajectory has weakened materially. Revenue has contracted sharply in TTM (reported growth ~-91%) and is also down across recent annual periods, with margins compressing versus FY2024–FY2025 annual levels. Net income is still positive in TTM, but the combination of steep top-line decline and lower profitability reduces earnings quality and visibility.

Balance Sheet

The balance sheet is a clear strength: leverage is low with TTM debt-to-equity around 0.05 and equity is sizable relative to assets. While total debt rises in TTM versus recent annual reports that show no debt, overall gearing remains conservative. Returns on equity have cooled substantially (TTM ROE ~1.9% vs mid-single digits in FY2024–FY2025 and much higher earlier), signaling weaker efficiency and/or a softer earnings cycle despite strong capitalization.

Cash Flow

Cash generation is currently pressured. TTM operating cash flow and free cash flow are negative, and the company is not converting accounting profits into cash in the most recent period. The annual cash flow profile has also been volatile (strong positive cash flow in FY2024 but negative in FY2025), which increases execution and funding-risk sensitivity if the downturn persists—even though balance sheet strength helps buffer the impact.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	38.80B	42.33B	57.94B	70.72B	75.26B	83.81B
Gross Profit	6.84B	7.83B	11.44B	12.05B	13.61B	13.31B
EBITDA	5.06B	9.43B	9.51B	11.36B	37.38B	29.69B
Net Income	2.70B	5.37B	4.49B	7.09B	27.54B	20.92B
Balance Sheet
Total Assets	236.77B	149.94B	126.61B	89.02B	89.84B	74.63B
Cash, Cash Equivalents and Short-Term Investments	12.55B	20.83B	28.06B	20.72B	25.77B	21.41B
Total Debt	8.50B	0.00	0.00	0.00	0.00	4.79B
Total Liabilities	67.13B	31.70B	23.94B	14.49B	22.41B	24.58B
Stockholders Equity	168.94B	117.81B	102.41B	74.54B	67.43B	50.04B
Cash Flow
Free Cash Flow	-3.94B	-6.03B	7.05B	295.32M	-1.48B	4.49B
Operating Cash Flow	-1.31B	-3.73B	8.16B	1.24B	-195.28M	5.51B
Investing Cash Flow	-4.70B	3.59B	214.06M	-5.52B	20.02B	17.02B
Financing Cash Flow	-2.16B	-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 8348.00, below the 50-day MA of 8126.60, and above the 200-day MA of 6471.93, indicating a bullish trend. The MACD of 149.59 indicates Negative momentum. The RSI at 54.67 is Neutral, neither overbought nor oversold. The STOCH value of 32.09 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
6966	75 Outperform	¥135.97B	13.22	―	2.45%	4.60%	-21.64%
6627	74 Outperform	¥67.32B	21.65	―	1.85%	3.60%	-17.45%
6871	70 Outperform	¥342.62B	34.00	―	1.02%	29.60%	24.39%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
6707	55 Neutral	¥146.38B	127.51	―	―	-51.82%	-96.08%
6875	50 Neutral	¥138.12B	52.66	1.86%	0.76%	-16.19%	-50.21%
6769	43 Neutral	¥8.80B	1,246.75	―	1.86%	-7.54%	―