5957.T

Company Overview and Core Strengths

• Nitto Seiko is an independent B2B manufacturer founded 88 years ago, headquartered in Ayabe, Kyoto with 19 locations across 10 countries and 6 regional production bases supporting local-for-local manufacturing. The company's three core strengths are:
  • Custom and original product technical capability: Almost all products are made-to-order per customer requirements, with 275 total patents as of the end of last year.
  • Cross-segment problem-solving for manufacturing sites: It is the only manufacturer that produces screws, screw tightening equipment, and measurement/inspection equipment, enabling end-to-end total solution proposals.
  • Global expansion with local-for-local production: It expanded its footprint to Germany and India in recent years to accelerate global growth.

New Medium-Term Management Plan Structure

• The new 3-year plan starting this year is the final stage of the company's 10-year long-term management plan, with a core theme of improving profitability, targeting growth acceleration via strategic investment and corporate reform. The plan is structured around four core growth strategies: business expansion, environment, human capital, and finance.

Business Expansion Strategy by Segment

• Fastener Business: Focus on addressing new automotive needs linked to CASE. Prioritize development of high value-added patented products aligned with the industry trends of IoT, electrification, automation, and weight reduction. While total component count in automobiles is gradually declining, the company's patented integrated multi-function products deliver higher per-unit value, with prices up to tens of times higher than standard 1 yen average-priced screws.
• Industrial Machinery Business: Focus on expanding sales to overseas non-Japanese companies. The segment currently has high dependence on China and the U.S., so it will prioritize expansion into low market share regions of India, Europe, and Vietnam, capturing growing demand for labor-saving automation in fast-growing emerging markets.
• Control Business (Environmental Business):
  1. PFAS countermeasures: Japan is planning strengthened PFAS regulations, driving growing demand for response solutions. The company already offers PFAS screening analysis, and is co-developing PFAS decomposition equipment with Ritsumeikan University, working to commercialize full end-to-end PFAS response solutions.
  2. Organic solvent recycling: The company co-developed a new high-performance, low-cost silica separation membrane recycling device with startup ESEP Inc., which delivers lower CO2 emissions than distillation methods and better performance than existing adsorption methods. The company completed demo unit display and is currently working toward mass production.
• Medical Business: Developing the world's first bio-absorbable high-purity magnesium for in-vivo medical use, which is patented in Japan and the U.S. The material eliminates the need for a second implant removal surgery after fracture treatment, reducing patient/doctor burden and healthcare costs. The company obtained ISO13485 certification in March 2025 and is progressing with product development.

Environmental Strategy

• Prioritize reduction of the company's own CO2 emissions and waste, plus ES support for stakeholders. Initiatives include facility efficiency improvements, energy conservation, solar panel adoption, and Scope 3 emission calculation. The company also works on developing new safety-focused products and regional contribution aligned with its founding mission.

Human Capital Strategy

• Sets numerical targets for labor productivity growth and employee engagement scores. Focuses on three pillars: meaningful work, comfortable work environment, and human capital development, with reforms to personnel systems, work environment, and internal training programs. The strategy aims to integrate human capital strategy and corporate management strategy to maximize human capital value for social problem-solving.

Financial Strategy and Shareholder Returns

• The company acknowledges its PBR has remained below 1x as of the end of 2025, driven by challenges with sales scale and profit margin. It prioritizes improving PBR via sales growth, margin improvement, efficient asset utilization, and appropriate shareholder returns. Targets are ROIC of 8% or higher, ROE of 9% or higher, progressive dividend with a floor of 24 yen per share, and DOE of 3% or higher.
• Over the 3-year plan period, cash allocation prioritizes investment in high-growth overseas subsidiaries, M&A, and new business, focused on expanding environmental business, labor-saving business, CASE-aligned business, production capacity expansion, and efficiency improvement. Capital expenditure prioritizes the priority regions of India, Europe, and Vietnam, while R&D shifts to profitability-focused new product development, specifically PFAS commercialization, Medical business productization, and new screw tightening driver development. The company maintains a balance between financial health and growth investment.
• A new shareholder benefit program was introduced starting from the December 2025 fiscal year, offering local specialty products from Ayabe, Kyoto to qualifying shareholders.

Sustainability and Regional Revitalization

• The company identifies four material issues: shared value with customers, environmental coexistence, regional revitalization, and human capital development. It was awarded the Regional Revitalization Minister's Award as a hub company for regional industry, maintains a glocal philosophy of think global, act local, and runs multiple regional contribution initiatives including naming rights for two local facilities, main sponsorship for the Ayabe水源の里 Trail Run, and an 11-year campaign gifting screws to exam students to wish them success. It has also established a special subsidiary for disabled employment, achieved 100% male childcare leave acquisition last year, and holds multiple certifications for health management and women's empowerment.

• The 3-year new medium-term management plan targets an operating profit of 6 billion yen by 2028, with all initiatives aligned to this profitability goal.
• Financial targets for the plan period: ROIC of 8% or higher, ROE of 9% or higher, progressive dividend with a 24 yen per share minimum, and DOE of 3% or higher.
• For the Medical business's bio-absorbable magnesium implants: the company expects commercial launch to take several years due to regulatory approval timelines that are not fully within the company's control, but projects that the segment could reach approximately 20 billion yen in revenue if it captures 20% of the light load fracture implant market, and will contribute to earnings growth in the medium to long term.
• For environmental business products including PFAS response solutions and organic solvent recycling devices: the company is targeting commercialization and volume revenue generation within the 3-year plan period.

Overall consolidated sales for Nitto Seiko is 50.2 billion yen, with capital of 3.5 billion yen, approximately 2,000 consolidated employees and 30 group companies.

1. Fastener Business: Accounts for 70% of total consolidated sales revenue. Within the Fastener segment, the customer breakdown by revenue share is: ~40% automotive industry, ~20% housing and construction industry, 13% electrical and electronic components segment, growing share in general goods, and a small but rapidly growing share for data centers driven by generative AI demand. The segment holds 102 patents out of the company's total 275 patents, has a monthly production capacity of 2.2 billion units across 6 overseas production countries, and can produce precision screws as small as 0.6 millimeters.
2. Industrial Machinery Business: Combined with the Control Business accounts for ~30% of total sales revenue, but accounts for a disproportionately larger share of total operating profit than its revenue share. The segment holds the No.1 market share for automatic screw tightening machines in Japan and the No.2 global market share.
3. Control Business: Combined with the Industrial Machinery Business accounts for ~30% of total sales revenue. It holds 90% domestic market share in the niche market of residential ground survey equipment, and has an overseas sales network covering approximately 80 countries.
4. Medical Business: It is a new business currently in the product development stage and does not yet contribute material revenue.

• Commercialization timing for the Medical business's implant products is dependent on Japanese Ministry of Health, Labour and Welfare regulatory approval, which the company cannot fully control, creating uncertainty around when the business will begin contributing to revenue.
• The housing and construction segment, which accounts for 20% of Fastener business revenue, is currently experiencing continued sluggish performance due to severe labor shortages and rising material costs.
• The company's PBR has remained below 1x, reflecting market undervaluation driven by underperformance on sales scale and profit margin, creating pressure to deliver on profitability improvement targets.
• Nitto Seiko's headquarters is located in a small regional town, which creates challenges for human capital recruitment compared to urban locations.

Q: What is the breakdown of Fastener business customers by industry, and why is CASE-related demand growing in the automotive sector?

A: The share by industry is ~40% automotive, ~20% housing construction, 13% electrical/electronic components, with strong growth in game console precision screws and rapidly growing demand for data center screws driven by generative AI growth. Automotive CASE-related demand is growing because increased adoption of ADAS and autonomous driving adds more sensors, control units, and ECUs to vehicles, which require more of the company's precision fastening components.

Q: How do Nitto Seiko's patented CASE-related fasteners impact unit pricing and volume compared to standard products?

A: Nitto Seiko holds 102 Fastener segment patents. Patented products have capabilities competitors cannot match, with unit prices up to tens of times higher than the average 1 yen per standard screw. While total vehicle component count is gradually declining, and the company's integrated multi-function products reduce total part count, per-unit added value increases significantly, driving margin growth.

Q: Is the company's Industrial Machinery overseas expansion strategy focused on fast-growing emerging markets like India and Vietnam, and is the demand driven by automation?

A: Yes, that understanding is correct. Growing markets in these regions are increasingly automating previously manual processes to improve quality and productivity, which drives demand for the company's automatic screw tightening equipment, and the company is targeting this growing demand.

Q: When will the Medical business begin contributing to sales, and what is its potential market size? What does "light load部位" mean?

A: The product is currently undergoing animal and clinical trials, and regulatory approval timelines are not fully controlled by the company, so commercial launch is expected to take several years. In the medium to long term, if the product captures 20% of the light load fracture implant market, the potential size is approximately 20 billion yen. Light load部位 refers to low-weight-bearing areas such as finger and facial fractures, not high-load areas like shoulders, hips, or legs.

Q: Will Nitto Seiko keep its headquarters in Ayabe, Kyoto, and how does the company address regional human capital recruitment challenges?

A: The company will remain committed to its founding理念 and continue to pursue global expansion from its regional base. To address recruitment challenges, the company runs early career education programs at local primary, middle, and high schools to build awareness and cultivate local talent who will return to Ayabe after college. It also offers scholarship programs for local high school students attending college and studying abroad, and a program that pays salaries to new hires who want to pursue higher education after joining the company. The company has operated the Ayabe Industrial Training Center, a night school with electrical and mechanical programs open to the public as well as employees, since 1965, to improve technical skill levels across the region, with Nitto Seiko employees serving as instructors.

Q: What is the background to the recent strengthening of shareholder returns?

A: In response to the Tokyo Stock Exchange's request to improve PBR for companies trading below 1x, the company recognizes that a sub-1x PBR indicates the market is not correctly valuing the company, with key drivers being insufficient sales scale and profit margin. As a B2B company, the company also recognizes it needs to better communicate its future growth strategy and business plans to the market via IR activities, and strengthen shareholder returns alongside these communication efforts to improve market valuation.