6484.T

Company Overview & Core Strengths

• KVK is a specialized plumbing faucet manufacturer founded in 1939, headquartered in Gifu Prefecture, Japan, with 2 consolidated subsidiaries (Dalian Kitamura Valve in China, KVK PHILIPPINES, INC.) and 1,189 employees as of September 2025. It produces and sells a full range of plumbing products for entire residential water systems, holding a 21.4% volume-based domestic market share from April to September 2025.
• Core strengths are customer-aligned design/proposal capabilities, proprietary technology for value-added products, and integrated consistent quality production across 4 domestic and overseas facilities. The company offers ~11,000 SKUs with direct manufacturer after-sales service.

Interim Financial Performance

• Total interim sales hit a record high of 15.114 billion yen, +6.3% year-over-year, driven by increased orders for core products. Operating profit reached 1.378 billion yen (+16.5% YoY), marking 3 consecutive years of interim profit growth, with gains supported by higher sales offsetting raw material cost increases. Recurring profit was 1.733 billion yen (+23.4% YoY), and net profit attributable to parent company shareholders was 1.19 billion yen (+26.1% YoY), boosted by government subsidies for new factory construction. All financial metrics exceeded management's interim forecasts.
• Cost structure remained stable: cost of goods sold was 11.346 billion yen, equal to ~75% of sales, with minimal change from prior year, as efficient production limited exposure to copper price and foreign exchange volatility.
• The balance sheet remains very strong: current ratio is 348.8%, equity ratio is 82.6%, both improved from the prior year end.

Strategic & Operational Updates

• The company is executing a mid-term management plan (2023-2025) focused on three priorities: strengthening sales infrastructure, strengthening production infrastructure, and improving sustainability-focused management foundation. Its long-term Vision 2030 aims to become a leading global plumbing brand focused on accessibility, product durability, environmental protection, talent development, and strong governance.
• New product launches: 1) Launched two mid-high end thermostatic faucet lines (KIERRE and REUNA) for bathrooms, focused on distinctive design for mid-high price segments; 2) Launched a retrofittable Bluetooth remote switch for faucets, which enables touchless operation for accessibility, easier cleaning, and water savings.
• Operational improvements: The company continues to pursue waste elimination and cost competitiveness through its KVK Production System (KPS), and hosted an industry improvement workshop that identified new opportunities for production line optimization.
• Sales expansion: Held regional conferences for its national dealer network to strengthen channel relationships, exhibited at domestic trade shows to highlight new product lines, and exhibited at the 2025 China International Kitchen & Bath Exhibition in Shanghai to build brand presence and sales capabilities in the Chinese and Asian markets, receiving positive feedback for its high-quality Japanese-made products.
• Shareholder returns: The company plans an annual dividend increase to 80 yen per share (40 yen interim, 40 yen full year), with a projected 33.7% consolidated payout ratio for the full 2026 fiscal year. It expanded shareholder benefit product offerings to 6 SKUs, including its new high-end faucets and ultra-fine bubble shower heads, and added a digital IR app for easier shareholder access to information and proxy voting.

• The company revised its full year 2026 March Fiscal Year sales guidance downward from the original target of 36 billion yen to 30.5 billion yen, due to worse-than-expected sluggish demand in the Chinese market.
• The company maintained its target of 10% for both operating profit margin and return on equity (ROE) for the full fiscal year.

For the 2026 March Fiscal Year Interim period, KVK's product segment performance (all by sales revenue, converted magnitude):

1. Mixing faucets with shower: 4.894 billion yen, +278 million yen year-over-year, accounting for 32.4% of total interim sales
2. Mixing faucets (non-shower): 6.333 billion yen, +473 million yen year-over-year, accounting for 41.9% of total interim sales
3. Single faucets: 1.772 billion yen, +73 million yen year-over-year, accounting for 11.7% of total interim sales
4. Other products: 2.114 billion yen, +65 million yen year-over-year, accounting for 14.0% of total interim sales Total company interim sales reached 15.114 billion yen, with the two core mixing faucet segments accounting for 74.3% of total revenue.

• Persistent sluggish demand in the Chinese market, which led to the downward revision of the full-year sales target, remains a key downside risk for top-line performance.
• Rising copper prices and continued yen-denominated foreign exchange volatility create upward pressure on raw material and procurement costs, though the company has so far managed to offset this impact through increased sales and operational efficiency.
• New residential construction starts in Japan are in a year-over-year declining trend, due to the aftereffect of rush demand ahead of the April 2025 revision to building codes and energy efficiency standards, which creates near-term pressure on domestic demand for new construction plumbing products.

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