6493.T

• Corporate Position and Core Strengths

  • NITTAN is a global manufacturer of internal combustion engine components, holding top domestic market share for automotive engine valves and global top market share for medium-speed marine engine valves. It operates 18 manufacturing facilities across 11 countries globally, with 2,549 employees worldwide. 64% of total revenue comes from overseas markets.
  • The company holds 5 core technologies: forging, surfacing build-up welding, joining, precision processing, and surface processing (added via the acquisition of NITTAN Ena Metal).

• Mid-term Long-term Strategy (NITTAN Challenge 10 / NC10)

  • NC10 has a 10-year goal to reach over 100 billion yen in revenue, over 10 billion yen in operating profit, and 10% operating profit margin. It is structured around 4 pillars: increasing value of existing internal combustion engine component business (VISION I), developing new businesses in electrification and new sectors (VISION II), open innovation development (VISION X).
  • Market outlook projects that 68% of global mobility will still use internal combustion engines by 2040, with 91% of 2020 volume remaining. The company will serve both ICE and electrification market demand. Key product development includes: GHG reduction/high-efficiency valves for ICE, hydrogen/ammonia compatible marine valves; Nixtroid reduced-size reduction gears for electric bicycles, FCEV motor rotors, EV helical gears, and co-development of low thermal expansion alloy components for liquid hydrogen storage/transport.
  • India Strategy: India is projected to see 2.8x growth in ICE demand by 2040. NITTAN has already completed building expansion, and is expanding production capacity from 12 million units/year to 24 million units/year to handle new high-margin orders from Hyundai Motor India and local Indian OEMs. A second phase of investment is planned for 2027.
  • Current progress: Even with the inclusion of acquired NITTAN Ena Metal, current revenue is under 60 billion yen, so the company is accelerating progress via its partnership with Yokohama Capital.

• Partnership with Yokohama Capital

  • This is a comprehensive win-win strategic partnership for NC10 goal achievement, not just financing. Yokohama Capital will provide 25 billion yen total funding (15 billion yen in bonds, 10 billion yen in share warrants), with a structure that limits shareholder dilution: conversion/exercise can only happen if share price rises above the dilution-equivalent level, protecting existing shareholders.
  • Funding allocation: 12 billion yen for India strategy (VISION I), 995 million yen for M&A (VISION II), 287 million yen for treasury stock purchase. The partnership will support portfolio optimization, existing business profitability improvement, new star business cultivation, and strategic M&A.

• ESG and Stakeholder Initiatives

  • Achieved 36.7% CO2 reduction (Scope 1/2/3) in 2024, exceeding targets, and received S-Class Excellent Enterprise certification from Japan's Ministry of Economy, Trade and Industry.
  • Implemented local brand awareness and recruitment advertising in the Kanagawa region, and continued CSR/SDG initiatives across global operating locations.
  • Maintained a stable dividend plan of 14 yen per share full year (7 yen interim, 7 yen end-of-year), and continues to evaluate expansion of the existing QUO card shareholder benefit program.

• Full-year 2026 March fiscal year guidance is maintained unchanged from the initial announcement. Despite much better than expected first half operating profit performance, management expects temporary sales decline in the second half due to customer semiconductor supply issues and US trade policy impacts, and maintained a very conservative assumption for foreign exchange rates.
• Management will promptly revise and disclose guidance if necessary after finalizing full-year foreign exchange calculations at the end of December.
• Total capital expenditure for the full year is planned at 5.3 billion yen, focused on domestic mirror-finish valve equipment, core system updates, and India capacity expansion. All expected tariff impacts for North American-bound exports have already been agreed to be passed through to customer prices.
• The existing mid-term management plan is unchanged, and does not yet include expected benefits from the Yokohama Capital partnership. Benefits will be added to the plan once they become visible.
• Management expects continued tough demand conditions due to China's economic slowdown and high raw material prices, but projects growth aligned with the global automotive market average, with significant operating profit growth driven by automation, productivity improvement, and full-year black operations across all business units and facilities.

For the 2026 March Fiscal Year First Half (interim period):

• Small Engine Valve Business: Total revenue was 21.26 billion yen (87% of total consolidated revenue), saw negative impact from production cuts at Honda's North American factories. Revenue contribution share increased 3% year-over-year in the 2025 March full fiscal year.
• Marine Components Business: Turned to year-over-year revenue and profit growth, after recovering from the 2023 December factory fire. For the full fiscal year, further revenue and profit growth is expected from increased orders and price adjustments.
• Gear Business: Continued sales decline, full-year outlook maintains this trend, though the company is pursuing productivity improvements and new customer development.

• Second half of the fiscal year faces headwinds from customer semiconductor procurement issues and US trade policy impacts, which are expected to cause temporary sales declines.
• Geopolitical and trade policy risks for North American exports are mitigated via pre-agreed price pass-through with customers, and limited impact from local production in North America.
• Investment in India faces limited risks other than local talent shortage; management will use Yokohama Capital's expertise to conduct additional risk analysis and pre-emptive risk mitigation.
• Continued weak demand in the Asian market due to poor sales of ICE vehicles, and continued sales decline in the gear business segment.

Q: What is the background and rationale for NITTAN's investment in the India market? / A: India is a very attractive market for internal combustion engine components, with projected 2.8x growth in ICE demand by 2040. The market has shifted from prioritizing low price to demanding high-value, high-quality products, and geopolitical factors limit competitor entry, while NITTAN has had an established local presence for 12 years. The company has already received large new orders for high-margin hollow valves, with strong future pipeline, justifying the two-phase investment plan. Only material risk is local talent shortage, which the firm will address with Yokohama Capital's risk management support.

Q: How does management view the current NITTAN share price level? / A: Management believes that Japanese manufacturing equities including NITTAN remain undervalued. The company will continue pursuing profitability improvements, and focus on achieving a price-to-book ratio of 1x via expanding profit margins and increasing IR activity to lift market-recognized enterprise value.

Q: What is NITTAN's M&A strategy going forward? / A: NITTAN is still in the stage of evaluating opportunities, with multiple candidates and no narrow target yet. The company is open to opportunities domestically and internationally, including both internal combustion engine component manufacturers (which offer immediate synergy benefits aligning with ongoing ICE market demand) and new sectors to diversify the business portfolio and develop next generation businesses. The partnership with Yokohama Capital will be leveraged to advance strategic M&A.

Q: Will NITTAN expand its shareholder benefit program? / A: Recent share price gains have reduced the combined dividend and benefit yield to ~2%, and management believes a 3%+ yield should be maintained. The company is currently evaluating changes to the shareholder benefit program alongside dividend policy to hit this yield target.