NEW COSMOS ELECTRIC CO.,LTD. Q4 FY2025 earnings call

Core Mission and Corporate Positioning

• The company's core mission is to eliminate gas accidents worldwide, and contribute to building a safe, secure, and comfortable environment, while fostering a workplace where diverse talent can contribute.
• Founded in 1960 (65th anniversary in 2025), the company develops, manufactures, sells, and maintains gas sensors and gas alarms, with group company Figaro Engineering also selling gas sensors. It holds the top 44.9% market share for home gas alarms in Japan, and is the only Japanese manufacturer that produces both home and industrial gas detection products.

Core Technological Strengths

• The company has over 60 years of gas sensor development experience, with unique strength in hot-wire semiconductor type gas sensors.
• Its proprietary MEMS hot-wire semiconductor gas sensor is a world-unique technology: it is ultra-small, low-power, low-cost, and highly mass-producible, enabling the development of battery-powered methane alarms for the North American market that cannot be easily matched by competitors. The company is expanding its MEMS sensor product lineup to meet growing cross-industry demand.
• It has world-top level gas sensor production capacity across three Japanese production sites (Cosmos Sensor Center, Yodogawa Plant opened 2025, and Figaro Engineering's factory), with core sensor production exclusively in Japan; partial product assembly is done overseas.

For the 2025 March fiscal year, total consolidated revenue was 42.153 billion yen, with the following segment performance: 1. Home Gas Alarm Related: 21.735 billion yen in revenue, 12.7% year-over-year growth, accounting for 51.5% of total consolidated revenue. Growth was driven by strong demand for battery-powered methane alarms in North America following mandatory installation regulations, plus solid domestic sales of city gas alarms and overseas gas sensor sales. 2. Industrial Fixed Gas Detection Alarm Related: 11.993 billion yen in revenue, 6.1% year-over-year growth, accounting for 28.5% of total consolidated revenue. Growth came from strong sales to the semiconductor industry in both domestic and overseas markets, plus steady maintenance service revenue. 3. Portable Industrial Gas Detector Related: 6.4 billion yen in revenue, 1.7% year-over-year growth, accounting for 15.2% of total consolidated revenue. Growth was driven by strong sales to Japan's city gas and power industries, alongside steady maintenance services. Combined industrial segments (fixed + portable) make up ~43.7% of total revenue, putting home and industrial sales near a 50/50 split.

• Mid-Term Management Plan (2025-2027): Qualitative target is to expand globally around MEMS gas sensor technology, contribute to zero gas accidents and a carbon neutral society, focused on "deployment and expansion": monetizing past investments (primarily North America home alarm market expansion) and building future growth foundations (carbon neutral market in Europe, development of battery-powered LP gas alarms).
  • Quantitative targets for the final plan year (2028 March fiscal year): Consolidated revenue of ≥60 billion yen, overseas revenue ratio ≥50%, operating profit margin ≥12.5%, PBR of 1.0, ROE of 8.5%, ROIC of 8%.
  • Total planned investment of 8 billion yen over the plan period, with ~2 billion yen allocated to expanding production capacity for North America-bound battery-powered methane alarms. The company targets building a production system capable of outputting 3 million MEMS gas sensors per year by the end of the plan period.
  • Dividend policy target: Reach a 30% payout ratio during the 2025-2027 mid-term plan, with steady increases over time.
• 2026 March Fiscal Year Forecast: Revenue of 48 billion yen (13.9% year-over-year growth), operating profit of 5.6 billion yen (8.6% year-over-year growth). Profit growth is slower than revenue growth due to full commencement of depreciation for the new factory and continued rising raw material, logistics, and processing costs.
• Dividend Forecast: 2025 March fiscal year ended with a 60 yen per share dividend; 2026 March fiscal year is forecast to pay 70 yen per share including a commemorative dividend.

• U.S. tariff policy changes represent an uncertainty: while current production exported from Mexico to the U.S. qualifies for duty-free treatment under the USMCA agreement, future tariff policy outcomes are unclear, which could impact cost and competitiveness for North American sales.
• Current ROE and PBR are below general market benchmarks, requiring improvement through growth investments and productivity gains to meet mid-term targets.
• Home gas alarm mandatory installation regulation proposals across 6 U.S. states have not yet been finalized, so actual market size growth will depend on final legislative outcomes.

Q: Have competing battery-powered home methane alarm products entered the market, and do any use 新コスモス電機's sensors? / A: A small number of other firms sell battery-powered methane alarms, but these use different detection principles or have much higher production costs than 新コスモス電機's products. Currently, 新コスモス電機 is the only manufacturer capable of mass supplying these products at an appropriate cost point.

Q: How do 新コスモス電機's hydrogen sensors achieve such a high 80% market share in Japanese hydrogen refueling stations? / A: The key advantage is the hydrogen sensor itself: our sensors have extremely strong hydrogen selectivity, producing very few false alarms even in environments with multiple other gases. They also detect hydrogen with high sensitivity and stable performance, which is unmatched by competing products, especially critical for highly flammable hydrogen that requires fast, accurate detection.

Q: Shareholders have called for higher shareholder returns, will the company raise payout ratio or adopt a DOE target? / A: The company's policy is to maintain stable dividends and avoid cutting dividends even in weak performance periods. The clear near-term target is to reach a 30% payout ratio by the end of the 2025-2027 mid-term plan.

Q: What industries and regions is the company focusing on for its carbon neutral/hydrogen business expansion? / A: The priority industry segments are FCEV (on-vehicle hydrogen detectors), energy (various gas detectors and alarms), and gas utilities (home hydrogen alarms). At this stage, the company is focused on the broader European region rather than individual specific countries, as hydrogen adoption is still in early demonstration phases across the market.