Nissan Chemical (4021) Results Meeting – Investor and Environmentally Friendly
Nissan Chemical shares finished up 3.4% to close at ¥3,660 on Friday, May 12th, after the 13:00 announcement and notched up a further 2.2% rise on Monday, May 15th. The company turned in firm results, hiked its dividend to ¥52 and announced a ¥5bn share buyback program. Guidance tends to be conservative. Our revised estimates are outlined in this report. In recent months, we have been making four comments on Nissan Chemical:
- The shares looked oversold after an overreaction at Q3,
- Valuations appear expensive, but ROE is 15% and management has a 70% shareholder return guideline,
- Earnings growth is low at present, in part due to proactive development costs, and
- We are somewhat concerned by OLED penetration.
Key Points from FY16 Results
- The shift to OLEDs is not yet having a major impact.
- Sunever anti-reflection coating is seeing strong growth for use in manufacturing of DRAMs and 3D NAND. ArF types should grow by 13%.
- The agrochemical segment should see strong medium-term growth on expanding sales of anti-mite agent fluralaner for pets
- Pharmaceuticals OP is declining with generic pressure on anti-cholesterol drug Livalo. while the custom manufacturing business grows.
- Even after a ¥5bn share buyback and dividend hike, Nissan calculates its return to shareholders at 55.4%, still shy of the 70% guideline.
- A table showing Nissan Chemical’s quarterly earnings trend and FY17 guidance is included in file.
Nissan Chemical is a manufacturing company. Along with its affiliates, Co. operates in six business segments: chemicals, performance materials, agricultural chemicals, pharmaceuticals, trading, and others. Co.'s principal products include basic chemicals, such as melamine, sulfuric acid, nitric acid and ammonia; fine chemicals, including special epoxy, flame retardant and disinfectant; display materials; semiconductor materials; inorganic materials; agricultural chemicals and fertilizers; and hypercholesteremia curative drugs. Co. is also involved in the trading, landscaping and tree-planting, environmental survey, transportation and plant engineering businesses.
Founded in 2009, Pelham Smithers Associates (PSA) provides market intelligence on Asian technology, focusing in particular on Japan. The industries covered by our team of specialists are: consumer electronics, telecomms, pharmaceuticals, internet, electronic parts and materials, automotive technology, retail and capital goods.
PSA produces both company and sector reports. The focus of PSA’s research is to identify winners and losers as new technologies impact the top and bottom lines of corporations. Critical to our research is the clear explanation of how these new technologies work and how they impact companies and industries.
The founding partners have worked closely together for twenty years and the team has more than doubled in size since 2012.
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