■ Performance trends of Nippon Electric Technology <1723>

4. Performance Outlook for the Fiscal Year Ending March 2025

The performance for the fiscal year ending March 2025 is expected to show revenue of 42,500 million yen (a 9.3% increase compared to the previous period), operating profit of 7,500 million yen (a 20.0% increase), ordinary profit of 7,600 million yen (a 20.2% increase), and net income attributable to shareholders of the parent company of 5,300 million yen (a 13.4% increase). Due to strong performance in the second quarter, there have been upward revisions in revenue by 1,000 million yen, operating profit by 1,300 million yen, ordinary profit by 1,300 million yen, and net income attributable to shareholders of the parent company by 1,000 million yen. Regarding the operating profit forecast, while certain costs are anticipated for business investments such as human resource acquisition, human resource development, and the establishment of partnerships, it is expected that significant growth will be secured due to the continued environment of high profitability. In addition, while the industrial systems-related business may require some effort, the air conditioning instrumentation-related business appears to have a slightly conservative outlook regarding existing projects and profit margins, suggesting further upward revisions may be expected as the fiscal year-end approaches.

As a business strategy for the air conditioning instrumentation-related business, the new construction will focus on strengthening the business from a medium to long-term perspective with a keyword of 'corporate-wide optimization.' In existing projects, cooperation with the new construction department aims to strengthen the business foundation, and it seems that large projects are increasing at the moment. In the industrial systems-related business, in addition to strengthening the foundation of existing operations, there is a policy to establish new businesses through proposals for smart factories and to expand the business in a balanced manner through strengthened sales to existing plant manufacturers. Company-wide, while continuing to address the labor shortage, efforts will be made to streamline operations in both sales and technology through the promotion of DX, aiming to improve business profitability.

The order intake continues to need selective orders that take into account construction capacity due to record-high ongoing projects, and improving profitability is expected to continue, although the company seems to be exhibiting a conservative outlook. Regarding revenue, large projects such as redevelopment projects in the metropolitan area and Osaka, as well as semiconductor factories, are expected to be completed in the second half for the new construction of air conditioning instrumentation-related businesses. Consequently, with upward revisions, revenue for the second half is forecasted to be an 18.0% increase compared to the same period last year, which is strong compared to the second quarter. Given the nature of the business, it is somewhat possible to accurately forecast revenue two years ahead, and the accuracy improves the closer it is, making it a generally reasonable forecast. The company believes there is potential for more small to medium-scale projects to be added to revenue. On the profit side, the gross profit margin for revenue in the second half is predicted to decline compared to the same period last year, but considering the business environment, no elements suggesting a decline are identified, suggesting that a conservative forecast has been maintained. However, there is a possibility of absorbing an expense of 1 billion yen for growth investments anticipated at the beginning of the fiscal year, and as it stands, a landing as per the full-year performance forecast after upward revisions is anticipated.

(Author: FISCO guest analyst Nobumitsu Miyata)