Outlook for Japan Airtech <6291>

The performance forecast for the fiscal year ending December 2024 is as follows: a 1.1% decrease in revenue from the previous year to 13.5 billion yen, operating profit increasing by 31.5% to 930 million yen, ordinary profit increasing by 29.7% to 1.31 billion yen, and net income increasing by 28.4% to 940 million yen. Although revenue is almost on par with the previous period, profit at various stages is expected to increase. Based on the results of the second quarter of the fiscal year ending December 2024, the full-year performance forecast has been revised, keeping revenue expectations unchanged from the beginning of the period but raising the level for profit at various stages. With the upgraded levels, the operating profit margin is expected to be 6.9% (an increase of 1.7 points from the previous period), and the ordinary profit margin is expected to be 9.7% (an increase of 2.3 points). In the second half, under a business environment characterized by robust investment in electronic components and equipment in the electronic and bio fields, the company aims for increased revenue and profit. Analyzing market trends, investments in new factories and equipment for the semiconductor and related electronic component industries remain active in the electronic sector, with many inquiries directed towards the company. Particularly, there seems to be a strong investment appetite among semiconductor manufacturing equipment makers, leading to a continuous stream of orders for clean rooms, cleanroom equipment, clean booths, and other related items. In the automobile sector, investment in EV-related equipment is strong, which is expected to increase orders for clean rooms and cleanroom equipment. In the bio field, aside from the pandemic-induced demand, the customer base, which is relatively stable in terms of performance without pandemic-related peaks and valleys, is expected to contribute to filling the gap left by the decline in extraordinary demand.

Although we have made upward revisions to our performance, we still consider ourselves to be conservative in our estimates. Since the start of the fiscal year ending December 2024, we have implemented changes in standard product pricing and reevaluated pricing for special products, contributing to an improvement in profit margins in the second quarter. Therefore, similar progress can be expected for the full year. However, concerning costs, there is a possibility of ongoing high material prices and requests for price increases from suppliers, leading to an uncertain situation. Consequently, in anticipation of this increased cost risk, we have cautiously factored it into our performance forecasts.

Furthermore, efforts to win further orders and respond to increased orders are underway. To secure orders, we actively promote participation in various exhibitions. In 2024, overseas exhibitions in China (1 each for electronics and bio) and in Germany (for pharmaceuticals, chemicals, and bio) yielded positive results. Domestically, we participated in 'Interphex Week' in the pharmaceutical and cosmetics sectors (held in Osaka and Tokyo) and 'FOOMA JAPAN 2024' in the food machinery sector. These actions serve as tools to attract new customers and have resulted in multiple inquiries at all venues. In response to increasing orders, in June 2024, we relocated the production line of PTFE filters (high-performance filters mainly used in clean rooms of semiconductor manufacturing plants) from the Isesaki Plant to the Akagi Smart Factory. Previously, filters were manufactured separately at both plants, but by consolidating production at the Akagi Smart Factory, production efficiency has been enhanced. The introduction of new machinery during the relocation has further strengthened production capacity and work efficiency. PTFE filters have the function of removing ultrafine particles of 0.1 micrometers, and with the ongoing miniaturization of circuits in the pre-process of semiconductor manufacturing (the process of forming electronic circuits on wafers), the demand for them is expected to increase significantly. In the future, at the Isesaki Plant, we plan to increase production as a manufacturing base for standard products by introducing sheet metal processing equipment to enhance production capacity.

(Writer: FISCO analyst Tomoichi Murase)