■ Performance Trends of Japan Airtech <6291>

1. Performance Overview of the Second Quarter Financial Results for the Fiscal Year Ending December 2024

For the second quarter of the fiscal year ending December 2024 (January-June 2024), the performance was as follows: revenue decreased by 6.3% year-on-year to 6,758 million yen, operating profit increased by 19.7% to 606 million yen, ordinary profit increased by 30.4% to 1,044 million yen, and net income increased by 30.5% to 747 million yen. Progress seen in comparison to the full-year performance forecast (after upward revision) shows revenue at 50.1%, operating profit at 65.2%, ordinary profit at 79.7%, and net income at 79.5%. Revenue progressed smoothly in the second quarter, and profit at each stage showed favorable progress. Profit improved as dividends received from overseas affiliates exceeded expectations at 397 million yen, and profit improvement measures such as product price revisions, cost reductions, and expense reductions proved effective. Regarding product price revisions, standard products saw a 5-10% price increase mainly for bio-related products, and prices for special products were revised to appropriate levels for each customer. Additionally, transportation costs for products were increased. Cost reductions through reviewing parts used in special products, design changes for cost reductions, revising assembly work times in the manufacturing process, and improving manufacturing efficiency yielded various activities for cost reductions. The strong performance led to an upward revision of the full-year profit forecast for each stage in August 2024. In terms of profit margins, the operating margin improved by 2.0 points to 9.0% year-on-year, and the ordinary profit margin increased by 4.4 points to 15.5%. Despite a 74 million yen increase in personnel costs due to improved treatment for human capital and increased hiring of employees for labor condition rationalization, profit margin improvement effects from product price revisions (98 million yen) and freight rate control (23 million yen) led to the improvement. Looking at revenue by sector, growth was observed in the electronic industry, semiconductor production plans in Japan, expanded equipment investments in the electronic industry, and automobile-related companies. The sales ratio for the second quarter of the fiscal year ending December 2024 increased by 3.1 points to 52.6% from 49.5% in the fiscal year ending December 2023. In the bio-related field, sales ratios increased in the pharmaceutical sector due to strong investments in pharmaceutical plant and research facilities and infectious disease research, while sales of infection control equipment slowed down, causing a decrease in the medical field.

2. Sector-wise Revenue for the Second Quarter of the Fiscal Year Ending December 2024

Sector-wise revenue for the second quarter of the fiscal year ending December 2024 showed that the electronic industry sector accounted for 56% (an increase of 3 percentage points from the previous period end) while the biologics sector accounted for 44% (a decrease of 3 percentage points). Comparing the sales ratio for the second quarter of the fiscal year ending December 2024 with that of the fiscal year ending December 2023, the electronic industry sector expanded in the fields of electronics and automobiles. In the biologics sector, although the pharmaceutical and food sectors slightly increased, the medical sector shrank. Due to the effects of the COVID-19 pandemic from the fiscal year ending December 2020 to December 2022, the sales ratio of biologics fields focusing on medical care and pharmaceuticals exceeded that of the electronic industry sector. However, since the fiscal year ending December 2023, the electronic industry sector has once again led in sales revenue, compensating for the decrease in sales in the biologics sector due to the convergence of special demand with the recovery of the electronic industry sector.

3. Item-wise Revenue

Sales of clean rooms have been performing well across various sectors such as infectious disease research facilities, the electronic industry sector, and regenerative medicine sectors. While the sales revenue as of the second quarter of the fiscal year ending December 2024 appears to have decreased by 28.0% year-on-year to 658 million yen, this is due to timing of orders, and with a significant order backlog at the end of the second quarter of the fiscal year ending December 2024, the overall performance is expected to remain strong. Sales revenue for clean room equipment also showed positive results, increasing by 19.4% to 2,193 million yen. Sales revenue for clean booths slightly decreased to 1,314 million yen (a decrease of 4.8% year-on-year), but the company continues to receive numerous domestic orders related to the electronics sector and is expected to maintain positive performance in the future. Sales revenue for clean benches and biologics equipment saw a significant decrease by 48.2% year-on-year to 640 million yen. This decline is largely attributed to the reduced sales of infection control equipment that previously had special demand. However, thanks to strong investments from pharmaceutical companies, orders have been increasing, raising hopes for future developments. Sales revenue for installation and maintenance service components amounted to 1,550 million yen, showing a 4.0% increase. Sales growth can be expected for the full year, with an increase in installation and replacement HEPA filter orders. Sales revenue for clean supply products reached 154 million yen, a 26.2% increase.

The domestic semiconductor industry in Japan is progressing with facility investments, including building semiconductor plants, due to government support to strengthen semiconductor production capabilities. This has had a positive impact on the market environment surrounding the company, resulting in an increase in inquiries from semiconductor manufacturing equipment manufacturers and accelerating the flow of orders. As a result of this positive development, the company's sales and order backlogs for clean room-related products have been increasing, indicating a likely continuation of this trend throughout the fiscal year. Furthermore, this positive impact has also been a tailwind in price negotiations with business partners. Despite actively revising product prices, the company seems to have secured an advantageous position in price negotiations due to the increase in inquiries. The company plans to continue with product price revisions, considering the increase in labor costs as a result of wage hikes and requests for price revisions from suppliers, and expectations are set for improved performance throughout the fiscal year.

4. Financial Condition

Total assets at the end of the second quarter of the fiscal year ending December 2024 decreased by 825 million yen compared to the previous period to 18,764 million yen. Cash and deposits decreased by 2,095 million yen to 3,293 million yen. This was due to dividends as well as the impact of shortened payment terms to suppliers. Additionally, fixed assets increased by 512 million yen to 6,347 million yen due to the increase in construction provisional accounts for the construction of the Soka Multipurpose Center, among others.

Total liabilities decreased by 1,006 million yen compared to the previous period to 4,475 million yen. Current liabilities decreased by 917 million yen to 3,773 million yen. The main breakdown includes a decrease of 1,146 million yen in electronic record obligations and an increase of 206 million yen in unpaid corporate taxes, among others. Fixed liabilities decreased by 88 million yen to 701 million yen.

Net assets increased by 180 million yen compared to the previous period to 14,288 million yen. This was mainly due to a decrease in profit from dividends of 626 million yen and recognition of intermediate net income of 747 million yen.

As a result, the equity ratio at the end of the second quarter of the fiscal year ending December 2024 remained at a high level of 76.1%, an increase of 4.1 points compared to the previous period.

(Writer: FISCO analyst Tomoichi Murase)