Equity Research · Investment Report

Nippon Tungsten Co., Ltd.

日本タングステン株式会社 · TSE Standard: 6998 · Industrials / Metal Fabrication (Powder Metallurgy)

Price (Aug 5, 2026)

¥2,118

Market Cap

¥10.9bn

PER (FY26A)

38.0x

PER (FY27E)

14.3x

PBR

0.77x

Div Yield (FY27E)

2.8%

BUY Target ¥2,400 · +13% upside
FY2027E EPS ¥148 × 16.2x

Contents

Executive Summary
Investment Thesis
Financial Trajectory
Business Deep Dive
Segment Structure
Anomaly Analysis
Profit Quality
Valuation
Catalysts
Risks
Conclusion

1. Executive Summary

One-page view: what this company is, what happened in FY2026, and why we are BUY.

Nippon Tungsten is a 95-year-old Fukuoka-based powder-metallurgy specialist (founded 1931) that refines and processes tungsten & molybdenum and manufactures fine-ceramic products via proprietary powder-blending, sintering and wire-drawing technology. It sells consumable & capital-equipment parts into five end markets: data-center HDD storage (magnetic-head substrates), sanitary/diaper production lines (NTダイカッター rotary cutters), semiconductor manufacturing equipment (power-feed terminal parts), medical devices (catheter tungsten wire) and industrial machinery (twin-screw extruder parts, steel-mill wear parts). A sixth income stream comes from real-estate rental & solar power (¥268m non-operating income). The business is split into two segments — 機械部品事業 (Machine Parts, 53.6% of FY26 sales) and 電機部品事業 (Electrical Parts, 46.4%).

FY26 Sales

¥12,776m

+3.1% YoY

FY26 Op. Profit

¥713m

+3.5% YoY

FY26 Net Profit

¥270m

-60.1% (impairment)

FY27E Net Profit

¥720m

+166% (guidance)

The FY2026 story in one sentence: operating profit actually grew +3.5% and ordinary profit hit an 8-year high (¥1,133m, +18.9%), but a one-time, non-cash ¥797m impairment on Machine Parts' China-facing extruder equipment (booked as a special loss below the OP line) collapsed reported net profit to ¥270m. Strip the impairment and the underlying business improved — Electrical Parts operating profit jumped +65.6% on semiconductor-equipment and medical-tungsten-wire demand.

Why BUY: (1) FY2027E net profit +166% to ¥720m on guidance (sales +17.4% to ¥15.0bn) — no repeat impairment + a +44.8% order backlog (¥3.83bn); (2) a credible shareholder-return reset: from FY2027 a ¥60 DPS floor + 40% payout target (≈2.8% yield) on a net-cash balance sheet (equity ratio 70.4%); (3) valuation at 14.3x FY27E EPS and 0.77x PBR under-prices the Electrical Parts growth engine and the tungsten-price pass-through franchise. Risks centre on the Machine Parts China/industrial-machinery cycle and tungsten raw-material swings.

2. Investment Thesis

Three pillars, ordered by conviction.

① Electrical Parts — the rising profit engine Strong

Semiconductor-equipment power-feed terminal parts expanded sharply in FY2026 (AI-driven wafer-fab/equipment capex up-cycle); medical catheter tungsten wire grew in North America; resistance-welding electrodes recovered with auto production. Result: segment OP +65.6% to ¥659m, margin 7.5% → 11.1%, on revenue +12.7% — classic operating leverage plus successful price pass-through of the tungsten raw-material surge. Orders +18.5% and backlog +45.9% (¥1,819m) give FY2027 visibility. The segment's share of company sales has risen 42.5% → 46.4% in two years.

Volume: semiconductor terminal parts boom + medical wire + electrode recovery drove most of the +¥668m revenue gain.
Price: catheter-wire price revisions and breaker-contact repricing monetized tungsten inflation (APT price ~8× since Jan-2025 under China export controls) into margin expansion — evidence of pricing power and switching-cost moats.
Risk to pillar: EV relay contacts remain soft (customer spec-change); tungsten price swings re-set the pass-through game each move.

② FY2027 earnings recovery + shareholder-return floor Medium-Strong

FY2027 guidance: sales ¥15.0bn (+17.4%), OP ¥730m (+2.3%), ordinary ¥1,010m (-10.9%), NP ¥720m (+166%), DPS ¥60. The net-profit recovery is largely (a) absence of the ¥797m impairment, (b) backlog conversion (+44.8% order backlog ≈ 30% of annual sales), and (c) tungsten price pass-through inflating the top line. The 2026-05-14 board decision — ¥60 DPS floor + 40% payout target from FY2027 — converts the normalized ~7.4% ROE (2.1% reported, distorted by impairment) into a tangible yield floor.

Normalized ROE ≈ 7.4% ex-impairment; equity ratio 70.4%; net cash ≈ ¥716m (¥3,195m cash vs ¥2,479m interest-bearing debt).
Caution: OP guidance is only +2.3% and ordinary profit falls -10.9% (FX/equity-method normalization) — the growth is price/low-margin-led, not core-compounding.

③ Franchise franchises + circular tungsten model Medium

Machine Parts holds two company-claimed #1 niches: world #1 HDD magnetic-head substrates (data-center large-capacity HDD demand) and domestic #1 carbide rotary cutters (aging-population adult-diaper lines) — both consumable/repeat-replacement businesses with spec-in switching costs. The tungsten recycling ("circular") model — scrap → powder → products — secures procurement as China restricts exports (~80% of world supply; APT ~8× since Jan-2025), turning a supply risk into a competitive advantage. The 2028 mid-term plan (announced 2026-05-14) explicitly prioritizes 希少資源を通じた価値最大化 (value maximization via scarce resources) and reallocates capital from the impaired China extruder book to growth businesses.

HDD substrates and NTダイカッター kept Machine Parts profitable even as China industrial-machinery demand collapsed.
Risk: HDD cycle peaks; independent market-share data unavailable (company-dated claims only).

3. Financial Trajectory

Consolidated P&L, FY2022–FY2026 + FY2027E guidance (¥ million, FY ends March 31).

Consolidated Income Statement

Item (¥m)	FY2022	FY2023	FY2024	FY2025	FY2026	FY2027E
Net Sales	12,038	12,645	11,464	12,392	12,776	15,000
YoY %	+21.7%	+5.0%	-9.3%	+8.1%	+3.1%	+17.4%
Gross Profit	3,007	3,053	2,558	2,928	3,113	—
Gross Margin %	25.0%	24.1%	22.3%	23.6%	24.4%	—
SG&A	2,093	2,126	2,082	2,238	2,399	—
Operating Profit	913	927	476	689	713	730
OP Margin %	7.6%	7.3%	4.2%	5.6%	5.6%	4.9%
Ordinary Profit	1,239	1,227	786	952	1,133	1,010
Ordinary Margin %	10.3%	9.7%	6.9%	7.7%	8.9%	6.7%
Extraordinary Losses (impairment)	46	202	212 (119)	0	797	0
Net Profit (attrib.)	870	767	527	676	270	720
Net Margin %	7.2%	6.1%	4.6%	5.5%	2.1%	4.8%
EPS (¥)	180.51	158.78	108.87	139.58	55.76	148.3
DPS (¥)	120	120	75	50	50	60
Payout %	39.7%	39.1%	52.6%	36.6%	150.3%	~40%
ROE %	8.4%	7.0%	4.5%	5.5%	2.1%	~5.5%

FY2027E per company guidance (決算短信/web). FY2026 NP includes ¥797m impairment. 5-yr sales CAGR +1.5%; EPS CAGR -25% (distorted by FY26).

Sales & Operating Profit, FY2022–FY2027E

FY27E per company guidance. Note: FY2024 OP trough (¥476m, -48.7%) was cyclical; FY2026 OP +3.5% despite the ¥797m below-the-line impairment.

4. Business Deep Dive

Seven dimensions covering both core segments — 機械部品事業 (Machine Parts) and 電機部品事業 (Electrical Parts).

4.1 Product Portfolio & Business Model D1

Machine Parts — consumable & precision wear components built on tungsten hardness/density:

NTダイカッター — cemented-carbide rotary cutters for diaper/sanitary production lines; consumable (repeat replacement while lines run); domestic #1 share (company claim).
HDD magnetic-head substrates — thin-film ceramic substrates for HDD heads; world #1 share claim; data-center large-capacity HDD demand.
二軸混練押出機用金属部品 / MAZELLOY® (MZ01/MZⅡ) — high-durability twin-screw extruder elements for reinforced plastics & battery-electrode paste; wear resistance >10× tool steel, replacement interval 1/10, running cost <half; won ものづくり日本大賞優秀賞 (2023). China-facing growth bet — impaired in FY2026.
Also: steel-mill wear parts (up in FY26), automation/labor-saving equipment, mold products (weak), long carbide products for coating tools.

Electrical Parts — tungsten/molybdenum "heat + electrical" materials:

半導体製造装置用給電端子部品 — power-feed terminal parts for semiconductor equipment; FY2026 star, demand expanding sharply.
医療用カテーテル用タングステンワイヤー — high-purity fine W wire for minimally-invasive catheters (radiopacity + flexibility); North-America-led growth.
電気接点 (breaker/power-switch contacts TD/TCP, EV relay contacts) — for breakers, electricity meters, relays.
抵抗溶接用電極 (resistance-welding electrodes), EDM electrodes / C-EDM, plasma electrodes, cemented carbides / MAZELLOY / HEAVY ALLOY / fine ceramics.

Group structure: 5 consolidated subsidiaries (福岡機器製作所, 昭和電気接点工業所, 上海恩悌三義実業, Nippon Tungsten USA, Nippon Tungsten Europe) + equity affiliate SV NITTAN (Thailand; FY26 sales ¥1,297m, NP ¥177m). Non-operating income includes real-estate rental & solar power (~¥268m).

4.2 Market Position & Competitive Moat D2

Moat sources

Switching costs: cutter/substrate/contact quality directly gates line yield and downtime — spec-in once, customers resist switching.
Tacit-knowledge barrier: tungsten melts >3,000°C (cannot be cast); powder blending, sintering-shrinkage control and micro-wire drawing are decades of accumulated process data.
Niche #1 positions: world #1 HDD head substrates, domestic #1 carbide rotary cutters (company-dated claims); MZⅡ first to deliver "light + >10× wear" extruder elements.
Pricing power (demonstrated): catheter-wire price revisions and breaker-contact repricing converted a ~8× tungsten cost shock into margin expansion (Electrical Parts 7.5% → 11.1%).

Competitive landscape

Competitor	Overlap
A.L.M.T. Corp (Sumitomo Electric group)	Full tungsten/moly chain; semiconductor heat-dissipation substrates, wire-drawing dies; ITER fusion monoblock
Sumitomo Electric Hardmetal	Cutting tools / wear parts; US tungsten recycling JV (Niagara Refining)
Mitsubishi Materials / Tungaloy / DIJET / OSG / Union Tool	Cemented carbides, cutting tools, dies
日本新金属 (Japan New Metals) & other W/Mo processors	Wire / rod / plate processing

Web Search: no independent market-share figures published for the HDD-substrate, cutter or medical-wire niches — company-dated claims only.

4.3 Profit Driver Decomposition (Volume / Price / Cost / Mix) D3 — most important

Machine Parts — FY26 OP −25.2% (885 → 662)

Volume ↓: 二軸混練押出機 parts — the lumpy China demand of FY2025 paused (大幅な減収); molds down; HDD substrates strong all year; steel-mill wear parts up; NTダイカッター H1 down → Q3–Q4 rebound (new-structure units).
Price/Mix ↓: loss of high-margin China extruder sales = negative mix.
Cost ↓: tungsten raw-material inflation + depreciation from equipment renewal on a shrinking sales base.
Impairment ¥797m (below OP): Q4 write-down of extruder production equipment (book ~¥800m); official rationale — battery/reinforced-plastic compounding demand delayed by flagging EV demand + raw-material surge. The ramp is delayed, not dead.
Implied all-in segment economics FY26: 662 − 797 ≈ −135m.

Electrical Parts — FY26 OP +65.6% (398 → 659)

Volume ↑ (main driver): semiconductor-equipment terminal parts boom; catheter tungsten wire strong (N.America); welding electrodes up on auto recovery; breaker contacts recovered from FY25 inventory adjustment.
Price ↑ (major contributor): successful 価格改定/価格転嫁 — catheter-wire and breaker-contact price revisions monetized tungsten inflation.
Cost ↓: raw-material inflation was a headwind, but pass-through + scale + mix converted it into margin expansion (7.5% → 11.1%).
Offset: EV relay contacts soft (customer spec-change to alternative materials) — partially recovered Q3–Q4.
Revenue +¥668m (+12.7%) with margin +3.6pp = operating leverage + pricing power.

Key insight: the two segments are mirror images in FY2026 — Machine Parts took the tungsten cost shock on shrinking China volume (and wrote down assets); Electrical Parts monetized the same cost shock through pricing on growing volume. This is why consolidated OP still rose +3.5% while Machine Parts alone went negative on an all-in basis.

4.4 Demand Structure & End Markets D4

End market	Trend FY2026	Trajectory	Segment
Data-center HDD (substrates)	Strong	AI/data-center large-capacity HDD investment cycle; the core franchise	Machine
Sanitary/diaper machines (NTダイカッター)	Choppy (H1↓ H2↑)	Aging-population adult-diaper demand globally; new-structure unit replacement	Machine
China industrial machinery (extruder parts)	Sharp decline + impairment	Battery/plastics compounding demand delayed on weak EV; recovery tied to EV/ESS capex	Machine
Steel mills (wear parts)	Up	Stable replacement demand; durability differentiation	Machine
Semiconductor equipment (terminal parts)	Sharp growth	Global wafer-fab/equipment capex up-cycle (AI chips); biggest structural tailwind	Electrical
Medical devices (catheter W wire)	Strong (N.America)	Minimally-invasive penetration; aging populations; new regions	Electrical
Automotive (welding electrodes / EV relays)	Electrodes ↑ / EV relays soft	Auto production recovery vs US EV demand flagging + material substitution	Electrical
Industrial switchgear (breaker contacts)	Recovered + price up	Infrastructure/grid investment; raw-material pass-through	Electrical

Geographic revenue mix (FY2026, ¥12,776m total)

N.America +45% and China +53% YoY in FY2026 — regional diversification improving. Key customer: Proterial (ex-Hitachi Metals) ¥1,336m = 10.5% (Machine Parts).

4.5 Strategic Shift: the "2028 Mid-Term Plan" D5

「日本タングステングループ2028中期経営計画」 (announced 2026-05-14, CEO 中原賢治): Vision 2028 — "人と資源の制約を乗り越え、選ばれる存在" (overcome human & resource constraints, be the chosen partner). 2031 = 100th anniversary.
Strategy ① 希少資源を通じた価値最大化 — circular business model (tungsten scrap recycling), portfolio optimization, focus on core businesses + strategic investment in growth businesses (semiconductor parts, medical wire).
Machine Parts role: extruder segment pivots from "lumpy China sales" to 量産化 toward battery/reinforced-plastic customers (US/EU) with recycled powder; the impairment acknowledges the delay, not abandonment.
Capex FY2026 ¥825m / investing CF −¥851m (facility renewal + productivity); depreciation ~¥678m. Real-estate & solar income (~¥268m) is a stable non-operating cushion.
Capital policy: FY2027 dividend floor ¥60 + 40% payout target — a shareholder-return reset consistent with TSE capital-cost consciousness.

4.6 Competition & Risks D6

Risk	Detail	Sensitivity
China demand cyclicality	Machine Parts has now taken impairments in FY2023 (¥202m) and FY2026 (¥797m) from this exact exposure	High — China = 5.9% of sales but the marginal profit swing is large
Customer concentration	Proterial = 10.5% of FY26 sales (HDD/materials supply chain)	Medium
Tungsten supply / price	China (~80% world supply) export controls since Feb-2025; APT ~$331 → ~$1,900/mtu (~8× in 15 months); mitigated by inventory buffer, pass-through, recycling	High but partially hedged by pricing power
HDD cycle peak	Substrate franchise tied to data-center storage capex	Medium-High
FX	Weak yen boosts exports/overseas subsidiaries; swings in non-operating income	Medium
Material substitution	EV relay contacts lost to alternative materials; medical-wire faces nitinol/MP35N alternatives	Medium

4.7 Governance & Capital Policy D7

Governance

監査等委員会設置会社 (Audit & Supervisory Committee company); 9–10 directors incl. ~5 outside (3–4 of them on the audit committee); nomination & compensation advisory committee chaired by an outside director.
CEO 中原賢治 (Kenji Nakahara) — became 代表取締役社長 around Feb–May 2026, succeeding 後藤信志; announced with the 2026-02-05 役員異動.
Executive officer system (4 officers); internal audit office; risk-management committee.

Capital policy

Net cash: cash ¥3,195m vs interest-bearing debt ~¥2,479m; equity ratio 70.4%.
PBR ~0.77x (BPS ¥2,745.22 at ¥2,118); ROE FY26 2.1% reported ≈ 7.4% normalized (ex-impairment).
2026-05-14 board: dividend floor ¥50 → ¥60, payout target 30% → 40%, effective FY2027 (interim ¥30 + year-end ¥30 plan).
Equity affiliate SV NITTAN (Thailand) — growing equity-method contributor (NP ¥105m → ¥177m).

5. Segment Structure

Revenue & operating-profit mix by segment, FY2022–FY2026 (+FY27E sales guidance).

Segment Revenue (¥m)

Segment	FY2022	FY2023	FY2024	FY2025	FY2026	YoY26
機械部品 (Machine Parts)	6,732	7,066	6,383	7,146	6,854	-4.1%
電機部品 (Electrical Parts)	5,367	5,608	5,107	5,271	5,939	+12.7%
Total	12,099	12,674	11,491	12,418	12,794	+3.0%

Segment Operating Profit (¥m) & margin

Segment	FY2022	FY2023	FY2024	FY2025	FY2026	Margin26
機械部品 (Machine Parts)	936	862	502	885	662	9.7%
電機部品 (Electrical Parts)	530	602	534	398	659	11.1%
Corporate adj.	-553	-537	-560	-594	-608	—
Consolidated OP	913	927	476	689	713	5.6%

Cross-foot verified: segment sums + corporate adjustments = consolidated for every year. Electrical Parts' OP share of segment total rose from 36% (FY22) to 50% (FY26).

Segment Operating Profit Composition (stacked, ¥m)

FY2026: the engines converge — Machine ¥662m vs Electrical ¥659m (50/50), a structural shift from Machine-dominated (64/36 in FY22).

6. Anomaly Analysis

What broke, why, and how risky it is.

6.1 Net Profit −60.1% in FY2026 (Profit Dive) High severity

Cause: special loss of ¥797m impairment on Machine Parts fixed assets (industrial-machinery market) — 収益性低下 from the China-facing twin-screw extruder parts book after FY2025's concentrated orders. Reported NP fell ¥676m → ¥270m; EPS 139.6 → 55.8円; ROE 5.5% → 2.1%; payout ratio jumped to 150.3%.

Risk assessment: the impairment is non-cash and sits below OP (OP actually +3.5%, ordinary +18.9%) — earnings quality event, not an operational collapse. But it is the 4th impairment in 5 years (see 6.3) and signals management held the underperforming asset book too long. No further impairment is assumed in FY27 guidance.

6.2 Operating Profit −48.7% in FY2024 (Margin Break) High severity — cyclical trough

Cause: HDD inventory correction in the data-center supply chain + automotive parts below prior-year; wage increases (賃上げ) lifting fixed labor costs; electricity & auxiliary-material (hydrogen) cost inflation; higher depreciation from proactive equipment renewal. Both segments fell (Machine −360, Electrical −68); revenue −9.3% but OP −48.6% — operating leverage cut both ways. A further ¥93m FX-translation write-off (overseas subsidiary liquidation) plus ¥119m impairment dragged NP to ¥527m.

Risk assessment: the recovery to ¥689m (FY25) and ¥713m (FY26) confirms it was cyclical, not structural. HDD cycle and wage inflation are the swing factors to monitor.

6.3 Recurring Impairment Pattern (4 of 5 years) Medium-high severity

Cause: concentrated exposure of Machine Parts to cyclical industrial machinery (extruder parts, coating-tool carbides, steel-mill parts) with China demand swings; cumulative ¥1,164m impaired over 5 years.

Risk assessment: capital-allocation quality is the governance question; watch for any further Machine Parts write-downs beyond FY26 (guidance assumes none).

6.4 Dividend Cuts → Policy Reset Medium severity, positive forward

Cause: DPS fell ¥120 → ¥75 (FY24) → ¥50 (FY25/26) tracking profits; FY26 payout hit 150.3% (net profit too small to cover the maintained ¥50).

Reset (2026-05-14, effective FY2027): ¥60 DPS floor + 40% payout target — a confident signal tied to FY27 guidance (NP ¥720m, ≈41% payout), and a ~2.8% yield floor at current prices. Risk: the 40% is a guideline (目安), not hard.

6.5 Positive Inflections Positive

North America +45% (¥762m → ¥1,104m) and China rebound +53% (¥491m → ¥751m) in FY2026 — medical wire & semiconductor parts demand + yen tailwind.
Order backlog +44.8% to ¥3,832m (Machine +43.8%, Electrical +45.9%) — a strong leading indicator for FY2027 (backlog ≈ 30% of annual sales).
Ordinary profit ¥1,133m (+18.9%) — an 8-year high, the cleanest earnings signal.

6.6 EPS Volatility & Earnings-Mix Fragility Medium severity

Cause: EPS 180.5 → 158.8 → 108.9 → 139.6 → 55.8円; non-operating income (FX, scrap sales, equity-method income, real-estate/solar ¥268m) routinely matches or exceeds operating income in swing terms.

Risk assessment: prefer OP/ordinary-based valuation; NP is noisy. The ordinary-profit trend (786 → 952 → 1,133) is the reliable signal.

7. Profit Quality

Cash, margins, returns and the quality of reported earnings.

Quality metric	FY2022	FY2023	FY2024	FY2025	FY2026
Gross margin %	25.0%	24.1%	22.3%	23.6%	24.4%
OP margin %	7.6%	7.3%	4.2%	5.6%	5.6%
Ordinary/NP ratio (経常/純利)	1.42	1.60	1.49	1.41	4.20
Operating CF (¥m)	1,908	1,171	289	1,020	984
Free CF (¥m)	1,656	933	-782	78	133
ROE %	8.4%	7.0%	4.5%	5.5%	2.1%
Payout ratio %	39.7%	39.1%	52.6%	36.6%	150.3%
Equity ratio %	65.2%	66.9%	70.6%	71.2%	70.4%
Net cash (¥m)	1,411	2,010	996	808	716

Overall verdict — "clean operations, noisy bottom line": operating cash flow has covered capex in 4 of 5 years (FCF positive), the balance sheet is net cash with a 70%+ equity ratio, and gross margin is stable ~24%. The reported-profit weakness is a below-the-line impairment problem, not a cash or margin problem. Normalized ROE ≈ 7.4% (FY26 ex-impairment). The main quality negatives are (1) recurring impairments inside Machine Parts and (2) the 150% payout ratio in FY26 (unsustainable — hence the policy reset to a ¥60 floor + 40% target).

8. Valuation

Primary method: FY2027E P/E (recovery year). Cross-check: PBR and dividend yield.

Metric	Value	Note
Current price (Aug 5, 2026)	¥2,118	+15.4% intraday Aug 6 (¥2,490) on results momentum
Shares outstanding	5,155k	Market cap ≈ ¥10.9bn
FY2026A EPS	¥55.76	Depressed by impairment
FY2027E EPS	¥148.3	Guidance NP ¥720m / 4,855k avg shares
PER (FY26A / FY27E)	38.0x / 14.3x	FY26 multiple is meaningless; use FY27E
PBR	0.77x	BPS ¥2,745.22 — below book value
Dividend yield (FY26 ¥50 / FY27E ¥60)	2.4% / 2.8%	¥60 floor from FY27

Scenario price targets (on FY2027E EPS ¥148.3)

Scenario	Multiple	Target	Upside vs ¥2,118
Conservative (PBR ≈ 0.65x)	×12.0	¥1,780	-16%
Base (benchmark ~×15)	×15.0	¥2,225	+5%
Target (growth + recovery)	×18.0	¥2,670	+26%
Our target	×16.2	¥2,400	+13%

Peer context: A.L.M.T. Corp (Sumitomo Electric's tungsten arm) and Sumitomo Electric group trade well above ×15; a specialist semiconductor-materials re-rating on the Electrical Parts engine plus the dividend floor justify the ×16.2 target. Benchmark Nikkei ~15×.

9. Catalysts

Catalyst	Timing	Significance
FY2027 Q1 results — first read on backlog conversion & tungsten pass-through	Jul/Aug 2026	High — validates +17.4% sales guidance
Dividend policy reset applied (¥60 floor + 40% payout)	FY2027 (from Apr 2026)	Yield floor ~2.8%; shareholder-return re-rating
2028 Mid-term plan execution — circular tungsten & growth investment	FY2026–FY2028	Medium — strategy/ROIC narrative
China EV/battery-extruder demand recovery (MAZELLOY 量産化)	FY2027–FY2028	Upside — turns an impaired book back into growth
Semiconductor equipment capex cycle continuation	Ongoing	Electrical Parts volume engine
HDD data-center demand (large-capacity drives)	Ongoing	Core franchise momentum

10. Risks

Risk	Detail	Rating
China / industrial-machinery cycle	Machine Parts has impaired the same exposure twice (FY23 ¥202m, FY26 ¥797m); further weakness would hit NP again (below-OP but real)	High
Tungsten raw-material swings	APT ~8× in 15 months under China export controls; pass-through lags each move; margin volatility structural	High
Customer concentration	Proterial = 10.5% of sales (HDD/materials chain)	Medium
HDD cycle peak	Data-center storage capex could slow; substrate franchise is the Machine Parts profit anchor	Medium-High
FY27 guidance quality	OP +2.3% / ordinary −10.9% — sales growth is price-led; net profit recovery depends on no repeat impairment	Medium
FX	Yen moves swing exports, overseas subsidiaries and non-operating income	Medium
Material substitution	EV relay contacts lost to alternative materials; medical-wire faces nitinol/MP35N alternatives	Medium

11. Conclusion

Verdict

BUY · Time horizon: 12–18 months · Conviction: Medium-High. Nippon Tungsten offers a recovery-plus-compounding setup at 14.3× FY27E EPS and 0.77× book: FY2027 net profit is guided +166% (impairment absent), the order backlog is +44.8%, and management has put a hard ¥60 dividend floor with a 40% payout under the stock. The FY2026 profit dive — headline-negative — is a non-cash write-down of a China-facing asset book that the market had already stopped trusting; the underlying profit engine (Electrical Parts: semiconductor + medical, OP +65.6%, margin 11.1%) is improving. The thesis's main caveat is that FY27 earnings growth is price/recovery-led rather than core-compounding, and Machine Parts carries recurring China-cycle impairment risk.

Rating grid

Dimension	Score	Comment
Growth (FY27E NP +166%, backlog +45%)	Strong	Recovery year + order visibility
Profitability (normalized ROE ~7.4%, OP margin 5.6%)	Fair	Below cost of capital; needs scale
Balance sheet (net cash, 70.4% equity ratio)	Strong	No refinancing risk
Shareholder returns (¥60 floor + 40% payout)	Strong	~2.8% yield floor, policy reset
Valuation (14.3× FY27E, 0.77× PBR)	Attractive	Below-book with earnings recovery

Recommended actions

✅ Build / add on weakness toward ¥2,000; target ¥2,400 (+13%).
✅ Monitor FY2027 Q1 (Jul/Aug 2026) for backlog conversion and semiconductor-parts momentum.
⚠️ Re-evaluate if Machine Parts books another impairment or tungsten pass-through breaks.
⚠️ Trim if HDD cycle rolls over and the semiconductor capex cycle decelerates simultaneously.

Bottom line: a small-cap tungsten specialist whose worst headline (FY26 NP −60%) was a non-cash impairment on an already-doubted asset book — while the real business (Electrical Parts pricing power, order backlog, dividend floor) improved. Buy the recovery, respect the China-cycle risk.

Disclaimer: This report is generated by an AI research pipeline (irbank download → ima knowledge base → financial model → anomaly & segment analysis → pitch deck) from the company's EDINET filings (FY2022–FY2026) and public web sources as of 2026-08-06. It is for information purposes only and does not constitute investment advice. Figures are ¥ million unless stated. Per-share figures reflect the Jan-2024 1-for-2 stock split. FY2027 guidance per company disclosure (決算短信/web). Independent market-share data for niche segments was not available; company-dated "world/domestic #1" claims are marked as such.