JAPAN PURE CHEMICAL CO., LTD.

Business Details

Since its founding in 1971, the company has developed, manufactured, and sold gold, silver, and palladium plating chemicals for contact and connection points used in printed circuit boards, semiconductor package substrates, connectors, lead frames, and other applications, based on proprietary technology. The company employs a formulation-type fabless management model, with its strength lying in total solution proposals delivered by engineers who visit customers directly. It sells to domestic and overseas plating specialist manufacturers, electronic component manufacturers, and general electronics manufacturers, and maintains sales agents in South Korea, Taiwan, China, and Singapore. Of the ¥18,073 million in sales for FY2026 (ending March 2026), the overseas ratio was 51.9%.

Recent Overview

Sales increased substantially by 43.3% year on year, driven by growing AI demand, while profit margins declined

In FY2026 (ending March 2026), the company achieved net sales of ¥18,073 million (up 43.3% year on year), primarily driven by a rapid expansion in demand for generative AI-related semiconductor packages, modules, and memory applications. By application, sales for printed circuit boards and semiconductor package substrates were ¥8,680 million (up 52.1% year on year), connectors were ¥2,599 million (up 40.6% year on year), and lead frames were ¥6,424 million (up 35.5% year on year). On the other hand, as the rate of increase in cost of sales exceeded that of net sales, the gross profit margin declined to 10.7% (from 12.9% in the prior period), and the operating margin also declined to 3.2% (from 4.0% in the prior period). The company recorded a gain on sale of investment securities of ¥1,655 million as extraordinary income, resulting in net income of ¥1,803 million (up 14.2% year on year). The market value of policy-held shares reached ¥10,743 million at fiscal year-end, equivalent to 59.5% of net assets, and the company continues to sell such shares with the aim of reducing this ratio to below 20% of net assets as set out in its medium-term management plan. For FY2027 (ending March 2027), the company forecasts net sales of ¥24,000 million (up 32.8% year on year), operating income of ¥610 million (up 5.8% year on year), and net income of ¥2,170 million (up 20.3% year on year). The annual dividend is planned to increase by ¥30, from ¥200 (¥126 in the prior period) to ¥230.

Key Products

Growth Drivers

• Sustained expansion in demand for semiconductor package, module, and memory plating chemicals, driven by expanding infrastructure investment by hyperscalers for generative AI
• Robust demand for printed circuit board and semiconductor package substrate plating chemicals for AI servers, data centers, and high-end smartphones (sales of ¥8,680 million in this application in FY2026 (ending March 2026), up 52.1% year on year)
• A recovery trend in smartphone and industrial equipment applications for connectors, driven by the product's competitive advantage in gold-saving efficiency
• The resolution of inventory adjustments in automotive applications and steady consumer demand for lead frames, along with the sales-boosting effect of elevated precious metal prices
• Expansion of the overseas sales ratio (from 48.8% in the prior period to 51.9% in the current period), enhancing geographic diversification and access to growth markets
• Medium- to long-term expansion in demand for automotive plating chemicals driven by the spread of ADAS and SDVs
• Creation of next-generation products through active R&D investment centered on the development of plating chemicals for new materials and battery materials
• Continued recognition of extraordinary income through the planned sale of policy-held shares (gain on sale of ¥1,655 million in FY2026 (ending March 2026))

Risks

• Commodity risk from fluctuations in international market prices for precious metals (gold, silver, palladium), which directly affect cost of sales (accounting for the majority of raw material costs by value)
• The decline in gross profit margin from 12.9% to 10.7% despite substantial sales growth, requiring a response to the rising cost ratio trend
• Risk of demand slowdown and inventory adjustment in automotive applications due to reviews of electric vehicle policy, US tariff measures, and slowing domestic demand in China
• Risk of insufficient recovery in demand for consumer devices such as smartphones and personal computers
• Risk of supply constraints for non-AI applications as memory production is prioritized for AI applications amid expanding AI demand
• Risks related to US trade policy and geopolitical risk (Ukraine, Middle East situation) associated with relocation of major customers' production bases or restrictions on raw material supply
• Foreign exchange risk associated with an overseas sales ratio of 51.9% (amid an increasing trend of dollar-denominated transactions)
• Risk that the market value of policy-held shares, which stands at 59.5% of net assets (¥10,743 million), could result in the disappearance of valuation difference on available-for-sale securities and fluctuations in deferred tax liabilities (¥2,765 million) in the event of a stock price decline
• Risk of suspension of product manufacturing and shipment in the event of a disaster due to concentration at a single production site (such as a major earthquake in the greater Tokyo area)
• Risk of leakage or disclosure of technical know-how and risk of infringement of third-party intellectual property rights
• High dependence on the electronics industry (significantly affected by trends in the smartphone and personal computer markets)
• Intensifying competition in technology development due to the rise of overseas local manufacturers