NIHON DEMPA KOGYO CO., LTD.

Business Details

The Group is engaged in the integrated manufacturing and sale of crystal-related products, including Quartz Crystal Resonators, Quartz Crystal Oscillators, other crystal devices, applied equipment, synthetic quartz, and quartz blanks. The Group comprises 15 companies in Japan and overseas. It targets five key customer markets—automotive, mobile communications, industrial equipment, defense, and optics (the "Five Pillars + One")—and supplies products related to frequency control, selection, and detection worldwide. Quartz Crystal Resonators account for approximately 72% of net sales, with China representing the largest regional share of sales.

Recent Overview

Net sales increased, but operating profit fell 27% due to upfront investment; profit for the period rose owing to a reduced tax burden

For the full year of FY2026 (ending March 2026), net sales increased to ¥54,629 million (up 2.9% year on year). While automotive-related sales in Europe remained sluggish, this was offset by increased sales in Japan and moves to secure safety stock amid rising memory prices. Sales for industrial equipment (related to AI data centers) and special equipment also increased. On the other hand, research and development expenses of ¥2,830 million (up 35.7% year on year) and increased depreciation expenses associated with DX investment weighed on profit, resulting in operating profit of ¥3,355 million (down 27.4% year on year). Income tax expense decreased significantly to ¥487 million (from ¥1,162 million in the prior period), leading to profit for the period of ¥2,065 million (up 15.2% year on year). Free cash flow was negative ¥3,178 million. For FY2027 (ending March 2027), the company forecasts net sales of ¥60,600 million (up 10.9% year on year) and operating profit of ¥4,000 million (up 19.2% year on year), driven by increased sales of products for AI data centers.

Key Products

Growth Drivers

• Expanding demand for Quartz Crystal Oscillators used in AI data centers (for optical transceivers and AI servers), explicitly cited as a driver of the sales increase forecast for FY2027 (ending March 2027)
• Sales growth in the defense and special equipment markets (Others category up 11.3% year on year in FY2026 (ending March 2026))
• Sales growth driven by increasing sophistication of ADAS (Advanced Driver-Assistance Systems) for automotive applications (reflected in the forecast for FY2027 (ending March 2027))
• Future productivity improvements from the introduction of state-of-the-art manufacturing lines and DX promotion toward Vision2030
• Utilization of government subsidies (¥115 million recognized in FY2026 (ending March 2026); deferred income from government subsidies of ¥1,032 million recorded under non-current liabilities)

Risks

• Fluctuations in demand in the automotive market (accounting for roughly half of net sales, with sluggish sales growth in Europe)
• Uncertainty in the trade environment due to geopolitical risks such as high U.S. tariff policy and worsening conditions in the Middle East
• Short-term pressure on profit from upfront investment in R&D, DX, and state-of-the-art equipment (operating profit down 27.4% in FY2026 (ending March 2026))
• Risk of declining sales in mobile communications (including smartphones) and optical products (down year on year in FY2026 (ending March 2026))
• Continued negative free cash flow and declining cash balance (period-end balance of ¥10,805 million, down ¥5,076 million year on year)
• Impact of Middle East conditions on costs of crude oil- and naphtha-derived materials (not reflected in earnings forecasts due to difficulty in quantification)