Nippon Sanso Holdings (4091): Raise PO; benefit from recovery in semiconductors and steel industries

Research evidence excerpt

Nippon Sanso Holdings (4091): Raise PO; benefit from recovery in semiconductors and steel industries

Short-term view

• Core OP for 1Q is expected at ¥54bn. While company guidance is likely to remain

unchanged, this represents solid progress against the full-year core OP plan of

¥208bn. OP is projected at ¥63bn (vs. consensus ¥55.9bn), supported by booking

gains from the HQ sale, serving as a positive share-price catalyst.

• In the European steel industry, a recovery in steel production volumes is expected,

driven by TRQ (tariff-rate quota) and CBAM (Carbon Border Adjustment

Mechanism). TRQ, scheduled for issuance in July 2026, is expected to reduce duty-

free quotas, leading to higher European steel output. CBAM will significantly

increase the cost of imported steel into Europe due to carbon tax adjustments.

Steel accounts for 16% (FY3/26) of Nippon Sanso Holdings’ European revenue,

implying a meaningful impact. In addition, US steel industry improvement,

supported by higher tariffs and stronger domestic demand, should partly benefit US

industrial gas demand; 8% of US revenue is exposed to steel.

• Strong semiconductor activity is expected to benefit Japan and Asia/Oceania

segments. Electronics sales exposure is 31% in Japan and 38% in Asia-Oceania.

Accelerated semiconductor fab construction in Japan is likely to materially benefit

Nippon Sanso, the country’s largest industrial gas company.

Medium/long-term view

• The industrial gas industry is essentially a global oligopoly of three companies, and

continued profitability improvement is expected due to suppliers’ strong pricing

power. While inflation-induced cost increases will likely be passed on to customers,

productivity improvements should contribute to steady expansion of profit margins.