Tokai Carbon (5301): Raise PO; improving shareholder returns and strong growth expectations

Research evidence excerpt

Tokai Carbon (5301): Raise PO; improving shareholder returns and strong growth expectations

Short-term view

• We expect 2Q operating profit of ¥4.8bn, above the company’s guidance of ¥4.0bn,

driven by strong SiC focus ring demand supported by growth in semiconductor

memory. Full-year operating profit guidance could be revised slightly upward to

around ¥30.0bn, which should act as a positive share-price catalyst.

• A new takeaway from 1Q results is that a surge in demand for cathode blocks used

in aluminum smelting in the Middle East is expected to contribute significantly in

2H FY12/26. Tokai Carbon’s cathode block facilities in Europe are set to operate at

full capacity. Major customers are estimated to include Emirates Global Aluminium

(EGA, United Arab Emirates) and Aluminium Bahrain (Alba, Bahrain), both leading

aluminium producers in the region.

• US carbon black, which has a significant impact on our earnings, has faced weak

demand and declining prices since 2023. However, growth prospects should

improve, supported by a decline in US tire imports and the ramp-up of new

domestic tire plants.

• For graphite electrodes, on 17 March 2026, the US Department of Commerce

initiated anti‑dumping and countervailing duty investigations into large‑diameter

graphite electrodes imported from China and India. Preliminary determinations are

scheduled for 24 July for countervailing duties and 4 August for anti‑dumping duties

(possibly subject to delay). If anti‑dumping duties are imposed, this should provide

upside for graphite electrodes. In addition, competitor GrafTech announced price

increases of US$600-1,200/t on 26 March 2026. Together with strong conditions in

the US steel market, the outlook for graphite electrodes is improving.

Medium/long-term view