Raise PO; IONEL improvement for ESS, but earnings remain weak

Research evidence excerpt

Raise PO; IONEL improvement for ESS, but earnings remain weak

Short-term view

• 1Q OP is expected at ¥5.5bn, exceeding consensus of ¥4.2bn, mainly due to

inventory valuation effects driven by higher raw material costs. Full-year OP

guidance (yet to be announced) is projected at ¥18.0-19.0bn, broadly in line with the

consensus of ¥19.2bn; expect no surprises.

• In SAP, volume growth driven by the Indian market is expected to contribute. For

electronics-related materials, growth is expected in Acryviewa for large LCD TVs in

China, photoresist raw materials, and iodine. However, weakness across products

including specialty acrylates, Softanol, and specialty chemicals is likely to partly

offset this.

• IONEL (electrolytes and additives for lithium-ion batteries) is expected to benefit

from increased demand for ESS (energy storage systems), particularly for data

centers. Equity-method income is projected to improve, driven by significant

capacity expansion at the China JV in 2026–27.

Medium-/long-term view

• Oversupply in SAP and acrylic acid remains a concern. Increased exports by Chinese

diaper manufacturers are likely to weaken non-China diaper producers, which is

viewed as negative for Nippon Shokubai. On the other hand, South Asian markets

such as India and Pakistan are promising demand areas for SAP. Capacity expansion

of +50,000 tons in Indonesia, scheduled for completion in July 2027, is expected to

contribute.

• The company is aggressively expanding IONEL (electrolytes/additives for lithium-ion

batteries) as a future growth driver.

o At the China JV Hunan Fluopont New Materials (38% owned), capacity

is planned to increase from 2,400 tons in FY3/26 to 5,400 tons in

FY3/27 and 12,400 tons in FY3/28. Demand growth is expected not