Zeon (4205.T): Update - battery materials growing in high-margin cathode space

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Zeon (4205.T): Update - battery materials growing in high-margin cathode space

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04 Aug 2026 02:35:55 ET │ 19 pages

Zeon (4205.T)

Update - battery materials growing in high-margin cathode space

CITI'S TAKE

We revise our earnings forecasts. In Q1, we ascertained that results

exceeded expectations for both elastomers and high-performance

materials. While our view remains unchanged that Q1 will likely be the Buy

quarterly earnings peak, as we previously envisaged, top-line expansion Price (03 Aug 26 15:30) ¥2,244.0

and profit improvement in battery materials are progressing better than

expected, leading us to raise our full-year earnings outlook further. With Target price ¥2,900.0↑

many positive medium-term themes, any share price weakness due to from ¥2,700.0

concerns about quarterly earnings peaking could present an attractive Expected share price return 29.2%opportunity to accumulate further. We revise our target price from ¥2,700 to

¥2,900 (maintaining our valuation multiple of 13x FY3/28 PER) and Expected dividend yield 3.4%

maintain our Buy rating. Expected total return 32.6%

Market Cap ¥429,379M

Q1 results — Q1 OP was ¥16.3bn (consensus immediately before earnings and our

US$2,732Mforecast were for c¥11bn). Elastomers delivered ¥5.5bn in OP versus our forecast of

¥3.9bn. The outperformance came from smooth progress in price pass-throughs

while production and sales utilized relatively inexpensive inventory from before the

Middle East flared up. High-performance materials reported ¥10.1bn in OP versus

our forecast of ¥6.7bn. Even excluding the reversal of inventory-related expenses for Price Performance

optical films (¥0.8bn in absolute terms), this significantly exceeded expectations, (RIC: 4205.T, BB: 4205 JP)