Summary

Nakamura Choko Co., Ltd. is a precision processing manufacturer engaged in four business areas: Special Precision Equipment, Chemical Fiber Spinning Nozzles, the D-NexT business, and the Materials Science business. The company’s strengths lie particularly in the provision of highly wear-resistant components and materials. By adopting a flexible business model that responds quickly to customer needs and pursuing continuous product innovation, it has built a stable revenue base.

Its main business segments—Special Precision Equipment, Chemical Fiber Spinning Nozzles, D-NexT, and Materials Science—serve different market needs while generating synergies across the group. The Special Precision Equipment segment manufactures high-precision components for automobiles and electronic devices, accounting for approximately 40% of total sales. The Chemical Fiber Spinning Nozzles segment conducts business with major domestic and overseas manufacturers, with strong performance particularly in products related to wind power generation. The D-NexT business is promoting the manufacture of diamond wire for power semiconductors and is expected to contribute to future earnings growth. In the Materials Science business, new materials are being developed through joint research with the University of Tokyo, with anticipated applications in medical and environmental technologies.

For the fiscal year ended March 2023, net sales amounted to ¥3,322 million, representing a 17.7% year-on-year decline; however, the Chemical Fiber Spinning Nozzles segment posted 6.9% growth. Overall, the forecast for fiscal 2026 projects net sales of ¥3,000 million and operating income of ¥350 million, reflecting rising expectations for market recovery. The medium-term management plan emphasizes stronger collaboration among segments, the establishment of new business models, and accelerated overseas expansion, with particular focus on allocating resources to the Special Precision Equipment segment. Investors are paying close attention to the growth of each segment and how the company will maintain its market competitiveness. Despite a challenging economic environment, Nakamura Choko is expected to sustain growth and pursue long-term stability.

1. Performance Overview for the Fiscal Year Ended March 2023

For the cumulative fiscal year ended March 2023 (April 2022–March 2023), consolidated net sales totaled ¥3,322 million, down 17.7% year on year, reflecting a continued challenging business environment. The Special Precision Equipment segment remained in the red, posing a major challenge to earnings recovery. Meanwhile, the Chemical Fiber Spinning Nozzles segment achieved 6.9% growth, driven by increased demand for carbon fiber nozzles for the wind power generation market.

Net sales are expected to decline to ¥2,413 million in the fiscal year ending March 2024, followed by a modest recovery to ¥2,640 million in the fiscal year ending March 2025. Analysis of the income statement shows that operating income for FY2023 remained largely flat, with a profit margin of less than 1%. Although a reduction in cost of sales contributed to results, it was insufficient to significantly improve profitability.

On the balance sheet, current assets totaled approximately ¥3,117 million, consisting mainly of cash and deposits of ¥1,999 million, trade receivables of ¥473 million, and inventories of ¥539 million. Concerns remain regarding declining liquidity and a lower equity ratio, which affect financial soundness. The cash flow statement shows operating cash flow of ¥442 million, indicating improvement, while investment cash flow remained high at ¥288 million, underscoring a strong growth orientation. Although ROE was negative, signs of improvement are expected from FY2024 onward. Overall, while operating under a severe economic climate, Nakamura Choko continues to maintain growth in specific segments, and the strategic direction of each segment will be critical to future expansion.

2. Earnings Outlook for the Fiscal Year Ending March 2025

For the fiscal year ending March 2025, net sales are projected at ¥3,000 million and operating income at ¥350 million. The Chemical Fiber Spinning Nozzles segment is expected to serve as the primary growth driver, supported by rising demand for carbon fiber nozzles in the wind power generation market.

Conversely, the Special Precision Equipment segment continues to face a difficult environment and remains in a loss position, posing a significant obstacle to overall earnings recovery. Weak demand in the automotive and electronic components markets makes the acquisition of new customers essential for expanding orders. In the D-NexT segment, although demand for diamond wire for power semiconductors is increasing, delays in specification adjustments and reduced production volumes remain concerns. In the Materials Science segment, development of nano-sized zeolites is ongoing, with potential applications in medical and environmental technologies. Overall, the performance outlook for FY2025 hinges on growth across segments amid expectations of market recovery. Investors are particularly focused on the growth trajectory of the Chemical Fiber Spinning Nozzles segment and the company’s ability to secure competitive advantage.

3. Medium- to Long-Term Growth Strategy

Nakamura Choko has formulated a medium-term management plan through 2026 based on the principles of “effort, vitality, and creativity,” aiming for sustainable growth and improved profitability. The basic policy calls for strengthening collaboration among the four core segments—Special Precision Equipment, Chemical Fiber Spinning Nozzles, D-NexT, and Materials Science—while deepening relationships with customers and local communities.

Specific targets include establishing a production framework for wear-resistant components in the Special Precision Equipment segment, aiming for ¥860 million in sales. The Chemical Fiber Spinning Nozzles segment targets ¥1,800 million in sales by responding to demand from aerospace and medical applications. The D-NexT segment aims for ¥320 million in sales through new customer acquisition. The Materials Science segment plans to advance development of nano-sized zeolites, targeting ¥20 million in sales by 2030.

Capital investment exceeding ¥540 million is planned to support business expansion and the establishment of new ventures. In particular, the D-NexT segment is expanding product offerings for power semiconductors, with expectations for entry into new markets. By responding flexibly to changes in the external environment while advancing technological innovation and operational efficiency, Nakamura Choko seeks to achieve sustainable growth. For investors, the growth potential and execution capability of each business segment will be key evaluation factors, with expectations that a solid foundation for long-term growth will be established.

・ For the fiscal year ended March 2023, net sales were ¥3,322 million, down 17.7% year on year. While losses in the Special Precision Equipment segment remain an issue, the Chemical Fiber Spinning Nozzles segment showed growth. Net sales are expected to decline to ¥2,413 million in FY2024 but recover modestly in FY2025, demonstrating resilience in specific segments despite a harsh economic climate.

・ The earnings forecast for FY2025 projects net sales of ¥3,000 million and operating income of ¥350 million. Growth in the Chemical Fiber Spinning Nozzles segment is anticipated, while losses in the Special Precision Equipment segment remain a challenge.

・ Under its medium-term management plan through 2026, Nakamura Choko aims to strengthen coordination among its four main segments, set clear sales targets for each business, and invest over ¥540 million in capital expenditures to achieve sustainable growth.

Business Overview

1. Overview of the Business Model

Nakamura Chokoh operates as a precision manufacturing company, offering specialized precision equipment, spinning nozzles for chemical fibers, the D-NexT diamond wire business, and material science products, primarily providing highly wear-resistant parts and materials. The company demonstrates particular strength in processing hard and brittle materials such as diamond and cemented carbide, leveraging the technical capabilities of each segment to develop products that create unique competitive advantages. Nakamura Chokoh’s business model emphasizes flexibility in responding to customer needs and continuous product innovation through the adoption of new technologies, enabling long-term relationship building with clients. As a result, the company has established a stable revenue base by complementing its established products with the sale of new materials.

In manufacturing, the company focuses on introducing state-of-the-art equipment and optimizing processes, while adhering to international quality management standards to ensure high product quality. This high level of product quality and customer responsiveness contributes to repeat orders and maintains a competitive advantage in the market.

2. Main Business Segments

Nakamura Chokoh is organized into four primary business segments: specialized precision equipment, spinning nozzles for chemical fibers, the D-NexT business, and material science. Each segment provides products tailored to different market needs, creating synergies that enhance overall business efficiency.

Specialized Precision Equipment Segment
This segment designs and manufactures high-precision parts for automobiles and electronic devices, particularly wear-resistant components. It represents the core of Nakamura Chokoh’s revenue, accounting for approximately 40% of total sales. Utilizing advanced microfabrication technology to deliver high-quality products strengthens customer satisfaction and loyalty.

Spinning Nozzle Segment for Chemical Fibers
Through Japan Nozzle Co., Ltd., this segment supplies high-quality spinning nozzles to the chemical fiber industry. The company actively engages with major domestic and international manufacturers, with particularly strong performance in products related to wind power generation, supporting stable growth expectations.

D-NexT Business
The D-NexT business focuses on manufacturing diamond wires specialized for power semiconductors, with ongoing product launches responding to recent market needs. The business aims to transition from traditional solar power applications, contributing to future performance growth. Marketing initiatives to acquire new customers are also being strengthened.

Material Science Segment
In collaboration with the University of Tokyo, this segment focuses on nanoscale zeolite research, driving the development of new product functionalities. Applications across various industries are anticipated, positioning this segment as a potential driver of sustainable growth. Notably, new material development in medical and environmental technologies is expected to enhance the company’s competitive edge.

3. Market Position and Competitive Advantage

Nakamura Chokoh holds a unique market position in precision equipment and wear-resistant parts, with strong competitive advantages in both the specialized precision equipment and spinning nozzle segments. Its technical superiority directly translates into high product quality achieved through the introduction of new technologies, allowing for flexible and rapid responses to customer needs. The company’s accumulated technical expertise over time also represents a key component of its competitiveness.

The company has built a long-term relationship with customers, earning a reputation as a reliable partner. By maintaining a robust supply chain and developing products based on customer feedback, Nakamura Chokoh continues to differentiate itself from competitors. Its longstanding track record supports trust in acquiring new customers, contributing to the maintenance and potential growth of market share.

4. Market Background

The specialized precision equipment industry, in which Nakamura Chokoh operates, is a complex market environment demanding attention to environmental issues, sustainable materials, and technological innovation. In the chemical fiber industry, growing demand for recycled and environmentally friendly products requires companies to focus on sustainable product development.

The semiconductor industry is experiencing strong growth, and the D-NexT business is receiving particular attention. As demand in the power semiconductor market expands, Nakamura Chokoh is leveraging its technological expertise to capture market share. Furthermore, innovations in nano-zeolite technology are expected to create market opportunities in medical and environmental sectors.

In an uncertain global economic environment, companies must develop adaptive strategies. Nakamura Chokoh is expected to strengthen its competitive position and achieve sustainable growth by pursuing new markets and technological innovation.

Each of Nakamura Chokoh’s business segments has strategies tailored to distinct market needs, forming a flexible business model aimed at sustainable growth. By collaborating across segments to create synergies, the company enhances its overall competitiveness and positions itself for continued success.

Business Performance Trends

1. Recent Performance Overview

Nakamura Choko Co., Ltd. specializes in the manufacture of special precision equipment and spinning nozzles for chemical fibers. In recent years, its performance has been significantly affected by external factors. For the fiscal year ended March 2023, net sales amounted to ¥3,322 million, representing a 17.7% year-on-year decline. However, this level was more stable compared to the fiscal year ended March 2022, reflecting a normalization following the sharp recovery from FY2021 to FY2022.

In the fiscal year ended March 2024, net sales declined to ¥2,413 million, but in the fiscal year ended March 2025, they showed a modest recovery to ¥2,640 million.

A notable highlight is the 6.9% growth in the Chemical Fiber Spinning Nozzles segment, driven by increased demand for carbon fiber nozzles for the wind power generation market. In contrast, the Special Precision Equipment segment continues to face a challenging environment and remains in a loss position, posing a significant obstacle to earnings recovery.

Overall, the forecast for fiscal 2026 projects net sales of ¥3,000 million and operating income of ¥350 million, reflecting growing expectations for market recovery. This overview indicates that the Chemical Fiber Spinning Nozzles segment serves as a key growth driver. Investors should closely monitor the growth of each segment and assess how the company intends to secure and strengthen its market competitiveness.

2. Analysis of the Income Statement

An examination of the income statements over the past three years highlights changes in net sales, profit margins, and cost structure. In FY2023, net sales were ¥3,322 million. Although operating income remained largely flat, the operating margin was below 1%, clearly reflecting the company’s challenging earnings environment.

While operating income reached ¥312 million in FY2022, the following year recorded an operating loss of ¥532 million, underscoring the need for new growth strategies and a reassessment of the cost structure.

Although a decline in cost of sales contributed positively, it was insufficient to significantly improve profitability. Selling, general and administrative expenses have been on an upward trend, and ordinary income has remained largely flat amid the impact of non-operating income and extraordinary losses.

Given these circumstances, company-wide cost management is essential, and improving operational efficiency through process reforms will be key to sustainable growth. Investors should closely examine initiatives aimed at improving operating income and the effectiveness of cost reduction measures, while evaluating the company’s strategy for achieving sustainable profitability.

3. Analysis of the Balance Sheet

An analysis of Nakamura Choko’s balance sheet reveals notable characteristics in terms of liquidity and asset-liability composition. As of FY2023, current assets totaled approximately ¥3,117 million, including cash and deposits of ¥1,999 million, trade receivables of ¥473 million, and inventories of ¥539 million.

The decline in cash balances is particularly noticeable, raising concerns regarding liquidity management. Although decreases in receivables and inventories may indicate improved inventory management, the overall decline in liquidity warrants careful attention.

On the liabilities side, total liabilities amounted to ¥3,974 million, of which interest-bearing debt accounted for ¥2,496 million—a substantial proportion. The continued decline in the equity ratio raises concerns about financial soundness. Accordingly, a review of financing methods and optimization of the capital structure are required. To support long-term growth strategies, financial stabilization will be essential.

Investors should continue monitoring how the company strengthens its financial position and liquidity management to support its growth strategy.

4.  Analysis of the Cash Flow Statement

The cash flow statement highlights the impact of free cash flow and investment activities on overall performance. In 2023, operating cash flow was ¥442 million, showing improvement year on year. Meanwhile, investing cash flow stood at ¥288 million, reflecting a high level of investment and emphasizing a growth-oriented stance.

In particular, investment in the D-NexT business is expected to be critical for maintaining future competitiveness, and heightened awareness of cash flow management is necessary.

Cash flow from financing activities was negative ¥271 million, indicating continued financial strain. To secure greater financial flexibility going forward, the company must reassess investments in affiliated entities and new projects, while strengthening cash flow management.

For investors, maintaining healthy cash flow while ensuring efficient resource allocation will be central to evaluating the company’s ability to achieve sustainable growth.

5. Analysis of Key Performance Indicators

Key performance indicators for Nakamura Choko include ROE, ROA, and EBITDA, which are important measures of profitability and capital efficiency. Although ROE was negative in 2023, signs of improvement are emerging from FY2024 onward. EBITDA improved year on year to ¥133 million, but it has not yet reached a level indicative of strong growth.

Improving profit margins in both new and existing businesses and utilizing capital more efficiently are pressing challenges. By advancing the development of new materials and delivering products aligned with market needs, the company must enhance overall performance. Maintaining sound performance indicators will contribute to higher corporate value and increased attractiveness to investors.

Investors should monitor changes in these indicators and evaluate how effectively the company secures sustainable growth and competitiveness, with strategic execution being a key determinant.

Despite a challenging economic environment, Nakamura Choko continues to sustain growth in specific segments. Its performance remains influenced by a variety of external factors, and the strategic direction of each segment will be critical in determining future growth. In particular, maintaining positive cash flow and reviewing the capital structure will be indispensable for supporting sustainable growth. Careful consideration of these elements will assist investors in making informed and reliable investment decisions.

Medium-Term Management Plan and Growth Strategy

1. Business Environment and Key Challenges

Nakamura Choko Co., Ltd. operates through four core segments: Special Precision Equipment, Chemical Fiber Spinning Nozzles, D-NexT, and Materials Science. Across these businesses, the company faces a persistently challenging management environment while striving for sustainable growth and improved profitability.

In particular, order conditions in the semiconductor-related business remain tight. While demand for new materials is increasing, cost competition is intensifying. In the chemical fiber industry, shifts in supply-demand balance have led to a more challenging sales environment for certain products, necessitating expansion into overseas markets. In response to these external factors, Nakamura Choko must adopt a flexible and adaptive management approach.

From an expert perspective, these challenges require a management style capable of responding swiftly to changes in the market environment. Amid tightening order conditions, the industry as a whole is under pressure to reduce costs and improve operational efficiency. Maintaining competitiveness will depend on product differentiation and technological innovation. From an investor standpoint, how effectively management adapts its strategy to this environment is a key indicator of sustainable growth potential.

2. Overall Strategic Framework

Nakamura Choko’s medium-term management plan covers a three-year period through 2026. Based on the corporate philosophy of “effort, vitality, and creativity,” the plan outlines concrete strategies to achieve sustainable growth and enhanced profitability.

A core policy is to strengthen collaboration among business segments and pursue a management approach based on coexistence and shared value. The company places emphasis on strengthening relationships with customers, employees, and local communities.

Key initiatives include concentrating resources on the Special Precision Equipment segment, establishing new business models, accelerating overseas expansion, and reinforcing research and development. For example, in the D-NexT segment, the company is expanding product offerings for power semiconductors and working to cultivate new markets. The progress of these priority initiatives serves as a key barometer of growth potential for investors.

3. Priority Measures (Domestic / Overseas / By Business Segment)

Under the medium-term plan, clear targets and strategies have been established for each segment.

In the Special Precision Equipment segment, the company aims to establish a full-scale production system for wear-resistant components utilizing diamond and cemented carbide materials, targeting sales of ¥860 million. By building a system capable of responding quickly to market needs, the company plans to expand transactions with new customers.

In the Chemical Fiber Spinning Nozzles segment, the company aims to increase sales to ¥1,800 million by responding to demand from aerospace and medical applications. By fully utilizing large-scale equipment at its new plant, the company seeks to benefit from economies of scale and strengthen competitiveness.

Overseas expansion is also a key focus. In the D-NexT segment, the company is pursuing new customer acquisition with a sales target of ¥320 million. Market development through domestic and international partnerships is considered particularly important.

Meanwhile, in the Materials Science segment, development of nano-sized zeolites is being advanced, with a sales target of ¥20 million by 2030. Sustaining growth across each business line is essential.

Investors should carefully evaluate how these segment-specific initiatives translate into measurable financial growth, particularly in terms of generating sustainable earnings.

4. Investment Policy (Capital Expenditures / R&D, etc.)

The company plans capital expenditures exceeding ¥540 million to support expansion across business segments and the establishment of new ventures.

In the Special Precision Equipment segment, investment will focus on leveraging advanced technological capabilities to accommodate new materials and improve production efficiency. This strategy is expected to strengthen the company’s competitive foundation and enable flexible responses to changes in order conditions.

In the Chemical Fiber Spinning Nozzles segment, investment in large-scale equipment at the new factory is being advanced, aiming to improve quality and reduce costs through full-scale operations. These investments align with the company’s strategy to enhance profitability and reinforce competitiveness amid changing market conditions.

In addition, research and development efforts in the D-NexT and Materials Science segments are being emphasized, particularly with regard to accelerating the commercialization of nano-sized zeolites. Through external collaborations, efficient development and resource allocation are expected to facilitate early monetization of these businesses, reinforcing their growth orientation from an investor perspective.

5. Expected Outcomes, Benefits, and KPIs

The anticipated effects of the medium-term management plan are reflected in specific KPIs for each segment.

The Special Precision Equipment segment targets sales of ¥860 million, with expansion into the semiconductor market expected to be a key growth driver. The Chemical Fiber Spinning Nozzles segment projects sales of ¥1,800 million, supported by increased orders driven by demand growth.

The D-NexT segment aims for sales of ¥320 million, with progress in acquiring new customers expected to contribute to market share expansion. The Materials Science segment is advancing its long-term growth strategy toward 2030, outlining a clear future direction.

For investors, the critical issue is how these KPI-based action plans are executed and how strongly management commits to achieving them. The extent to which concrete numerical targets are met will serve as an important measure of sustainable growth potential.

6. Approach to Risk Factors

Nakamura Choko operates in markets characterized by fluctuating supply-demand dynamics, making responsiveness to risk factors essential. Order conditions are susceptible to external influences, and global political and economic developments also present unavoidable risks. Addressing these uncertainties is a key strategic priority.

While maintaining an aggressive growth posture, the company must implement appropriate risk management, particularly in new business development and overseas expansion. The introduction of new technologies and changes to production lines require time and resources, and contingency planning is necessary in case progress does not proceed as planned.

Investors should closely evaluate the company’s risk management capabilities and responsiveness to market changes in assessing the credibility of its growth narrative.

7. Execution Framework

A robust execution framework is indispensable for implementing the medium-term management plan. Under strong leadership from management, enhanced information sharing and collaboration across business segments will facilitate swift decision-making.

By aligning employee awareness under the philosophy of “everyone in sales, everyone in manufacturing, everyone participating,” the company aims to enhance individual performance and organizational cohesion.

Fostering a culture of learning and promoting employee skill development will contribute to sustainable growth and the cultivation of next-generation leaders. Strengthening this organizational framework will be key to advancing the company’s growth strategy.

Through the development of such an execution structure, investors can build confidence in the company’s future prospects and its ability to enhance corporate value.

Overall, Nakamura Choko’s medium-term management plan and growth strategy reflect a pragmatic response to industry conditions. By leveraging the strengths of each business segment while presenting a clear future vision to investors, the company is positioning itself for continued progress. Considerable attention will be focused on its future developments.

News & Topics

1. Current Status and Outlook of the Special Precision Equipment Segment

In the fiscal year ending March 2025, Nakamura Choko is confronting a challenging environment in its Special Precision Equipment segment. In the automotive sector, production volumes have declined due to the slowdown of the Chinese economy and certification misconduct issues among automobile manufacturers. As a result, demand—particularly from bearing manufacturers—has weakened, negatively impacting overall sales volume.

In the electronic components sector, the prolonged stagnation of the smartphone market has also kept demand subdued.

Amid these difficulties, Nakamura Choko is focusing on acquiring new customers to expand orders. As innovation in ultra-fine precision processing technology advances, the company has secured orders for new items from existing customers and plans to begin shipments of new-material mounting machine nozzles in the second half of the fiscal year. This is expected to increase shipment volumes. However, evaluation of collets for semiconductor applications is taking time, and this has delayed meaningful sales expansion.

On a positive note, transactions with major automotive parts manufacturers are increasing, which could contribute to future revenue improvement. While a short-term recovery in core products is still awaited, successful expansion into new markets over the medium to long term could yield significant positive impact.

2. Progress in the Chemical Fiber Spinning Nozzles Segment

The Chemical Fiber Spinning Nozzles segment has been significantly affected by the slowdown of the Chinese economy and the contraction in mask-related demand. Nevertheless, demand for carbon fiber nozzles remains strong.

Nakamura Choko is strengthening orders for film dies and large-scale nozzles for nonwoven fabrics, which is expected to contribute to revenue growth. In addition, the company is working to reduce its dependence on the Chinese market by expanding sales activities in countries such as India and Turkey.

This strategic direction is effective in adapting flexibly to changes in the business environment and is expected to promote business diversification. Although the overall chemical fiber market remains sluggish at present, sales of carbon fiber nozzles have exceeded the previous year’s level, placing future growth within reach. From an investor perspective, if the strategy to reduce reliance on China proves successful, improved business stability and positive long-term impact can be anticipated.

3. Expansion of the D-Next Segment and Market Response

The D-Next segment is focusing on expanding sales of diamond wire, with revenue in the fiscal year ending March 2025 expected to approximately double year on year. Demand remains particularly strong for power semiconductors and difficult-to-machine materials.

While the company has succeeded in acquiring major customers and enhancing product competitiveness, there is a risk that demand may fall short of plans due to delays in specification adjustments and reduced production volumes.

Regarding the sale of diamond wire manufacturing equipment for solar power generation projects in India, progress has been limited. Nonetheless, initiatives aligned with anticipated future market needs remain important. The growth of the D-Next segment is viewed as a positive medium-term factor, and continued efforts to secure new revenue sources while accounting for external variables will be essential. For investors, trends in diamond wire demand warrant close attention, as they have a direct impact on business performance.

4. Initiatives and Future Outlook of the Materials Science Segment

In the Materials Science segment, the company is accelerating the commercialization of products utilizing nano-sized zeolites. Development of new applications is progressing, particularly in cosmetics, toothpaste, and semiconductor sealing materials.

The company is also exhibiting at trade shows to raise awareness, and inquiries are increasing.

In today’s environment, where environmental considerations are increasingly important, this segment has strong potential to enter new markets. Expanding into new application areas and responding to diversified customer needs will be key, especially in catalyst and separation membrane applications.

Investors should closely monitor whether innovation in the Materials Science segment contributes to sustainable growth and how quickly commercialization progresses.

5. Arbitration Risk with Jiangsu San Chao

An ongoing arbitration case with Jiangsu San Chao in China may impact operations. The dispute concerns damages claimed in connection with the transfer of diamond wire production equipment, and a final arbitration ruling has not yet been issued.

In an interim decision dated May 22, 2025, Jiangsu San Chao was ordered to pay compensation for direct damages; however, the specific amount has not been determined, leaving the financial impact uncertain.

Management has indicated that it is closely monitoring the arbitration process and that estimating its impact remains difficult. This uncertainty constitutes a risk factor for the company, and investors should pay careful attention to developments. An unfavorable outcome could have a significant impact on business performance and financial conditions.

6. Health Management and Employee Well-Being

Nakamura Choko is actively promoting health management initiatives and implementing programs to support employee health and safety. Measures such as regular health checkups and hygiene education are designed to improve employee productivity. These efforts form an important foundation for sustainable growth and long-term operational stability.

As part of its corporate social responsibility (CSR), initiatives related to health and environmental sustainability contribute to enhancing corporate value and are viewed positively by investors. In particular, establishing materials and manufacturing processes that reduce environmental impact will influence future competitiveness and help build an image as a company committed to sustainable growth.

Through these news and topical developments, a multifaceted picture of Nakamura Choko’s current status and future prospects emerges. Building on the points discussed in this chapter, the next chapter will move toward a more detailed analysis of earnings forecasts and business strategies.

Company Overview

1. Basic Information

Nakamura Choko Co., Ltd. was founded in 1954 in Sakai City, Osaka Prefecture, and was incorporated in 1970. The company is headquartered in Tsuruta-cho, Nishi-ku, Sakai City, and had paid-in capital of ¥349 million as of the end of March 2025.

Under the leadership of Representative Director and President Makoto Inoue, the company upholds a management philosophy of “participatory management by all employees.” It designs, manufactures, and sells special precision equipment and products made from highly wear-resistant hard and brittle materials. Its core products include items for chemical fiber applications and materials science-related products, providing high-value-added solutions tailored to customer needs.

With technological innovation and environmental considerations becoming increasingly important, the company is actively engaged in research and development of new materials to achieve sustainable growth. The group employs 140 people on a consolidated basis and 65 on a non-consolidated basis. Its strong technical specialization and disciplined management approach are regarded as foundations for stable growth within the industry.

Given this background, Nakamura Choko represents a potentially attractive option for investors. Its stable management base, high level of expertise, and commitment to innovation position it as a forward-looking investment opportunity, albeit one that entails measured risk.

2. History and Key Milestones

The history of Nakamura Choko dates back to 1954, when Nakamura Iron Works was established and began manufacturing small screws for sewing machines. The company was incorporated in 1970. In 1989, it constructed a new head office factory. It strengthened its commitment to quality and environmental management by obtaining ISO 9001 certification in 1999 and ISO 14001 certification in 2001.

In 2005, the company launched sales of the nozzle cleaning machine “MAC-I.” In 2008, it strengthened its chemical fiber-related business by making Nippon Nozzle Co., Ltd. a wholly owned subsidiary.

In 2015, the company was listed on the Tokyo Stock Exchange Mothers market, accelerating its growth trajectory. In 2019, it established manufacturing technology for zeolite nanoparticles. In 2020, it sold the Izumi Plant, and in 2022, it transitioned from the Mothers market to the Growth market.

These milestones demonstrate the company’s flexibility and growth-oriented strategy, reinforcing the foundation for sustainable expansion. For investors, such milestones serve as indicators of credibility and adaptability, important considerations in future investment decisions.

3. Organizational Structure and Key Management

Nakamura Choko’s organizational structure is supported by a streamlined and agile management team capable of swift decision-making. Representative Director and President Makoto Inoue is responsible for formulating and promoting the company’s strategic vision, practicing participatory management in line with its corporate philosophy.

Senior Managing Director Hiroaki Inoue plays a key role not only in overseeing business operations but also in advancing global strategy, aiming to expand growth in international markets.

The company maintains a structure in which departments collaborate closely in product development and market responsiveness. Flexibility in adapting to technological innovation and market trends is particularly emphasized. With diverse expertise across the management team, the company maintains strategic balance and fosters an organizational culture oriented toward sustainable growth. For investors, this governance and leadership framework represents an important factor in assessing long-term potential.

4.  Business Activities and Market Environment

Nakamura Choko’s core businesses include the Special Precision Equipment segment and chemical fiber-related products, particularly those serving the medical and electronics industries. These businesses are critical to maintaining competitive advantage in markets that demand technological innovation and environmental responsibility.

In particular, research and development of highly wear-resistant hard and brittle materials and new advanced materials are positioned as key drivers of future growth.

Approximately 45.2% of total sales are generated overseas, reflecting a structure capable of responding flexibly to international demand and market fluctuations. Amid intensifying competition, the company seeks sustainable growth by enhancing customer satisfaction and strengthening adaptability. Investors should evaluate whether the company’s strategies remain aligned with evolving market conditions.

5. ESG and Sustainability Initiatives

In pursuing sustainable growth, Nakamura Choko is strengthening its initiatives related to Environmental, Social, and Governance (ESG) considerations. The company places particular emphasis on developing environmentally friendly products and fulfilling its corporate social responsibility. These efforts not only build customer trust but also enhance brand value in society.

The company also prioritizes employee development and contributions to local communities, promoting diversity and implementing structured training programs. Such initiatives enhance the company’s social reputation and serve as positive indicators for long-term growth from an investor perspective.

As ESG considerations increasingly influence investment decisions, Nakamura Choko’s sustainability initiatives are becoming a key focus within its corporate strategy. Its efforts toward sustainable growth represent an attractive aspect of its future business model and merit investor attention.

6. Future Outlook and Investment Considerations

Building on its past growth, Nakamura Choko aims to further expand its market presence by restructuring its business model and developing new markets. In particular, research and development of new materials and a shift toward environmentally conscious products are expected to define its future target markets.

With a target of ¥3,000 million in net sales for 2025, the company is positioned as a competitive player in growing industrial sectors. The key to its continued success will lie in further advancing its technological capabilities and maintaining a flexible approach to evolving market needs.

In evaluating future business developments, investors should focus on the company’s sustainability and stability. Given its growth prospects, Nakamura Choko’s shares are likely to continue attracting attention as part of investment considerations.

In summary, the company overview of Nakamura Choko provides not only basic corporate information but also insight into its business strategy, organizational structure, and commitment to sustainable growth. Understanding the company as a whole offers investors a comprehensive basis for evaluating its potential and future prospects.

Shareholder Returns

1. Dividend Policy and History

Nakamura Choko positions shareholder returns as one of its top management priorities and promotes a dividend policy based on a long-term perspective. The basic principle is to enhance profitability while maintaining stable dividend payments. However, in recent years, challenging business performance has had a direct impact on its dividend policy.

Looking at performance over the past several years, in fiscal year 2019 the company recorded net sales of ¥4,809 million and operating income of negative ¥4,194 million, reflecting severe conditions. Although net sales temporarily recovered to ¥3,806 million in fiscal year 2021 and reached ¥4,038 million in fiscal year 2022, they declined again to ¥3,322 million in fiscal year 2023. Such fluctuations in performance have influenced the company’s dividend policy, leading in particular to the decision to suspend dividends in fiscal year 2023.

Amid the broader economic downturn caused by the COVID-19 pandemic, the company’s earnings were significantly affected. Changes in the external environment and ongoing market uncertainty have made it difficult to maintain stable dividend payments. Looking ahead, the company has set a target of achieving net sales of ¥8,000 million by 2030, which will require securing an operating margin of at least 10%.

While continuing to prioritize shareholder returns, management is implementing strategies to restore profitability. Through transparent communication with shareholders, the company leaves open the possibility of resuming or increasing dividends in the future. Thus, Nakamura Choko’s dividend policy is closely linked to its earnings performance and market conditions, requiring flexible management responses.

2. Share Buybacks and Their Impact

Nakamura Choko is also considering share buybacks as a means of returning value to shareholders. Share buybacks involve repurchasing the company’s own shares from the market and are recognized as an effective tool, particularly when the stock price is depressed. By enhancing shareholder value, buybacks can contribute to stock price stabilization and improvements in earnings per share (EPS).

In recent years, the company’s share price has declined amid challenging performance. Implementing a share buyback could serve as a signal of confidence and a measure to rebuild trust with shareholders, providing reassurance to investors. By acquiring treasury shares, the company may improve capital efficiency and increase earnings per share.

However, share buybacks require a certain level of capital and must be executed within a framework that does not hinder business operations. Nakamura Choko must maintain appropriate cash reserves and ensure that buybacks do not negatively affect future growth initiatives. Therefore, careful judgment and long-term balance between corporate growth and shareholder returns are essential when considering such actions.

Overall, while share buybacks can be an effective means of enhancing shareholder value, their implementation requires prudent planning and disciplined execution. Future developments in this area warrant close attention as part of the company’s shareholder return strategy.

3. Total Payout Ratio and Financial Soundness

In evaluating Nakamura Choko’s shareholder return measures, the total payout ratio is an important indicator. The total payout ratio represents the percentage of profits returned to shareholders through dividends and share buybacks combined. A higher ratio suggests that the company places greater emphasis on returning profits to shareholders, making it an attractive factor for investors.

Under the current economic environment, maintaining financial soundness remains a key challenge. When dividend payments and share buybacks are difficult to implement, corporate stability comes under scrutiny. Amid continued earnings pressure, the company has had little choice but to suspend dividends; however, restoring profitability and resuming stable dividends in the future remains a desirable objective.

Improvement in the total payout ratio should be aligned with the company’s growth strategy. Specifically, achieving the 2030 targets of ¥8,000 million in net sales and an operating margin of at least 10% will be essential to strengthening shareholder returns. As profitability improves, the capacity for shareholder distributions will also increase, underscoring the importance of long-term strategic planning.

Accordingly, Nakamura Choko must clarify and execute strategies to generate sustainable profits while improving its financial position. Ensuring transparency in shareholder return policies and maintaining appropriate communication are crucial to rebuilding shareholder trust.

4. Medium- to Long-Term Policy and Sustainability

Nakamura Choko’s shareholder return policy looks beyond short-term profit distribution and focuses on sustainable growth from a medium- to long-term perspective. Establishing a structure capable of generating stable and continuous earnings forms the foundation for delivering sustainable returns to shareholders. With 2030 as a milestone, the company is promoting concrete initiatives to enhance business profitability.

In particular, the Special Precision Equipment business and the chemical fiber spinning nozzle business are key growth drivers, and improving profitability in these areas is an urgent priority. Strengthening earnings in these segments will lay the groundwork for the eventual resumption and potential increase of dividends.

To secure sustainable growth, the development of new businesses and reinforcement of existing operations are also essential. The company must respond flexibly to changes in the internal and external environment while promoting technological innovation and operational efficiency. Such strategies enhance shareholder confidence and meet investor expectations.

While emphasizing long-term shareholder returns, Nakamura Choko seeks sustainable growth through the appropriate allocation of management resources. Transparent communication remains indispensable to ensuring that shareholder return measures function effectively and strengthen trust.

5. Communication with Investors

Communication with investors plays a critical role in the company’s shareholder return policy. Nakamura Choko is expected to provide highly transparent disclosures and clearly communicate its business strategies and performance progress. This is essential for enabling shareholders to understand the company’s situation and maintain confidence.

In particular, management’s clear articulation of its approach to shareholder returns and future outlook enhances investor trust. By maintaining a proactive stance toward shareholder returns, the company can strengthen relationships with shareholders and respond to investor expectations.

Regular financial reporting and announcements of management policies are also vital components of investor communication. As investors closely monitor corporate progress, management must continue to provide timely and proactive disclosures. These efforts can enhance shareholder loyalty and contribute to the realization of stable shareholder returns in the future.

In summary, Nakamura Choko places importance on shareholder returns and is expected to build trust through active communication with investors. By doing so, it can support corporate growth and deliver appropriate returns to shareholders.

The company’s shareholder return policy is closely influenced by its management strategy, business performance, and market environment. Taking these factors into account, investors are encouraged to monitor the company’s initiatives from a medium- to long-term perspective. The realization of shareholder returns depends on the strategic planning and execution of management, with expectations for stable, high dividends and value creation over time.

Business Risks

1. Factors Affecting Business Performance

Nakamura Chokoh’s business performance is strongly influenced by external factors and market trends. In particular, the company’s specialized precision equipment segment relies heavily on demand from the semiconductor and automotive industries. While the semiconductor market has been energized by advances in AI and IoT, supply and demand remain unstable, raising concerns about growth prospects for 2025. In the automotive market, factors such as the slowdown in the Chinese economy and certification scandals are expected to reduce overall production volumes.

Furthermore, demand in the electronics components market, including smartphones, has stagnated due to the Chinese economic slowdown, which also impacts sales. Nakamura Chokoh’s performance is vulnerable to short-term market fluctuations, and reliance on specific customers or segments amplifies the effect of any changes on revenue. Therefore, investors must carefully monitor market trends and evaluate these factors from multiple angles to assess the associated risks.

2. Industry-Specific Risks

The industries served by the specialized precision equipment business carry numerous inherent risks. First, the speed of technological innovation is exceptionally high. In the semiconductor and automotive sectors, rapid adoption of new technologies is required, and delays can result in a loss of competitiveness. Additionally, fluctuations in raw material prices can directly affect profit margins. If prices of specialized materials surge, the company’s cost structure may weaken, increasing the risk of reduced competitiveness.

International economic conditions also play a significant role. U.S.-China trade tensions and geopolitical risks have substantial effects across the industry. As dependence on overseas markets increases, differences in business practices may also lead to operational risks. Moreover, due to the advanced technologies required, securing and developing skilled talent is essential; shortages could adversely affect business continuity. Nakamura Chokoh must adopt flexible strategies to respond to technological innovation and evolving market needs.

3. Financial and Managerial Risks

Nakamura Chokoh faces various financial and managerial risks, including declining current assets and increasing interest-bearing debt. A continued decrease in current assets could threaten liquidity and operational stability. The risk of shareholder dilution should also not be ignored. The exercise of stock options increases the number of shares, potentially reducing shareholder value and undermining investor confidence.

Furthermore, the company is highly dependent on its management team, and unexpected absences could disrupt operations. High turnover rates or inadequate labor conditions can make it difficult to retain top talent, negatively affecting overall productivity. Investors should carefully consider these financial and managerial risks, prioritizing the company’s financial health and transparency of management strategies.

4. Regulatory and Compliance Risks

Compliance with laws and regulations is critically important in the specialized precision equipment industry. With increasingly strict environmental and safety standards, failure to comply can result in higher product costs and reduced competitiveness. In international transactions, inability to navigate differing regulations across countries and regions increases the risk of legal issues that can harm the company.

Recent changes in international conditions and trade policies also present risks that require careful attention. For example, stricter U.S. tariff policies could directly affect export competitiveness and significantly impact business performance. Therefore, the company must strengthen its compliance systems and properly assess related risks.

5. Overseas Expansion Risks

Nakamura Chokoh derives a significant portion of its revenue from overseas markets, projected to account for approximately 45.2% in 2025. This highlights the substantial impact of international market trends on the company. Changes in markets and international conditions directly affect business performance, making attention to trade agreements and foreign exchange risks essential. Intensified international competition, shifts in economic policies, and regulatory differences may influence investment decisions.

Investors should continuously monitor international market trends and economic policy changes, establishing risk management strategies. In an environment of heightened geopolitical tensions and trade friction, adaptability is key. Therefore, thorough preparation and risk assessment are critical when entering overseas markets.

Understanding and appropriately managing these risks is essential for long-term success. Investors are expected to make strategic investment decisions based on these risk factors while maintaining a focus on sustainable revenue. Nakamura Chokoh is expected to address these challenges effectively and continue to sustain corporate growth.