Nippon Pillar Packing Co., Ltd.
Prime Market of the Tokyo
Notice of Issuance of a Sponsored Research Report
Nippon Pillar Packing Co., Ltd. (the "Company") is pleased to announce that the Company has released a sponsored research report in order to facilitate communication with our shareholders and investors, and to help deepen their understanding of the Company.
The research report was written by Capital Goods Research & Advisory Co., Ltd. The report does not carry any investment recommendation - it is solely prepared to provide an easy-to-understand explanation of the Company's business model, industry trends, performance trends, long-term business strategy, and other information that has already been made public. For details, please refer to the attached document.
With semiconductors and decarbonization as the two main themes, there is great long-term growth potential
(Consolidated financial results and stock market data of Nippon Pillar Packing: 1 billion yen, JPY, %)
- Table of Contents -
Point 1: Semiconductor market to double in 2030 compared with 2020
A report issued by CGRA on November 17, 2021 mentioned WSTS's estimation that the global semiconductor market is expected to expand from about 400 billion U.S. dollars in 2020 to 1 trillion U.S. dollars in 2030. This is expected as the data processing volume will increase associated with the spread of CASE (Connected, Autonomous, Shared and Electric) in the automotive industry and IoT/ICT, and the progress of 5G, post-5G, and DX. That means the market size which has doubled over the last 20 years will double in the next 10 years. In addition, the report stated that Bloomberg NEF and other research providers made a prediction that investments in energy-related facilities would increase worldwide (from the current level of 1.7 trillion dollars to 3.3 to 5.8 trillion dollars) toward decarbonization as fuels will be shifted to hydrogen to achieve carbon neutrality by 2050. This time, the Company stated, in the documents for the briefing of financial results of the fiscal year ended March 2022, which were issued on May 26, that the global market of semiconductors and semiconductor manufacturing equipment would double in 2030 compared with 2020 and that new demand, such as ammonia- related demand, was likely to be created as the power source composition in Japan would change.
Point 2: Business size and profitability likely to shift
The Company is rolling out businesses in two segments: the electronic equipment business in which the mainstay is fittings for semiconductor manufacturing equipment, which account for over 90% in the world market share; and the industrial equipment business in which the main product is mechanical seals. Although about 75% of consolidated sales are dependent on capital investments made by semiconductor manufacturing equipment manufacturers and device manufacturers, the Company can also benefit from an increase in capital investment associated with energy transitions to hydrogen, ammonia, etc. As stated above, the market for semiconductors and their manufacturing equipment has doubled over the last 20 years, and is predicted to double over the 10 years to 2030. Under such circumstances, the Company has seen its sales double and operating profit grow about 3 times in the past 10 years, with profit levels and profit margins rising steadily while achieving record operating profit every 5 years. In the fiscal year ended March 2022, the Company hit record high financial results with sales of 40 billion yen, operating profit of more than 10 billion yen and an operating profit margin of 28%. CGRA considers that the expansion of the semiconductor market, development of new customers, introduction of new products, creation of new markets for decarbonization such as seals for the hydrogen and ammonia-related businesses, and the augmentation of ESG management will stimulate the Company's earnings performance. The performance may grow at a pace faster than the growth of the market, and this might cause a significant shift in its business size and profitability.
Point 3: Boost in shareholder returns expected ahead of the 100th anniversary
The numerical targets set in the three-yearmedium-term business plan "BTvision22" (fiscal year ended March 2021 to fiscal year ending March 2023), which is currently in progress, were achieved one year ahead of schedule. Therefore, the earnings estimated for the fiscal year ending March 2023 were set as the earnings target for the final year of the medium-term business plan. A new medium-term business plan for the next three years is planned to be announced in May 2023. The Company will celebrate its 100th anniversary in 2024. At present, the pledged dividend payout ratio is 30% or more, but the total payout, including stock repurchases, has increased for six consecutive years in real terms, including the forecast for the fiscal year ending March 2023. In addition, the average capitalization yield over the past three years, including stock repurchases, is an attractive one, marking 4.1%, and the dividend per share for the fiscal year end March 2023 is expected to be 108 yen (a dividend payout ratio of 30.8%), up 2 yen from last fiscal year. Going forward, earnings are expected to grow and ROE is likely to increase as capital policies such as stock repurchases will be taken. CGRA expects that shareholder returns will be boosted and that the stock valuation, which has remained relatively low, will be corrected during the period before and after the 100th anniversary in 2024.
"Semiconductors" and "decarbonization" are keywords over the medium to long term.
Performance is expected to grow faster than the growth rate of the market.
Continuous improvement in shareholder returns can be expected.
Figure 1: Spur in capital investment in decarbonization field and high growth of semiconductor market can be expected
Prospects for capital investment in the decarbonization field in the global semiconductor market and energy field
Prospects for capital investment in the global energy field toward a decarbonized society
To between 3.3 trillion and 5.8 trillion dollars
The size of the semiconductor market has doubled in the past 20 years and is expected to double in the next 10 years.
Figure 2: Growth in the semiconductor market drives the Company's performance up
Trend in semiconductor market and consolidated sales and
operating profit of Nippon Pillar Packing
Figure 3: Continuous improvement in shareholder returns expected
(yen) Dividend per share, stock repurchase, dividend payout ratio and total payout ratio
Source: Created by CGRA based on company materials
Semiconductor market to double in 2030 compared with 2020
The company has potential for growth over the long term with the semiconductor market as a leading indicator.
Expectations are placed on continuous increase in shareholder returns including stock repurchases.
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Nippon Pillar Packing Co. Ltd. published this content on 21 July 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 21 July 2022 09:23:08 UTC.