Nippon Chemi-Con stock downgraded to underweight by Morgan Stanley

Published 20/09/2024, 19:28
Nippon Chemi-Con stock downgraded to underweight by Morgan Stanley

On Friday, Morgan Stanley revised its stance on Nippon Chemi-Con (6997:JP), shifting its rating from Equalweight to Underweight and reducing the price target to JPY850.00 from the previous JPY1,350.00. The adjustment follows an analysis of the company's financial projections and the potential impact of share conversions by shareholder JIS.

The financial institution projects that Nippon Chemi-Con will achieve an operating profit (OP) of JPY6.0 billion for the fiscal year ending in March 2025 (F3/25). It was noted that if the company's operating profit does not reach JPY8.8 billion, JIS, which holds JPY10 billion of Class A shares and JPY5 billion of Class B shares, has the right to convert these to common shares at a premium before March 31, 2026.

In Morgan Stanley's base scenario, it is assumed that JIS will convert its Class A and Class B shares into common shares at a rate of JPY955 per share. Additionally, JIS would receive a further 6% of the converted Class A shares and 25.5% of Class B shares. This potential dilution of equity is a factor in the revised outlook.

Furthermore, the report anticipates that Ibiden, another firm within the sector, will see its operating profit decline for the second consecutive year in F3/25. The forecast also suggests only limited growth in the following fiscal year (F3/26) due to increased depreciation expenses associated with the commencement of mass production at the Ono Plant among other factors.

Morgan Stanley expects that the company's mid-term outlook for F3/26, which is to be presented at the F3/25 second quarter results briefing, will be revised downwards. This anticipated revision is likely to lead to a reduction in the market consensus regarding the company's financial performance.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2025 - Fusion Media Limited. All Rights Reserved.