Inaba Denki Q2 FY2027: Net profit jumps 35%, outlook raised

Inaba Denki (Inaba Denki Sangyo) reported first-half revenue of ¥229.4 billion, up 19.3% year on year. Operating profit rose 42.6% to ¥20.0 billion, while interim net income attributable to owners of the parent increased 35.0% to ¥14.3 billion. The company set a new first-half record, and operating profit grew faster than revenue.

• Revenue: ¥229.4 billion, up 19.3% year on year, with growth in electrical materials, industrial equipment and proprietary products
• Operating profit: ¥20.0 billion, up 42.6%; the operating margin rose to 8.7% from 7.3% a year earlier
• Ordinary profit: ¥21.0 billion, up 38.3% year on year
• Interim net income: ¥14.3 billion, up 35.0%; earnings per share for the first half were ¥127.52

The company said demand for urban redevelopment and corporate capital investment remained firm despite continued increases in logistics costs and material prices. Concerns about materials supply, including those linked to tensions in the Middle East, lifted demand across all segments, and efforts to maintain stable supply also supported results. Profit growth outpaced revenue growth, indicating that stronger sales translated into improved earnings.

Electrical Materials Business grew sales. Higher selling prices, reflecting increased logistics costs and raw material prices, contributed to growth, as did strong deliveries for large projects such as urban redevelopment, data centers and factories. Sales of air-conditioning equipment and lighting fixtures increased, while demand for wires and cables also rose amid higher copper prices and concerns over materials supply.

Industrial Equipment Business posted higher revenue on manufacturing-sector investment. Resilient corporate earnings and labor shortages fueled demand for labor-saving and automation solutions, lifting sales of control equipment and electronic components. A stronger semiconductor market, driven by expanding AI-related demand, also boosted sales to semiconductor equipment makers and other related industries.

Proprietary Products Business benefited from strong sales of air-conditioning products, with shipments of a proprietary air-conditioning product reaching a record high. As customers sought to secure inventory amid concerns over Middle East tensions, the company worked to ensure stable supplies of insulated copper tubing and its Research Cover air-conditioning pipe covers, supporting higher sales. Demand increased across all businesses, but segment-level revenue and profit figures could not be reliably confirmed in the earnings release, so no monetary comparisons are provided here.

Total assets at the end of the first half were ¥316.457 billion, up ¥3.132 billion from the end of the previous fiscal year. The equity ratio rose to 66.7% from 62.9%. Total liabilities declined, partly reflecting lower borrowings and trade payables, while net assets grew on increases in retained earnings and the valuation difference on securities.

The company forecasts a year-end dividend of ¥45 per share, bringing the annual total to ¥85 including the ¥40 interim dividend. Last fiscal year, dividends were ¥70 at the interim stage and ¥50 at year-end before the stock split; on a post-split basis, the annual total was ¥85, making this year's forecast effectively unchanged. Interim cash-flow figures could not be confirmed from the earnings release, and no share buyback announcement was identified.

Inaba Denki raised its consolidated forecast for FY2027, citing first-half results and other factors. It now expects operating profit to rise 24.5% from the previous year to ¥37.0 billion and net income to increase 15.3% to ¥27.0 billion.

The earnings release does not include the previous forecast or the amount of the revision, so a direct comparison is not available. The company referred investors to its separate notice on the forecast revision. Whether large electrical-materials projects, labor-saving investment by manufacturers and strong air-conditioning product sales continue will be key to meeting the full-year plan.

As it accelerates overseas expansion, Inaba Denki added nine companies to its consolidated group from the first half, including U.S.-based Inaba Denko America Inc. and PATLITE subsidiaries in the U.S., Europe and Asia. The company said the businesses are expected to become more important to the group over time, prompting their inclusion in the consolidation.

The broader consolidation adds overseas sales networks and proprietary-product capabilities to a business centered on electrical materials and air-conditioning products in Japan. Because the newly consolidated companies may affect year-on-year comparisons, investors will need to distinguish growth in existing operations from contributions by overseas subsidiaries. The earnings release did not disclose the individual results of these companies or their contribution to consolidated earnings.

Inaba Denki continues to face rising materials costs and geopolitical uncertainty. The key question is not only whether demand remains strong, but also whether the company can secure supplies and protect profitability.

• Rising material and logistics costs: Continued increases in wires, cables, other materials and logistics costs could weigh on margins if the company is slow to pass them on through higher selling prices.
• Supply-chain disruption: Greater supply concerns linked to events such as tensions in the Middle East could make it harder to secure necessary materials, affecting deliveries to customers and shipments of the company's own products.
• Demand reversal: The factors supporting demand could weaken if inventory-building in response to supply concerns or the increase in air-conditioning product shipments runs its course.
• Uncertainty from overseas expansion: Expansion by overseas subsidiaries is exposed to changes in regional economic and market conditions. Investors should also watch for a gap between the assumptions underlying the full-year forecast and actual conditions.