Nippon Kayaku (4272) x Drones x Semiconductor Encapsulants | The Power of a World No. 1

When a drone falls, who protects it from the sky? When an airbag inflates instantly, who generates the gas? When an AI chip keeps running while generating heat, who protects it with encapsulant?

The answer to all of these is Nippon Kayaku. They handle safety in the sky with parachute systems for drones, hold the world's No. 1 spot for semiconductor encapsulant epoxy resins, and are also world No. 1 in airbag inflators.

These two top-tier titles are being left at an undervalued level with a stock price of 1,725 yen, a PBR of 0.95x, and a market capitalization of 276 billion yen as of May 1st. They are effectively debt-free, have an equity ratio of 71.6%, and the analyst target price remains set at 2,200 yen, about 27% above the current stock price.

The full-year financial results are also coming up on May 12, 2026. Let's make sure to secure this 'chemical stock with two world No. 1s' while we can.

This analysis was conducted using the AI Investment Doctor | Bankoku Style developed by Bankoku (@lukehide). It is a unique analysis that combines the latest financial data with eight axes: company size, investment style, economic sensitivity, industry, theme, business model, phase, and external factors. Membership subscribers can use it for free, so please try it out for yourself.

Chapter 1: Market Environment Awareness

1-1. Relationship between the semiconductor cycle and chemical materials

In 2026, the recovery phase of the semiconductor market is continuing. With the expansion of investment in AI data centers, semiconductor manufacturing remains at a high level, and demand for epoxy resins for encapsulants is accumulating as an essential material in the final stage of semiconductor manufacturing. Among logic semiconductors, AI chips have high heat generation and high integration, making the performance requirements for encapsulants strict—a domain where the superiority of Nippon Kayaku's high-performance epoxy resins is easily demonstrated.

As a headwind for the chemical sector as a whole, there is the Middle East crisis caused by the US-Iran military conflict that escalated in February 2026. Tensions in the Strait of Hormuz affect chemical raw material procurement costs as upward pressure on energy costs. Since Nippon Kayaku focuses on functional materials, its dependence on petrochemicals is relatively low, but it should be noted that it is not completely unrelated.

1-2. Automobile production and demand trends for safety components

The global airbag market continues to see strengthened safety standards, mainly in emerging countries, and demand for inflators is solid over the medium to long term. On the other hand, the impact of the mutual tariffs imposed by the Trump administration in April 2025 on the automotive supply chain is continuing in 2026, and it is a situation that requires close attention for Nippon Kayaku's airbag business, which has a partnership with Toyoda Gosei. If the trend toward a stronger yen continues, it could affect the profitability of export-oriented airbag components.

1-3. The rise of drones and flying cars

As regulations for industrial drones are being developed globally, parachute systems for crash prevention and emergency descent are entering a domain where they are being considered for mandatory use as safety components. Nippon Kayaku is breaking into safety technology for flying cars through its investment in SkyDrive, and has achieved an early entry with unique products that divert the gunpowder and gas generation technology cultivated in airbag inflators. Although the sales scale is small at present, it has the potential to become a catalyst for a stock price re-evaluation as the market expands in the future.