26/May/2026 － Japan Pure Chemical: Our Views on the Significant Improvement of the Capital Policy

Japan Pure Chemical Co., Ltd. (“JPC” or the “Company”), one of the core portfolio holdings of Hibiki Path Advisors SPC (“we” “us” or “our”), disclosed its financial results for FY3/26 and revisions to the capital policy under its Medium-Term Management Plan on April 24, 2026.

More importantly than the earnings themselves, this disclosure marked a clear shift in the Company’s capital allocation policy and signaled a more serious commitment to enhancing corporate value. In particular, we view the formal inclusion of accelerated cross-shareholding disposals — with the proceeds to be used for enhanced shareholder returns — in the revised mid-term management plan as a meaningful inflection point. It suggests that the Company is finally beginning to rethink its longstanding approach to balance sheet management and capital efficiency.

First, to briefly touch upon the financial results for FY3/26, the Company reported revenue of JPY 18,073 mn (up 43.3% YoY), operating profit of JPY 576 mn (up 14.7% YoY), recurring profit of JPY 776 mn (up 18.0% YoY) and net profit of JPY 1,803 mn (up 14.2% YoY). Overall, the results were solid, supported by demand for AI-related semiconductor packaging and optical communication modules, confirming that the Company possesses a competitive edge in high value-added growth areas centered around AI.

What stands out more in this disclosure is not the earnings outlook itself, but the clear change in the Company’s capital policy. While the Company expects operating profit to grow steadily to JPY 610 mn in FY3/27 (up 5.8% YoY), it is guiding for a much larger increase in net profit to JPY 2,170 mn (up 20.3% YoY). In our view, this is largely being driven by the accelerated sale of policy shareholdings, which suggests the Company is finally starting to take a more serious approach to reducing excess non-core assets on the balance sheet.

Figure 1: JPC FY3/27 Financial Results Forecast

(Source: Financial Results for the Year Ended March 31, 2026)

The revised capital policy in the Company’s Medium-Term Management Plan, announced alongside the earnings results, also calls for a major increase in the planned reduction of cross-shareholdings — from the previous JPY 2.5 – 3.0 bn to JPY 7.0–7.5 bn. After already selling JPY 1.74 bn during FY3/26, the Company is now planning to sell an additional JPY 5.2 – 5.8 bn over the next two years, representing a clear acceleration both in pace and scale. Based on the approximately JPY 10.7 bn balance of cross-shareholdings at the end of FY3/26, this effectively means the Company is targeting the disposal of roughly half of its holdings within just two years.

In addition, since the majority of these cross-shareholdings consist of semiconductor and optical communication-related companies, including Ibiden and Fujikura, the market value of investment securities on the balance sheet has likely increased materially since the FY3/26 FY-end. Therefore, there may be additional room for further unwinding of cross-shareholdings.

Regarding shareholder returns, the Company has clearly shifted its stance from the beginning of 2026, marking a material break from its prior approach. The Company raised its full-year dividend for FY3/26 from JPY 126 to JPY 200 per share, an increase of approximately 59%, on January 26, 2026, and has now further increased its dividend forecast for FY3/27 to JPY 230 per share (up 15%). As the total amount of shareholder returns for the entire Medium-Term Management Plan has also been significantly raised from the JPY 3.5 – 4.0 bn set last year to JPY 6.5 – 7.0 bn, even assuming the dividend level of JPY 230 per share announced for FY3/27 is maintained in FY3/28, there could still be capacity for an additional JPY 2.7 – 3.2 bn of shareholder returns¹. Accordingly, we hope that this represents a transition toward sustained improvement in capital efficiency, rather than a one-off measure.

Figure 2: Revisions to the Capital Policy within the Medium-Term Management Plan

(Source: Financial Results for the Year Ended March 31, 2026)

We have engaged in continuous dialogue with JPC over the past approximately eight years. Throughout this period, we have consistently pointed out that, despite the Company’s strong competitive position in its core businesses, its capital policy has remained overly conservative. Against this backdrop, we consider it highly significant that, as part of the revised capital policy under the Medium-Term Management Plan, the Company has now explicitly set out concrete measures to accelerate the reduction of cross-shareholdings and enhance shareholder returns.

Furthermore, in the same earnings announcement, the Company highlighted the development of an innovative plating solution for next-generation bonding materials for power semiconductors, and noted potential applications in advanced semiconductor packaging², where miniaturization continues to advance. We view these initiatives in high-growth areas as likely to contribute further to the long-term enhancement of the Company’s corporate value.

Figure 3: Development of Next-Generation Plating Technology for Power Semiconductors

(Source: Financial Results for the Year Ended March 31, 2026)

The Company has begun to shift toward a management approach that is more clearly oriented toward the capital markets than before. While we view this response as an important milestone in our engagement to date, we intend to reassess our future course of action from a zero-based perspective.

EOD

¹ Calculated assuming total dividends of JPY 1.16 bn for FY3/26, and JPY 1.33 bn for FY3/27 to FY3/28, derived by multiplying JPY 230 per share by 5,785 thousand shares, which is the total number of issued shares of 6,067 thousand shares less 264 thousand treasury shares.
² Posted on the Company’s website on April 30 (Japanese only): [Notice of Media Coverage] An article about the Company was published in the Kagaku Kogyo Nippo. On page 5 of the Kagaku Kogyo Nippo dated April 30, 2026, an article regarding the Company titled “Japan Pure Chemical: Plating Chemicals Using Intermetallic Compound Materials” was published.

This post does not constitute, and shall not be construed as, any proposal, solicitation, marketing, advertisement, inducement, or representation with respect to any service or product, nor does it constitute advice regarding the purchase or sale of any investment product or any type of investment, the making of any investment, the entering into of any transaction, or the refraining from any action (whether or not any terms or conditions are stated herein), and does not express any opinion regarding the merits of any particular investment or investment strategy. Any examples of strategies or transactions are provided solely for explanatory purposes and do not represent past or future strategies or performance, nor do they indicate the likelihood of success of any particular strategy. Furthermore, this post does not constitute investment, financial, legal, tax, or any other professional advice.

This post has been prepared based on publicly available information (which we have not independently verified) and does not purport to be complete, timely, or comprehensive.

We do not intend, either directly or indirectly, including through other shareholders, to propose at any shareholders’ meeting of JAPAN PURE CHEMICAL CO., LTD. (“Japan Pure Chemical”) the transfer or disposal of the business or assets of Japan Pure Chemical. In addition, we do not have any intention to engage in any conduct that would make the continuous and stable operation of the business of Japan Pure Chemical difficult.