Nabtesco <6268> has been gaining upward momentum after hitting a year-to-date low of \3,756 on March 31. Supported by expectations for a recovery in precision reduction gears and the company's exposure to the defense sector, the stock appears poised for a sustained rally.

According to the consolidated financial results for the fiscal year ended December 2025 announced on February 12, operating profit surged 60.3% year-on-year to \20.73 billion. Both the TRS (Transport Solutions) segment, which includes railroad vehicle and aircraft equipment, and the CMP (Component Solutions) segment, which handles precision reduction gears for factory automation, delivered strong performances. Despite recording reorganization-related losses for a European railroad vehicle equipment subsidiary and a goodwill impairment charge for a marine vessel equipment subsidiary, net income still jumped 55.1% year-on-year to \15.69 billion.

For the fiscal year ending December 2026, Nabtesco forecasts operating profit of \27.7 billion (up 33.6% YoY), marking another year of substantial growth. This growth is expected to be driven by continued strength in aircraft and marine vessel equipment within the TRS segment, alongside a recovery in CMP segment orders for precision reduction gears, which have been rebounding for four consecutive quarters since Q1 FY12/25. The company also plans to pay an annual dividend of \82 per share, an increase of \2 from the previous year.

There is a high probability that the company will beat its guidance, given the strong recovery momentum in precision reduction gears and a rising MRO (Maintenance, Repair, and Overhaul) ratio in the TRS segment. In fact, some research firms project operating profit to reach around \30 billion. Furthermore, the company's plans to expand into strain wave gears and reduction gears for humanoid robots make it a compelling play on physical AI.

Source: MINKABU PRESS