The truth behind Kureha (4023) falling into the red. Niche materials stocks aiming for V-shaped recovery next fiscal year despite impairment losses due to stalled EV

[Summary]

Kureha, known as the "NEW Kurerap" company, fell into the red for the fiscal year ending March 2026, with a net loss attributable to owners of the parent company of 10,693 million yen.

However, it would be unfair to view the current deficit simply as a "deterioration in the company's core business." According to the company's explanation, the main cause was an impairment loss in the vinylidene fluoride resin business due to the stagnation in the EV market, and in addition, it also recorded an impairment loss on a manufacturing facility for a drug for chronic renal failure. Impairment losses totaled 36.5 billion yen, of which the vinylidene fluoride resin business accounted for 33.996 billion yen.

On the other hand, for the fiscal year ending March 2027, the company expects profit attributable to owners of the parent company to be 7.5 billion yen and annual dividend of 216 yen. The issue that investors should look at is not the deficit itself, but the extent to which profits can be recovered after the impairment loss.

First, the conclusion

Kureha's financial results for the fiscal year ending March 2026 look pretty bad.

Revenue decreased by 0.2% year on year to 161,688 million yen, while operating profit and loss were in the red of 18,592 million yen and final profit and loss was in the red of 10,693 million yen. (Kureha Financial Results for the Year Ending March 2026)

However, if you look at the details, it is not that the business as a whole has collapsed, but that the financial results have significantly lowered expectations for battery materials for EVs.

The following three points are important.

• The main reason for the deficit was a large-scale impairment loss in the vinylidene fluoride resin business, including PVDF.
• Total operating income for each segment before impairment loss was 14,524 million yen. *The company expects a return to profitability for the fiscal year ending March 2027, with operating income of 11 billion yen and final profit of 7.5 billion yen.

In other words, Kureha is at a point where it should be viewed as a niche materials stock that is helping to clean up the aftermath of the EV materials boom, rather than a "loss-making stock."

What happened?

Kureha announced its financial results for the fiscal year ending March 2026 on May 12, 2026.

The main figures are as follows.

The company forecasts that the annual dividend for the fiscal year ending March 2027 will be 216 yen, an increase of 2 yen from the previous fiscal year. The dividend policy is based on DOE, or the consolidated dividend on equity ratio of 5%.

The fact that the company has forecast a dividend increase despite reporting a loss suggests that the company may be treating this loss as a temporary factor, mainly due to impairment accounting, rather than a permanent operating deficit.

However, the dividend payout ratio is expected to be 110.1% for the fiscal year ending March 2027. Although the company has a strong stance on dividends, if the recovery in profits is delayed, the outlook on the company's ability to pay dividends is likely to change.

Main cause of falling into the red

The main reason for the fall into the red was an impairment loss in the vinylidene fluoride resin business, which is involved in materials for EVs.

Kureha's key product, vinylidene fluoride resin (product name: KF Polymer), is used as a binder to bond electrode active materials in lithium-ion batteries. Kureha explains that the product is used around the world as a major brand of binder for lithium-ion batteries and has a high market share. (Kureha Battery Material Story)

The problem is that the growth of the EV market has temporarily slowed, and demand for battery materials is expected to take longer to recover than expected.

The company's financial results explain that it has revised its future earnings plan because the EV market continues to be sluggish and demand for vinylidene fluoride resin, which is used as a binder for automotive lithium-ion secondary batteries, is expected to take time to recover. As a result, an impairment loss of 33,996 million yen was recorded in the vinylidene fluoride resin business.

Furthermore, an impairment loss of 2,504 million yen was recorded for manufacturing equipment for drugs for chronic renal failure. This is due to a decline in profitability due to the rise of new therapeutic drugs and drug price reductions.

In other words, the current deficit includes not only PVDF but also impairment losses on pharmaceutical-related equipment. However, in terms of amount, PVDF-related costs are overwhelmingly large.

Has the main business really collapsed?

This is the most important part of Kureha's financial settlement.

Although the consolidated operating profit and loss were in the red, the total operating profit for the reportable segments was 14,524 million yen. The consolidated deficit was mainly due to the recording of an impairment loss of 36.5 billion yen as other expenses not allocated to reportable segments.

Looking at each segment, core earnings remain at a certain level.

In the functional products business, sales of vinylidene fluoride resin for binders for lithium-ion batteries decreased. On the other hand, supported by PGA resin processed products, PPS resin, and carbon products, the segment returned to operating profit from an operating loss in the previous fiscal year.

This is easy to overlook. Although the headline of a deficit is strong, there is no need to uniformly zero-evaluate business profits after impairment losses.

Kureha's dual-sided business model

What makes Kureha interesting is the dual nature of its business portfolio.

Key point

Key point
NEWKey point
        ↓
stability

Key point
PVDF、PPS、PGA、Key point
        ↓
EV、semiconductors、Key point

        ↓

stability
Key point

To general consumers, it appears to be a ``Crerap company.''

However, from an investor's perspective, Kureha is not just a household goods company. It is a composite materials company with fields such as EV battery materials, high-performance resins, carbon products, pharmaceuticals, agricultural chemicals, and construction-related products.

This duality makes it difficult to read the current financial results.

Protective earnings supported by NEW Krerap

The household wrap ``NEW Clewrap'' and the fishing line ``Seger'' are not flashy growth themes.

However, for Kureha, it is an extremely important source of stable income.

In the resin products business for the fiscal year ending March 2026, sales revenue and operating income for the entire segment decreased due to the discontinuation of sales of heat-shrinkable multilayer film. On the other hand, in the consumer goods field, sales of NEW Klewrap and vinylidene fluoride fishing line "Seaguar" increased, and both sales and operating income in this field increased.

It is because of this stable cash that Kureha is able to invest in high-performance materials such as PVDF and PPS.

NEW Klewrap is not just a household item, but also a source of funding to support investments in high-tech materials.

PVDF is damaged, but the theme is not gone

The most noteworthy factor in this deficit is, of course, PVDF.

PVDF binder is an important component that bonds electrode materials in lithium-ion batteries. Since it is related to battery performance, lifespan, and safety, it is closely linked to the growth of the EV and storage battery markets.

However, investors should remain calm and note that the EV theme is not completely over, but that excessive expectations have been adjusted.

The EV market will not grow in a straight line. Waves are driven by policy, subsidies, interest rates, price competition, battery inventories, and resource prices.

Kureha's current impairment loss reflects the downturn in that wave.

In the medium to long term, the following demand themes remain.

• EV *Storage battery
• Renewable energy
• High-performance resin
• Around semiconductors and electronic materials

Therefore, what investors should be looking at is not whether PVDF is over, but when the PVDF market will bottom out and how much profit can be made from assets after impairment.

Is the V-shaped recovery in the fiscal year ending March 2027 real?

For the fiscal year ending March 2027, the company is forecasting sales revenue of 172 billion yen, operating profit of 11 billion yen, and profit attributable to owners of the parent company of 7.5 billion yen.

This V-shaped recovery requires the following conditions.

• PVDF inventory adjustment completes
• Downward pressure on EV battery materials market eases
• Supported by other functional products such as PPS, PGA, and carbon products
• NEW Household products such as Krewrap and Seaguar will be stabilized.
• The burden of amortization and investment after impairment is reduced.
• DOE 5% target dividend policy can be supported by profit recovery

Of particular note is the progress toward the forecast of operating income of 11 billion yen.

In the fiscal year ending March 2026, operating cash flow was positive at 28,009 million yen. Impairment is an accounting loss, not a cash outflow itself. This point is reassuring.

On the other hand, an impairment loss does not automatically mean a recovery in business performance. The volume and price of PVDF, the profit margin of the functional products business, and the ability to pass on the price of household goods will be the proof points for the recovery scenario.

Stock price scenario

Bullish scenario

In the bullish scenario, it is confirmed that the PVDF market has bottomed out, increasing the probability of a return to surplus in the fiscal year ending March 2027.

In this case, the market is likely to evaluate the next material.

• The main cause of the deficit was a one-time impairment loss
• Operating cash flow remains positive
• Annual dividend forecast of 216 yen will be maintained
• PVDF long-term theme remains
• The dual nature of household goods and high-performance materials will be reconsidered

After the stock price has digested the bad news from the 3,500 yen level to the 4,000 yen level, there is room for the stock price to test towards 4,500 yen. This is not a target price, but a revised scenario if a recovery in profits is confirmed.

Bearish scenario

In the bearish scenario, inventory adjustment in the EV market will be prolonged, delaying recovery in PVDF price and quantity.

The following risks should be especially noted.

• Price competition in China's EV market
• Excess supply of battery materials
• Regression of European and American EV policies
• Delay in improving profitability of PVDF
• Be wary of high dividend payout ratio
• Delay in recovery of investment in high-performance materials

In this case, the stock price will likely remain in the 3,500 to 4,000 yen range for a while.

Even if a company is bought based on its dividend yield alone, unless it is accompanied by a recovery in profits, it will be difficult to continue reviewing its valuation.

KPIs to watch in the second half of 2026

Investors should follow the following indicators when looking at Kureha in the second half of 2026.

The most important of these is the bottoming out of PVDF and the progress towards operating income forecast of 11 billion yen.

I would like to see not only the dividends but also whether the quality of profits returns.

Summary

Kureha's deficit for the fiscal year ending March 2026 is certainly an impactful financial result.

However, if you look at the contents, it does not mean that the entire core business has collapsed. Rather, the essence of the current financial results is to once again reset expectations for PVDF, which have grown due to the EV boom, and make a fresh start toward a return to profitability in the fiscal year ending March 2027.

Kureha is a company with the following characteristics.

• Stable income from NEW Clerap and Seaguar
• Technological capabilities in battery materials centered on PVDF *High-performance materials such as PPS, PGA, carbon products, etc.
• Shareholder return policy targeting DOE5%

Therefore, when making investment decisions in the second half of 2026, it is important not to take a short-sighted view and think that it is dangerous because it is in the red.

What is important is how much profit can be recovered after the impairment loss.

Bottoming out of the PVDF market, progress on forecasts for the fiscal year ending March 2027, and stance on maintaining dividends. These three points are the key to reevaluating Kureha stock.

This article is for reference information when making investment decisions, and does not recommend buying or selling specific stocks.

Source

• Kureha Financial Summary
• Kureha Battery Material Story