Tsubaki Nakashima 6464 analysis | Authenticity of structural reform questioned after stop rise

[Summary]

Tsubaki Nakashima (6464) had sales revenue of 17.784 billion yen, operating profit of 1.127 billion yen, and profit attributable to owners of the parent company of 308 million yen in the first quarter of the fiscal year ending December 2026, returning to profit from the deficit in the same period of the previous year. The net profit progress rate against the full-year company plan was 61.6%. If you just look at the numbers, it's a pretty strong start.

However, it is too early to simply call it a "resurrection." Operating income includes a gain on the sale of land at the Georgia factory in the United States, and the effects of structural reforms on our core business are still being determined.

Assuming that the stock price was bought up to 419 yen on May 26, 2026, an increase of 80 yen from the previous day, it is realistic to see the reason for the sudden rise not only as a result of "good financial results," but also as a supply-demand event in which short-term funds and buybacks overlapped in stocks that had become low-priced stocks.

What the market will be looking at from this point on is not whether there will be upward revisions or expectations for the resumption of dividends, but whether the baton will be passed from one-time profits to core profits from 2Q onwards.

First, the conclusion

The recent sharp rise in Camellia Nakashima cannot be dismissed as just a material stock that blooms for a day.

The company turned a profit in the 1Q and is making good progress toward its full-year plan. Furthermore, structural reforms are being implemented at the same time, including the closure of the Irwin factory in the United States. It is only natural that the market began to suspect that it had run out of bad news.

However, if you look at it calmly, it is not yet confirmed that it will be revived.

Sales revenue decreased compared to the same period last year. Part of the profit improvement was due to gains on asset sales. Although the closure of the Irwin factory in the US is expected to reduce fixed costs, it will also involve closure-related losses and transfer costs.

In other words, we are not currently in a phase where a recovery in the core business has been confirmed, but rather in a phase where the market has priced in the recovery in the core business first.

Still, the reason why this new material hit the market is because it seemed like more than just a cost-cutting measure.

The question for Tsubaki Nakashima is whether she can let go of her past successes. Having a factory, expanding your base, and maintaining scale. Decisions that were once rational can turn into today's inefficiencies due to changes in demand and cost environments.

Common sense is nothing more than ``methods that have worked in the past'' that have been fixed by the majority.

When market conditions change, yesterday's rationality reverses into today's burden.

Now comes the difficult part.

1Q results are strong, but quality needs to be confirmed

The financial results for the first quarter of the fiscal year ending December 2026, announced on May 13, 2026, had a large visual impact.

Sales are decreasing.

However, operating income increased significantly and the final profit also turned into the black. This change was an easy-to-understand sign of reversal for the market, as the stock had been sold in the red or with impairment losses until the previous period.

On the other hand, you need to be careful about the content of your profits.

In the financial results briefing materials, it is explained that as part of structural reforms, idle land on the grounds of the Georgia factory in the United States was sold in February, and the sale gain of 1 billion yen contributed to operating income. If we view this as an improvement in core business profits, we would be a bit forward-looking.

The full-year operating profit plan is 2.5 billion yen, compared to 1Q operating profit of 1.127 billion yen. The progress rate of 45.1% is high. However, operating income excluding gain on sales in the same document is 90 million yen. The focus is on how much of the profitability improvement in the main business will remain after 2Q.

The numbers are good. The problem is quality.

Why was it bought on May 26th?

We believe that the sharp rise on May 26, 2026 was a result of fundamentals and supply and demand working together at the same time.

First, in terms of fundamentals, we made strong progress with a return to profitability in the first quarter. Even if the stock price does not react significantly immediately after the announcement on the 13th, there may be a time lag and the stock price may be reconsidered and bought. Especially for stocks with low PBRs and low prices, "oversold corrections" are likely to occur in the wake of a single financial result.

Next is supply and demand.

This stock had lost a lot of market confidence due to its large deficit in the previous fiscal year, no dividends, and heavy overseas business. The stock price had also fallen to the 300 yen level. When the company turns profitable and the factory closes, investors who were selling will want to lighten their positions.

What you need to be careful about here is how to read the credit multiplier.

Generally, the credit ratio is the number of outstanding purchases divided by the outstanding sales. A high multiple does not simply mean that you are selling better. When looking at supply and demand, it is necessary to separately check the margin buying margin, margin selling margin, lending/borrowing ratio, and short selling margin by institutional investors.

As far as we can confirm, there is data that as of May 20, 2026, the short interest balance of Barclays Capital Securities was in the 1% range. Although it is too strong to conclude that there is a short squeeze based on this alone, it is true that stocks with low market capitalization tend to widen in price when buybacks occur.

This rise is likely due to a combination of good financial results, exhaustion of bad news, short sales and buybacks, and participation of short-term funds.

However, stocks that rise due to supply and demand can quickly fall when supply and demand reverses. It's better not to forget this.

The main focus of structural reform is the closure of the Irwin factory in the United States

What is really important in this article is the review of the global production system rather than the daily price range of stock prices.

Tsubaki Nakashima is a mechanical parts manufacturer that handles precision balls, precision rollers, blowers, etc. The official website explains that the company has manufacturing bases not only in Japan, but also in the United States, Italy, Poland, Slovakia, Bosnia, the United Kingdom, China, Thailand, and India.

Global expansion seems to be a strength.

However, if you have a region with weak demand or an unprofitable base, your fixed costs will become heavier. Particularly in a situation where labor, energy, and logistics costs are high in Europe and the United States, the more unprofitable bases remain, the more profits will be cut.

Customers are not paying for a company's past successes.

What customers value is whether you can solve their problems in the most efficient way at this moment. The number of factories, history, and former market share do not in and of themselves provide customer value. Fixed costs that have no value to the customer will ultimately put pressure on prices, delivery times, quality, and investment capacity.

On May 13, 2026, the company announced the closure of its Irwin factory, which is affiliated with its consolidated subsidiary TN TENNESSEE, LLC. in Tennessee, USA. The Response article explains that this is part of the "global reorganization of production bases," which is a measure to strengthen cost competitiveness in the medium-term management plan 2025-2029.

This is a material that can easily penetrate the market.

This is because the market's doubts after the loss in the previous fiscal year were whether this company would really be able to consolidate its overseas bases.

Factory closures are painful. There will also be closure losses. It's not a pretty story in the short term.

Even so, if you close unprofitable locations and shift production to locations with demand, your break-even point will decrease. That's what the market wants to see.

The status quo seems safe.

However, as the market changes, choosing not to change can itself be the riskiest decision. Structural reform is not an event. It is not a matter of closing the factory just once.

Can we have a structure that continues to change?

Only when this is confirmed will the market reevaluate this company in a true sense.

From the logic of the old era to the logic of the new era

If we look at this factory closure as simply a reduction in fixed costs, it is a little shallow.

What investors are looking for is whether the management mindset is changing.

Looking at this comparison, closing the Irwin factory is not a "withdrawal" but an act of changing the premise of management.

Change is not just about adding something.

Rather, it often starts with throwing it away.

Three thoughts that stimulated investors

This stock price rise is driven not only by facts but also by speculation.

Expecting upward revision

As of 1Q, the progress rate for profit attributable to owners of the parent company was 61.6%.

If you look at the numbers normally, you would expect an upward revision. The company has left its full-year forecast unchanged, but this is likely due to the temporary nature of the sale gain and the company's desire to assess the recovery of its core business from 2Q onwards.

The market will move ahead here.

However, even if there is an upward revision, what is important is whether it is accompanied by the quality of operating income. Even if there is an upside on sales gains alone, it is difficult to continue evaluating the stock.

Expecting resumption of dividends

The drop in dividends in the previous fiscal year had a significant effect on the stock price.

Therefore, when we see a 1Q surplus and structural reforms, it is easy to speculate that the dividend will be resumed sooner. For low-ranking stocks, this type of return expectation tends to attract short-term funds.

However, the company has not yet clearly indicated that it will resume dividends.

The decision should be based on financial security, cash generation, closure-related costs, and financial expenses. Rather than buying on the assumption that dividends will be resumed, this is the stage to see if the company can return to a structure that allows for dividends to be resumed.

Expecting PBR fix

IRBANK states that PBR as of May 12, 2026 is 0.34x.

A PBR of 0.3x is a level at which the market's confidence has fallen considerably. Given the combination of deficits, impairment losses, no dividends, and heavy overseas bases, such low valuations are not uncommon.

However, if structural reforms stop the deficit and return profits and cash, there will be room for PBR correction.

This is also a point where the market is easy to buy.

However, we are no longer in an era where PBR will go up just because it is low. Low PBR stocks are dangerous if you can't explain why they are low. In Tsubaki Nakashima's case, the answer is "sustainability of core business profits and financial instability."

Only when this is improved will the low PBR correction become convincing.

Illustration: Rapid rise flow

Points to consider in the future

The point to be made from here is pretty clear.

What is particularly important is profit over sales, and cash over profit.

Sales revenue is still decreasing. It is dangerous to be optimistic by looking only at improved profits. For structurally reformed stocks, accounting profits return first, then cash, and finally market confidence returns.

I went to the market to buy much earlier this time.

Now it's the company's turn to catch up with the numbers.

Bullish scenario

The bullish scenario is that the reorganization of the company's bases, including the closure of the Irwin factory, will take effect sooner than expected, and the operating profit margin will improve in the second quarter and beyond.

In this case, the high progress made in the first quarter is not just temporary, but is evaluated as an early result of structural reforms. If there is an upward revision to the full-year forecast, a policy to resume dividends, or additional measures to improve capital efficiency, there is likely to be room for revision of PBR from 0.3x.

Supply and demand for low-priced stocks will also be on your side.

However, for the bullish scenario to continue, we need confirmation of core business profits excluding gains on sales.

Bearish scenario

In the bearish scenario, the surplus in 1Q is mainly due to gains from sales, and core business profits do not increase from 2Q onward.

If sales continue to decline and demand in Europe and the United States remains weak, simply cutting fixed costs by closing factories will not be enough. There will also be closure-related costs and transfer costs.

Also, if margin buying increases after a sudden rise, the top price will become heavier.

Stocks that go up due to supply and demand will go down due to supply and demand.

This is scary as you would expect from a low-priced stock.

Summary

We believe that Tsubaki Nakashima's sudden rise as of May 26, 2026 is due to a combination of 1Q profitability, high progress toward full-year plans, closure of the U.S. Irwin factory, expectations for low PBR revision, and supply and demand for buybacks.

The themes the market is seeing are clear.

Will structural reforms really change the earnings structure?

1Q profits include gains on sales, so it cannot be said that this is due to a revival of the main business. Still, the significance of returning to surplus from the large deficit of the previous term is not small. The market probably bought the ``possibility of bottoming out'' rather than a ``complete recovery.''

What is needed from here is confirmation, not topicality.

Operating income from 2Q onwards, operating CF, factory closure effects, presence or absence of upward revisions, and dividend resumption policy. If these things come together, the story of fixing low PBR will become even stronger.

On the other hand, if core business profits do not return, this stop high will end as a reaction to short-term supply and demand.

The numbers have gotten better. The market also reacted.

But it's still too early to trust. From now on, Tsubaki Nakashima will begin to erase doubts in the market with the numbers from its main business.

It is not the failure itself that destroys a company.

You can't throw away your past successes.

Companies that cannot change will not lose out to competition in an instant. Past successes slowly harden you from within.

If this structural reform is genuine, there is room for Tsubaki Nakashima to be reconsidered as a company that throws away old common sense and regains customer value and capital efficiency, rather than a company that closed its factories.

Change begins with letting go.

The market is now looking at that resolve.

Source

• Tsubaki Nakashima "Summary of financial results for the first quarter of the fiscal year ending December 2026 [IFRS] (consolidated)", disclosed on May 13, 2026
• Tsubaki Nakashima "Financial results briefing for the first quarter of the fiscal year ending December 2026", published on May 13, 2026
• Yahoo! Finance, Tsubaki Nakashima timely disclosure information
• Response, Tsubaki Nakashima to close U.S. Irwin factory in February 2027
• IRBANK, Tsubaki Nakashima IR information/stock price trends
• karauri.net, Tsubaki Nakashima short selling balance information