Nippon Paint (4612) Status Update summary

Medium-term strategy and business model

• Continues to focus on the asset assembler model, compounding sustainable EPS through both organic and inorganic growth, with autonomy and accountability for management teams across the group.

• No change to the medium-term strategy; the mission remains maximizing shareholder value (MSV) by assembling solid companies and leveraging their strengths.

• Emphasizes careful M&A, prioritizing low-risk, high-return deals, and avoiding overpaying or pursuing synergies at the expense of profitability.

• Recent AOC acquisition aligns with this strategy, expected to significantly accrete EPS from year one and add a new pillar to the portfolio.

• Management style is decentralized, with local teams empowered to make decisions balancing market share and profitability.

Financial guidance and performance update

• Updated FY2025 guidance reflects a significant upward revision in operating income, mainly due to the 10-month contribution from AOC and a fixed asset transfer.

• Revenue forecast raised to ¥1,820bn (+11.1% YoY), operating profit to ¥244bn (+30.1% YoY), both exceeding previous records.

• New EPS guidance is ¥69.0, up from the original ¥57.1, factoring in currency impacts, AOC contribution, and one-off acquisition costs.

• Cash flow remains strong, with leverage expected to stay below 3x net debt/EBITDA even after the AOC acquisition, and further reduction anticipated by end-2026.

• No share buybacks planned; capital will be prioritized for future M&A to drive sustainable EPS growth.

Market and regional updates

• Organic growth is steady, with market share increases pursued only when profitable; strategy adapts by region and market conditions.

• China remains a focus for growth despite a challenging environment, with stable or increasing market share and strong brand positioning in lower-tier cities.

• Southeast Asia: Indonesia and Malaysia deliver solid growth, leveraging premium products and expanded distribution.

• Europe and US: DuluxGroup and Dunn-Edwards maintain growth via innovation and channel expansion.

• In Turkey and Indonesia, political and currency risks are monitored, but no major long-term concerns; local production and consumption models help mitigate volatility.