TOKYO ELECTRON DEVICE (2760) FY2027 Q1 Earnings Report

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Executive Summary

Driven by the rapid expansion of the Semiconductor and Electronic Devices Business and strong operating leverage, profit expanded significantly relative to revenue growth. Revenue was ¥603.2B (+33.6% YoY), Operating Income was ¥40.7B (+179.5%), Ordinary Income was ¥39.1B (+127.8%), and Net Income was ¥26.7B (+115.1%; attributable to owners of the parent was ¥26.5B, +117.7%). Profit growth substantially exceeding revenue growth was attributable to the relatively contained increases in cost of sales and selling, general and administrative expenses.

Factors Affecting Performance

【Revenue】Revenue increased 33.6% YoY to ¥603.2B. By segment, the Semiconductor and Electronic Devices Business led company-wide growth with revenue of ¥503.5B (83.5% of total revenue, +38.4% YoY), while the Computer Systems-Related Business remained solid at ¥99.7B (16.5% of total revenue, +14.0% YoY).

【Profit and Loss】The gross profit margin improved to 15.4% from 14.3% in the same period of the previous year, while the SG&A expense ratio was 8.7% and its increase remained below the revenue growth rate. As a result, the Operating Income margin expanded by approximately 350bp to 6.7% from 3.2% in the same period of the previous year. Segment profit for the Semiconductor and Electronic Devices Business recovered sharply to ¥23.7B, up 945.8% YoY, and was the primary driver of company-wide profit growth. Non-operating expenses included a foreign exchange loss of ¥0.9B, while extraordinary gains and losses were immaterial, limiting the impact of temporary factors. Revenue and profit both increased.

Segment Analysis

The Semiconductor and Electronic Devices Business showed a significant recovery in profitability, with revenue of ¥503.5B (+38.4% YoY), Ordinary Income of ¥23.7B (+945.8%), and a profit margin of 4.7% (0.6% in the same period of the previous year). The Computer Systems-Related Business maintained high profitability, with revenue of ¥99.7B (+14.0% YoY), Ordinary Income of ¥15.3B (+3.1%), and a profit margin of 15.4% (down approximately 160bp from 17.0% in the same period of the previous year), although its profit growth rate was limited. Segment profit is presented on an Ordinary Income basis and therefore differs in definition from consolidated Operating Income.

Key Financial Indicators

【Profitability】The Operating Income margin of 6.7% and Net Income margin of 4.4% both improved from the same period of the previous year (3.2% and 2.7%, respectively), while the gross profit margin of 15.4% also exceeded 14.3% in the same period of the previous year. 【Cash Flow Quality】Operating Cash Flow (OCF) was negative at ▲¥39.6B, substantially below Net Income of ¥26.7B. Increases in accounts receivable of +¥19.0B and inventories of +¥8.2B, together with a ▲¥19.1B decrease in accounts payable, placed pressure on working capital. 【Investment Efficiency】ROE (annualized) was high at 19.6%, indicating strong capital efficiency accompanied by financial leverage. 【Financial Soundness】The Equity Ratio was 33.2%, broadly unchanged from 32.6% in the same period of the previous year. Total assets were ¥1635.9B, and net assets were ¥543.6B.

Cash Flow Analysis

Operating Cash Flow was ▲¥39.6B, representing a substantial divergence from Net Income of ¥26.7B. The primary factors were a ¥19.0B increase in accounts receivable, a ¥8.2B increase in inventories, and a ¥19.1B decrease in accounts payable. The resulting advance burden of working capital during a period of revenue growth constrained cash generation. Investing Cash Flow was ▲¥2.7B, with capital expenditures remaining limited at ¥0.3B. Financing Cash Flow was +¥20.6B, supplementing the OCF deficit through an increase in short-term borrowings and other factors. Consequently, free cash flow was ▲¥42.4B, indicating that the period’s profit growth has not yet translated into cash flow.

Quality of Earnings

Non-operating income was ¥0.4B, compared with non-operating expenses of ¥2.0B, including interest expense of ¥0.8B and a foreign exchange loss of ¥0.9B. Accordingly, Ordinary Income remained slightly below Operating Income of ¥40.7B. Extraordinary gains and losses were almost entirely absent, and the difference between Ordinary Income of ¥39.1B and Net Income of ¥26.7B was primarily attributable to the ¥12.4B income tax burden. Meanwhile, OCF of ▲¥39.6B diverged significantly from accrual-based earnings. The expansion of working capital accompanying increases in accounts receivable and inventories has delayed the conversion of profit into cash, which is an important consideration when evaluating earnings quality.

Earnings Forecast and Guidance

The full-year company forecast is revenue of ¥2400.0B (+17.8% YoY), Ordinary Income of ¥136.0B (+39.5%), and forecast EPS of ¥318.26. Q1 progress was 25.1% for revenue and 28.7% for Ordinary Income, representing a pace above the standard progress rate of 25%. During the quarter, revisions were made to the earnings forecast and dividend forecast, reflecting a review of the full-year plan.

Shareholder Returns

The forecast annual dividend is ¥129.00, implying a forecast Payout Ratio of approximately 40.5% against forecast full-year EPS of ¥318.26. This represents an increase from the previous year’s actual dividend of ¥35 (based on the interim dividend), and the dividend forecast was revised during the quarter. However, OCF of ▲¥39.6B and free cash flow of ▲¥42.4B were both negative during the quarter, and the dividend payment of ¥21.2B was not directly funded by cash flow generated during the period. Dividend sustainability will depend on the normalization of working capital and recovery in OCF over the full year.

Risk Factors

1. Segment concentration risk: The Semiconductor and Electronic Devices Business accounts for 83.5% of revenue, creating a structure in which supply-and-demand fluctuations in this business directly affect company-wide performance.

2. Working capital and cash flow risk: OCF of ▲¥39.6B diverged substantially from Net Income of ¥26.7B. The increase in accounts receivable of +¥19.0B and inventories of +¥8.2B, together with the ▲¥19.1B decrease in accounts payable, has placed pressure on liquidity.

3. Financial leverage risk: Dependence on interest-bearing debt has increased due to growth in short-term borrowings and other liabilities. The increased weighting of short-term funding relative to cash and deposits of ¥54.5B requires monitoring.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Return

The Company’s profitability is above the industry median.

Growth and Capital Efficiency

The Company’s revenue growth rate substantially exceeds the industry median, demonstrating outstanding growth within the industry.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. Operating Income increased +179.5% compared with revenue growth of +33.6%, representing profit growth substantially exceeding revenue growth. The primary factor was the recovery in the Semiconductor and Electronic Devices Business profit margin (0.6%→4.7%).

2. Progress toward the full-year forecast was above the standard pace, at 28.7% for Ordinary Income and 28.2% for Net Income. However, OCF was negative, making the conversion of profit growth into cash a key focus going forward.

3. While the Computer Systems-Related Business maintained a high profit margin of 15.4%, this was down approximately 160bp YoY. Trends in project mix and pricing will therefore be areas of focus.

Theoretical Share Price (Reference Value)

Sensitivity: ¥2,225〜¥2,355 at ±1% for the cost of equity, and ¥2,278〜¥2,305 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference relative to the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat on the high side.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting professionals as necessary.

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