RS Technologies (3445) FY2026 Q1 Earnings Report

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Executive Summary

Although the Company reported higher revenue and income, the growth in net income attributable to owners of the parent was slower than that in ordinary income, reflecting the structure of profit allocation. Revenue was ¥19.15B (+8.7% YoY), operating income was ¥3.63B (+21.0%), and ordinary income was ¥4.25B (+30.6%). Quarterly net income attributable to owners of the parent was ¥1.93B (+12.2%), below the growth rate of ordinary income. Operating income growth supported by improved gross profit margins, together with improved non-operating income and expenses including foreign exchange gains and subsidy income, supported the increase in ordinary income. However, the growth rate on an attributable-to-owners-of-the-parent basis was relatively restrained due to the impact of consolidated profit allocation, including ¥0.85B in net income attributable to non-controlling interests.

Factors Affecting Earnings

【Revenue】Revenue increased 8.7% YoY to ¥19.15B. The core prime silicon wafer manufacturing and sales business expanded substantially to ¥5.78B (+31.9%), while the wafer reclamation business also recorded higher revenue of ¥7.04B (+6.4%). Semiconductor-related equipment, materials, and other products declined slightly to ¥6.38B (-1.2%), with growth driven primarily by the prime silicon wafer business.

【Profit and Loss】Operating income increased 21.0% YoY to ¥3.63B, primarily because the gross profit margin improved from 30.2% to 32.2%, resulting in profit growth exceeding the rate of revenue growth. The wafer reclamation business, with a profit margin of 38.5%, formed the core of consolidated earnings, while semiconductor-related equipment, materials, and other products recovered sharply to a profit margin of 3.8% (nearly zero in the same period of the previous year). Ordinary income increased 30.6% YoY to ¥4.25B, additionally supported by improved non-operating income and expenses, including ¥0.26B in foreign exchange gains and ¥0.31B in subsidy income. Net income attributable to owners of the parent was ¥1.93B (+12.2%), with growth remaining below that of ordinary income due to the burden of income taxes and other taxes of ¥1.47B and net income attributable to non-controlling interests of ¥0.85B. Overall, the Company achieved higher revenue and income, confirming positive operating leverage driven by improved gross profit margins.

Segment Analysis

Of total segment profit of ¥4.27B, the wafer reclamation business made the largest contribution at ¥2.71B (+14.0% YoY; profit margin 38.5%) and remains the main pillar of consolidated operating income. The prime silicon wafer manufacturing and sales business achieved both high growth and high profitability, generating ¥1.33B (+21.9%; profit margin 23.0%). Semiconductor-related equipment, materials, and other products improved substantially to ¥0.24B (+¥2.90B; nearly zero profit in the same period of the previous year), recovering to a profit margin of 3.8%. Other businesses recorded only a minor loss, resulting in a limited impact on consolidated results. After deducting ¥0.64B for company-wide expenses and adjustments for unrealized gains on inventories, consolidated operating income was ¥3.63B.

Key Financial Indicators

【Profitability】The operating margin of 19.0% improved by approximately 1.9pt YoY, reflecting the increase in the gross profit margin to 32.2% (30.2% in the same period of the previous year). The consolidated net profit margin was approximately 10.1%, indicating generally favorable profitability. 【Cash Quality】Annualized DSO was 114 days, DIO was 92 days, and CCC was 141 days, all above generally accepted warning levels. Accounts receivable of ¥23.93B and inventories of ¥5.66B represent challenges for working capital efficiency. 【Investment Efficiency】Annualized ROE was 6.8%; despite the high net profit margin, the low total asset turnover ratio is constraining ROE. With total assets of ¥206.12B, cash and deposits of ¥93.67B, and investment securities of ¥18.66B, the Company has substantial asset holdings and room to improve asset efficiency. 【Financial Soundness】The equity ratio was 78.7%. Interest-bearing debt was substantially reduced from the previous year to ¥1.60B in short-term debt and ¥8.81B in long-term debt. The Company has ample net cash and an extremely stable financial foundation.

Cash Flow Analysis

Although direct data from the statement of cash flows could not be confirmed, an analysis of changes in the balance sheet indicates that cash and deposits were ¥93.67B, a slight decrease from ¥96.77B in the same period of the previous year. Meanwhile, short-term borrowings declined substantially from ¥3.70B to ¥1.60B, and long-term borrowings from ¥14.14B to ¥8.81B. This suggests that cash generated from operating activities may have been used to repay borrowings. Current assets of ¥133.79B substantially exceeded current liabilities of ¥28.67B, maintaining strong liquidity equivalent to a current ratio of 466.7%. However, accounts receivable of ¥23.93B and inventories of ¥5.66B are large relative to the scale of revenue, making the funds tied up in working capital a point requiring attention from a cash efficiency perspective.

Quality of Earnings

The ¥0.62B difference between ordinary income of ¥4.25B and operating income of ¥3.63B represents the net amount of non-operating income of ¥0.999B, including ¥0.39B in interest income, ¥0.31B in subsidy income, and ¥0.26B in foreign exchange gains, less non-operating expenses of ¥0.38B, including ¥0.10B in interest expenses. These items include elements of a temporary nature. It is therefore appropriate to assess recurring earning power based on the operating margin of 19.0%. Comprehensive income was ¥8.08B, substantially exceeding net income of ¥2.78B, primarily due to foreign currency translation adjustments of ¥2.58B and the share of OCI of equity-method affiliates of ¥2.19B. Comprehensive income attributable to owners of the parent was ¥3.82B, while that attributable to non-controlling interests was ¥4.26B. The high proportion allocated to non-controlling interests characterizes the divergence between net income and comprehensive income.

Earnings Forecast and Guidance

The full-year plan calls for revenue of ¥84.00B (+9.5% YoY), operating income of ¥15.40B (+7.8%), and ordinary income of ¥17.20B (+3.4%). Q1 progress rates were 22.8% for revenue, 23.6% for operating income, 24.7% for ordinary income, and 19.3% for net income attributable to owners of the parent, indicating that revenue and profit had reached standard levels taking seasonality into account. However, progress in net income attributable to owners of the parent was relatively low, and sustaining profit growth in the second half while taking into account the effects of income taxes and other taxes and allocations to non-controlling interests will be key to achieving the full-year plan. The earnings forecast and dividend forecast remain unchanged.

Shareholder Returns

The full-year dividend forecast is ¥55.0 per share. Based on forecast full-year EPS of ¥376.54, the forecast payout ratio is approximately 14.6%, which is relatively low when assessed solely on the basis of dividends. Treasury stock holdings are minimal, and no large-scale share repurchases have been confirmed. Given the Company’s ample net cash and significant financial capacity, as indicated by an equity ratio of 78.7%, the burden of the dividend forecast is limited. The sustainability of dividends in line with the degree of achievement of the full-year earnings plan will be a key focus.

Risk Factors

1. Working capital accumulation: Annualized DSO was 114 days, DIO was 92 days, and CCC was 141 days, all exceeding generally accepted efficiency levels. Accounts receivable of ¥23.93B and inventories of ¥5.66B are substantial and may result in funds being tied up during periods of business expansion.

2. Sensitivity to semiconductor market conditions and customer investment trends: The prime silicon wafer manufacturing and sales business led growth with a YoY increase of +31.9%, making demand trends in this business highly influential on consolidated performance.

3. Changes in the composition of non-operating income: Non-operating income of ¥0.999B includes foreign exchange gains of ¥0.26B and subsidy income of ¥0.31B. These items should be distinguished from recurring earning power, and fluctuations may affect the level of ordinary income.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The Company’s profitability significantly exceeds the industry median and ranks among the higher levels within the manufacturing sector.

Growth and Capital Efficiency

The revenue growth rate exceeds the industry median but has not reached the upper bound of the IQR, placing it in the upper-middle range.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. The operating margin of 19.0% improved YoY, with positive operating leverage driven primarily by the increase in the gross profit margin. The wafer reclamation business (profit margin 38.5%) and the prime silicon wafer business (profit margin 23.0%; revenue +31.9%) form the core of the earnings structure.

2. Short-term and long-term borrowings were substantially reduced by 56.8% YoY and 37.7% YoY, respectively, further strengthening the conservatism of the financial foundation. The equity ratio of 78.7% and abundant cash and deposits are features underlying the potential for improved capital efficiency.

3. Annualized DSO of 114 days, DIO of 92 days, and CCC of 141 days exceed generally accepted efficiency levels. The accumulation of working capital during periods of revenue growth will be a structural point of observation affecting future cash efficiency.

Theoretical Share Price (Reference Value)

Sensitivity: ¥5,449–¥5,772 at ±1% for the cost of equity, and ¥5,590–¥5,618 at ±0.1 for ω.

Notes:

• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the end of the quarter are used (there is a timing difference from the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

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

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This report is an earnings analysis document automatically generated by AI through analysis of 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 with a professional as necessary.

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