RS Technologies Co.,Ltd. FY2026 Q2 Earnings Report

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Executive Summary

Cumulative results for Q2 FY2026 showed higher revenue and earnings, characterized by improved profitability at the operating level and a boost from non-operating income, which increased the growth rate of ordinary income. Revenue was ¥405.9B (+6.8% YoY), Operating Income was ¥77.3B (+8.9%), Ordinary Income was ¥90.2B (+26.0%), and Net Income was ¥63.2B (+16.9%; of which ¥41.5B was attributable to owners of the parent, +9.2%). While the core Prime Silicon Wafer Manufacturing and Sales Business drove company-wide growth, with revenue and profit both increasing by approximately 4割, the Semiconductor-Related Equipment and Materials Business posted lower revenue and earnings.

Factors Affecting Performance

【Revenue】Revenue was ¥405.9B (+6.8% YoY). The Prime Silicon Wafer Manufacturing and Sales Business led the company with a significant increase in revenue to ¥139.0B (+39.0%), while the Wafer (Wafer Reclamation) Business remained solid at ¥142.8B (+6.8%). Meanwhile, the Semiconductor-Related Equipment and Materials Business posted lower revenue of ¥136.4B (-12.1%), indicating uneven growth across the business portfolio.

【Profit and Loss】Operating Income was ¥77.3B (+8.9%), and the Operating Margin of 19.1% improved by approximately 0.4pt from the same period last year. While maintaining a gross margin of 31.4%, SG&A expenses increased to ¥50.1B (+11.9%), outpacing revenue growth, making the absorption of fixed costs a constraint on margin improvement. Ordinary Income grew by 26.0% to ¥90.2B, exceeding the growth rate of Operating Income, supported by ¥19.3B in non-operating income, including ¥6.6B in interest income, ¥4.2B in foreign exchange gains, and ¥7.4B in subsidy income. Net Income was ¥63.2B (+16.9%), while Net Income attributable to owners of the parent was ¥41.5B (+9.2%). The difference between Profit Before Tax of ¥90.2B and Net Income attributable to owners of the parent reflects the allocation of ¥27.0B in income taxes and ¥21.7B in profit attributable to non-controlling interests. Although the results can be characterized as higher revenue and earnings, the growth in Ordinary Income is somewhat highly dependent on non-operating factors.

Segment Analysis

In terms of segment profit, the Wafer (Wafer Reclamation) Business was the core business with the largest profit contribution, generating ¥50.7B (+6.9%; profit margin of 35.5%). The Prime Silicon Wafer Manufacturing and Sales Business posted significant profit growth to ¥32.4B (+39.1%; profit margin of 23.3%), driving growth. The Semiconductor-Related Equipment and Materials Business recorded a significant decline in profit to ¥4.1B (-54.6%; profit margin of 3.0%), widening the profitability gap with the other businesses. The performance of this business is susceptible to the semiconductor capital investment cycle and price competition, and may pose downside risk to company-wide profit growth.

Key Financial Indicators

【Profitability】The Operating Margin of 19.1%, gross margin of 31.4%, and Net Margin of 10.2% based on Net Income attributable to owners of the parent all maintained double-digit profitability. Annualized ROE was 7.4%, with a low total asset turnover ratio being the primary factor constraining capital efficiency.【Cash Flow Quality】Operating Cash Flow (OCF) of ¥104.1B was approximately 2.5 times Net Income attributable to owners of the parent of ¥41.5B, indicating strong cash conversion. However, increases in accounts receivable of ¥249.5B and inventories of ¥65.5B are putting pressure on working capital.【Investment Efficiency】Capital expenditures of ¥65.3B reached approximately 2.1 times depreciation and amortization of ¥30.8B, indicating a period of continued growth and replacement investment. Free cash flow was negative ¥10.0B.【Financial Soundness】The company has a high Equity Ratio of 78.7% and substantial liquidity, with cash and deposits of ¥972.9B. Interest-bearing debt declined year on year in both the short-term and long-term categories.

Cash Flow Analysis

Operating Cash Flow was ¥104.1B, up 19.7% from the same period last year, demonstrating cash generation exceeding Net Income attributable to owners of the parent. However, the ¥19.1B increase in accounts receivable and ¥12.4B increase in inventories put pressure on working capital and were factors weighing on OCF. Investing Cash Flow was negative ¥114.1B, including ¥65.3B in capital expenditures as well as deposits into time deposits and other items. Financing Cash Flow was negative ¥73.9B, reflecting progress in repaying short-term and long-term borrowings and suggesting a reduction in financial risk through debt reduction. Free cash flow, calculated by deducting capital expenditures from OCF, was negative ¥10.0B. However, given cash and deposits of ¥972.9B, the company can be considered highly resilient to the investment burden during the period.

Quality of Earnings

The excess of Ordinary Income over Operating Income was ¥12.8B, supported by ¥19.3B in non-operating income, including ¥6.6B in interest income, ¥4.2B in foreign exchange gains, and ¥7.4B in subsidy income. These items differ in nature from recurring sources of business earnings. The fact that Ordinary Income growth of +26.0% significantly exceeded Operating Income growth of +8.9% suggests dependence on non-operating factors. Comprehensive Income was ¥158.4B, substantially exceeding Net Income of ¥63.2B, primarily due to ¥74.8B in foreign currency translation adjustments, a temporary factor reflecting foreign exchange valuation gains on overseas assets and foreign subsidiaries. The significant divergence between Net Income and Comprehensive Income means that changes in asset values cannot be fully captured by income statement earnings alone.

Earnings Forecast and Guidance

The full-year company forecasts are Revenue of ¥840.0B (+9.5% YoY), Operating Income of ¥154.0B (+7.8%), and Ordinary Income of ¥172.0B (+3.4%), with no revisions to the earnings forecasts during the quarter. Progress rates were 48.3% for Revenue, 50.2% for Operating Income, and 52.4% for Ordinary Income, broadly in line with the standard first-half progress rate of 50%. Meanwhile, the progress rate for Net Income attributable to owners of the parent was 41.5%, slightly below the standard level. This reflects the allocation of profit attributable to non-controlling interests and the impact of the tax burden, leaving room to achieve the full-year plan depending on progress in the second half.

Shareholder Returns

The dividend at the end of Q2 was ¥0 per share, while the full-year company forecast is an annual dividend of ¥55 per share. Based on forecast EPS of ¥376.54, the forecast Payout Ratio is approximately 14.6%, indicating a low dividend burden relative to earnings. As no share repurchases were recorded, shareholder returns are evaluated using the Payout Ratio rather than the Total Return Ratio. Given the financial foundation of cash and deposits of ¥972.9B and interest-bearing debt of ¥98.1B, liquidity is sufficient to support the annual dividend of ¥55.

Risk Factors

1. Deterioration in working capital efficiency: Accounts receivable increased to ¥249.5B (+¥26.3B YoY), while inventories increased to ¥65.5B (+¥8.8B YoY), collectively reducing OCF by ¥31.5B. The increasing amount of funds tied up during the revenue expansion phase is a concern.

2. Deterioration in profitability of the Semiconductor-Related Equipment and Materials Business: Revenue in this business declined by -12.1% YoY, while segment profit fell by -54.6% to ¥4.1B and the profit margin declined to 3.0%. The business has high sensitivity to the semiconductor capital investment cycle and customers’ investment decisions, making it a downside factor for company-wide profit growth.

3. Dependence of Ordinary Income on non-operating income: The ¥12.8B excess of Ordinary Income over Operating Income was supported by relatively less recurring items such as interest income, subsidy income, and foreign exchange gains. If the company continues to exhibit a high degree of dependence on factors outside its core business, the quality of Ordinary Income will require close monitoring.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The company’s profitability significantly exceeds the industry median and is positioned within the upper range.

Growth and Capital Efficiency

The Revenue Growth Rate is slightly below the industry median, leaving the company in the middle range in terms of growth speed.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. Profitability is well above the industry average, with the Operating Margin of 19.1% showing an improving trend from the same period last year. However, the growth rate of SG&A expenses (+11.9%) exceeded the Revenue Growth Rate (+6.8%), making the sustainability of fixed-cost absorption a key factor in future margin trends.

2. Within the business portfolio, the Prime Silicon Wafer Manufacturing and Sales Business and the Wafer Business serve as the pillars of growth and profit, while deteriorating profitability in the Semiconductor-Related Equipment and Materials Business is observed as a weakness of the overall portfolio.

3. The funds tied up in working capital due to increases in accounts receivable and inventories represent a structural monitoring point that will influence future cash-generating capacity, despite the solid level of OCF itself.

Theoretical Share Price (Reference Value)

Sensitivity: ¥5,670–¥6,007 at ±1% for the Cost of Equity, and ¥5,815–¥5,848 at ±0.1 for ω.

Notes:

• As forecast ROE is below the Cost of Equity, the theoretical value will be below Book Value Per Share.
• Net assets as of the end of the quarter are used; there is a timing gap relative to the full-year forecast.
• As 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 and is not a prediction of the market share price or a recommendation of any specific investment action, nor does it 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 benchmark is 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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