RS Technologies Co.,Ltd. FY2026 Q2 Earnings Report

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Executive Summary

The 2026 fiscal year Q2 resulted in higher revenue and earnings, with steady progress in both revenue and profit. Revenue was ¥405.9B (+6.8% year on year), Operating Income was ¥77.3B (+8.9%), Ordinary Income was ¥90.2B (+26.0%), and Net Income was ¥63.2B (+16.9%). The increase in revenue was driven by strong growth in the core Prime Silicon Wafer Business (+39.0%), while the increase in Ordinary Income was supported by non-operating income, including interest income and foreign exchange gains.

Factors Affecting Performance

【Revenue】Revenue was ¥405.9B (+6.8% year on year). By segment, Prime Silicon Wafers posted a substantial increase in revenue to ¥139.0B (+39.0%), driving company-wide performance, while Wafer Reclaim remained solid at ¥142.8B (+6.8%). In contrast, Semiconductor-Related Equipment and Materials declined to ¥136.4B (-12.1%) due to deteriorating demand conditions.

【Profit and Loss】Operating Income was ¥77.3B (+8.9%), and the Operating Margin improved to 19.1% from 18.7% in the previous year, a +0.4pt improvement. The gross margin improved to 31.4% from 30.6%, but this was partially offset by an increase in the SG&A ratio to 12.4% from 11.9%. Ordinary Income grew faster than Operating Income, reaching ¥90.2B (+26.0%), driven by interest income of ¥6.6B and foreign exchange gains of ¥4.2B. Net Income was ¥63.2B (+16.9%); however, Net Income attributable to owners of the parent was limited to ¥41.5B (+9.2%) after deducting Net Income attributable to non-controlling interests of ¥21.7B. The results therefore represented higher revenue and earnings.

Segment Analysis

There were significant differences in profitability among the segments. Wafer Reclaim was the largest source of earnings, generating Operating Income of ¥50.7B and a profit margin of 35.5%. Prime Silicon Wafers generated Operating Income of ¥32.4B and a profit margin of 23.3%, showing strong growth in both revenue and profit in the +39% range year on year. Semiconductor-Related Equipment and Materials posted Operating Income of ¥4.1B (-54.6% year on year), with its profit margin declining sharply to 3.0%; lower demand and deteriorating profitability are weighing on the company-wide profit margin. Other Businesses recorded an Operating Loss of ¥0.1B.

Key Financial Indicators

【Profitability】The Operating Margin was 19.1%, improving from 18.7% in the previous year, while the gross margin was 31.4%, compared with 30.6% in the previous year. ROE was 3.7%.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥104.1B, exceeding Net Income of ¥63.2B, indicating strong cash backing for earnings. However, accounts receivable increased by ¥19.1B and inventories increased by ¥12.4B, creating a working capital burden.【Investment Efficiency】Investing Cash Flow was -¥114.1B, of which capital expenditures accounted for ¥65.3B, indicating continued investment in capacity expansion and efficiency improvements. Free Cash Flow temporarily turned negative at -¥10.0B.【Financial Soundness】The Equity Ratio was high at 78.7%, while long-term borrowings were limited to ¥82.1B, indicating a conservative financial structure.

Cash Flow Analysis

Operating Cash Flow was ¥104.1B, an increase of +19.7% year on year, maintaining cash generation above Net Income. Depreciation and amortization of ¥30.8B provided the foundation for OCF, while increases in accounts receivable (-¥19.1B) and inventories (-¥12.4B) were burdens on working capital. Investing Cash Flow was -¥114.1B, affected by capital expenditures of ¥65.3B as well as the deployment of funds into time deposits and other activities. Financing Cash Flow was -¥73.9B, primarily attributable to debt repayments. Free Cash Flow, calculated as the sum of OCF and Investing Cash Flow, was -¥10.0B, indicating that investment preceded cash generation during the quarter. However, cash and deposits remained ample at ¥972.9B, and there are limited concerns regarding liquidity.

Quality of Earnings

Operating Income, which reflects the earning power of the core business, constituted the core of Ordinary Income. The main components of non-operating income of ¥19.3B were foreign exchange gains of ¥4.2B and interest income of ¥6.6B. These items depend on market conditions and interest-rate levels and can therefore be considered less sustainable than Operating Income. No extraordinary gains or losses were recorded during the current period. Comparability differs because a gain on negative goodwill of ¥3.7B recorded in the previous year did not recur in the current period. OCF was more than 1.6 times Net Income, indicating strong cash backing for earnings and limited accrual-related concerns. The difference between Ordinary Income and Net Income was primarily attributable to Net Income attributable to non-controlling interests of ¥21.7B and does not undermine the quality of core earnings itself.

Earnings Forecast and Guidance

Progress against the full-year forecast was 48.3% for Revenue (¥405.9B/¥840.0B), 50.2% for Operating Income (¥77.3B/¥154.0B), and 52.4% for Ordinary Income (¥90.2B/¥172.0B). Revenue, Operating Income, and Ordinary Income had all reached approximately the standard progress benchmark of 50%, indicating steady first-half progress. No revisions were made to the earnings forecast or dividend forecast this time.

Shareholder Returns

The dividend was zero as of the end of Q2, while the full-year forecast dividend per share is ¥55. Based on forecast full-year EPS of ¥376.54, the Payout Ratio is approximately 14.6%, remaining at a conservative level. Given ample funds on hand, including OCF of ¥104.1B and cash and deposits of ¥972.9B, there are limited concerns regarding the availability of funds for dividends. No data on share repurchases has been identified.

Risk Factors

1. Differences in profitability among segments: The Operating Margin of the Semiconductor-Related Equipment and Materials segment was 3.0%, down from approximately 6.5% in the previous year, and declining demand and deteriorating profitability are weighing on company-wide margins.

2. Deterioration in working capital efficiency: Accounts receivable increased by ¥19.1B and inventories increased by ¥12.4B, tying up funds from a cash flow perspective. Trends in future collections and inventory management will be key monitoring points.

3. Temporarily high non-operating income: Foreign exchange gains of ¥4.2B and interest income of ¥6.6B, which boosted Ordinary Income, depend on market conditions and may fluctuate depending on future foreign exchange and interest-rate trends.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The company’s profitability significantly exceeds the industry median, placing it in the upper-tier group.

Growth and Capital Efficiency

The Revenue Growth Rate was slightly below the industry median but remained within the IQR and at an average level.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. Strong growth in the Prime Silicon Wafer Business (Revenue +39.0%, profit +39.1%) drove company-wide performance, clearly establishing the segment as a growth driver.

2. The decline in the profit margin of the Semiconductor-Related Equipment and Materials segment to 3.0% confirms a structure in which this segment’s lower profitability constrains improvement in the company-wide margin.

3. The conservative financial structure, with an Equity Ratio of 78.7% and long-term borrowings of ¥82.1B, enables the company to maintain financial soundness while preserving investment capacity.

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 is below Book Value per Share.
• Net assets as of the end of the quarter are used, resulting in 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 / Mechanically calculated using only publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not forecast or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release 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 discretion and responsibility, after consulting with professionals as necessary.

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