SEIREN CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

The Company posted higher revenue and higher profit in Q1, driven by solid volume growth in automotive interior materials and rapid expansion in the Environmental and Lifestyle Materials Business. Revenue was ¥491.4B (+21.0% YoY), Operating Income was ¥66.7B (+23.5%), and Ordinary Income was ¥71.0B (+24.4%). Net Income attributable to owners of the parent was limited to ¥46.6B (+13.9%), as the increase in the effective tax rate (28.1%→34.3%) compressed profit growth. The increase in Operating Income resulted from Selling, General and Administrative expenses as a percentage of revenue improving to 13.7% (-2.1pt YoY), offsetting the decline in the gross margin to 27.3% (-1.7pt YoY), and can be characterized as revenue and profit growth led by cost management.

Factors Affecting Performance

【Revenue】Revenue was ¥491.4B, representing an increase of +21.0% YoY. The core Vehicle Materials Business (automotive interior materials) steadily expanded to ¥304.3B (61.9% of total revenue, YoY+10.0%), driving most of the revenue increase. Environmental and Lifestyle Materials recorded ¥60.6B (YoY+143.6%), while the Other category recorded ¥19.0B (YoY+416.0%), both marking substantial growth and demonstrating increasing diversification of the business portfolio. Electronics also grew to ¥39.7B (YoY+21.4%), while High Fashion was the only segment to report a revenue decline, at ¥52.4B (YoY-3.8%).

【Profit and Loss】Operating Income was ¥66.7B (YoY+23.5%), securing profit growth slightly above the rate of revenue growth. The gross margin declined to 27.3% from 29.0% in the previous year, a decrease of -1.7pt, but the SG&A ratio improved to 13.7%, a -2.1pt improvement, resulting in the Operating Income margin expanding to 13.6% (+0.3pt YoY). Ordinary Income was ¥71.0B (YoY+24.4%); an increase in non-operating income, including total interest and dividend income of ¥4.7B, was an upward factor, while foreign exchange losses of ¥2.1B (¥0.5B in the previous year) were a downward factor. Net Income attributable to owners of the parent was limited to ¥46.6B (YoY+13.9%). The slowdown in net profit growth relative to pre-tax profit growth (+24.7%) was attributable to the effective tax rate rising from 28.1% to 34.3%. Extraordinary income and losses consisted only of a ¥0.2B gain on the sale of fixed assets, indicating limited temporary distortion in the recurring earnings structure. Although the Company posted higher revenue and profit, the increase in the tax burden constrained growth in final profit.

Segment Analysis

Five of the six reported segments recorded both revenue and profit growth. Vehicle Materials is the core business, accounting for more than half of total Company profit, with revenue of ¥304.3B (61.9% of total revenue, YoY+10.0%) and Operating Income of ¥45.1B (YoY+8.2%, margin 14.8%). Electronics posted substantial profit growth, with revenue of ¥39.7B (YoY+21.4%) and Operating Income of ¥10.1B (YoY+60.1%); its margin improved to 25.3%, the highest level among all segments, from 19.7% in the previous year (+5.7pt). Environmental and Lifestyle Materials expanded rapidly, with revenue of ¥60.6B (YoY+143.6%) and Operating Income of ¥5.2B (YoY+131.7%), although its margin declined slightly to 8.6% from 9.3% in the previous year (-0.7pt). High Fashion was the only segment to report lower revenue, at ¥52.4B (YoY-3.8%), but profitability improved, with Operating Income of ¥4.7B (YoY+7.3%) and a margin of 9.0% (+0.9pt YoY), apparently supported by cost management. Medical grew steadily, with revenue of ¥20.8B (YoY+19.7%), Operating Income of ¥2.9B (YoY+24.7%), and a margin of 14.1%.

Key Financial Indicators

【Profitability】The Operating Income margin improved to 13.6% from 13.3% in the previous-year period, an increase of +0.3pt. The improvement in the SG&A ratio to 13.7% (-2.1pt YoY) more than offset the decline in the gross margin to 27.3% (-1.7pt YoY). The Ordinary Income margin was 14.4% (+0.4pt YoY), while the Net Income margin attributable to owners of the parent was 9.5% (-0.6pt YoY); the increase in the effective tax rate from 28.1% to 34.3% contributed to the stagnation in the net profit margin. 【Cash Flow Quality】Operating Cash Flow was ¥61.7B, approximately 1.3 times Net Income attributable to owners of the parent of ¥46.6B, indicating sound cash-generation capacity supporting earnings. Comprehensive Income was ¥68.5B, exceeding net income, primarily due to foreign currency translation adjustments of +¥20.6B; this reflects a non-recurring factor arising from the revaluation of overseas assets due to yen depreciation. 【Investment Efficiency】ROE was 2.8% (actual quarterly result, not annualized), calculated by dividing Net Income attributable to owners of the parent of ¥46.6B by average shareholders’ equity of approximately ¥1,628B. As this is a quarterly result, the annualized level would differ and should be noted. 【Financial Soundness】The Equity Ratio was 72.8%, up +1.0pt from 71.8% in the previous-year period, supported by a substantial capital base consisting of net assets of ¥1,657.6B against total assets of ¥2,278.3B. Current assets of ¥1,315.3B versus current liabilities of ¥373.2B resulted in a high current ratio of approximately 352%. Cash and deposits of ¥391.6B exceeded long-term borrowings of ¥75.5B, indicating conservative financial leverage.

Cash Flow Analysis

Operating Cash Flow was ¥61.7B, an increase of +165.6% from ¥23.2B in the previous-year period. In addition to earnings growth, the decrease in trade receivables, which contributed +¥8.5B in cash, and the increase in trade payables, which contributed +¥3.4B, supported the increase. Investing Cash Flow was -¥36.6B, primarily due to capital expenditures increasing to ¥27.9B, more than doubling from ¥12.2B in the previous year. Financing Cash Flow was -¥32.1B, with dividend payments of ¥22.3B and share repurchases of ¥6.1B representing the main cash outflows. Free Cash Flow (Operating CF + Investing CF) was ¥25.1B, down from ¥28.1B in the previous-year period, which included the impact of Investing CF being exceptionally positive. However, the substantial improvement in Operating CF absorbed the increase in capital expenditures, and the Company’s underlying cash-generation capacity strengthened from the previous year.

Quality of Earnings

Profit for the quarter was subject to limited impact from extraordinary income and losses and broadly reflected the recurring earnings structure. Extraordinary income consisted solely of a ¥0.2B gain on the sale of fixed assets, with no extraordinary loss recorded; accordingly, Ordinary Income of ¥71.0B and pre-tax income of ¥71.2B were nearly identical. Non-operating income of ¥6.6B consisted primarily of interest income of ¥2.4B and dividend income of ¥2.3B, representing stable income from financial assets. Meanwhile, most of the ¥2.3B in non-operating expenses consisted of foreign exchange losses of ¥2.1B (¥0.5B in the previous year), which weighed on profit as a non-recurring fluctuation factor. Comprehensive Income was ¥68.5B, ¥21.9B above Net Income attributable to owners of the parent of ¥46.6B; the primary source of the difference was the +¥20.6B foreign currency translation adjustment, a non-cash item arising from the translation of overseas subsidiaries into yen. The fact that net profit growth (+13.9%) fell below the growth rates of Operating Income and Ordinary Income (+23.5%, +24.4%) was attributable to an accounting and tax factor—the increase in the effective tax rate (28.1%→34.3%)—and should be evaluated separately from the Company’s underlying earnings power.

Earnings Forecast and Guidance

Progress against the full-year forecast was 25.2% for revenue (¥491.4B/¥1,953.0B), 29.5% for Operating Income (¥66.7B/¥226.0B), 30.9% for Ordinary Income (¥71.0B/¥230.0B), and 29.7% for Net Income attributable to owners of the parent (¥46.6B/¥157.0B), exceeding the quarterly benchmark of 25% in each case. In particular, progress for Ordinary Income and net income exceeded that for revenue, indicating a solid start relative to the full-year forecast. Although the earnings forecast was revised during the quarter, there was no revision to the dividend forecast, and the broad full-year outlook remains unchanged.

Shareholder Returns

The full-year dividend forecast is ¥76 per share, with no revision as of the current quarter. Based on the full-year EPS forecast of ¥267.58, the Payout Ratio is approximately 28.4% (¥76/¥267.58), consistent with the single forecast-based figure. The Company conducted share repurchases of ¥6.1B during the quarter, continuing shareholder returns in addition to dividends. Given its financial base, including an Equity Ratio of 72.8% and cash and deposits of ¥391.6B, the combined dividends and share repurchases appear to be conducted within the limits of financial soundness.

Risk Factors

1. Segment Concentration Risk: The Vehicle Materials Business (automotive interior materials) accounts for 61.9% of revenue and more than half of Operating Income, creating a structure in which performance is susceptible to supply-and-demand trends in the automotive market and changes in customers’ production plans.

2. Foreign Exchange Risk: Foreign exchange losses during the quarter were ¥2.1B, up from ¥0.5B in the previous-year period. Given the Company’s overseas operations, fluctuations in the yen exchange rate are likely to affect non-operating income and expenses.

3. Working Capital Increase Risk: Trade receivables of ¥465.9B and inventories of ¥194.7B represent substantial balance sheet balances, and the cash conversion cycle based on annualized revenue is estimated to be in the 80-day range. The accumulation of working capital accompanying revenue expansion could become a source of volatility in Operating CF.

Industry Benchmark (Reference; Compiled by the Company)

Profitability and Returns

Profitability, as measured by both the Operating Income margin and Net Income margin, is substantially above the industry median.

Growth and Capital Efficiency

The revenue growth rate is approximately 2.8 times the industry median, demonstrating a high level of growth within the industry.

※Source: Compiled by the Company

Key Points in the Financial Results

1. The improvement in the SG&A ratio (-2.1pt) exceeded the decline in the gross margin (-1.7pt), expanding the Operating Income margin to 13.6%. Structural improvement in profitability through cost management has been confirmed.

2. The Operating Income margin in Electronics rose to 25.3% (+5.7pt YoY), while Environmental and Lifestyle Materials recorded more than double-digit growth in both revenue and profit. The profit mix is improving through the expansion of high-margin businesses.

3. The effective tax rate increased from 28.1% to 34.3%, causing net profit growth (+13.9%) to fall below the growth rates at the Operating and Ordinary Income levels (+23.5%, +24.4%). Full-year progress for both revenue and profit is running above the quarterly benchmark of 25%.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade). It does not represent a forecast of the market share price or a recommendation to take any specific investment action.

Sensitivity: ¥2,778–¥2,941 at ±1% for the cost of equity, and ¥2,856–¥2,859 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).

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-06 / This value does not forecast or guarantee the future share price)

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This report is an earnings analysis document automatically generated by AI based on XBRL financial results 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 financial results data. Investment decisions should be made at your own responsibility, after consulting with professionals as necessary.

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