IBIDEN (4062) FY2026 Q3 Earnings Report

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Executive Summary

Revenue and earnings increased, primarily driven by expanding demand in the Electronics segment, confirming profit growth supported by operating leverage. Revenue was ¥2,986.2B (¥2,703.4B in the same period of the previous year, +10.5%), Operating Income was ¥445.3B (¥348.6B, +27.7%), Ordinary Income was ¥436.3B (¥359.1B, +21.5%), and Net Income was ¥313.3B (¥250.7B, +25.0%). Operating Income growth significantly outpaced Revenue growth, and the Operating Income margin improved by approximately 2pt from the same period of the previous year to 14.9%.

Factors Affecting Business Performance

【Revenue】Revenue was ¥2,986.2B, up +10.5% YoY, with the core Electronics segment leading overall growth through an +18.2% increase in Revenue to ¥1,719.2B. In contrast, Other Businesses and Ceramics declined by ▲3.6% and ▲1.9%, respectively, indicating that growth is concentrated in the Electronics Business. The Electronics segment accounted for 57.6% of total Revenue, representing nearly the entire increase in consolidated Revenue.

【Profit and Loss】Operating Income increased +27.7% to ¥445.3B, primarily because profit in the Electronics segment rose substantially by +65.9% (19.2% margin). In contrast, Ceramics profit declined ▲36.8% (9.7% margin), while Other Businesses profit declined ▲6.8% (7.3% margin), further increasing the earnings structure’s dependence on the Electronics Business. Extraordinary gains and losses were nearly offset, with gains of ¥83.0B and losses of ¥87.3B (net ▲¥4.3B); subsidy income and impairment losses on fixed assets correspond to each other and did not contribute to an increase in Net Income. The difference between Ordinary Income and Net Income was attributable to the ¥118.7B burden of income taxes and other taxes, with the effective tax burden rate approximately 27.5% against pretax income of ¥432.0B. In conclusion, the company achieved higher Revenue and earnings, and the quality of earnings growth is favorable as it was led by Operating Income.

Segment Analysis

The Electronics segment formed the core of company-wide profit, with Revenue of ¥1,719.2B (+18.2%), profit of ¥330.4B (+65.9%), and a profit margin of 19.2% (an improvement of approximately 5.5pt from 13.7% in the previous year). Ceramics posted Revenue of ¥610.0B (▲1.9%), profit of ¥59.0B (▲36.8%), and a profit margin of 9.7% (a decline of approximately 5.3pt from 15.0% in the previous year), indicating deteriorating profitability. Other Businesses recorded Revenue of ¥757.1B (▲3.6%), profit of ¥54.9B (▲6.8%), and a profit margin of 7.3%, remaining broadly flat. Company-wide profit growth was accompanied by a concentration of profit in the Electronics Business, while the diversification benefits of the business portfolio relatively weakened during the current period.

Key Financial Indicators

【Profitability】The Operating Income margin of 14.9% (12.9% in the previous year) and Net Income margin of 10.5% (9.3% in the previous year) both improved, while the gross margin remained at the high level of 32.1%. 【Cash Flow Quality】Operating Cash Flow (OCF) was ¥726.9B, equivalent to 2.32 times Net Income attributable to owners of the parent of ¥313.3B, indicating strong cash backing for earnings. 【Investment Efficiency】ROE was 5.7% and the Equity Ratio was 52.1%; asset expansion through capital expenditures of ¥801.2B (1.80 times depreciation and amortization of ¥444.9B) has weighed on capital efficiency. 【Financial Soundness】Cash and deposits of ¥3,407.2B exceeded interest-bearing debt of ¥1,700.0B, while current assets of ¥5,047.2B substantially exceeded current liabilities of ¥2,592.3B, indicating a stable financial foundation.

Cash Flow Analysis

Operating Cash Flow was ¥726.9B, up +6.6% YoY, increasing in line with Net Income growth. In terms of working capital, the ¥59.2B increase in trade payables made a positive contribution, while increases of +¥36.5B in inventories and +¥13.0B in trade receivables absorbed cash, indicating an expansion in working capital accompanying higher Revenue. Investing Cash Flow was an outflow of ¥804.1B, most of which consisted of capital expenditures of ¥801.2B, reflecting proactive investment to expand production capacity. As a result, free cash flow was negative at ¥77.2B; however, the reason OCF did not cover investments can be interpreted as the front-loading of investments rather than insufficient investment. Financing Cash Flow was an outflow of ¥474.1B, mainly consisting of cash outflows for dividend payments and debt repayments, while share repurchases were minimal at ¥0.1B.

Earnings Quality

The increase in current-period profit was supported by growth in Operating Income, with limited reliance on one-time factors. Extraordinary income of ¥83.0B and extraordinary losses of ¥87.3B were nearly offset, resulting in a net loss of ¥4.3B; therefore, they did not contribute to an increase in Net Income. Non-operating income of ¥35.4B was approximately 1.2% of Revenue, primarily consisting of dividend income of ¥10.3B and interest income of ¥19.9B, and remained at a scale that supplemented Operating Income. Comprehensive income was ¥592.0B, substantially exceeding Net Income of ¥313.3B. The difference was attributable to foreign currency translation adjustments of ¥147.0B and valuation difference on securities of ¥132.4B, indicating that valuation-related factors separate from the business’s recurring earnings power boosted comprehensive income.

Earnings Forecast and Guidance

The full-year company forecasts are Revenue of ¥4,200.0B (+13.7%), Operating Income of ¥610.0B (+28.1%), and Ordinary Income of ¥570.0B (+19.0%), with no revision to the earnings forecasts. Progress rates were 71.1% for Revenue, 73.0% for Operating Income, and 76.6% for Ordinary Income. Revenue of ¥1,213.8B and Operating Income of ¥164.7B will be required in Q4, implying a required Operating Income margin of 13.6%. As this is below the 14.9% for the cumulative Q3 period, the hurdle for achieving the full-year plan is not relatively high.

Shareholder Returns

The Q2 dividend was ¥30.00 per share, and the Payout Ratio (total dividends ÷ Net Income attributable to owners of the parent of ¥313.3B) was approximately 27%. Share repurchases were minimal at ¥0.1B, making dividends the primary form of shareholder returns. In addition, a 2-for-1 stock split of common shares was conducted effective January 1, 2026, and the forecast year-end dividend for the fiscal year ending March 2026 is presented after reflecting the split. Without reflecting the split, the year-end dividend would be ¥20.00 and the annual dividend would be ¥50.00. Although the Payout Ratio is below the benchmark for sustainability, free cash flow was negative during the current period; therefore, the funding source for dividends is supported by financial capacity, including cash and deposits of ¥3,407.2B.

Risk Factors

1. Concentration of profit in the Electronics segment: The Electronics segment’s profit margin of 19.2% drives the company-wide profit margin of 14.9%, and Electronics accounts for approximately 80% of segment profit (¥330.4B / approximately ¥444.3B). The business structure is susceptible to fluctuations in semiconductor-related demand.

2. Utilization risk associated with large-scale capital expenditures: Capital expenditures of ¥801.2B reached 1.80 times depreciation and amortization of ¥444.9B and accounted for most of Investing Cash Flow. Depending on the timing of investment commencement and demand trends, future depreciation and amortization expenses and asset efficiency could be affected.

3. Widening profitability gap by business: Profitability deteriorated in Ceramics (9.7% profit margin, ▲5.3pt YoY) and Other Businesses (7.3% profit margin). If declining profitability outside Electronics continues, the diversification benefits of the business portfolio may weaken.

Industry Benchmark (Reference; Company Analysis)

Industry Benchmark (manufacturing)

Profitability and Returns

Both the Operating Income margin and Net Income margin substantially exceeded the industry median, placing the company in the upper group within the industry.

Growth and Capital Efficiency

The Revenue growth rate also substantially exceeded the industry median, placing the company among the industry’s higher-growth companies.

※Source: Company analysis

Key Points from the Earnings Results

1. The Electronics segment’s profit margin improved by approximately 5.5pt from the previous year, becoming the primary driver of the expansion in the company-wide Operating Income margin. Whether this improvement is structural or attributable to temporary demand factors will need to be confirmed through future trends.

2. Capital expenditures exceeded OCF, resulting in negative free cash flow; however, CapEx reached 1.80 times depreciation and amortization, indicating the front-loading of capacity expansion investment rather than insufficient investment. The timing of the commencement of operations for construction in progress will determine future asset efficiency.

3. While the Net Income progress rate of 83.8% exceeds the standard full-year forecast progress rate of 75%, the required Operating Income margin of 13.6% in Q4 is below the cumulative current-period result. Accordingly, the earnings hurdle for achieving the full-year plan is not high.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,830–¥1,938 at ±1% for the cost of equity, and ¥1,880–¥1,885 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 relative to 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 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 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 responsibility, after consulting with a professional adviser as necessary.

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