Quick View
| Metric | Current Period | Same Period of Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥1232.2B | ¥974.6B | +26.4% |
| Operating Income | ¥268.8B | ¥176.4B | +52.4% |
| Ordinary Income | ¥274.7B | ¥174.1B | +57.8% |
| Net Income | ¥180.7B | ¥128.8B | +40.3% |
| ROE | 3.1% | 2.3% | - |
Executive Summary
This earnings period delivered higher revenue and profit, primarily driven by strong growth and improved profitability in the Electronics Business, resulting in a significant improvement in earnings quality. Revenue was ¥1,232.2B (+26.4% YoY), Operating Income was ¥268.8B (+52.4%), Ordinary Income was ¥274.7B (+57.8%), and Net Income attributable to owners of the parent was ¥179.2B (+40.8%). The Operating Income margin was 21.8%, expanding by approximately 3.7pt from 18.1% in the same period of the previous year. The emergence of operating leverage, with profit growth outpacing revenue growth, was a key feature.
Factors Affecting Earnings
【Revenue】Consolidated revenue was ¥1,232.2B, up +26.4% YoY. The core Electronics segment led overall performance with revenue of ¥775.3B (+37.7%), accounting for approximately 62.9% of external sales. Ceramics also secured revenue growth at ¥243.7B (+24.3%), with both reportable segments expanding, while Other Businesses remained at ¥270.8B (+9.2%).
【Profit and Loss】Operating Income was ¥268.8B (+52.4%), growing faster than revenue. The Electronics segment recorded the highest margin at 27.6%, substantially exceeding Ceramics’ 13.2% and contributing to the increase in the company-wide margin to 21.8%. Ordinary Income was ¥274.7B (+57.8%), while Net Income was ¥179.2B (+40.8%). Extraordinary losses of ¥9.4B, mainly consisting of ¥9.4B in losses on disposal of fixed assets, somewhat restrained the Net Income growth rate relative to Operating Income and Ordinary Income. The company achieved both revenue and profit growth, confirming a sustained improvement in profitability.
Segment Analysis
The Electronics segment was the central driver of consolidated profit, with revenue of ¥775.3B (+37.7%), segment profit of ¥213.8B (+52.4%), and a margin of 27.6%. Ceramics recorded revenue of ¥243.7B (+24.3%) and profit of ¥32.2B (+53.6%), with its margin improving from approximately 10.5% in the same period of the previous year to 13.2%. Other Businesses posted revenue of ¥270.8B (+9.2%) and profit of ¥22.4B (+49.0%); although its scale is small, profitability is improving. Depreciation of idle fixed assets in Electronics of ¥8.3B was recorded as a non-operating expense and is not included in segment profit, which should be noted.
Key Financial Indicators
【Profitability】The Operating Income margin of 21.8% and Net Income margin of 14.7% both improved year on year. Beginning with a Gross Profit margin of 36.4%, the containment of the SG&A expense ratio at 14.6% contributed to the increase in Operating Income.【Cash Quality】Operating Cash Flow (OCF) was ¥958.9B, reaching 5.3 times Net Income and indicating cash generation exceeding accounting profit. However, the ¥735.8B increase in advances received made a significant contribution, and caution is warranted when assessing this as a recurring level.【Investment Efficiency】ROE remained at 3.1%, primarily due to the low Total Asset Turnover ratio. Construction in progress of ¥1,208.5B accounted for 27.7% of property, plant and equipment, with capacity expansion investment temporarily suppressing asset efficiency.【Financial Soundness】The Equity Ratio was 54.9% and the Current Ratio was 182.6%, both at high levels, while cash and deposits of ¥3,733.7B exceeded current liabilities. Cash was approximately 6 times the ¥610.0B in long-term borrowings, indicating conservative financial leverage.
Cash Flow Analysis
Operating Cash Flow (OCF) was ¥958.9B, increasing substantially by +902.8% YoY and reaching 5.3 times Net Income of ¥179.2B. The primary driver of this increase was the ¥735.8B increase in advances received, with working capital factors associated with contract progress making a significant contribution. Meanwhile, inventories increased by ¥55.0B, using cash, while trade receivables decreased by ¥26.8B, providing a positive contribution. Investing Cash Flow was an outflow of ¥161.3B, primarily consisting of ¥157.5B in capital expenditures. Financing Cash Flow was an outflow of ¥33.0B, mainly due to dividend payments. Free Cash Flow amounted to ¥797.6B, securing a level well above capital expenditures and dividends. Nevertheless, it should be noted that OCF volatility may increase when the effects of the increase in advances received reverse.
Quality of Earnings
While recurring earnings power remains solid, extraordinary losses of ¥9.4B, including ¥9.1B in losses on disposal of fixed assets, were recorded, somewhat restraining the Net Income growth rate relative to Operating Income and Ordinary Income. Non-operating income of ¥18.8B consisted of ¥4.1B in dividends received, ¥3.9B in foreign exchange gains, and other items. Each was limited in scale, and their impact on Ordinary Income was minor. Although cash conversion of earnings was favorable, as OCF substantially exceeded Net Income, the primary driver was the working capital factor of increased advances received. Accordingly, caution is warranted because this includes a temporary boost from an accruals perspective. Comprehensive Income was ¥191.9B, close to Net Income of ¥180.7B. Valuation differences on other securities of ¥37.1B and foreign currency translation adjustments of ¥27.3B were positive contributors, while deferred hedge gains or losses of △¥53.2B were a negative contributor.
Earnings Forecast and Guidance
The full-year company plan calls for Revenue of ¥5,500.0B (+32.1% YoY), Operating Income of ¥1,270.0B (+104.7%), and Ordinary Income of ¥1,270.0B (+108.8%). The Q1 achievement rates were 22.4% for Revenue, 21.2% for Operating Income, and 21.6% for Ordinary Income, all slightly below the simple one-quarter progress rate of 25%. The full-year plan assumes a doubling of Operating Income, making acceleration of profit growth toward the second half of the fiscal year the key to achieving the plan. The company has also disclosed that revisions to its earnings forecast and dividend forecast were made during the quarter.
Shareholder Returns
Dividends paid during the quarter were ¥42.0B, representing a Payout Ratio of approximately 23.4% against Net Income attributable to owners of the parent of ¥179.2B. Share repurchases were minimal at ¥0.04B, leaving the Total Return Ratio at approximately 23.4%, nearly the same level as the Payout Ratio. Given the financial capacity represented by cash and deposits of ¥3,733.7B and Free Cash Flow of ¥797.6B, the company has a substantial foundation supporting dividend sustainability. The company has disclosed that the presentation of dividends per share has been adjusted in connection with the stock splits effective January 2026 and scheduled for October 2026 (2 shares for each 1 share), and that annual dividend amounts cannot be compared on a simple basis.
Risk Factors
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Business concentration risk: The Electronics segment accounts for 62.9% of Revenue and approximately 80% of segment profit, creating a structure in which demand fluctuations in this business and customers’ capital expenditure cycles could significantly affect consolidated results.
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Investment recovery and utilization risk: Construction in progress amounted to ¥1,208.5B, accounting for 27.7% of property, plant and equipment, indicating that capacity expansion investment is underway. Key points to monitor include utilization rates and investment recovery after completion, as well as trends in idle assets, as indicated by the ¥8.3B in depreciation of idle fixed assets in the Electronics segment.
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Cash flow quality and working capital fluctuations: The significant increase in OCF depends heavily on the ¥735.8B increase in advances received. If this factor reverses, OCF could fluctuate more than earnings. Trends in trade receivables and inventories should also be closely monitored.
Industry Benchmark (For Reference; Compiled by the Company)
Industry Benchmark (manufacturing)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Income margin | 21.8% | 8.7% (4.2%–14.3%) | +13.1pt |
| Net Income margin | 14.7% | 7.1% (3.2%–10.6%) | +7.5pt |
The company’s profitability substantially exceeds the industry median and is positioned at a high level.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue growth rate (YoY) | 26.4% | 6.2% (-1.1%–14.6%) | +20.2pt |
The Revenue growth rate is also positioned in the upper tier of the industry, with the company expanding at a pace substantially above the industry average.
※Source: Compiled by the Company
Key Takeaways from the Earnings
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The Operating Income margin of 21.8% and Net Income margin of 14.7% are substantially above the industry median, with the improved profitability of the Electronics segment, at a margin of 27.6%, driving company-wide profitability.
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The full-year plan assumes a +104.7% increase in Operating Income, while the Q1 achievement rate of 21.2% is slightly below the simple progress rate of 25%. Acceleration of profit growth in the second half of the fiscal year will be a key factor in assessing achievement of the plan.
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Construction in progress of ¥1,208.5B indicates future production capacity expansion, while suppressing asset efficiency, as reflected in the low Total Asset Turnover ratio. The conversion into Revenue and profit after operations commence will be a medium-term focus.
Theoretical Share Price (Reference Value)
| Scenario | Theoretical Share Price |
|---|---|
| bear (bearish) | ¥1,948 |
| base (base case) | ¥2,010 |
| bull (bullish) | ¥2,032 |
| Assumption | Value |
|---|---|
| Book value per share (BPS) | ¥2,066 |
| Adjusted forecast EPS | ¥172.1 |
| Cost of Equity r | 9.27% (10-year government bond 2.77% + equity risk premium 6.00% + size premium 0.50%) |
| Persistence coefficient of residual income ω / Explicit forecast period | 0.62 / 5 years |
| Assumed Payout Ratio | 30.0% |
| Forecast EPS confidence adjustment | ×1.150 (based on the Company’s historical guidance achievement rate) |
| implied PBR / PER | 0.97x / 11.7x |
Sensitivity: ¥1,954–¥2,069 at Cost of Equity ±1%, and ¥2,009–¥2,012 at ω ±0.1.
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 gap 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 the future share price.)
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 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 advisor as necessary.
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AI Financial Analysis
Executive Summary
Ibiden delivered a very strong FY2027 Q1 result, led by rapid growth and operating leverage in its Electronics business. Revenue rose 26.4% year on year to ¥123.2bn. Operating income increased 52.4% to ¥26.9bn, materially outpacing sales growth. Profit attributable to owners of parent grew 40.8% to ¥17.9bn. The gross margin was 36.4%, up approximately 40bp from 36.0% a year earlier. The operating margin expanded 370bp to 21.8% from 18.1%, demonstrating substantial fixed-cost absorption. The net profit margin increased by approximately 140bp to 14.5%. SG&A expense rose only 3.2% year on year to ¥18.0bn, well below revenue growth, and was the principal driver of the operating-margin expansion. Electronics revenue increased 37.7% to ¥77.5bn and segment profit rose 52.4% to ¥21.4bn. Electronics accounted for approximately 80% of reported segment profit and remains the core business. Ceramic revenue increased 24.3% to ¥24.4bn, while segment profit increased 53.6% to ¥3.2bn. Other businesses recorded revenue of ¥21.3bn and segment profit of ¥2.2bn. Operating cash flow was exceptionally high at ¥95.9bn, compared with ¥17.9bn of net income, producing free cash flow of ¥79.8bn after ¥15.7bn of capital expenditure. This cash-flow surplus was predominantly supported by a ¥73.6bn increase in advances received, so it should not be treated as entirely recurring cash generation. Management's full-year forecast calls for revenue of ¥550.0bn, operating income of ¥127.0bn, and profit attributable to owners of ¥84.0bn. Q1 progress of 22.4% for revenue, 21.2% for operating income, and 21.3% for parent profit is modestly below a straight-line 25% benchmark but does not constitute a material deviation. The key forward issue is whether high-margin electronics demand and customer advance receipts can remain supportive while the substantial construction-in-progress pipeline is converted into productive capacity.
Profitability Analysis
Annualized DuPont ROE is 12.3%, composed of a 14.5% net profit margin, 0.466x asset turnover, and 1.82x financial leverage. Margin is the dominant contributor to returns: the 14.5% net margin is above the 10% excellent-profitability benchmark, while the asset-turnover profile reflects the company's capital-intensive manufacturing base. The largest year-on-year improvement was in operating profitability, with operating margin rising 370bp to 21.8%, rather than a balance-sheet-driven increase in leverage. Gross margin improved by about 40bp to 36.4%, indicating that the margin gain was not solely generated below gross profit. SG&A grew only 3.2%, versus 26.4% revenue growth, lowering the SG&A-to-sales ratio from 17.9% to 14.6% and evidencing strong operating leverage. Electronics achieved an estimated segment margin of 27.6%, versus 13.2% in Ceramics and 10.5% in Other, underscoring its central importance to group earnings. The Electronics segment profit disclosure excludes ¥8.3bn of depreciation on idle fixed assets recorded in non-operating expenses; this charge should be monitored as it indicates some capacity is not yet fully utilized. EBITDA was ¥44.5bn and EBITDA margin was 36.1%, providing a stronger view of underlying cash-generative profitability for this capital-intensive business. The tax burden was 0.675, equivalent to a 31.9% effective tax rate, and modestly restrained conversion of pretax profit into net income. Interest burden was 0.987 and interest coverage was 123.87x, confirming that financing costs had no material effect on profitability. The ¥9.1bn loss on disposal of fixed assets reduced reported profit before tax, but represented only about 5% of parent net income; operating earnings remain predominantly recurring.
Growth Assessment
Growth quality was robust at the operating level: revenue expanded ¥25.8bn year on year, while operating income increased ¥9.2bn. Electronics generated ¥21.2bn of the ¥25.8bn group revenue increase and ¥7.3bn of the ¥9.2bn increase in segment profit, making it the main engine of current growth. Ceramics also contributed positively, with revenue growth of ¥4.8bn and segment-profit growth of ¥1.1bn. The Other segment's sales declined slightly by 1.1% year on year, but its segment profit increased 48.9%, indicating improved profitability despite limited top-line growth. Full-year guidance implies 32.1% revenue growth and 104.7% operating-income growth, which assumes the current recovery in high-margin business accelerates through the remaining quarters. Q1 operating-income progress is 21.2% against the full-year forecast, 3.8 percentage points below a 25% straight-line benchmark; this is within the 10-percentage-point materiality threshold and can be consistent with quarterly production or shipment timing. Capital expenditure of ¥15.7bn was 90% of depreciation and amortization of ¥17.6bn, indicating investment remains substantial but is not yet exceeding depreciation in the reported quarter. Construction in progress of ¥120.8bn, equivalent to 27.7% of PPE, indicates a large manufacturing investment pipeline. Successful commissioning and demand absorption for this capacity are important to sustaining sales growth and preserving the current high operating margin.
Financial Health
Liquidity is strong, with a current ratio of 182.6% and a quick ratio of 175.6%, both well above healthy benchmarks. Working capital was ¥249.2bn, supported by cash and deposits of ¥373.4bn, equivalent to 35.3% of total assets. Current assets of ¥550.8bn exceeded current liabilities of ¥301.6bn by a substantial margin, limiting short-term refinancing and maturity-mismatch risk. Total equity was ¥580.5bn and the equity ratio was 54.2%, although this was down from 57.3% a year earlier as liabilities increased faster than equity. Long-term loans were ¥61.0bn, while bonds payable were ¥45.0bn and current bonds payable were ¥15.0bn; balance-sheet liquidity is ample relative to these obligations. Reported debt-to-equity was 0.82x, below the 2.0x risk threshold, while debt/capital was a conservative 9.5%. Debt/EBITDA of 1.37x and EBITDA interest coverage of 204.92x indicate a very strong ability to service debt. Cash and deposits increased ¥77.7bn, or 26.3% year on year, to ¥373.4bn, principally reflecting strong reported operating cash inflow. Treasury stock's carrying balance narrowed by ¥1.85bn, or 53.7%, to negative ¥1.60bn, contributing modestly to equity but not representing a material capital-allocation event. Construction in progress rose ¥9.1bn year on year to ¥120.8bn and is the key balance-sheet item to monitor because it represents investment awaiting operational deployment. The high CIP ratio is a quality alert: 27.7% of PPE is under construction versus a 20% warning threshold, raising execution risk, potential commissioning delays, and the risk of underutilized assets if electronics demand weakens.
Notable B/S Changes
Cash and deposits: +¥77.7bn (+26.3%) to ¥373.4bn - strengthened liquidity, largely reflecting the exceptionally high reported operating cash inflow. Construction in progress: +¥9.1bn (+8.1%) to ¥120.8bn - substantial investment pipeline; at 27.7% of PPE, commissioning timing and return on investment require close monitoring. Treasury stock: +¥1.85bn (+53.7%, less negative) to -¥1.60bn - reduced treasury-stock carrying balance modestly supported equity, without material repurchase spending in Q1. Total liabilities: +¥73.2bn (+18.2%) to ¥476.2bn - increase was concentrated in current operating liabilities, including advances received, which supported cash flow but may reverse with order fulfillment.
Cash Flow Quality
Reported operating cash flow was ¥95.9bn, equal to 5.35x profit attributable to owners of ¥17.9bn, and free cash flow was ¥79.8bn after ¥15.7bn of capital expenditure. The negative 7.4% accruals ratio and 2.16x OCF/EBITDA cash-conversion ratio are favorable indicators of cash realization in the reported period. However, the principal source of the unusually strong operating cash flow was a ¥73.6bn increase in advances received. This working-capital inflow materially exceeds the period's net income and means that cash conversion should be normalized when assessing recurring free-cash-flow capacity. Other operating-cash-flow support came from a ¥4.5bn increase in trade payables and a ¥2.7bn reduction in trade receivables. Inventories increased by ¥5.5bn, creating a partial offset to these favorable working-capital movements. Capital expenditure was below depreciation, at a 0.90x CapEx/depreciation ratio, while the large CIP balance indicates that investment commitments continue despite the Q1 cash surplus. The company paid ¥4.2bn of cash dividends and spent only ¥0.04bn on share repurchases, both readily covered by reported free cash flow. The receivables quality alert requires attention: annualized DSO was 61 days, above the 60-day warning threshold. This suggests slower collection than the manufacturing benchmark and may lengthen the cash-conversion cycle if customer payment timing does not improve. The current quarter's receivables balance of ¥82.0bn, plus electronically recorded monetary claims of ¥3.4bn, should therefore be assessed alongside the sustainability of advance receipts rather than in isolation.
Dividend Sustainability
Cash dividends paid were ¥4.2bn in FY2027 Q1, while reported free cash flow was ¥79.8bn, indicating very strong near-term cash coverage. The modest ¥0.04bn of share repurchases means capital returns in the quarter were overwhelmingly dividend-based. The company has revised its dividend information in connection with planned share splits, and the stated split-adjusted per-share presentation means period-to-period DPS comparisons require careful normalization. The balance sheet, including ¥373.4bn of cash and deposits, strong liquidity ratios, and low debt/capital of 9.5%, provides substantial financial flexibility for dividends. Dividend sustainability should nevertheless be evaluated against normalized cash flow because Q1 operating cash flow included a large ¥73.6bn advance-receipt inflow. The sizeable construction-in-progress balance also means a portion of internal cash generation may be required to complete and ramp strategic manufacturing assets. On reported Q1 cash flow, dividend funding capacity is strong; the durability of that capacity depends on electronics earnings, customer deposits, and capital-investment requirements.
Risk Assessment
Business risks include Electronics concentration: Electronics produced approximately 80% of segment profit and earned a 27.6% segment margin. A downturn in advanced semiconductor-package demand, customer order patterns, or product mix would have a disproportionate impact on consolidated earnings., Capacity execution risk: Construction in progress was ¥120.8bn, or 27.7% of PPE, above the 20% quality-alert threshold. Delayed start-up, cost overruns, yield issues, or insufficient demand during ramp-up could depress returns on invested capital., Receivables collection risk: Annualized DSO of 61 days exceeds the 60-day warning level. Slower customer collections could reverse part of the quarter's favorable working-capital position and increase cash-conversion-cycle pressure., Manufacturing utilization risk: ¥8.3bn of idle fixed-asset depreciation was recorded in non-operating expenses for Electronics. This indicates that some assets are not yet fully productive and exposes earnings to utilization and demand volatility., Technology and supply-chain risk: As an electronics materials and component manufacturer, the group is exposed to semiconductor-cycle volatility, qualification requirements, customer concentration, raw-material and energy cost movements, and production-quality risks..
Financial risks include Working-capital reversibility: The ¥73.6bn increase in advances received was the central contributor to ¥95.9bn of operating cash flow. Lower future advances or delivery against prepaid orders could substantially reduce operating cash flow even if accounting profit remains solid., Capital intensity: PPE represented 41.3% of total assets and the construction program is significant. Asset returns depend on timely commissioning and a sustained utilization level., Foreign-exchange sensitivity: Q1 included ¥3.9bn of foreign-exchange gains. Although small relative to operating income at approximately 1.4%, currency movement can affect export competitiveness and reported non-operating income., Balance-sheet leverage is manageable rather than aggressive, with reported D/E of 0.82x, debt/EBITDA of 1.37x, and debt/capital of 9.5%; financing risk is currently low but should be monitored as capacity investment proceeds..
Key concerns include Highest priority: conversion of the unusually high CIP balance into profitable, utilized production capacity., High priority: whether advances received remain a sustainable source of operating cash flow rather than reversing as customer deliveries occur., Moderate priority: collection discipline and the movement in DSO above the 60-day warning threshold., Moderate priority: the persistence of idle fixed-asset depreciation, which may signal a mismatch between installed capacity and near-term output., Moderate priority: preserving the current 21.8% operating margin as production mix, utilization, and competitive conditions evolve..
Investment Implications
Key takeaways include Revenue grew 26.4%, operating income grew 52.4%, and operating margin expanded 370bp to 21.8%, demonstrating powerful operating leverage., Electronics is the core earnings driver, delivering ¥77.5bn of revenue and ¥21.4bn of segment profit with a 27.6% segment margin., Reported cash generation was exceptionally strong, but the ¥73.6bn increase in advances received means free cash flow should be normalized before extrapolation., Liquidity and debt-service capacity are strong, with a 182.6% current ratio, 1.37x debt/EBITDA, and 204.92x EBITDA interest coverage., The investment case is increasingly tied to execution of the ¥120.8bn construction-in-progress pipeline and maintenance of high electronics utilization..
Metrics to watch include Electronics revenue growth, segment margin, and idle fixed-asset depreciation, Construction in progress as a percentage of PPE and the pace of asset commissioning, Customer advances received and operating cash flow excluding working-capital movements, Annualized DSO and trade-receivable balances, CapEx/depreciation and free cash flow after capacity-expansion spending, Progress toward the ¥550.0bn revenue and ¥127.0bn operating-income full-year forecasts.
Regarding relative positioning, Ibiden exhibits above-benchmark profitability for a capital-intensive manufacturer, with a 21.8% operating margin, 14.5% net margin, and 36.1% EBITDA margin. Its liquidity and debt metrics are also conservative. Relative performance is therefore strong, but it carries a higher-than-normal execution sensitivity due to the large capacity build-out, elevated receivable days, and cash flow that was materially enhanced by customer advances.