Tekscend Photomask Corp. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥61.77B
• Operating Income: ¥12.90B
• Net Income: ¥12.35B
• EPS: ¥133.82

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Texend Photomask Co., Ltd. (IFRS, consolidated) delivered modest top-line growth in FY2026 Q2 with revenue of 617.71 (100M JPY), up 3.8% YoY, while operating income declined 13.3% YoY to 128.96, indicating margin pressure amid a still-solid demand backdrop. Gross profit was 212.26, implying a gross margin of 34.4%, and EBITDA reached 200.27 with a 32.4% margin, underscoring healthy cash earnings capacity despite higher depreciation (71.31). Operating margin was approximately 20.9% (operating income/revenue), down YoY, likely reflecting cost inflation, product mix headwinds, or lower utilization. Notably, profit before tax was 154.29 and net income was 123.50 (+41.5% YoY), pointing to substantial non-operating tailwinds (about 25.3 in pre-tax contributions vs operating income) and/or changes in tax and minority interests. The reported effective tax rate of 58.1% appears inconsistent with profit before tax and net income, suggesting timing/classification effects under IFRS or differences between consolidated net profit attributable to owners and total tax expenses; we treat tax items with caution. DuPont metrics show net profit margin of 20.0%, asset turnover of 0.330, and financial leverage of 1.43x, resulting in ROE of 9.4% (reported and calculated aligned). Balance sheet strength is a key positive: total assets of 1,873.68 and total equity of 1,311.02 imply an equity ratio around 70.0%, consistent with the disclosure, and liabilities are modest at 513.70. Interest-bearing debt is minimal (short-term 3.99 and long-term 3.99), and cash & equivalents stand at 277.15, implying a substantial net cash position. Operating cash flow was 137.67, 1.11x net income, indicating acceptable earnings quality and working capital discipline. Free cash flow was negative at -84.23, driven by sizable investing cash outflows (-221.90) and capex (-194.01), consistent with capacity expansion in an asset-intensive photomask business. Financing cash flow was -145.07, reflecting aggressive shareholder returns via share repurchases (-180.00), while dividends were unreported. Accounts receivable of 276.68 and inventories of 38.25 against accounts payable of 191.05 point to a lean inventory model and a relatively short cash conversion cycle, albeit current liabilities are unreported, limiting precise liquidity ratios. Overall, the company exhibits robust core profitability and strong capital structure, with interim ROE of 9.4% supported by high margins and low leverage. However, the combination of capex-heavy investment and substantial buybacks has driven negative FCF in the period, which is manageable given the net cash balance but warrants monitoring if sustained. Data limitations (notably non-operating items, taxes, and current liabilities) constrain full ratio diagnostics; our analysis focuses on disclosed items and calculated relationships. Near term, margin normalization and capex execution are the swing factors; medium term, demand for advanced photomasks and utilization will drive returns.

Profitability Analysis

ROE_decomposition: ROE 9.4% = Net profit margin 20.0% x Asset turnover 0.330 x Financial leverage 1.43x. Profit margin is the primary driver; leverage is low, and asset turnover is modest consistent with an asset-intensive photomask business. margin_quality: Gross margin 34.4% and operating margin ~20.9% indicate strong pricing power and value-add, but the YoY decline in operating income despite +3.8% revenue suggests mix/price or cost headwinds in the period. EBITDA margin of 32.4% underscores resilient cash earnings. The gap between operating income (128.96) and PBT (154.29) implies meaningful non-operating contributions (~25.3), possibly FX gains, investment income (equity-method income 2.48), or other financial items. operating_leverage: With revenue +3.8% YoY and operating income -13.3% YoY, incremental margins turned negative this period, indicating adverse operating leverage—likely from cost inflation, higher depreciation, or lower utilization. Depreciation of 71.31 is substantial vs prior periods (not disclosed), consistent with recent capex elevating fixed cost base.

Growth Assessment

revenue_sustainability: Top-line growth of 3.8% YoY is modest for a cyclical semiconductor-related business; it likely reflects stable demand in mainstream nodes and selective strength in advanced masks. The lean inventory level (38.25) and substantial receivables (276.68) suggest shipments are steady with limited channel stuffing. profit_quality: Net income +41.5% YoY despite lower operating income points to non-operating support and/or tax/minority interest effects. OCF/NI at 1.11x supports reasonable earnings-to-cash conversion. The EBITDA base (200.27) remains strong, but the operating margin compression tempers quality. outlook: Capex of 194.01 indicates capacity/tool upgrades likely aimed at medium-term technology transitions (e.g., advanced nodes/complex masks). Near term, margins hinge on utilization, product mix, and input costs; medium term, secular demand for photomasks in leading-edge and specialty processes should support growth if capex ramps efficiently.

Financial Health

liquidity: Cash & equivalents 277.15 provide ample liquidity; current assets total 640.82 but current liabilities are unreported, so current/quick ratios are not calculable. Working capital reported as 640.82 mirrors current assets due to missing current liabilities data, so we refrain from interpreting that figure. solvency: Total equity 1,311.02 and total liabilities 513.70 imply an equity ratio near 70% and liabilities-to-equity of ~0.39x. Interest-bearing debt is minimal (total loans 7.98), indicating strong solvency and a net cash balance. capital_structure: Leverage is low with financial leverage at 1.43x (Assets/Equity). The disclosed 'debt-to-equity ratio' of 0.39x appears to represent total liabilities to equity rather than interest-bearing debt to equity; on a net debt basis the company is net cash.

Cash Flow Quality

earnings_quality: OCF 137.67 vs net income 123.50 gives an OCF/NI ratio of 1.11x, a solid conversion indicating earnings are backed by cash, though working capital components are not fully disclosed. FCF_analysis: Free cash flow is -84.23 (defined here as OCF + Investing CF), driven by heavy capex (-194.01) and broader investing outflows (-221.90). FCF shortfall appears intentional for growth/capacity rather than a deterioration in core cash generation. working_capital: Accounts receivable 276.68 and inventories 38.25 against accounts payable 191.05 suggest relatively efficient inventory management and a short cash conversion cycle. However, without full current liabilities detail, precise DSO/DIO/DPO analysis is not possible.

Dividend Sustainability

payout_ratio_assessment: Dividend amounts are unreported; payout ratios cannot be calculated. Given net income strength and net cash, the capacity to sustain ordinary dividends appears supported by fundamentals, but confirmation requires actual DPS data. FCF_coverage: With FCF negative in the period due to capex, dividend coverage (if any) would rely on the cash balance and operating inflows. This is acceptable in an investment phase but not indefinitely if elevated capex persists. policy_outlook: Shareholder return commitment is evidenced by sizeable buybacks (-180.00 in financing CF). Absent DPS disclosure, the mix of returns appears skewed to repurchases in this period; future policy likely balances capex needs with ongoing returns.

Risk Assessment

Business Risks:

• Semiconductor cycle volatility affecting photomask demand and utilization rates
• Product mix and ASP pressure, especially if leading-edge demand softens
• Execution risk on large capex programs (tool delivery, ramp yield, and qualification timelines)
• Customer concentration typical in foundry/IDM ecosystems
• Technology transition risk (e.g., complexity and cost curve for advanced masks)

Financial Risks:

• Negative FCF during investment phase if capex remains elevated
• Exposure to FX and non-operating gains/losses that can swing net income
• Potential for margin compression if depreciation and fixed costs rise faster than revenue
• Limited disclosed detail on current liabilities and interest costs constrains liquidity analysis

Key Concerns:

• Operating income decline (-13.3% YoY) despite revenue growth suggests near-term margin pressure
• Heavy capex (-194.01) driving negative FCF (-84.23), necessitating careful balance with shareholder returns
• Tax/profit classification inconsistencies (effective tax rate vs PBT/net) complicate bottom-line interpretation

Investment Implications

Key Takeaways:

• Core profitability remains strong with EBITDA margin of 32.4%, but operating leverage turned negative in the period
• ROE of 9.4% is driven by high margins and low leverage; asset turnover remains inherently modest
• Balance sheet is robust with ~70% equity ratio and minimal debt, leaving ample flexibility
• Negative FCF reflects strategic investment; sustainability depends on timely ramp and returns on capex
• Significant buybacks (-180.00) highlight active capital allocation toward shareholders

Metrics to Watch:

• Operating margin trajectory and incremental margins as utilization/mix evolve
• Capex-to-sales and ROIC on new investments
• OCF/NI conversion and FCF as capex cadence normalizes
• Order visibility and AR trends (receivables turnover) for demand health
• Non-operating items and effective tax rate normalization
• Net cash balance relative to cumulative shareholder returns

Relative Positioning: Positioned as a capital-intensive, high-barrier photomask supplier with strong balance sheet and cash earnings; near-term margins are under pressure versus prior year, but investment supports medium-term competitiveness in advanced nodes.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis