TAIYO HOLDINGS (4626) FY2026 Q3 Earnings Report

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Executive Summary

For the cumulative Q3 ended March 2026, the Company delivered higher revenue and profit, with Operating Income growing substantially faster than Revenue, confirming a marked improvement in profitability. Revenue was ¥1,037.4B (¥906.8B in the same period of the previous year, +¥130.6B, +14.4%), Operating Income was ¥245.7B (¥180.2B, +¥65.5B, +36.4%), Ordinary Income was ¥242.2B (¥177.5B, +36.5%), and Net Income was ¥174.5B (¥129.7B, +34.6%). The background to the significant outperformance of profit growth relative to revenue growth was operating leverage resulting from an improved gross margin and a lower SG&A ratio.

Factors Affecting Earnings

【Revenue】Revenue was ¥1,037.4B, up +14.4% year on year. The core Electronics Business recorded a +14% increase in revenue, driven by higher demand for materials for PKG substrates for memory applications and increased sales volume of materials for rigid substrates for automotive and smartphone applications. The Pharmaceutical Business also recorded a +14% increase in revenue, owing to the full-scale commencement of new contract manufacturing projects and increased contract manufacturing from existing customers. Meanwhile, the average exchange rate was ¥149.3, representing yen appreciation of ¥3.6 year on year, which had a negative impact on revenue growth.

【Profit and Loss】Operating Income was ¥245.7B, up +36.4% year on year, substantially exceeding the revenue growth rate. The gross margin improved to 48.8% from 47.6% in the same period of the previous year, while the SG&A ratio declined to 25.1% from 27.8%, resulting in a significant expansion of the Operating Income margin to 23.7%. Ordinary Income was ¥242.2B (+36.5%), with only a small gap from Operating Income, reflecting the earning power of the core business. Extraordinary items included extraordinary gains of ¥7.2B, mainly gains on the liquidation of subsidiaries, and extraordinary losses of ¥8.2B; the net impact was limited to approximately ¥1B negative, indicating a limited effect from temporary factors. Net Income of ¥174.5B showed only a small divergence from Ordinary Income, suggesting that the increase in profit was derived from the core business. In conclusion, the Company achieved higher revenue and higher profit.

Segment Analysis

The Electronics Business generated Revenue of ¥711.7B (68.6% of total), Operating Income of ¥217.7B, and a profit margin of 30.6%, making it the core business and the principal contributor to both Company-wide revenue and profit. The Pharmaceutical Business generated Revenue of ¥280.6B (27.0% of total), Operating Income of ¥40.5B, and a profit margin of 14.4%. The primary driver of the Company-wide increase in profit was expanding demand for materials for PKG substrates in the Electronics Business, while the Pharmaceutical Business also contributed to profit growth as its profit margin improved year on year due to the expansion of contract manufacturing. The profit margins of the two segments differ by approximately 16pt, highlighting the Company’s high degree of earnings dependence on the Electronics Business.

Key Financial Indicators

Profitability: ROE 21.8%, Operating Income margin 23.7%
Investment efficiency: Comparison data for capital expenditures and depreciation are not available within the disclosed information; therefore, this item is omitted.
Financial soundness: Equity Ratio 55.5% (53.6% in the previous year), Current Ratio 265.4%
Per-share indicators: EPS ¥156.93 (¥115.99 in the previous year, +35.3%), BPS ¥960.21

Cash Flow Analysis

As specific disclosure data for Operating CF, Investing CF, and Financing CF are not included in the provided materials, analysis based on the statement of cash flows is omitted. As reference information, the annualized days sales outstanding were 94 days, inventory days were 110 days, and the cash conversion cycle was 151 days, all exceeding commonly used cautionary thresholds of 60 days, 90 days, and 120 days, respectively. The increase in revenue may have resulted in greater funds being tied up in working capital.

Quality of Earnings

The difference between Ordinary Income of ¥242.2B and Net Income of ¥174.5B was primarily attributable to income taxes and other taxes of ¥66.7B. The divergence between the two remained within 10%, with no particular anomaly. Non-operating income of ¥10.5B was only approximately 1.0% of Revenue, indicating limited materiality. However, gains on the sale of marketable securities of ¥5.2B accounted for approximately half of non-operating income and included a non-recurring element. Accounts receivable increased by 27.4%, exceeding the 14.4% growth in Revenue. From an accrual perspective, this may indicate a slight deterioration in the speed of cash conversion from earnings, warranting monitoring.

Earnings Forecast and Guidance

Progress toward the full-year forecasts (Revenue of ¥1,330.0B, Operating Income of ¥296.0B, and Ordinary Income of ¥291.0B) was 78.0% for Revenue, 83.0% for Operating Income, and 83.2% for Ordinary Income, all exceeding the standard Q3 cumulative progress rate of 75%. Based on its Q3 results, the Company raised its full-year earnings forecasts, with Operating Income revised upward by +¥27B versus the previous forecast. The Electronics Business’s Q4 forecast was left unchanged, and the upward revision primarily reflected strong results through the first half.

Shareholder Returns

The Q2 dividend was ¥165 per share. The Payout Ratio (dividend payments ÷ Net Income of ¥174.5B) was approximately above 110%, representing a dividend level exceeding Net Income for the period. As no share repurchases could be confirmed from the materials, the Total Return Ratio is not calculated. Retained earnings of ¥773.1B and cash and deposits of ¥395.1B provide financial support for the dividend payment.

Catalysts

【Short term】Achievement of the Company’s Q4 forecast, particularly the demand trend in the Electronics Business and the divergence between the actual exchange rate and the assumed rate of ¥145.0/USD. 【Long term】Expansion of new contract manufacturing clients in the Pharmaceutical Business’s contract development and manufacturing organization (CDMO) operations, and the development status of floating solar power generation projects by Taiyo Green Energy.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Profitability metrics substantially exceed the industry median, placing the Company in the high-profitability group within the manufacturing industry.

Growth and Capital Efficiency

The revenue growth rate also substantially exceeds the industry median, placing the Company in the high-growth group within the industry.

※Source: Compiled by the Company

Risk Factors

1. Working capital cycle extension: Days sales outstanding of 94 days, inventory days of 110 days, and a cash conversion cycle of 151 days all exceed commonly used cautionary thresholds. Accounts receivable increased 27.4% year on year, exceeding the revenue growth rate of 14.4%, and changes in collection efficiency could affect capital efficiency.

2. Foreign exchange fluctuations: The average exchange rate for the period was ¥149.3, representing yen appreciation of ¥3.6 year on year and acting as a constraint on revenue growth. The divergence between the actual exchange rate and the assumed Q4 exchange rate of ¥145.0 could affect earnings.

3. Payout Ratio level: Based on the interim dividend of ¥165 per share, the Payout Ratio exceeds Net Income, which could affect the flexibility of shareholder returns if profit growth slows.

Key Takeaways from the Earnings

1. The Operating Income margin expanded to 23.7% from 19.9% in the same period of the previous year, clearly demonstrating the effect of operating leverage from an improved gross margin and a lower SG&A ratio. The Electronics Business’s profit margin of 30.6% is driving Company-wide profitability.

2. The 83.0% progress rate for Operating Income against the full-year forecast exceeds the standard progress rate of 75%, and the Company raised its full-year forecast based on its Q3 results.

3. The extension of the working capital cycle accompanying increases in accounts receivable and inventory (CCC of 151 days) remains an item requiring continuous monitoring from the perspective of capital efficiency during a period of revenue growth.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,268–¥1,345 at ±1% for the cost of equity, and ¥1,297–¥1,320 at ω±0.1.

Notes:

• As the progress of Net Income against the full-year forecast (87%) exceeds the standard level (75%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies whose progress is ahead of schedule tend to outperform their forecasts; the adjustment may be excessive for businesses with strong seasonality).
• Net assets as of the quarter-end have been used (there is a timing difference relative to the full-year forecast).

(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 through AI-based integrated analysis of XBRL earnings summary data and PDF earnings presentation materials. 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 a professional as necessary.

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