Quick View
| Metric | Current Period | Same Period Last Year | YoY |
|---|---|---|---|
| Revenue | ¥69.7B | ¥79.0B | −11.8% |
| Operating Income | ¥5.1B | ¥7.5B | −32.3% |
| Ordinary Income | ¥2.9B | ¥7.4B | −61.3% |
| Net Income | −¥1.0B | ¥7.7B | −113.1% |
| ROE | −0.1% | 1.3% | - |
Executive Summary
In Q1 FY2026, the Company reported lower revenue and earnings, and quarterly net income attributable to owners of the parent turned into a loss of 0.8B yen. Revenue was 69.7B yen (-11.8% YoY), Operating Income was 5.1B yen (-32.3%), and Ordinary Income was 2.9B yen (-61.3%). Net Income attributable to owners of the parent was negative 0.8B yen, representing a significant deterioration from 7.7B yen in the same period last year (on a consolidated net income basis). In addition to the increased fixed-cost burden accompanying the decline in revenue, higher non-operating expenses and tax expenses amplified the deterioration in earnings.
Factors Affecting Performance
【Revenue】Revenue was 69.7B yen, down 11.8% YoY. As the Company operates as a single segment (Thin-Film Deposition Equipment Business), fluctuations in customers’ capital expenditure timing and acceptance timing are considered the primary causes of revenue volatility. Work in progress was 166.1B yen, substantially exceeding raw materials of 40.9B yen, indicating potential for ongoing projects to be recognized as revenue, while delays in acceptance could also result in downside risk to revenue.
【Earnings】Operating Income was 5.1B yen (-32.3%), and the Operating Income margin declined to 7.3% from approximately 9.6% in the same period last year. The rate of earnings decline exceeding the rate of revenue decline indicates that the fixed-cost burden of SG&A expenses of 18.3B yen became relatively heavier amid declining revenue. Ordinary Income deteriorated to 2.9B yen (-61.3%), as non-operating expenses of 3.7B yen (equity-method investment loss, foreign exchange loss of 1.1B yen, and interest expense of 0.5B yen) exceeded non-operating income of 1.5B yen. In addition, income taxes of 3.8B yen exceeded profit before tax of 2.8B yen, resulting in an effective tax rate of 136.0%. In conclusion, the Company reported lower revenue and earnings.
Segment Analysis
The Group operates as a single segment, the Thin-Film Deposition Equipment Business, and segment-specific disclosure has been omitted.
Key Financial Indicators
【Profitability】The Operating Income margin was 7.3%, down approximately 2.3pt from approximately 9.6% in the same period last year, while the Net Income margin was negative 1.2%. Although the gross margin was maintained at 33.5%, the Operating Income margin is not high for a manufacturing company. 【Cash Flow Quality】Work in progress of 166.1B yen accounts for the majority of inventories, indicating a structure involving substantial cash tied up in manufacturing and acceptance processes. Accounts receivable were 50.1B yen, while accounts payable were 35.3B yen. 【Investment Efficiency】ROE was negative 0.1%, partly due to low sales turnover relative to total assets of 1,192.0B yen. 【Financial Soundness】The Equity Ratio was a substantial 67.6%, while short-term borrowings were limited to 4.0B yen against cash and deposits of 356.8B yen, indicating a strong financial base.
Cash Flow Analysis
As cash flow statement data has not been disclosed, cash trends are analyzed based on changes in the balance sheet. Cash and deposits were a substantial 356.8B yen, providing liquidity significantly exceeding short-term borrowings of 4.0B yen. Meanwhile, work in progress of 166.1B yen indicates cash tied up in projects under manufacture and represents a point to note from the perspective of capital efficiency. Contract liabilities (advances received) were 181.3B yen, accounting for approximately 71% of current liabilities. These funds represent advances received in connection with future obligations to provide products and services and differ in nature from financial liabilities involving cash outflows. Overall, on-hand liquidity is substantial and financial flexibility is considerable; however, the progress of converting work in progress into revenue and cash will determine future capital efficiency.
Quality of Earnings
The current-period results were strongly affected not only by a slowdown in recurring operating activities but also by non-recurring factors, namely non-operating income and expenses and the tax burden. Non-operating expenses included an equity-method investment loss, a foreign exchange loss of 1.1B yen, and interest expense of 0.5B yen, which depressed Ordinary Income. Income taxes of 3.8B yen were incurred against profit before tax of 2.8B yen, and the high effective tax rate of 136.0% was the direct cause of the shift to a net loss. Normalization of the tax burden will therefore be a key focus in evaluating future earnings. Comprehensive income was substantially positive at 240.2B yen, but most of this resulted from valuation differences on available-for-sale securities of 229.3B yen and foreign currency translation adjustments of 15.6B yen, and does not indicate an improvement in operating earnings power. Extraordinary loss consisted solely of a loss on disposal of fixed assets of 0.1B yen, with a minor impact on current-period earnings.
Earnings Forecast and Guidance
The full-year Company plan calls for revenue of 382.0B yen (+12.8% YoY), Operating Income of 62.0B yen (+85.9%), and Ordinary Income of 74.0B yen (+131.1%), anticipating substantial increases in both revenue and earnings. Q1 progress rates were only 18.2% for revenue, 8.2% for Operating Income, and 3.9% for Ordinary Income, all substantially below the simple pro rata benchmark of 25%. The Company’s plan assumes performance weighted toward the second half, and there were no revisions to the earnings forecast or dividend forecast as of the current quarter. Achieving the full-year plan will require accelerated revenue recognition from Q2 onward, improved margins, and normalization of non-operating income and expenses and the tax burden.
Shareholder Returns
The full-year dividend forecast is ¥56.00 per share, representing a planned increase from the prior-year dividend of ¥27. Based on average shares outstanding during the period of 3,987 ten thousand shares, the annual total dividend is estimated at approximately 2.3B yen, resulting in an estimated Payout Ratio of approximately 39.9% against forecast full-year net income attributable to owners of the parent of 56.0B yen. No share repurchases were confirmed; accordingly, shareholder returns are evaluated based on the Payout Ratio rather than the Total Return Ratio. Although Q1 recorded a net loss of 0.8B yen, the assessment of funds available for dividends depends on the achievement of the full-year earnings plan. Substantial on-hand liquidity of 356.8B yen in cash and deposits supports the Company’s short-term capacity to pay dividends.
Risk Factors
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Single-business and demand volatility risk: The Company operates as a single segment, the Thin-Film Deposition Equipment Business, and fluctuations in customers’ capital expenditure timing and acceptance timing directly affect revenue of 69.7B yen (-11.8% YoY).
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Risk of prolonged working capital retention: Work in progress of 166.1B yen accounts for the majority of inventories and could lead to cash being tied up and inventory valuation risk if manufacturing or acceptance is prolonged or specifications are changed.
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Non-operating income and expense and tax burden risk: The foreign exchange loss of 1.1B yen is equivalent to approximately 21.8% of Operating Income of 5.1B yen. In addition, the high effective tax rate of 136.0% has been a direct cause of the net loss for the period.
Industry Benchmark (For Reference; Company Analysis)
Key Points from the Earnings Results
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The Operating Income margin was 7.3%, down approximately 2.3pt YoY. The decline in Operating Income of -32.3%, exceeding the revenue decline rate of -11.8%, indicates the heavy fixed-cost burden amid declining revenue.
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The full-year plan assumes substantial increases in revenue and earnings (Operating Income +85.9%); however, Q1 progress rates for Operating Income and Ordinary Income were 8.2% and 3.9%, respectively, substantially below the standard progress rate of 25%. The extent to which performance recovers in the second half will therefore be the focus going forward.
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The increase in Comprehensive Income to 240.2B yen was mainly attributable to valuation differences on securities and foreign currency translation adjustments. It must therefore be evaluated separately from a recovery in the core earnings represented by Operating Income, Ordinary Income, and Net Income.
Theoretical Share Price (Reference Value)
| Scenario | Theoretical Share Price |
|---|---|
| bear | ¥1,860 |
| base | ¥1,894 |
| bull | ¥1,943 |
| Calculation Assumption | Value |
|---|---|
| Book Value Per Share (BPS) | ¥2,025 |
| Adjusted Forecast EPS | ¥150.5 |
| Cost of Equity r | 9.77% (10-year government bond 2.77% + equity risk premium 6.00% + size premium 1.00%) |
| Persistence Factor for Residual Income ω / Explicit Forecast Period | 0.62 / 5 years |
| Assumed Payout Ratio | 39.9% |
| Forecast EPS Confidence Adjustment | ×1.071 (based on the track record of guidance achievement rates in the same industry) |
| implied PBR / PER | 0.94x / 12.6x |
Sensitivity: ¥1,842–¥1,948 at ±1% in the cost of equity, and ¥1,890–¥1,897 at ±0.1 in ω.
Notes:
- As forecast ROE is below the cost of equity, the theoretical value is below book value per share.
- Net assets as of the quarter-end are used (there is a timing gap relative to the full-year forecast).
- As net assets include non-controlling interests, the theoretical value may be calculated somewhat above the appropriate level.
(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / This is a mechanically calculated value based solely on publicly disclosed data and is not a forecast of the market share price or a recommendation of any specific investment action, nor does it forecast or guarantee future share prices.)
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. 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 professionals as necessary.
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AI Financial Analysis
Executive Summary
FY2026 Q1 was a weak earnings start, with lower equipment revenue and a sharp deterioration below operating income. Revenue declined 11.8% YoY to ¥6.97bn. Operating income fell 32.3% to ¥0.51bn, materially underperforming the top-line decline. Gross profit decreased 10.6% to ¥2.34bn. Gross margin nevertheless improved by 49bp YoY to 33.5%, from 33.0% in the prior-year quarter. The gross-margin improvement indicates that direct production profitability was relatively resilient despite lower sales. Operating margin compressed by 222bp to 7.3%, from 9.6%, because SG&A declined only 1.7% to ¥1.83bn while revenue fell 11.8%. This points to negative operating leverage and a relatively fixed cost base. Ordinary income declined 61.3% to ¥0.29bn, as ¥0.37bn of non-operating expenses exceeded ¥0.15bn of non-operating income. Net income attributable to owners turned to a ¥0.82bn loss, compared with ¥8.09bn profit a year earlier. The loss was driven principally by a ¥3.81bn tax charge, equivalent to a 136.0% effective tax rate on ¥2.80bn of pre-tax profit. Foreign-exchange losses of ¥0.11bn and equity-method losses of ¥0.20bn also weakened earnings below the operating line. Comprehensive income was exceptionally strong at ¥240.22bn, but this was overwhelmingly unrealized OCI rather than operating earnings. In particular, the valuation difference on securities increased by ¥229.26bn in OCI, while foreign-currency translation adjustment OCI was ¥15.64bn. Balance-sheet liquidity remains very strong, supported by ¥356.76bn of cash and a 245.7% current ratio. However, working-capital intensity is elevated, with annualized inventory days of 408 and a 404-day cash-conversion cycle. Full-year guidance implies a substantial recovery after Q1, making order conversion, WIP release and operating-margin recovery the principal near-term earnings variables.
Profitability Analysis
The supplied annualized DuPont analysis reports ROE of -0.4%, comprising a -1.2% net profit margin, 0.234x asset turnover and 1.48x financial leverage. The negative net margin is the decisive driver of negative ROE; neither asset turnover nor leverage can offset a Q1 net loss. At the operating level, margin performance was mixed: gross margin improved 49bp YoY to 33.5%, but operating margin contracted 222bp YoY to 7.3%. The principal cause of operating-margin compression was negative operating leverage, as SG&A expense declined only 1.7% against an 11.8% revenue decline; the SG&A-to-sales ratio consequently rose to 26.2% from 23.5%, an approximately 270bp increase. Thus, the earnings setback appears more related to lower fixed-cost absorption than a deterioration in gross-profit generation. Below operating income, the interest burden was 0.549, meaning the pre-tax result retained only about 55% of EBIT after net non-operating items and extraordinary loss. Interest expense of ¥0.55bn was manageable relative to EBIT, with reported interest coverage of 9.35x, but FX losses of ¥1.11bn and equity-method losses of ¥2.01bn reduced ordinary income. The tax burden was negative at -0.292 because the ¥3.81bn tax expense exceeded pre-tax income, producing the net loss. This tax outcome is not representative of operating profitability and coincided with the large increase in deferred tax liabilities associated with security valuation gains. The modest ¥0.06bn fixed-asset disposal loss was immaterial to the earnings outcome. Capital efficiency is weak at the reported 2.3% ROIC, below the 5% caution threshold, reflecting subdued earnings against a significantly enlarged asset and equity base. Improvement in ROE and ROIC depends on restoring revenue conversion and improving SG&A absorption, rather than increasing financial leverage.
Growth Assessment
The Q1 revenue decline of 11.8% indicates a soft opening to the fiscal year for the single coating-equipment business. Gross profit declined less than revenue, supporting the view that product-level profitability held up comparatively well. However, the 32.3% reduction in operating income demonstrates that current sales volume is insufficient to absorb the cost base efficiently. WIP rose from ¥125.43bn to ¥166.07bn, while raw-material inventory decreased from ¥46.51bn to ¥40.91bn. This inventory mix suggests that production is substantially tied up in unfinished equipment rather than readily available finished output, heightening the importance of project completion, acceptance and shipment timing. Contract liabilities increased ¥66.85bn YoY to ¥181.34bn, which provides evidence of customer advances and a meaningful order-execution base. Management maintained its full-year forecast: revenue of ¥382.00bn, operating income of ¥62.00bn, ordinary income of ¥74.00bn and net income attributable to owners of ¥56.00bn. Q1 progress versus the full-year forecast is 18.2% for revenue, 8.2% for operating income, 3.9% for ordinary income and -1.5% for net income. Relative to the standard 25% Q1 pace, operating-income progress is 16.8 percentage points behind, ordinary-income progress is 21.1 percentage points behind and net-income progress is 26.5 percentage points behind. The forecast therefore requires a pronounced recovery in revenue recognition, operating leverage and below-the-line profitability over the remaining three quarters. The unchanged forecast indicates management expects the Q1 weakness to be timing-related or recoverable, but execution evidence will be needed in subsequent quarters.
Financial Health
Liquidity is robust. Current assets of ¥627.94bn exceed current liabilities of ¥255.55bn, resulting in a current ratio and quick ratio of 245.7%. Working capital totals ¥372.38bn, and cash and deposits of ¥356.76bn alone exceed current liabilities by a wide margin. Interest-bearing debt is limited to ¥4.00bn of short-term loans, equivalent to 0.5% of capital and covered 89.19x by cash. Although the short-term debt ratio is 100%, creating a technical refinancing-risk flag, the absolute refinancing risk is low because debt is very small relative to cash and equity. Total liabilities represent 32.4% of total assets, while total equity is ¥805.60bn. The reported 0.48x debt-to-equity ratio reflects total liabilities relative to equity; interest-bearing debt relative to equity is only about 0.5%. Investment securities rose ¥290.25bn YoY to ¥332.08bn and now represent 27.9% of total assets. This portfolio concentration materially increases exposure of book value and OCI to equity-market valuation movements. The balance-sheet expansion was funded largely through ¥240.22bn of comprehensive income, including sizable unrealized security valuation gains, rather than through Q1 retained earnings. Deferred tax liabilities increased from ¥32.66bn to ¥74.52bn, consistent with the valuation gains recorded in accumulated OCI. Contract liabilities of ¥181.34bn are substantial and support liquidity, but they also represent future delivery obligations requiring disciplined project execution. Lease obligations are minor, and asset-retirement obligations of ¥0.02bn are immaterial relative to total liabilities.
Notable B/S Changes
Investment securities: +¥290.25bn (+693.9%) to ¥332.08bn - now 27.9% of total assets; the increase materially raises exposure of equity and OCI to market valuation changes. Total equity: +¥229.54bn (+39.8%) to ¥805.60bn - largely supported by ¥240.22bn of comprehensive income, particularly unrealized securities valuation gains, rather than Q1 retained earnings. Contract liabilities: +¥66.85bn (+57.7%) to ¥181.34bn - customer advances support liquidity but create significant future equipment-delivery and acceptance obligations. Work in process: +¥40.64bn (+32.4%) to ¥166.07bn - indicates a larger project pipeline but contributes to elevated inventory days and execution-dependent cash conversion. Deferred tax liabilities: +¥41.86bn (+128.2%) to ¥74.52bn - consistent with unrealized valuation gains and reinforces the sensitivity of equity to investment-security market values.
Cash Flow Quality
Cash-flow quality cannot be quantified using OCF, investing cash flow or free-cash-flow measures in the supplied figures. Earnings quality at the income-statement level was weak in Q1 because net income attributable to owners was a ¥0.82bn loss despite ¥5.11bn of operating income. The divergence was driven by non-operating costs and a ¥3.81bn tax charge rather than by a collapse in gross margin. The large ¥240.22bn comprehensive-income gain does not represent operating cash generation, as ¥229.26bn arose from valuation difference on securities in OCI. Working-capital efficiency is the principal cash-conversion concern. Annualized DSO is 66 days, above the 60-day warning threshold, indicating slower collection than the stated benchmark. Annualized DIO is 408 days, far above the 90-day warning threshold. The annualized cash-conversion cycle is 404 days, substantially above the 120-day warning threshold. WIP accounts for 80.2% of inventory, versus the 40% warning threshold, indicating a long production and acceptance cycle and potential production bottleneck risk. The ¥40.64bn YoY increase in WIP amplifies the risk that cash conversion depends on timely installation, customer acceptance and revenue recognition. Conversely, the ¥66.85bn increase in contract liabilities provides customer-funded working-capital support. Subsequent quarters should demonstrate whether WIP is converted into shipments and receivables without further elongation of the cash-conversion cycle.
Dividend Sustainability
The full-year dividend forecast is ¥56.00 per share, unchanged at the time of the Q1 disclosure. Against forecast EPS of ¥140.48, the implied forecast dividend payout ratio is approximately 39.9%, below the 60% sustainability benchmark. Using 39.87 million average shares, the indicated annual cash dividend would be approximately ¥2.23bn, compared with forecast profit attributable to owners of ¥56.00bn. On forecast earnings, the dividend appears well covered. The Q1 loss means interim earnings coverage is not meaningful at this stage, so sustainability depends on delivery of the assumed second-half recovery. The large cash balance of ¥356.76bn and minimal interest-bearing debt provide a substantial liquidity buffer for shareholder distributions. However, a sizable portion of the increase in equity derives from unrealized securities valuation gains rather than retained operating earnings. Dividend capacity should therefore be evaluated primarily against recurring profit conversion and working-capital cash release rather than OCI gains. No buyback amount is provided, so no total return ratio is calculated.
Risk Assessment
Business risks include Demand and project-timing risk: Q1 revenue fell 11.8% YoY, and the maintained full-year forecast requires a material acceleration in equipment shipments and revenue recognition., Production-completion risk: WIP of ¥166.07bn, representing 80.2% of inventory, creates exposure to installation, customer-acceptance and delivery delays., Working-capital risk: annualized DIO of 408 days, DSO of 66 days and a 404-day cash-conversion cycle may constrain cash conversion if projects are delayed., Manufacturing and supply-chain risk: coating-equipment production can be exposed to procurement availability, component costs, yield issues and customer-specific project specifications., FX risk: ¥1.11bn of FX losses equaled 21.8% of operating income, exceeding the 20% exposure warning threshold and indicating earnings sensitivity to currency movements., Investment-portfolio volatility: investment securities of ¥332.08bn create material exposure to market-price movements and potential future OCI or impairment volatility..
Financial risks include Tax-rate volatility: the 136.0% effective tax rate turned a ¥2.80bn pre-tax profit into a net loss, demonstrating that below-the-line outcomes can be volatile., Capital-efficiency risk: reported ROIC of 2.3% is below the 5% caution threshold, especially relevant given the enlarged asset base., Refinancing structure risk: 100% of interest-bearing debt is short term, although the ¥4.00bn balance and 89.19x cash coverage make the practical liquidity impact limited., Financial-asset concentration: investment securities are 27.9% of total assets, and deferred tax liabilities reached ¥74.52bn following valuation gains..
Key concerns include The gap between Q1 operating-income progress of 8.2% and the standard 25% quarterly pace requires significant recovery in the remaining nine months., SG&A rigidity is evident: SG&A fell only 1.7% while revenue declined 11.8%, causing a 222bp operating-margin contraction., Ordinary income was weakened by ¥2.01bn of equity-method losses and ¥1.11bn of FX losses, making earnings more volatile than operating profit alone suggests., The exceptional OCI gain should not be interpreted as an equivalent improvement in recurring earnings or cash-generation capacity..
Investment Implications
Key takeaways include Gross margin improved to 33.5%, but negative operating leverage reduced operating margin to 7.3%., The company has substantial balance-sheet resilience, with ¥356.76bn cash, a 245.7% current ratio and only ¥4.00bn of interest-bearing debt., The investment-security portfolio expanded sharply to ¥332.08bn, increasing market-value sensitivity in equity and comprehensive income., High WIP and a 404-day annualized cash-conversion cycle make project execution and inventory monetization central to the earnings trajectory., Maintained guidance embeds a sharp post-Q1 earnings recovery and should be assessed against quarterly revenue recognition and margin progression..
Metrics to watch include Quarterly revenue and operating-income progress versus FY2026 guidance, Operating margin and SG&A-to-sales ratio, WIP balance, WIP share of inventory and annualized inventory days, Contract-liability conversion into delivered equipment and recognized revenue, Annualized DSO, DIO and cash-conversion cycle, FX gains/losses and equity-method investment income or loss, Investment-security valuation changes, OCI and deferred tax liabilities, ROIC recovery from the reported 2.3%.
Regarding relative positioning, The company is financially conservative from a cash and debt perspective, but current operating performance and working-capital efficiency are below the stated profitability and manufacturing-efficiency benchmarks. Its unusually large securities portfolio also makes reported equity and comprehensive income more sensitive to financial-market movements than a purely operating-asset-based equipment manufacturer.