OPTORUN CO.,LTD. FY2026 Q2 Earnings Report

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Executive Summary

Although the Company secured revenue growth, the most important point of this financial results report is that it fell into a net loss due to non-operating losses and an abnormal tax burden. Revenue was ¥158.5B (¥138.5B in the previous year, +14.5% YoY), Operating Income was ¥10.9B (-1.9%), Ordinary Income was ¥7.2B (-35.5%), and Net Income was ¥-0.2B (¥10.3B in the previous year, -101.8% YoY). While the gross margin was maintained at 32.9% at the operating level, the primary causes of the final loss were foreign exchange losses of ¥3.2B and non-operating expenses including equity-method losses, together with the effective tax rate rising to a level exceeding profit before tax.

Factors Affecting Earnings

【Revenue】Revenue was ¥158.5B, representing a YoY increase of +14.5%. Contract liabilities (customer advances) increased by +114% YoY to ¥245.4B, confirming that orders for ongoing projects are accumulating. As the Company operates a single segment (Film Formation Equipment Business), no breakdown by segment has been disclosed.

【Profit and Loss】Operating Income was ¥10.9B, a YoY decrease of -1.9%, and the Operating Income margin declined to 6.9% from 8.0% in the previous year. Cost of sales was ¥106.4B and SG&A expenses were ¥41.2B; the pace of increase in SG&A expenses exceeded revenue growth, indicating that operating leverage was not effective. Ordinary Income contracted to ¥7.2B (-35.5%), primarily due to foreign exchange losses of ¥3.2B, equity-method investment losses of ¥2.7B, and interest expenses of ¥1.2B. Corporate income taxes and other taxes of ¥7.9B exceeded profit before tax of ¥6.9B, resulting in an effective tax rate of approximately 115% and Net Income of ¥-0.2B. Extraordinary loss of ¥0.2B (loss on disposal of fixed assets) was immaterial and was not the primary cause of the deterioration in final profit. In conclusion, the Company posted revenue growth but lower earnings, with temporary non-operating factors and distortions in the tax burden impairing earnings quality.

Segment Analysis

The Group operates a single segment, the Film Formation Equipment Business, and does not disclose performance by segment.

Key Financial Indicators

【Profitability】The Operating Income margin was 6.9%, down from 8.0% in the previous year, while the Net Income margin deteriorated significantly to -0.1% (8.0% in the previous year). ROE remained close to zero, with non-operating income and expenses and the persistently high effective tax rate weighing on profitability.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥73.6B, substantially exceeding Net Income, representing an accrual structure primarily driven by cash inflows from customer advances resulting from the increase in contract liabilities; monitoring is required from the perspective of earnings quality.【Investment Efficiency】ROIC was low at approximately 1.0%, while investment securities accounted for 33.5% of total assets, suggesting dilution of capital invested in the operating business.【Financial Soundness】The Equity Ratio was high at 66.8%, and liquidity was sound, with the current ratio also exceeding 200%. Total assets were ¥1,406.3B and net assets were ¥939.0B, with the capital base increasing primarily due to valuation gains on investment securities.

Cash Flow Analysis

Operating Cash Flow was ¥73.6B, an increase of +37.9% YoY. The increase in contract liabilities (cash inflows from customer advances) was the primary contributing factor, while an increase in inventories (-¥58.3B) acted as an offset. Investing Cash Flow was +¥8.4B, with capital expenditures at ¥2.6B, a restrained level relative to depreciation and amortization expense of ¥5.9B. Financing Cash Flow was -¥14.7B, representing cash outflows mainly from dividend payments and other items. As a result, free cash flow was maintained at a high level of ¥82.0B; however, given the structure’s high dependence on customer advances, attention should be paid to a potential subsequent decline in cash flow when inventories are converted into shipments.

Earnings Quality

Recurring earnings consisted of Operating Income of ¥10.9B from equipment sales, while the extraordinary loss of ¥0.2B (loss on disposal of fixed assets) was immaterial and had a limited impact on final profit. Meanwhile, non-operating expenses reached ¥7.3B (equivalent to 4.6% of revenue), and highly non-recurring items, including foreign exchange losses of ¥3.2B and equity-method investment losses, significantly pressured Ordinary Income. Corporate income taxes and other taxes of ¥7.9B exceeded profit before tax of ¥6.9B, resulting in an abnormal effective tax rate of approximately 115%; the tax burden substantially distorted final profit. In addition, Operating Cash Flow of ¥73.6B significantly exceeded Net Income (¥-0.2B), creating an accrual structure likely reflecting a temporary boost from cash inflows due to the increase in contract liabilities. This should be taken into consideration when evaluating earnings quality.

Earnings Forecast and Guidance

Progress against the full-year forecast was 41.5% for revenue against a forecast of ¥382.0B, 17.5% for Operating Income against a forecast of ¥62.0B, and 9.7% for Ordinary Income against a forecast of ¥74.0B; all were below the standard progress rate of 50% at the halfway point of the fiscal year. Net Income was negative for the first half, representing a significant shortfall against the full-year forecast of ¥56.0B. The background includes headwinds from foreign exchange and equity-method investments, as well as delays in revenue recognition caused by the accumulation of inventories (work in process of ¥187.6B). In the second half, progress in converting contract liabilities of ¥245.4B into revenue will be the key to recovery. No revisions have been made to either the earnings forecast or the dividend forecast.

Shareholder Returns

The interim dividend was ¥28 per share, consistent with progress toward the full-year dividend forecast of ¥56. As the first half resulted in a net loss, the Payout Ratio has no meaningful interpretation on a simple calculation basis; however, based on free cash flow of ¥82.0B and cash and deposits of ¥391.0B, the Company has sufficient capacity to pay dividends. Future dividend sustainability will depend on a recovery in earnings through the conversion of inventories into revenue in the second half and normalization of the effective tax rate.

Risk Factors

1. Inventory and Working Capital Accumulation Risk: Work in process increased by +49% YoY to ¥187.6B. If shipments or customer acceptance are delayed, this may lead to delays in revenue recognition or the risk of valuation losses.

2. Volatility in Non-Operating Income and Expenses: Non-operating expenses, including foreign exchange losses of ¥3.2B and equity-method investment losses, reached ¥7.3B (equivalent to 4.6% of revenue), amplifying fluctuations in Ordinary Income and Net Income.

3. Persistently Abnormally High Effective Tax Rate and Distortion in the Tax Burden: Corporate income taxes and other taxes of ¥7.9B exceeded profit before tax of ¥6.9B, resulting in an effective tax rate of approximately 115% and becoming a source of volatility in final profit.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Return

Both the Operating Income margin and Net Income margin were below the industry median, placing the Company in the lower tier of the industry in terms of profitability.

Growth and Capital Efficiency

The revenue growth rate exceeded the industry median, and the pace of top-line expansion was relatively high within the industry.

※Source: Compiled by the Company

Key Points from the Financial Results

1. The top line continues to grow, but the Company fell into a net loss due to non-recurring non-operating items and distortion in the effective tax rate, resulting in a significant divergence in earnings quality between the operating level and the final level.

2. Operating Cash Flow is ample due to the accumulation of contract liabilities (customer advances), while work-in-process inventories have also accumulated at a high level. Progress in converting inventories into shipments and revenue in the second half will be a key area to monitor for an earnings recovery.

3. Investment securities have increased to 33.5% of total assets, and comprehensive income of ¥370.4B has contributed to the thickness of net assets. This contrasts with the efficiency of capital employed in the operating business (ROIC of approximately 1.0%); developments in both the asset composition and operating efficiency will warrant attention.

Theoretical Share Price (Reference Value)

This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥2,077–¥2,197 at ±1% for the cost of equity, and ¥2,128–¥2,140 at ±0.1 for 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 difference from the full-year forecast).
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-07 / This value does not forecast or guarantee the future share price)

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This report is an earnings analysis document automatically generated by AI based on XBRL financial results data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed financial results data. Investment decisions should be made at your own discretion and responsibility, after consulting with a professional as necessary.

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