YAMASHIN-FILTER CORP. FY2027 Q1 Earnings Report

Quick View

Executive Summary

The key feature of the quarter was higher revenue but lower profit, as increases in SG&A expenses and start-up costs for new businesses weighed on earnings. Revenue increased to ¥54.0B (+6.1% YoY), while Operating Income declined to ¥4.9B (-26.2%), Ordinary Income to ¥4.8B (-25.8%), and Net Income to ¥3.4B (-19.2%). The core Construction Equipment Filter Business contributed to revenue growth, but a decline in the gross margin and upfront expenses for the newly established “Functional Materials Business” reduced Operating Income.

Factors Affecting Performance

【Revenue】Revenue increased to ¥54.0B (+6.1% YoY). By segment, the Construction Equipment Filter Business led performance with revenue of ¥48.5B (+6.5%), accounting for 89.7% of the revenue mix, while the Air Business remained solid at ¥5.6B (+2.8%). The newly established Functional Materials Business generated ¥0.0B and remains in the initial start-up phase.

【Profit and Loss】Operating Income declined to ¥4.9B (-26.2%). The gross margin was 42.3%, down approximately 2.0pt from the previous year, while the SG&A ratio also deteriorated by approximately 2.0pt to 33.3%. As a result, the Operating Income margin declined to 9.0% from 12.9% in the previous year. By segment, the Construction Equipment Filter Business recorded ¥6.0B (+18.5% decline, 12.4% margin), while the Air Business reduced its loss to ¥-0.2B. However, the Functional Materials Business recorded a loss of ¥-0.9B, weighing on company-wide earnings. Ordinary Income was ¥4.8B (-25.8%) following a ¥0.2B foreign exchange loss in non-operating expenses. Net Income was ¥3.4B (-19.2%) after ¥1.4B in income taxes and other taxes (effective tax rate of approximately 29.7%). In conclusion, the Company posted higher revenue but lower profit.

Segment Analysis

The Construction Equipment Filter Business generated revenue of ¥48.5B (+6.5% YoY) and Operating Income of ¥6.0B (-18.5%), with a 12.4% margin. Although it remains the core business, its margin deteriorated from the previous year. The Air Business generated revenue of ¥5.6B (+2.8%) and an Operating Loss of ¥0.2B; the loss narrowed by 68.9% YoY, indicating an improvement trend. The newly established Functional Materials Business generated revenue of ¥0.0B and an Operating Loss of ¥0.9B. As it was identified as a new reportable segment beginning in the current quarter, no comparative data for the same period of the previous year is available. Significant differences in profitability among segments are evident, and the high degree of dependence on the core business is a structural characteristic.

Key Financial Metrics

【Profitability】The Operating Income margin was 9.0%, down approximately 3.9pt from 12.9% in the previous year, while the Net Income margin was 6.2%, down approximately 2.0pt from 8.2% in the previous year. ROE was 1.5%, primarily due to the decline in the Net Income margin.【Cash Flow Quality】Cash and deposits were ¥68.8B, an increase from the end of the previous year. Current assets of ¥163.7B versus current liabilities of ¥68.0B resulted in a robust current ratio of approximately 240%. Inventories were ¥23.2B, consisting primarily of finished-goods inventory.【Investment Efficiency】Total assets were ¥294.0B and net assets were ¥219.3B. The Equity Ratio declined to 74.6% from 81.3% in the previous year, but remained high relative to the industry.【Financial Soundness】Short-term borrowings were ¥36.0B, a significant increase from ¥16.0B at the end of the previous year. With Profit Before Tax of ¥4.8B against interest expense of ¥0.1B, the Company’s debt-servicing capacity itself remains secure.

Cash Flow Analysis

As detailed data from the statement of cash flows is not included in this report, fund movements are analyzed based on changes in the balance sheet. Cash and deposits increased to ¥68.8B from ¥67.2B at the end of the previous year, indicating that liquidity on hand has been maintained. Meanwhile, short-term borrowings increased from ¥16.0B to ¥36.0B, indicating a growing reliance on short-term borrowings for financing. Trade receivables were ¥48.0B and inventories were ¥23.2B, both increasing from the end of the previous year, suggesting expanding funding requirements associated with operating activities. Treasury stock increased from ¥1.75B to ¥7.65B, potentially indicating that treasury stock repurchases were conducted as part of shareholder returns. These movements suggest a structure in which increases in operating assets are being funded through short-term borrowings and a portion of cash on hand.

Quality of Earnings

The current quarter’s earnings were primarily generated by recurring business activities. Extraordinary losses were limited to a minor ¥0.0B loss on the disposal of fixed assets, and the impact of temporary factors was limited. Non-operating income and expenses were broadly balanced at ¥0.3B each, with the principal expense item being a ¥0.2B foreign exchange loss. The difference between Ordinary Income of ¥4.8B and Net Income of ¥3.4B was primarily attributable to ¥1.4B in income taxes and other taxes, resulting in an effective tax rate of approximately 29.7%, with no particular abnormalities observed. Comprehensive Income was ¥3.9B, and the ¥0.5B difference from Net Income of ¥3.4B was attributable to foreign currency translation adjustments. The positive contribution of the foreign exchange sensitivity of overseas assets and businesses to Comprehensive Income warrants attention.

Earnings Forecast and Guidance

The full-year plan calls for Revenue of ¥225.6B (+7.7% YoY), Operating Income of ¥28.2B (+9.0%), and Ordinary Income of ¥27.8B (+9.5%). There were no revisions to the earnings forecast or dividend forecast for the current quarter. Progress rates were 24.0% for Revenue, 17.2% for Operating Income, 17.3% for Ordinary Income, and 16.8% for Net Income. Revenue was broadly in line with the simple 25% progress benchmark, while all profit measures were approximately 10pt below that benchmark. The delayed progress was attributable to the decline in the gross margin and upfront expenses for the newly established business. The full-year plan is structured on the assumption of improved profitability in the second half.

Shareholder Returns

The full-year dividend plan is ¥20.00 per share, representing a policy of increasing the dividend from ¥8 in the previous year (the level before combining the interim and year-end dividends). Based on average shares outstanding during the period of 69,223 thousand shares, the Payout Ratio against projected full-year Net Income of ¥20.05B is approximately 68%, a relatively high level. Given the financial base of cash and deposits of ¥68.8B and an Equity Ratio of 74.6%, there appears to be no immediate impediment to funding dividends. However, the Payout Ratio itself should be monitored because of its high sensitivity to fluctuations in performance.

Risk Factors

1. Risk of prolonged losses in the new business: The Functional Materials Business recorded an Operating Loss of ¥0.9B in the current quarter, expanding to a level equivalent to approximately 18% of company-wide Operating Income of ¥4.9B. Although upfront start-up costs are expected, delays in monetization require ongoing monitoring as a factor that could continue to pressure company-wide margins.

2. Risk of reliance on short-term financing: Short-term borrowings increased +125.0% from ¥16.0B at the end of the previous year to ¥36.0B, accounting for approximately 53% of current liabilities of ¥68.0B. Cash and deposits of ¥68.8B are at a level sufficient to cover these borrowings, but the concentration of the financing structure in short-term funding warrants attention.

3. Risk of continued deterioration in profitability: The gross margin was 42.3%, down approximately 2.0pt from the previous year, while the SG&A ratio increased approximately 2.0pt to 33.3%. The Operating Income margin narrowed to 9.0% from 12.9% in the previous year. The growth rate of SG&A expenses (approximately 12.7% YoY) exceeded the Revenue growth rate (+6.1%), meaning that operating leverage is currently working in a negative direction.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The Operating Income margin is slightly above the industry median, while the Net Income margin is below the median, indicating relative underperformance at the non-operating income and tax burden stages.

Growth and Capital Efficiency

The Revenue growth rate is broadly in line with the industry median, placing the Company in the middle range of the industry in terms of growth.

※Source: Compiled by the Company

Key Points from the Financial Results

1. Despite higher revenue, the Operating Income margin declined from 12.9% in the previous year to 9.0%. The simultaneous deterioration in the gross margin and increase in SG&A expenses are notable developments indicating a change in the earnings structure.

2. The newly established Functional Materials Business recorded a ¥0.9B loss in the current quarter, confirming its impact on company-wide earnings. The loss in the existing Air Business narrowed by 68.9% YoY, indicating the coexistence of improvement and upfront investment within the business portfolio.

3. While progress toward the full-year plan was broadly favorable for Revenue, progress rates for Operating Income and Net Income remained in the 17% range. Accordingly, achieving the plan structurally assumes improved profitability in the second half.

Theoretical Share Price (Reference Value)

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

Sensitivity: 310円〜327円 for Cost of Equity ±1%, and 318円〜318円 for ω±0.1.

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）

---

This report is an earnings analysis document automatically generated by AI through analysis of XBRL earnings release 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, and, where necessary, after consulting with a professional advisor.

---End of Report---