Marumae (6264) FY2026 FY Earnings Report

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Executive Summary

For the fiscal year ended August 2026, Revenue and Operating Income both nearly doubled, driven by the Functional Materials Business. Net Income, however, includes ¥1.01B in extraordinary income, primarily from subsidies. Revenue was ¥20.43B (+79.2% YoY), while Operating Income was ¥4.13B (+99.8% YoY). Ordinary Income was ¥3.9B (+105.5% YoY), and Net Income attributable to owners of the parent was ¥3.46B (+157.6% YoY). The main driver of revenue growth was the expansion of the Functional Materials Business to ¥11.32B (+206.4% YoY). The operating margin improved to 20.2% from 18.1% in the prior year. Extraordinary income contributed to Net Income growth; recurring earnings power is more appropriately assessed using Operating Income and Ordinary Income.

Factors Behind Earnings Changes

【Revenue】Revenue was ¥20.43B, up ¥9.03B from ¥11.4B in the prior year. The Functional Materials Business, at ¥11.32B (55.4% of total revenue, +206.4% YoY), was the main source of growth. By product, Basic Materials expanded from ¥1.62B to ¥5.33B, and IT Materials from ¥1.35B to ¥3.59B. The Precision Components Business generated ¥9.12B (44.6% of total revenue, +18.3% YoY), with semiconductor-related revenue increasing from ¥6.14B to ¥7.55B. Growth in the Functional Materials Business includes the contribution from the prior-year business combination, so it should not be assumed that this growth rate will be sustained.

【Profit and Loss】The gross profit margin rose from 31.1% to 32.5%, while the SG&A ratio declined from 13.0% to 12.3%. SG&A expenses increased by +69.9%, below the rate of revenue growth, resulting in positive operating leverage. Operating Income was ¥4.13B (operating margin of 20.2%). After deducting non-operating expenses of ¥0.27B (mainly interest expense of ¥0.24B), Ordinary Income was ¥3.9B. Extraordinary income of ¥1.01B (mainly subsidy income) was a non-recurring factor. Profit before tax was ¥4.9B, and after ¥1.44B in income taxes, Net Income was ¥3.46B. Consolidated Net Income and Net Income attributable to owners of the parent were the same. In summary, both revenue and profit increased.

Segment Analysis

The Precision Components Business generated Revenue of ¥9.12B and segment profit of ¥2.29B (+25.5% YoY), with a margin of 25.1%. It is the main contributor to consolidated profit in absolute terms. Segment profit increased by ¥0.16B due to a change in the depreciation method from the declining-balance method to the straight-line method; this accounting impact should be considered when making year-over-year comparisons.

The Functional Materials Business generated Revenue of ¥11.32B and segment profit of ¥1.85B (+429.5% YoY), with a margin of 16.3%, a substantial increase from approximately ¥0.35B in the prior year. This profit was recorded after absorbing ¥0.19B in goodwill amortization and ¥0.2B in customer-related asset amortization, and its margin is below that of the Precision Components Business. Major customers were Tokyo Electron Miyagi at ¥3.39B, UACJ at ¥3.28B, and NHK Spring at ¥3.26B. Combined, the top three customers accounted for ¥9.93B, or approximately 48.6% of Revenue.

Key Financial Metrics

【Profitability】ROE was 20.5% (based on period-end net assets), the operating margin was 20.2% (18.1% in the prior year), and the EBITDA margin was 25.8%. EPS rose to ¥132.56 from ¥53.12 in the prior year.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥2.93B (-4.3% YoY), equivalent to just 0.85x Net Income. OCF before changes in working capital was ¥4.16B; an increase of ¥1.24B in inventory and ¥0.95B in trade receivables absorbed cash.【Investment Efficiency】Capital expenditures of ¥1.08B were approximately in line with depreciation and amortization of ¥1.13B, and represented approximately 5.3% of Revenue. Total asset turnover increased to 0.65x from 0.44x in the prior year.【Financial Soundness】The equity ratio was 53.5% (31.5% in the prior year), and the current ratio was 290.5%. Cash and deposits were ¥7.53B (¥4.25B in the prior year). Long-term borrowings declined from ¥12B to ¥8.21B. The accumulation of net assets through an equity issuance and retained earnings supported the improvement in the financial position.

Cash Flow Analysis

OCF edged down to ¥2.93B from ¥3.06B in the prior year, meaning cash generation did not grow despite profit doubling. From the subtotal before changes in working capital of ¥4.16B, deductions included a ¥1.24B increase in inventories, a ¥0.95B increase in trade receivables, and ¥1.01B in income taxes paid; a ¥0.4B increase in trade payables provided a partial offset. Investing Cash Flow was -¥0.14B, as ¥0.96B in subsidies received almost offset ¥1.08B in capital expenditures. Free Cash Flow (OCF + Investing Cash Flow) was ¥2.79B; excluding subsidies, cash generated after capital expenditures was ¥1.84B, calculated by subtracting capital expenditures of ¥1.08B from OCF of ¥2.93B. Financing Cash Flow was an inflow of ¥0.49B and included approximately ¥4.49B raised through share issuance and other means, repayment of ¥5.21B in long-term borrowings, and dividend payments of ¥0.8B. Cash and deposits increased by ¥3.28B, and the conversion of ¥2.66B in work in process into cash will be a key focus going forward.

Earnings Quality

Current-period earnings include non-recurring factors. Extraordinary income of ¥1.01B, primarily from subsidies, accounted for approximately 20% of Profit before tax of ¥4.9B. Ordinary Income was ¥3.9B; non-operating expenses of ¥0.27B (including ¥0.24B in interest expense) exceeded non-operating income of ¥0.04B, meaning non-operating items reduced profit. OCF/Net Income was 0.85x and OCF/EBITDA was 0.56x, as the increase in working capital delayed the conversion of earnings into cash. Comprehensive income was ¥3.62B, only ¥0.16B higher than Net Income of ¥3.46B; the main factor was deferred hedge gains of ¥0.15B. In addition, the change in the depreciation method for the Precision Components Business increased profit by ¥0.16B. In light of these factors, it is more appropriate to assess earnings power based on the growth rate of Operating Income rather than that of Net Income.

Earnings Forecast and Guidance

The company’s forecast for the next fiscal year is Revenue of ¥28B (+37.0% compared with the current period), Operating Income of ¥6.5B (+57.4%), Ordinary Income of ¥6.3B (+61.4%), and Net Income attributable to owners of the parent of ¥4.2B (+21.2%). The forecast operating margin is approximately 23.2%, approximately 3pt above the current period’s 20.2%. The slower forecast growth in Net Income compared with Operating Income appears to reflect the expectation that extraordinary income will not recur at a similar level next fiscal year. Forecast EPS is ¥148.06, and forecast annual dividends are ¥52.

Shareholder Returns

Due to the 1-for-2 stock split in April 2026, the interim dividend of ¥38 (pre-split) and the year-end dividend of ¥28 (post-split) cannot simply be added together. On a post-split basis, the annual dividend is ¥47, consistent with ¥94 on a pre-split basis. The payout ratio was 35.5% (37.7% in the prior year), and there were no share repurchases. Annual dividend payments are approximately ¥1.33B, equivalent to approximately 1.4x the ¥1.84B in cash generated after capital expenditures, excluding subsidies. The next fiscal year’s forecast dividend of ¥52 exceeds the current period’s post-split equivalent of ¥47.

Risk Factors

1. Working Capital and Cash Conversion Risk: OCF/EBITDA is 0.56x, and work in process of ¥2.66B accounts for approximately 66.6% of inventory. Inventory days are approximately 106; if inventory remains unsold, cash on hand may not increase in line with profit growth.

2. Customer Concentration and Market Risk: Sales to the top three customers are ¥9.93B (approximately 48.6%), and more than 90% of sales are domestic. The investment cycle in semiconductor manufacturing equipment may affect the Precision Components Business’s 25.1% profit margin.

3. Acquisition-Related Asset Risk: Goodwill of ¥2.8B and customer-related assets of ¥2.27B total ¥5.07B, equivalent to approximately 30% of net assets. If earnings from the Functional Materials Business fall short of plan, there is a risk of continued amortization expenses or impairment. Annual goodwill amortization is ¥0.19B.

Industry Benchmarks (Reference; Compiled by the Company)

Profitability and Returns

Both the operating margin and net margin are significantly above the upper end of the industry interquartile range.

Growth and Capital Efficiency

The Revenue growth rate is substantially above the industry interquartile range, though it should be noted that it includes the contribution from a business combination.

※Source: Company calculations

Key Points to Note in the Results

1. The operating margin improved from 18.1% to 20.2%, reflecting SG&A growth below Revenue growth. However, the ¥0.16B profit uplift from the change in the depreciation method for the Precision Components Business and growth in the Functional Materials Business attributable to the prior-year business combination should be excluded when assessing underlying performance.

2. Net Income includes ¥1.01B in extraordinary income, primarily from subsidies. Ordinary Income was ¥3.9B (+105.5% YoY). The forecast growth in Net Income for the next fiscal year (+21.2%) is below that of Operating Income (+57.4%), which is also consistent with the impact of this non-recurring factor.

3. While the financial position is robust, with an equity ratio of 53.5% and a current ratio of 290.5%, OCF/EBITDA of 0.56x and the level of work in process are key items to monitor in assessing cash conversion of earnings.

Theoretical Share Value (Reference)

Sensitivity: ¥909 to ¥964 for cost of equity ±1%; ¥927 to ¥950 for ω ±0.1.

Notes:

• Goodwill amortization of ¥6.7 per share is added back to earnings (a non-cash expense; for comparability with IFRS companies).

(Model: residual income model (Ohlson-type, explicit 5-year fade) / rate reference month: 2026-09 / a mechanical estimate from public data only; it is not a forecast of the market price or a recommendation of any investment action, and it does not predict or guarantee future share prices)

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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 available earnings data. Investment decisions are your responsibility; consult a professional as necessary.

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