Marumae (6264) FY2026 Q3 Earnings Report

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Executive Summary

The Company achieved substantial increases in revenue and profit, primarily due to the consolidation-driven expansion of the Functional Materials Business following the consolidation of KM Aluminum Co., Ltd. However, net income benefited from ¥1.013B in subsidy income recorded as extraordinary income; therefore, caution is warranted in interpreting the rate of profit growth as an equivalent improvement in recurring earnings power. Revenue was ¥14.02B (+92.9% year on year), Operating Income was ¥2.64B (+84.1%), Ordinary Income was ¥2.46B (+85.7%), and Net Income was ¥2.43B (+159.7%). The Operating Income margin was 18.9%, down from 19.8% in the same period of the previous year, as the increase in the SG&A expense ratio placed pressure on margins relative to the scale of revenue growth.

Factors Affecting Business Performance

【Revenue】Revenue was ¥14.02B (+92.9% year on year). By segment, the Functional Materials Business expanded sharply to ¥7.69B (+438.6%), while the Precision Components Business posted moderate revenue growth to ¥6.37B (+9.1%). The sharp expansion of the Functional Materials Business was primarily attributable to the consolidation of KM Aluminum Co., Ltd., with Basic Materials at ¥3.62B and IT Equipment Materials at ¥2.57B as the main contributors. In the Precision Components Business, revenue from semiconductor manufacturing equipment increased to ¥5.24B (+14.2%), while revenue from FPD manufacturing equipment declined to ¥0.80B (△21.6%).

【Profit and Loss】Operating Income was ¥2.64B (+84.1%), while the Operating Income margin of 18.9% declined from 19.8% in the same period of the previous year. The gross profit margin was also broadly flat at 32.1% (32.3% in the previous year), but the SG&A expense ratio rose to 13.2% (12.6% in the previous year), indicating that increased fixed costs relative to revenue growth pressured margins. Segment profit was ¥1.23B for the Functional Materials Business (16.0% margin, improved from 9.5% in the previous year) and ¥1.43B for the Precision Components Business (22.4% margin, down from 24.1% in the previous year). Profit in the Precision Components Business includes a ¥0.108B increase resulting from a change in the depreciation method (declining-balance method → straight-line method); excluding this effect, underlying profit was trending downward. Profit Before Tax of ¥3.47B includes ¥1.01B in subsidy income recorded as extraordinary income, and the sharp increase in Net Income to ¥2.43B was substantially supported by non-recurring factors. Overall, the Company recorded higher revenue and profit, but the quality of profit growth depends on the integration effects of the Functional Materials Business and extraordinary income.

Segment Analysis

The Functional Materials Business expanded sharply in both business scale and profitability following the consolidation of KM Aluminum, with revenue of ¥7.69B (+438.6% year on year) and Operating Income of ¥1.23B (+811.9%); its margin rose to 16.0% from 9.5% in the previous year. The Precision Components Business posted only modest profit growth, with revenue of ¥6.37B (+9.1%) and Operating Income of ¥1.43B (+1.7%), while its margin declined to 22.4% from 24.1% in the previous year. The profit growth of this business includes a ¥0.108B positive effect from the change in the depreciation method; excluding this effect, underlying profitability deteriorated slightly. By application, demand for semiconductor manufacturing equipment increased, while demand for FPD manufacturing equipment declined, indicating a concentration of demand.

Key Financial Indicators

【Profitability】The Operating Income margin was 18.9% (19.8% in the previous year), while the Net Income margin expanded year on year to 17.3%; however, Net Income includes ¥0.101B in extraordinary income from subsidy income. Annualized ROE was high at 21.4%, but the underlying level excluding the impact of extraordinary income is likely lower. 【Cash Flow Quality】Inventories, centered on work in process of ¥2.40B, increased sharply by +139.6% year on year. Annualized inventory days reached 109 days, and work in process accounted for 63.4% of inventories, making the accumulation of production and inventory a point requiring attention from a capital-efficiency perspective. 【Investment Efficiency】Total asset turnover was 0.551x and financial leverage was 2.24x; ROE of 21.4% is composed of these factors. 【Financial Soundness】The Equity Ratio improved to 44.7% (31.5% in the previous year), while the current ratio was high at 313.5%. Although the Company had ¥11.86B in long-term borrowings, interest coverage was sufficient at 14.85x, and concerns regarding short-term financial soundness were limited.

Cash Flow Analysis

Because individual items in the statement of cash flows have not been disclosed, cash trends are analyzed based on changes in the balance sheet. Cash and deposits increased by +¥6.61B (+155.3%) from ¥4.25B in the same period of the previous year to ¥10.86B, significantly improving short-term liquidity. Meanwhile, inventories increased sharply by +139.6% year on year, with work in process accounting for 63.4% of total inventories and annualized inventory days reaching 109 days. The collection period calculated from the combined balance of accounts receivable and electronically recorded receivables was approximately 76 days, while the payment period based on accounts payable was approximately 68 days. The resulting cash conversion cycle was approximately 117 days on an annualized basis. The increased scale of production and procurement accompanying revenue growth has heightened the degree to which working capital is tied up, which warrants attention when assessing cash-generation capacity.

Earnings Quality

Net Income of ¥2.43B includes ¥1.01B in extraordinary income from subsidy income, meaning that extraordinary factors accounted for approximately 41.7% of Net Income. Accordingly, there are limits to interpreting Net Income growth of +159.7% year on year as an improvement in recurring earnings. Non-operating income was very small (¥0.02B), while non-operating expenses totaled ¥0.21B, mainly comprising ¥0.18B in interest expense. Ordinary Income of ¥2.46B therefore remained at a level reflecting the deduction of this net burden from Operating Income of ¥2.64B. From an accrual perspective, the sharp increase in inventories, particularly work in process, is a point requiring attention when evaluating the quality of Operating Income, and verification based on cash flow is important. Profit in the Precision Components Business also includes a ¥0.11B increase resulting from the change in the depreciation method, meaning that multiple temporary and accounting-related factors contributed to the headline profit growth.

Earnings Forecasts and Guidance

The progress rates for the nine-month cumulative results against the full-year Company forecasts (Revenue of ¥20.00B, Operating Income of ¥4.10B, and Ordinary Income of ¥3.90B) were 70.1% for Revenue, 64.5% for Operating Income, and 63.1% for Ordinary Income. The Operating Income progress rate was 10.5 percentage points below the standard progress rate of 75% after nine months. To achieve the full-year plan in Q4, an Operating Income margin of approximately 24.4%, exceeding the cumulative margin of 18.9%, will be required. The progress rate against the Net Income forecast of ¥3.30B was higher than the other indicators at 73.7%, reflecting the contribution of the extraordinary factor of subsidy income already recognized during the current period. When assessing the pace of full-year profit growth, progress in Operating Income and Ordinary Income is therefore considered more representative of underlying performance.

Shareholder Returns

The dividend at the end of Q2 was ¥38.00 per share. The Payout Ratio, calculated using Net Income attributable to owners of the parent as the numerator, was approximately 43.9%, within the generally regarded sustainable range of less than 60%. However, because this Net Income includes ¥1.01B in extraordinary income from subsidy income, dividend sustainability must be assessed based on Ordinary Income and future Operating Cash Flow generation. In addition, a two-for-one stock split was conducted effective April 1, 2026; because the total full-year forecast dividend cannot be simply compared before and after the split, it is not presented. Retained earnings of ¥7.02B and cash and deposits of ¥10.86B provide a financial foundation supporting continued dividend payments.

Risk Factors

1. Dependence on semiconductor-related demand: Revenue from semiconductor manufacturing equipment in the Precision Components Business increased to ¥5.24B (+14.2% year on year), while revenue from FPD manufacturing equipment declined to ¥0.80B (△21.6%). Fluctuations in the semiconductor capital expenditure cycle could directly affect the utilization rate and margins of this business.

2. Accumulation of inventories and work in process: Inventories increased sharply by +139.6% year on year, with work in process accounting for 63.4% of total inventories. Annualized inventory days reached 109 days, requiring monitoring of production-process stagnation and inventory valuation risk during periods of demand fluctuation.

3. Net Income quality and impact of accounting changes: Net Income of ¥2.43B includes ¥1.01B in extraordinary income from subsidy income, representing approximately 41.7% of Net Income. In addition, profit in the Precision Components Business includes a ¥0.11B increase resulting from the change in the depreciation method, meaning that the growth in underlying earnings power may be smaller than the headline profit increase.

Industry Benchmarks (Reference; Compiled by the Company)

Profitability and Returns

The Company's Operating Income margin and Net Income margin both exceed the industry median by more than 10pt, placing its profitability among the higher levels within the industry.

Growth and Capital Efficiency

The Revenue growth rate substantially exceeds the industry median; however, caution is warranted because this includes the impact of the expanded consolidation scope resulting from M&A.

※Source: Compiled by the Company

Key Points from the Financial Results

1. The Functional Materials Business, following the consolidation of KM Aluminum, was the primary driver of higher revenue and profit. The rapid diversification of the profit composition away from reliance solely on the Precision Components Business represents a significant structural change in the financial results.

2. Of Net Income of ¥2.43B, ¥1.01B was recorded as extraordinary income from subsidy income. Therefore, the +159.7% year-on-year increase in Net Income includes the contribution of non-recurring factors in addition to improvements in recurring business earnings.

3. Inventory days of 109 days and a work-in-process ratio of 63.4% indicate an expansion of working capital during the period of revenue growth. Together with the Operating Income progress rate of 64.5%, below the standard progress rate of 75% against the full-year forecast, production and inventory efficiency from Q4 onward will be key points of focus in the financial data.

Theoretical Share Price (Reference Value)

Sensitivity: ¥784–¥832 at a ±1% change in the cost of equity, and ¥801–¥818 at a ±0.1 change in ω.

Notes:

• Net assets as of the quarter-end are used (there is a timing difference from the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(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; it 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 by AI based on 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, after consulting with a professional advisor as necessary.

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