| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥125.5B | ¥88.0B | +42.6% |
| Operating Income | ¥35.4B | ¥22.1B | +60.4% |
| Ordinary Income | ¥39.1B | ¥21.5B | +82.0% |
| Net Income | ¥28.5B | ¥15.9B | +79.3% |
| ROE | 3.5% | 2.0% | - |
For FY2026 Q1, Revenue was ¥125.5B (YoY +¥37.5B +42.6%), Operating Income was ¥35.4B (YoY +¥13.3B +60.4%), Ordinary Income was ¥39.1B (YoY +¥17.6B +82.0%), and Net Income was ¥28.5B (YoY +¥12.6B +79.3%). Supported by demand recovery in Japan and Asia and an improved product mix, Revenue rose sharply and Operating Leverage led to profits increasing faster than Sales. Operating margin improved 3.1pt to 28.2% (prior year 25.1%), aided by fixed-cost absorption and price/mix improvements. Ordinary Income outperformed Operating Income due to recorded foreign exchange gains of ¥3.4B. Progress against the full-year plan was above par (standard 25%): Revenue 25.3%, Operating Income 27.3%, Net Income 30.0%, indicating a strong start to the year.
[Revenue] Revenue was ¥125.5B (YoY +42.6%), with all segments contributing to growth. By region, Asia ¥82.2B (+58.5%) showed the largest growth rate, driven primarily by demand recovery for cutting tools for semiconductors and electronic components. Japan ¥78.3B (+31.8%) also recorded solid growth on the back of domestic manufacturing capital expenditure recovery. North America ¥6.0B (+24.5%) and Europe ¥7.5B (+13.9%) are recovering but remain relatively small in scale. Segmental sales composition shows Japan 62.4% and Asia 65.5% (including internal sales), clarifying a structure where both regions are driving growth.
[Profitability] Operating Income was ¥35.4B (YoY +60.4%), with Operating Margin improving 3.1pt to 28.2% (prior year 25.1%). Gross margin improved 0.2pt to 43.3% (prior year 43.1%), mainly due to price/mix improvements and higher utilization. SG&A was ¥18.9B (15.1% of Revenue), improving 2.9pt from ¥15.8B (18.0%) in the prior year, with fixed-cost absorption strengthening profit leverage. By segment, Japan contributed the most with Operating Income ¥20.7B (margin 26.4%), while Asia delivered ¥13.6B (margin 16.6%) — a YoY increase of +123.7% — materially improving the regional portfolio balance. Ordinary Income was ¥39.1B (+82.0%), with ¥4.3B in non-operating income including foreign exchange gains of ¥3.4B. Net Income settled at ¥28.5B (+79.3%) after ¥10.6B in corporate taxes (effective tax rate 27.1%). Extraordinary gains/losses largely offset (gain on sale of investment securities ¥0.5B and impairment loss ¥0.5B), so one-off effects were minor. In conclusion, the company achieved high-quality growth with both revenue and profit increases accompanied by improved operating margins.
Japan segment (Revenue ¥78.3B, Operating Income ¥20.7B, Margin 26.4%) delivered Revenue +31.8% and Operating Income +68.7%, demonstrating strong operating leverage driven by domestic manufacturing demand recovery and increased sales of high-value-added products. Asia segment (Revenue ¥82.2B, Operating Income ¥13.6B, Margin 16.6%) recorded Revenue +58.5% and Operating Income +123.7%, the highest growth, supported by robust demand for cutting tools for semiconductors and electronic components. North America segment (Revenue ¥6.0B, Operating Income ¥0.4B, Margin 6.0%) had Revenue +24.5% but Operating Income -14.3%, with small scale and cost structure pressure compressing margins. Europe segment (Revenue ¥7.5B, Operating Income ¥0.3B, Margin 4.7%) showed Revenue +13.9% and flat Operating Income, indicating slower growth and the lowest margin among regions at 4.7%. High-margin Japan and Asia regions drove profit growth while Europe and North America remain on a path of scale expansion.
[Profitability] Operating Margin was 28.2%, improving 3.1pt from 25.1% in the prior year. Gross margin was 43.3% (prior year 43.1%), reflecting price/mix improvements and higher utilization, and SG&A ratio improved to 15.1% (prior year 18.0%) due to fixed-cost absorption, down 2.9pt. Net margin expanded 4.6pt to 22.7% (prior year 18.1%), bolstered by recurring profit improvement plus the contribution of foreign exchange gains. ROE was 3.5%, consistent with Net Margin 22.7% × Total Asset Turnover 0.138 × Financial Leverage 1.11. [Cash Quality] From a working capital efficiency perspective, while Operating Margin overshot expectations, Inventories decreased to ¥58.2B (prior year ¥61.8B), but Trade Receivables increased to ¥167.2B (prior year ¥144.8B), indicating working capital tied up relative to Revenue growth. Contract liabilities (advance receipts) were small at ¥1.8B, so cash prepayment effects were limited. [Investment Efficiency] ROE at 3.5% is constrained primarily by low Total Asset Turnover of 0.138 (annualized), indicating low sales efficiency relative to asset base that suppresses returns. Construction in progress increased 86.8% to ¥53.3B (prior year ¥28.5B), reflecting ongoing capacity expansion and modernization investments; post-commissioning asset turnover and fixed-cost absorption will be key to improving capital efficiency. [Financial Soundness] Equity Ratio remains very high at 90.5% (prior year 90.7%), Current Ratio 603%, Quick Ratio 523%, with short-term liabilities of ¥72.8B versus cash and equivalents of ¥133.3B and Trade Receivables ¥167.2B, indicating ample liquidity. Interest-bearing debt is effectively zero, with D/E ratio 0.11x, maintaining a conservative capital structure. Intangible assets are small at ¥1.5B (0.2% of total assets), limiting goodwill risk.
Although the cash flow statement data is not disclosed, funding trends can be inferred from balance sheet movements. Cash and deposits decreased ¥31.0B to ¥133.3B (prior year ¥164.3B), and construction in progress increased ¥24.8B to ¥53.3B (prior year ¥28.5B), suggesting capital expenditures as the primary cash outflow. Trade Receivables rose ¥22.4B to ¥167.2B (prior year ¥144.8B), with working capital tied up by Revenue growth. Inventories decreased ¥3.6B to ¥58.2B (prior year ¥61.8B), indicating inventory optimization efforts. Investment securities increased ¥7.5B to ¥113.3B (prior year ¥105.8B), reflecting expanded valuation differences. Despite high Operating Income of ¥35.4B, cash balances were pressured by working capital and capex needs, but the company continues to maintain a strong liquidity position supported by cash and investment securities. The foreign exchange gains of ¥3.4B lifted Ordinary Income as non-operating income, but the cash impact depends on translation effects of foreign-currency-denominated assets and liabilities.
Core recurring earnings center on Operating Income of ¥35.4B, and extraordinary items (gain on sale of investment securities ¥0.5B and valuation loss ¥0.5B) netted out to approximately -¥0.02B, so one-off impacts were minimal. Non-operating income was ¥4.3B (3.5% of Revenue), comprising foreign exchange gains ¥3.4B, interest income ¥0.2B, subsidy income ¥0.2B, and other ¥0.2B, with FX gains representing a large share. FX gains are a temporary factor that can vary with market conditions, so monitoring sustainability of Net Margin if FX moves adverse is necessary. The gap between Ordinary Income ¥39.1B and Net Income ¥28.5B (~27%) is mainly explained by corporate taxes of ¥10.6B (effective tax rate 27.1%). Comprehensive income was ¥36.5B, ¥8.0B higher than Net Income ¥28.5B, composed of foreign currency translation adjustments ¥4.6B, valuation differences on available-for-sale securities ¥3.5B, and actuarial adjustments related to retirement benefits -¥0.1B. The expansion of valuation differences on investment securities indicates increased unrealized gains and potential for future realized sale gains, but also includes market volatility risk.
Full-year guidance remains unchanged at Revenue ¥496.0B (YoY +23.5%), Operating Income ¥130.0B (+48.9%), Ordinary Income ¥130.0B (+59.8%), Net Income ¥95.0B, and EPS ¥504.29. Q1 progress rates versus the full year were Revenue 25.3%, Operating Income 27.3%, Ordinary Income 30.1%, and Net Income 30.0%, exceeding the standard 25% and representing a stronger-than-expected start. Upside in Operating Income and Net Income was driven by sustained high margins in Japan and Asia and FX gains. For H2, potential reduction in FX contribution, higher depreciation (from new equipment commissioning), and demand uncertainty are considered, so guidance is conservatively maintained at this time. Order trends, inventory adjustments, and the timing of equipment commissioning are key to achieving full-year guidance.
Full-year dividend forecast is ¥65 (prior year ¥60), with a payout ratio of 12.9% (based on full-year EPS ¥504.29), remaining conservatively set. On a Q1 basis, EPS was ¥163.78 based on Net Income ¥28.5B and weighted average shares outstanding 17,413 thousand, implying an even lower quarterly payout ratio. Given the strong net cash position (Cash ¥133.3B + Investment Securities ¥113.3B - effectively zero interest-bearing debt) and high profitability, dividend continuity is highly secure. Although capex needs exist (increase in construction in progress), the company’s operating cash generation and ample liquidity make securing dividend funding feasible. There remains room for dividend increases linked to future performance, supporting potential mid-term strengthening of shareholder returns.
Demand fluctuation risk tied to the semiconductor and electronic component cycle: The company’s core sales in Asia and Japan depend on demand for cutting tools for semiconductors and printed circuit boards, causing business performance to be linked to cyclical supply/demand swings. Q1 Revenue +42.6% captured a recovery phase; however, a cycle reversal could produce substantial downside risk to Revenue and profits. Given the scale of fixed assets (Tangible fixed assets ¥347.0B, Construction in progress ¥53.3B), a decline in utilization could reverse operating leverage and sharply reduce Operating Margin.
Funding constraint risk due to deterioration in working capital efficiency: Trade Receivables ¥167.2B (prior year ¥144.8B) increased faster than Revenue, suggesting lengthening collection periods or relaxed credit terms. Although Inventories decreased to ¥58.2B (prior year ¥61.8B), inventory levels remain elevated and carry risks of obsolescence or valuation losses if demand suddenly changes. Continued working capital tie-up could impair operating cash generation and affect funds available for capex and shareholder returns.
Risk of delayed commissioning of capex and increased fixed-cost burden: The buildup of Construction in progress ¥53.3B (prior year ¥28.5B) indicates progressing capacity expansion and modernization, but delays in commissioning or shortfalls in yields/utilization could prevent the expected fixed-cost absorption. Increased depreciation from new equipment will pressure Operating Margin, and in downturn scenarios, the risk of overinvestment may materialize.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 28.2% | 6.8% (2.9%–9.0%) | +21.4pt |
| Net Margin | 22.7% | 5.9% (3.3%–7.7%) | +16.8pt |
Profitability is extremely high within manufacturing, with Operating Margin and Net Margin well above the median.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 42.6% | 13.2% (2.5%–28.5%) | +29.5pt |
Revenue growth substantially outpaced the manufacturing median, strongly benefiting from the demand recovery phase.
※Source: Company aggregation
Operating Margin 28.2% exceeds the manufacturing median 6.8% by 21.4pt, demonstrating profitability supported by high-value-added products and fixed-cost absorption. Progress against the full-year plan is strong (Operating Income 27.3%, Net Income 30.0% vs. standard 25%), marking a strong start. FX gains of ¥3.4B boosted Ordinary Income, but core business profitability is also strengthened by maintained high margins in Japan and Asia and improved SG&A ratio.
The buildup of Construction in progress to ¥53.3B (prior year ¥28.5B) indicates advancing mid-term capacity expansion and modernization; post-commissioning, fixed-cost absorption and easing supply constraints are expected. However, ROE of 3.5% remains constrained by low Total Asset Turnover of 0.138; improving working capital efficiency and early commissioning/monetization of new assets are key to enhancing capital efficiency. A strong financial base (Equity Ratio 90.5%, D/E 0.11x) provides resilience to cyclical swings but the low leverage also highlights a structural constraint on ROE.
This report is an earnings analysis document automatically generated by AI analyzing XBRL earnings release data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the Company based on publicly available financial statements. Investment decisions are your responsibility; please consult a professional advisor as needed.