Y.A.C.HOLDINGS CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

The core feature of this earnings period was a reduction in losses accompanied by revenue growth, with profitability in the process of bottoming out and improving. Revenue increased significantly to ¥60.2B (¥47.0B in the same period of the previous year, YoY +28.2%), while Operating Income was ¥-0.5B (¥-3.2B in the previous year), Ordinary Income was ¥-2.0B (¥-4.0B in the previous year), and Net Income was ¥-3.1B (¥-4.0B in the previous year). Although losses remained in all cases, they narrowed from the previous year. The primary drivers of revenue growth were the expansion of the Environmental and Social Infrastructure (+83.9%) and Semiconductor and Mechatronics (+18.9%) segments. Gross margin improved to 25.1% (21.8% in the previous year), indicating progress in fixed-cost absorption, while non-operating expenses such as foreign exchange losses and interest expenses continued to weigh on final earnings.

Factors Driving Earnings Changes

【Revenue】Revenue was ¥60.2B, representing a YoY increase of +28.2%. By segment, Semiconductor and Mechatronics grew significantly to ¥25.9B (composition ratio 43.0%, YoY +18.9%), while Environmental and Social Infrastructure increased to ¥24.1B (composition ratio 40.0%, YoY +83.9%), with both segments driving revenue growth. In contrast, Medical and Healthcare declined to ¥11.4B (composition ratio 19.0%, YoY -7.1%).

【Profit and Loss】Operating Income was ¥-0.5B (¥-3.2B in the previous year), representing a narrowing of the loss. Semiconductor and Mechatronics served as the effective driver of company-wide earnings, generating Operating Income of ¥2.0B and a profit margin of 7.9%, although this represented a YoY decline of -16.0%. Despite its sharp revenue growth, Environmental and Social Infrastructure remained low-margin, with Operating Income of ¥0.1B and a profit margin of 0.5%, while Medical and Healthcare recorded Operating Income of ¥-0.4B, representing a widening loss (YoY -555.6%). Ordinary Income was ¥-2.0B, with non-operating expenses of ¥1.7B (foreign exchange losses of ¥0.7B and interest expenses of ¥0.7B) serving as a downward pressure. Extraordinary losses of ¥0.4B (including losses on the disposal and sale of fixed assets) also weighed on Net Income, which was ¥-3.1B. Overall, the company exhibited a pattern of revenue growth accompanied by lower earnings, or a narrowing loss.

Segment Analysis

Semiconductor and Mechatronics generated revenue of ¥25.9B (composition ratio 43.0%, YoY +18.9%) and Operating Income of ¥2.0B (profit margin 7.9%), making it the core contributor to company-wide earnings. Environmental and Social Infrastructure achieved significant revenue growth to ¥24.1B (composition ratio 40.0%, YoY +83.9%), but remained low-margin, with Operating Income of ¥0.1B and a profit margin of 0.5%, indicating substantial room to improve project profitability. Medical and Healthcare recorded revenue of ¥11.4B (composition ratio 19.0%, YoY -7.1%) and Operating Income of ¥-0.4B (profit margin -3.6%), with its loss expanding. The disparity in profitability among segments is diluting the company-wide margin.

Key Financial Indicators

【Profitability】The Operating Income margin was -0.9% (previous year -6.8%), while the Net Income margin was -5.2% (previous year -8.6%). Both showed a trend of improvement but remained in negative territory. Gross margin improved by +330bp to 25.1% (previous year 21.8%), suggesting the effects of product mix and cost management.【Cash Quality】Cash and deposits were ample at ¥107.8B; however, work in process inventory amounted to ¥76.3B, indicating a structure requiring attention to the speed of asset monetization.【Investment Efficiency】ROE was -1.9%. Improvement in the Net Income margin and higher total asset turnover contributed, but ROE remained negative.【Financial Soundness】The Equity Ratio declined to 36.1% (previous year 38.7%), and leverage increased against the backdrop of higher interest-bearing debt (short-term borrowings ¥79.5B, long-term borrowings ¥67.5B, and bonds ¥21.0B).

Cash Flow Analysis

As detailed line items from the statement of cash flows are not disclosed in this report, cash trends are analyzed based on changes in the balance sheet. Cash and deposits increased to ¥107.8B from approximately ¥97.5B in the previous year, maintaining a substantial liquidity cushion. Meanwhile, short-term borrowings increased to ¥79.5B from ¥71.8B in the previous year, and working capital expanded due to increases in accrued bonuses and work in process inventory (¥76.3B). Although accounts receivable declined to ¥64.9B from ¥80.8B in the previous year, work in process inventory remained at a high level, creating a structure in which the timing of cash generation depends on the progress of project acceptance inspections. Capital expenditures and increases in property, plant and equipment were limited, while a notable feature was the increased dependence of financing on short-term borrowings.

Earnings Quality

Recurring earnings improvement resulted from growth in revenue and gross profit, while an extraordinary loss of ¥0.4B, as a non-recurring factor, made a certain contribution to the net loss. Non-operating expenses reached ¥1.7B (foreign exchange losses of ¥0.7B and interest expenses of ¥0.7B), accounting for approximately 2.9% of revenue and thus serving as the primary cause of the divergence between Operating Income, Ordinary Income, and Net Income. Comprehensive Income was ¥-2.4B, close to Net Income of ¥-3.1B, with valuation differences on available-for-sale securities of +¥0.7B and foreign currency translation adjustments of +¥0.1B partially offsetting the loss. Given the asset composition, including work in process inventory and accounts receivable, the timing of cash conversion may diverge from the pace of earnings improvement. Accordingly, trends in cash conversion require attention when evaluating earnings quality.

Earnings Forecast and Guidance

Against the Full-Year plan (Revenue ¥350.0B, Operating Income ¥33.0B, Ordinary Income ¥30.0B), the Q1 progress rate was 17.2% for Revenue. The progress rates for both Operating Income and Ordinary Income were negative because losses were recorded. Revenue progress was below the 25% benchmark for an even quarterly progression, and profit progress was similarly low, suggesting that the plan may be predicated on concentrated acceptance of large projects and profitability improvements in the second half of the fiscal year. Neither the earnings forecast nor the dividend forecast was revised as of Q1.

Shareholder Returns

The dividend forecast is ¥45.00 per year (¥20 in the previous year). The Payout Ratio against the Full-Year Net Income plan of ¥20.0B is estimated at approximately 39%, calculated based on the assumed total dividend amount using the average number of shares outstanding during the period. No revision to the dividend forecast was made as of this quarter. No share repurchases were confirmed, and shareholder returns consist solely of dividends; therefore, the relevant metric is the Payout Ratio rather than the Total Return Ratio.

Risk Factors

1. Working capital accumulation risk: With ¥76.3B of work in process inventory, total inventories of ¥15.8B, and accounts receivable of ¥64.9B, the asset structure is prone to accumulation, and delays in project acceptance inspections could impede cash generation.

2. Financial leverage and interest-rate sensitivity: Interest-bearing debt consists of short-term borrowings of ¥79.5B, long-term borrowings of ¥67.5B, and bonds of ¥21.0B, accounting for approximately 37% of total assets. Interest expenses increased to ¥0.7B from ¥0.5B in the previous year. The Equity Ratio also declined to 36.1% (previous year 38.7%), increasing sensitivity to changes in the interest-rate environment.

3. Segment profitability disparity: Despite sharp revenue growth (+83.9%), Environmental and Social Infrastructure remains low-margin, with an Operating Income margin of 0.5%, while Medical and Healthcare continues to record a loss, with an Operating Loss of ¥-0.4B. As a result, the company-wide profit margin is supported solely by Semiconductor and Mechatronics.

Industry Benchmark (For Reference; Company Research)

Industry Benchmark (manufacturing)

Profitability and Returns

The company’s profitability metrics are significantly below the industry median, with both Operating Income and Net Income margins ranking in the lower tier of the industry.

Growth and Capital Efficiency

The Revenue growth rate is significantly above the industry median, representing a high pace of revenue growth within the industry.

※Source: Company research

Key Earnings Highlights

1. Revenue growth and a +330bp improvement in gross margin substantially narrowed the Operating Loss from ¥-3.2B in the previous year to ¥-0.5B, indicating a trend toward improvement in the earnings structure.

2. By segment, Semiconductor and Mechatronics (profit margin 7.9%) is driving company-wide earnings, while profitability improvements in Environmental and Social Infrastructure (profit margin 0.5%) and Medical and Healthcare (profit margin -3.6%) will be important variables for the company-wide margin going forward.

3. Q1 progress against the Full-Year plan was 17.2% for Revenue, below the standard 25% benchmark for even quarterly progress. The degree to which project progress and profitability corrections are achieved in the second half of the fiscal year will be key to meeting the plan.

Theoretical Share Price (Reference Value)

Sensitivity: ¥983–¥1,041 at Cost of Equity ±1%, and ¥1,009–¥1,015 at ω±0.1.

Notes:

• Net assets as of the end of the quarter 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 using only publicly disclosed data; this 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 through analysis of XBRL earnings summary data. It does not recommend investment in any specific security. 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 professionals as necessary.

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