SAMCO (6387) FY2026 Q2 Earnings Report

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Executive Summary

Cumulative results for FY2026 Q2 showed increases in both revenue and earnings; however, the slowdown in profit growth relative to revenue growth warrants attention. Revenue was ¥4.59B (+11.3% YoY), Operating Income was ¥1.03B (+3.8%), Ordinary Income was ¥1.07B (+6.1%), and Net Income was ¥0.75B (+5.1%). Although the Operating Margin remained high at 22.4%, it declined from approximately 24.0% in the same period of the previous year, indicating that the Company has not fully converted revenue growth into profit growth.

Factors Affecting Performance

【Revenue】Revenue was ¥4.59B, representing an increase of +11.3% YoY, and progressed at a pace exceeding the full-year Company forecast (+9.2%). Contract liabilities increased significantly to ¥1.29B from ¥0.44B in the previous year, suggesting that advance payments for orders received are accumulating. Work in process also remained high at ¥2.12B (81.2% of inventories), reflecting a made-to-order manufacturing process.

【Profit and Loss】Operating Income was limited to ¥1.03B (+3.8% YoY), and the difference from the 11.3% revenue growth rate indicates weak operating leverage. The Operating Margin was 22.4%, down approximately 1.6pt from approximately 24.0% in the same period of the previous year, as the Company was unable to fully absorb increases in expenses such as salaries and research and development expenses (¥0.18B, 3.9% of revenue) through revenue expansion. Ordinary Income exceeded Operating Income by ¥0.04B, supported by non-operating income and expenses, including a foreign exchange gain of ¥0.02B. Net Income was ¥0.75B (+5.1% YoY). While revenue and earnings increased, there remains room for improvement in terms of profitability.

Key Financial Indicators

【Profitability】The Company maintained a highly profitable structure, with an Operating Margin of 22.4%, Net Profit Margin of 16.4%, and EBITDA Margin of approximately 23.6%; however, the Operating Margin declined by approximately 1.6pt YoY.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥1.75B, reaching 2.3 times Net Income of ¥0.75B. Although the cash backing of earnings is strong, the contribution from working capital factors, such as a ¥0.57B decrease in trade receivables and a ¥0.85B increase in contract liabilities, was significant.【Investment Efficiency】ROE (cumulative basis) was 5.4%, constrained by a low asset turnover ratio. The Company held cash and deposits of ¥8.21B against total assets of ¥18.78B, indicating room for more effective asset utilization.【Financial Soundness】The financial base is extremely sound, with an Equity Ratio of 73.9% and interest-bearing debt of ¥1.00B; cash and deposits were approximately 8.2 times interest-bearing debt.

Cash Flow Analysis

Operating Cash Flow was ¥1.75B, a significant improvement from -¥0.11B in the same period of the previous year. Investing Cash Flow was -¥0.04B, while Financing Cash Flow was -¥0.50B, including ¥0.48B in dividend payments. Free Cash Flow was ample at ¥1.71B. Factors contributing to the increase in OCF were a ¥0.57B decrease in trade receivables and a ¥0.85B increase in contract liabilities. Accordingly, the strong cash generation during the period included a temporary working capital effect associated with the order and billing cycle. Meanwhile, work in process increased by ¥0.21B, indicating that funds were invested in manufacturing progress. Capital expenditures of ¥0.02B were below depreciation and amortization expense of ¥0.05B, warranting attention to the potential impact of the low investment level on future production capacity.

Quality of Earnings

Non-operating income was limited to ¥0.06B (1.3% of revenue), consisting primarily of a ¥0.02B foreign exchange gain and ¥0.003B in dividend income, with core operating earnings accounting for the majority of profits. Ordinary Income exceeded Operating Income by only ¥0.04B, and no temporary extraordinary gains or losses were identified. The fact that OCF reached 2.3 times Net Income indicates strong cash backing for accounting earnings. On the other hand, its components depended on working capital factors, namely a decrease in trade receivables and an increase in contract liabilities. Whether cash generation can remain at the same level in subsequent periods will depend on trends in the acceptance and billing cycle.

Earnings Forecasts and Guidance

Progress against the full-year Company forecasts was 45.0% for Revenue, 41.8% for Operating Income, 44.0% for Ordinary Income, and 43.7% for Net Income, all slightly below the standard first-half progress rate of 50%. To achieve the full-year forecasts (Revenue of ¥10.20B and Operating Income of ¥2.46B), second-half Revenue of ¥5.61B and Operating Income of ¥1.43B (Operating Margin of 25.5%) will be required, necessitating an improvement of approximately 3.1pt in the Operating Margin from the first-half result of 22.4%.

Shareholder Returns

The Q2 dividend was ¥0, and the full-year dividend forecast assumes a year-end lump-sum dividend of ¥60 per share. The forecast total dividend was calculated at approximately ¥0.48B based on the average number of shares outstanding during the period, resulting in a Payout Ratio of approximately 28.0% against forecast full-year Net Income of ¥1.72B. First-half Free Cash Flow of ¥1.71B significantly exceeded the forecast total dividend, and dividend sustainability is supported by the level of cash and deposits and the strength of OCF. Virtually no share buybacks have been conducted, making it appropriate to evaluate shareholder returns based on the Payout Ratio.

Risk Factors

1. Prolongation of the work-in-process and acceptance cycle: Work in process of ¥2.12B accounts for 81.2% of inventories, making revenue, profit, and inventory valuation susceptible to fluctuations in the timing of acceptance and specification changes.

2. Working capital volatility risk: The timing of trade receivables collections and contract liability receipts contributed to the increase in OCF during the period. Working capital requirements may increase during periods of order expansion.

3. Restraint in capital expenditures: Capital expenditures of ¥0.02B were below depreciation and amortization expense of ¥0.05B. If restraint in renewal and capacity expansion investments continues, it could affect future production capacity and competitiveness.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The Company demonstrates profitability substantially above the industry median and has a high-margin structure even within the manufacturing industry.

Growth and Capital Efficiency

The revenue growth rate is around the industry median, placing the Company in a stable-growth range rather than representing exceptional growth.

※Source: Compiled by the Company

Key Points from the Financial Results

1. The Operating Margin of 22.4% is substantially above the industry median, but declined by approximately 1.6pt YoY. Recovery to 25.5% in the second half will be the key to achieving the full-year forecast.

2. OCF is strong at 2.3 times Net Income, but its sources are working capital factors—namely a decrease in trade receivables and an increase in contract liabilities. The work-in-process ratio of 81.2% and trends in DIO will determine the sustainability of future cash generation.

3. Capital expenditures remain below depreciation and amortization, making the allocation of investment toward future production capacity an important point to monitor behind the high Free Cash Flow.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,854–¥1,964 at ±1% in the Cost of Equity, and ¥1,903–¥1,914 at ±0.1 in ω.

Notes:

• Net assets as of the quarter-end are used (there is a timing difference from the full-year forecast).

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated values based solely on publicly disclosed data; these are not forecasts of the market share price or recommendations of specific investment actions, and do 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 summary 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 professionals as necessary.

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AI Financial Analysis

Executive Summary

FY2026 Q2 performance was solid in absolute terms, but profit growth trailed sales growth as gross and operating margins compressed. Revenue rose 11.3% YoY to ¥4.587bn, while operating income increased 3.8% to ¥1.028bn and net income grew 5.1% to ¥751m. The company maintained a high 22.4% operating margin and a 16.4% net margin, both well above the stated excellence benchmarks. Gross margin declined by approximately 250bp YoY to 48.6% from 51.1%, indicating that cost of sales rose faster than revenue. Operating margin declined by approximately 160bp to 22.4% from 24.0%, reflecting the lower gross margin and SG&A growth. Net margin declined by approximately 90bp from 17.3% to 16.4%. SG&A expenses increased 7.6% YoY to ¥1.202bn, slower than revenue growth, which provided partial operating-leverage support. R&D expense rose 18.4% YoY to ¥180m and represented 3.9% of revenue, indicating continued technology investment despite near-term margin pressure. Ordinary income grew faster than operating income, at 6.1% YoY, supported by ¥18m of foreign-exchange gains and other non-operating income. Operating cash flow was exceptionally strong at ¥1.753bn, equivalent to 2.33x net income. However, cash generation was materially supported by a ¥567m reduction in receivables and an ¥850m increase in contract liabilities, while inventories increased by ¥213m. Free cash flow was ¥1.709bn, substantially exceeding both net income and modest capital expenditure. The balance sheet remains highly liquid, with cash and deposits of ¥8.213bn, a 344.9% current ratio, and interest-bearing debt of only ¥1.003bn. The principal operational issue is working-capital intensity: annualized DSO was 90 days, annualized DIO was 202 days, and the annualized cash conversion cycle was 223 days. Full-year guidance implies a second-half weighting, as Q2 progress is 45.0% for sales, 41.8% for operating income, and 43.7% for net income versus a standard 50% at Q2. The full-year forecast remains achievable, but realization depends on converting the elevated work-in-process balance into revenue and maintaining customer collections and order-related advances.

Profitability Analysis

The annualized DuPont ROE is 10.8%, comprising a 16.4% net profit margin, 0.488x asset turnover, and 1.35x financial leverage. The earnings profile is driven primarily by high margins rather than leverage, consistent with a net-cash, equity-funded capital structure. The largest adverse movement was margin compression: gross margin fell about 250bp YoY, operating margin fell about 160bp, and net margin fell about 90bp. Revenue grew 11.3%, but cost of sales increased 17.0%, causing the gross-margin decline. SG&A increased 7.6%, below revenue growth, demonstrating favorable SG&A operating leverage; salaries and allowances were ¥321m and directors' compensation was ¥77m. R&D expense increased to ¥180m from ¥152m, or 3.9% of revenue, and grew faster than revenue, which is appropriate for a semiconductor-processing-equipment manufacturer but modestly dilutive to current margins. EBITDA was ¥1.082bn and EBITDA margin was 23.6%, confirming that core earnings remain strong despite the margin reset. The annualized ROA is approximately 8.2%, calculated using annualized Q2 net income of ¥1.502bn and average total assets of approximately ¥18.28bn. Financial leverage is restrained, and the interest burden of 1.044x reflects net non-operating income rather than material financing strain. Interest coverage of 193.38x and EBITDA interest coverage of 203.48x make interest expense immaterial to profitability. FX gains of ¥18m represented only 1.8% of operating income, so ordinary-income outperformance versus operating income was not dependent on a large non-recurring financial item. The 30.0% effective tax rate and 0.700 tax burden are broadly normal, supporting the quality and repeatability of reported net income.

Growth Assessment

Top-line growth of 11.3% YoY demonstrates continued demand expansion, but the slower 3.8% operating-income growth indicates that incremental revenue carried a lower margin in the first half. The full-year forecast calls for revenue of ¥10.20bn, operating income of ¥2.46bn, and net income of ¥1.72bn, representing management's expected YoY growth of 9.2%, 5.0%, and 1.4%, respectively. Q2 progress against full-year guidance is 45.0% for revenue, 41.8% for operating income, 44.0% for ordinary income, and 43.7% for net income. Each is 5.0-8.2 percentage points below the standard 50% Q2 run rate, implying a back-end-loaded second half rather than a guidance shortfall by itself. To reach guidance, second-half revenue must be ¥5.613bn, 22.4% above first-half revenue, while second-half operating income must be ¥1.432bn, 39.3% above first-half operating income. This requires a second-half operating margin of approximately 25.5%, above the first-half 22.4%, making gross-margin recovery and favorable product mix important. Inventory totaled ¥2.615bn, equivalent to 202 annualized inventory days, and work in process accounted for 81.2% of inventory. The concentration in WIP can support future shipments if production converts efficiently, but it also raises execution risk around manufacturing throughput, customer acceptance, and timing of revenue recognition. Contract liabilities increased by ¥850m YoY to ¥1.286bn, which provides evidence of customer advances or order-related obligations and supports near-term revenue visibility. The growth outlook is therefore supported by revenue momentum and contract liabilities, but it is conditional on efficient conversion of WIP and restoration of the gross margin.

Financial Health

Financial health is very strong from a liquidity and solvency perspective. Current assets of ¥13.502bn exceeded current liabilities of ¥3.914bn by ¥9.588bn, producing a 344.9% current ratio and an equally strong 344.9% quick ratio. Cash and deposits of ¥8.213bn represented 43.7% of total assets and covered short-term loans of ¥1.000bn by 8.21x. Interest-bearing debt was ¥1.003bn, consisting almost entirely of short-term loans, while long-term loans were only ¥3m. Although the short-term debt ratio is 99.7% and triggers a refinancing-risk alert, the practical refinancing risk is limited by the cash balance, low debt/EBITDA of 0.93x, debt/capital of 6.7%, and very high interest coverage. The maturity profile should nevertheless be monitored because virtually all borrowings require periodic short-term renewal rather than being termed out. Total liabilities were only 26.1% of total assets, and total equity was ¥13.884bn. Interest-bearing debt/equity was approximately 7.2%, indicating a conservative capital structure; the reported D/E ratio was 0.35x. Contract liabilities of ¥1.286bn are a meaningful current-liability component and reflect obligations to fulfill customer orders or deliver contracted equipment. Provisions include ¥425m for directors' retirement benefits, ¥55m for retirement benefits, ¥34m for bonuses, and ¥17m for product warranties; these obligations are manageable relative to liquidity. Investment securities increased ¥83m, or 32.0% YoY, to ¥344m, modestly increasing exposure to market-price movements while remaining only 1.8% of total assets. Long-term loans decreased ¥20m, or 85.6% YoY, to ¥3m, further reducing long-dated debt obligations. The company has no material acquisition-related intangible-asset burden, as intangible assets were only ¥35m or 0.2% of assets.

Notable B/S Changes

Long-term loans: -¥20m (-85.6% YoY) to ¥3m - further reduces long-term borrowing, leaving the debt structure almost entirely short term. Investment securities: +¥83m (+32.0% YoY) to ¥344m - a modest increase in market-value exposure, although securities remain only 1.8% of total assets. Contract liabilities: +¥850m (+194.6% YoY) to ¥1.286bn - supports near-term delivery visibility and operating cash flow, but creates a corresponding obligation to fulfill contracted equipment deliveries. Accounts receivable: -¥595m (-20.9% YoY) to ¥2.254bn - collection improvement supported operating cash flow, although annualized DSO remains elevated at 90 days. Work in process: +¥125m (+6.2% YoY) to ¥2.123bn - reinforces the need to monitor production completion, delivery timing, and potential inventory carry risk.

Cash Flow Quality

Cash-flow quality was strong on reported measures, with operating cash flow of ¥1.753bn equal to 2.33x net income of ¥751m. Free cash flow was ¥1.709bn after only ¥17m of capital expenditure, providing substantial internal funding capacity. The accruals ratio of negative 5.3% and cash conversion of 1.62x OCF/EBITDA are favorable and indicate cash realization exceeded accounting earnings in the period. However, the composition of operating cash flow requires careful interpretation. A ¥567m reduction in trade receivables and contract assets, together with an ¥850m increase in contract liabilities, was the dominant source of cash conversion. These benefits were partially offset by a ¥213m inventory build, including elevated work in process. The annualized DSO of 90 days exceeds the 60-day warning threshold, indicating slow collection relative to revenue. The annualized DIO of 202 days also materially exceeds the 90-day warning threshold, and the annualized CCC of 223 days exceeds the 120-day warning threshold. These metrics are particularly important for a made-to-order manufacturing business because large equipment projects can create long production and acceptance cycles. The 81.2% WIP share of inventory is the direct root cause of the inventory warning: capital is committed to partially completed equipment for an extended period. The impact is that a delay in production completion, delivery, or customer acceptance could reverse part of the current operating-cash-flow strength and increase obsolescence or project-cost risk. CapEx/depreciation was 0.31x, below the 0.7x underinvestment alert threshold, with capex of ¥17m versus depreciation and amortization of ¥54m. This low ratio strengthened current free cash flow but may be insufficient for sustained replacement, productivity enhancement, or capacity expansion if maintained over multiple years. The company also purchased ¥21m of intangible assets, mainly relevant to software investment, but total fixed-asset investment remains low relative to depreciation.

Dividend Sustainability

No Q2 dividend was declared, while the full-year forecast calls for DPS of ¥60. Based on forecast EPS of ¥214.38, the indicated dividend payout ratio is approximately 28.0%, which is conservative and comfortably below the 60% sustainability benchmark. Forecast aggregate dividends are approximately ¥482m using average shares of 8.03 million, broadly consistent with the ¥482m cash dividend paid during the first half. First-half free cash flow of ¥1.709bn covered this dividend cash outflow by approximately 3.5x. The balance sheet also provides substantial support, with ¥8.213bn of cash and deposits against ¥1.003bn of interest-bearing debt. Share repurchases were immaterial at approximately ¥0.3m, so dividend payout ratio remains the appropriate shareholder-return metric rather than total return ratio. Dividend sustainability is therefore strong under the current earnings forecast. The main medium-term constraint is not current liquidity but whether low capital expenditure and high working-capital intensity require greater cash retention for manufacturing capacity, modernization, or project funding.

Risk Assessment

Business risks include Working-capital conversion risk is high: annualized DSO of 90 days, annualized DIO of 202 days, and an annualized CCC of 223 days indicate a long order-to-cash cycle., Production-execution risk is elevated because work in process is ¥2.123bn and represents 81.2% of total inventory. This can reflect a production bottleneck or long build cycle, and delays in completion or acceptance could defer sales and cash collection., Margin risk is material: sales increased 11.3% YoY, but cost of sales rose 17.0%, reducing gross margin by approximately 250bp. Sustained cost inflation, unfavorable project mix, or pricing pressure would challenge the required second-half margin recovery., Semiconductor and advanced-materials equipment demand is cyclically sensitive to customers' capital-spending plans, technology transitions, export controls, and supply-chain availability., Foreign-exchange exposure is present, as FY2026 Q2 included ¥18m of FX gains. The current contribution is modest, but changes in exchange rates can affect overseas competitiveness and non-operating income..

Financial risks include The short-term debt ratio of 99.7% triggers a refinancing-risk alert because nearly all debt is short dated. Its impact is mitigated substantially by 8.21x cash coverage of short-term debt and low 0.93x debt/EBITDA., The high DSO alert is rooted in slow receivable collection, which can create cash-flow volatility despite strong reported operating cash flow., The high inventory-days and high-WIP-ratio alerts are rooted in capital tied up in unfinished equipment. This increases exposure to order cancellations, specification changes, completion delays, and inventory valuation pressure., The CapEx/depreciation ratio of 0.31x triggers both underinvestment alerts. Persistently spending below depreciation could impair facility renewal, automation, capacity readiness, and long-term competitive positioning., The increase in investment securities to ¥344m introduces modest valuation and market-risk exposure..

Key concerns include The key earnings requirement is a second-half operating margin of approximately 25.5% to achieve full-year operating-income guidance, compared with 22.4% in the first half., Operating cash flow was strong, but it was materially assisted by receivable collection and higher contract liabilities; investors should assess whether these working-capital contributions recur., The balance sheet is highly resilient, so the main risk to the earnings outlook is operational conversion of WIP into accepted shipments rather than leverage or liquidity stress..

Investment Implications

Key takeaways include The company combines high profitability, with a 22.4% operating margin and 16.4% net margin, with a very liquid and low-debt balance sheet., Revenue growth remains healthy at 11.3% YoY, but first-half cost growth outpaced sales growth and reduced gross margin by approximately 250bp., Reported cash conversion is excellent, with ¥1.753bn of operating cash flow and ¥1.709bn of free cash flow, although working-capital inflows materially contributed., Guidance requires meaningful second-half acceleration, particularly in operating income and operating margin., Capital allocation is conservative: the forecast ¥60 DPS implies an approximately 28% payout ratio, while capex remains below depreciation..

Metrics to watch include Gross margin and operating margin recovery in the second half, Conversion of ¥2.123bn of work in process into finished deliveries and recognized revenue, Annualized DSO, DIO, and CCC, especially whether receivable collection remains favorable, Contract-liability movement and the resulting visibility for equipment deliveries, CapEx/depreciation ratio and any evidence of increased replacement, automation, or capacity investment, Short-term-loan renewal terms and the level of cash retained after dividends.

Regarding relative positioning, Relative to typical manufacturing balance sheets, the company is exceptionally liquid and conservatively financed, with cash covering short-term debt more than eight times and debt/EBITDA below 1x. Its profitability is also strong, but its working-capital cycle is weaker than manufacturing efficiency benchmarks because of long receivable and inventory days, especially the unusually high WIP concentration. The resulting profile is that of a financially resilient, high-margin equipment manufacturer whose near-term performance is principally determined by project execution, product mix, and order-to-cash conversion.