SAMCO INC. FY2026 Q3 Earnings Report

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Executive Summary

Cumulative results for Q3 of FY2026 reflected higher revenue and earnings, accompanied by improved profit margins as operating leverage took effect. Revenue was ¥74.1B (+18.8% YoY), Operating Income was ¥18.6B (+33.7%), Ordinary Income was ¥19.6B (+43.4%), and Net Income was ¥13.8B (+42.1%). Profit growth exceeding revenue growth was attributable to the maintenance of a high gross margin (49.3%), while SG&A expenses did not increase as much as revenue. Progress against the full-year company forecasts was 68.7% for Revenue, 70.8% for Operating Income, and 71.7% for Net Income. Although these figures were slightly below the standard 75% progress level, the variance remained modest.

Factors Affecting Results

【Revenue】Revenue increased 18.8% YoY to ¥74.1B. Although a segment breakdown was not disclosed, contract liabilities (advances received) increased substantially to ¥1.65B from ¥0.44B in the previous year, suggesting that the receipt of advances associated with orders is progressing and may be one factor behind the revenue growth.

【Profit and Loss】Operating Income increased 33.7% YoY to ¥18.6B, and the Operating Income margin improved to 25.1% from approximately 22.3% in the same period of the previous year, an improvement of approximately 2.8pt. The decline in the cost-of-sales ratio and an SG&A expense ratio of 24.1%—which did not grow as much as revenue—contributed to the emergence of operating leverage. Ordinary Income increased 43.4% YoY to ¥19.6B. Non-operating income and expenses resulted in net income of ¥0.10B, including a foreign exchange gain of ¥0.07B, and this was one factor widening the gap from Operating Income. Net Income increased 42.1% YoY to ¥13.8B after deducting income taxes and other taxes of ¥0.59B (an effective tax rate of approximately 30%), with the gap from Ordinary Income generally corresponding to the tax burden. In conclusion, the Company achieved higher revenue and earnings, with both improved core profitability and non-operating foreign exchange gains contributing to the results.

Key Financial Indicators

【Profitability】The Operating Income margin of 25.1%, Net Income margin of 18.6%, and gross margin of 49.3% all improved from the same period of the previous year (Operating Income margin of approximately 22.3% and Net Income margin of approximately 15.5%), indicating progress in fixed-cost absorption associated with higher revenue. 【Cash Quality】Cash and deposits were ¥95.0B, accounting for 46.4% of total assets, while the current ratio was approximately 309.6%, indicating high liquidity. Meanwhile, work in process of ¥2.49B accounted for 78.2% of inventories, representing a structure that constrains asset turnover. 【Investment Efficiency】ROE of 9.4% was supported by the high Net Income margin, but total asset turnover remained low, leaving room for improvement in capital efficiency. 【Financial Soundness】The Equity Ratio was 71.5%, down from 76.3% in the previous year. Although interest-bearing debt of ¥1.00B consisted entirely of short-term borrowings, cash and deposits substantially exceeded short-term borrowings, indicating a high level of underlying financial resilience.

Cash Flow Analysis

Although this report does not include a detailed breakdown of the statement of cash flows, trends in the balance sheet indicate that cash and deposits increased by ¥2.52B to ¥95.0B from ¥69.8B in the previous year, suggesting that cash generation associated with earnings growth is progressing. Meanwhile, work in process increased to ¥2.49B from ¥2.00B in the previous year, while accounts receivable and notes receivable decreased to ¥1.77B from ¥2.85B. From a working capital perspective, the accumulation of work in process is a factor tying up funds, leaving room to improve asset turnover relative to the high level of earnings. Short-term borrowings of ¥1.00B were unchanged from the previous year, suggesting limited dependence on financing activities for funding.

Quality of Earnings

The primary difference between Ordinary Income and Net Income was income taxes and other taxes of ¥0.59B (an effective tax rate of approximately 30%), and no temporary factors such as extraordinary gains or losses were identified. Non-operating income of ¥0.12B included a foreign exchange gain of ¥0.07B, equivalent to approximately 3.9% of Operating Income of ¥18.6B, representing a source of volatility that differs in nature from recurring core operating earnings. Even excluding the foreign exchange gain, the improvement in profitability on an Operating Income basis is clear, indicating that the improvement in earnings power was primarily driven by core operations. On the other hand, the accumulation of inventories, particularly work in process, may be converted into earnings as future revenue recognition (accrual), but also entails risks of delayed acceptance inspection and inventory write-downs. It is therefore an item that warrants attention when assessing earnings quality.

Earnings Forecasts and Guidance

The full-year company forecasts are Revenue of ¥107.8B (+15.4% YoY), Operating Income of ¥26.3B (+12.3%), Ordinary Income of ¥27.2B (+14.7%), and Net Income of ¥19.2B (+13.1%). Cumulative Q3 progress was 68.7% for Revenue, 70.8% for Operating Income, 72.2% for Ordinary Income, and 71.7% for Net Income, all slightly below the standard 75% progress level. Revenue of ¥3.37B and Operating Income of ¥0.77B are required in Q4, implying a required Operating Income margin of 22.8%. As this is below the cumulative Q3 actual margin of 25.1%, the hurdle from a margin perspective is not high. In addition, revisions to the earnings forecasts and dividend forecasts (an increase in the dividend) were disclosed on the same date as these financial results.

Shareholder Returns

The full-year dividend forecast is ¥75.0 per share, and an upward dividend revision was disclosed on the same date as the announcement of these financial results. The Q2 dividend was ¥0, and the annual dividend is expected to be concentrated in the year-end dividend. Based on average shares outstanding during the period of 8,032 thousand shares, the total annual dividend is approximately ¥0.60B, resulting in a Payout Ratio of approximately 31.4% relative to the full-year Net Income forecast of ¥1.92B. The financial foundation of cash and deposits of ¥95.0B and an Equity Ratio of 71.5% is more than sufficient to cover the expected total dividend.

Risk Factors

1. Working capital accumulation: Work in process of ¥2.49B accounts for 78.2% of inventories, and annualized inventory days have lengthened. If acceptance inspections for made-to-order projects are delayed or inventory write-downs occur, asset efficiency and earnings quality may be affected.

2. Execution risk in achieving the full-year plan: Cumulative Q3 progress was 70.8% for Operating Income and 71.7% for Net Income, slightly below the standard progress level. The key issue is whether acceptance inspections and revenue recognition for the ¥3.37B of Revenue required in Q4 (equivalent to 45.5% of cumulative actual results) will proceed as planned.

3. Concentration of short-term borrowings: Interest-bearing debt of ¥1.00B consists entirely of short-term borrowings, creating a structure in which refinancing maturities are concentrated. However, cash and deposits exceed short-term borrowings by ¥8.50B, indicating high repayment capacity at present.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Both the Operating Income margin and Net Income margin substantially exceeded the industry median, placing profitability at a high level within the industry.

Growth and Capital Efficiency

The Revenue growth rate also substantially exceeded the industry median, demonstrating high growth within the industry.

※Source: Compiled by the Company

Key Points from the Financial Results

1. The Operating Income margin of 25.1% and Net Income margin of 18.6% each improved from the same period of the previous year, confirming the emergence of operating leverage as earnings growth exceeded revenue growth.

2. The level of inventories, centered on work in process, is a structural factor constraining total asset turnover. Achievement of the full-year plan will depend on the progress of acceptance inspections and revenue recognition in Q4.

3. The financial foundation of an Equity Ratio of 71.5% and cash and deposits of ¥95.0B supports repayment capacity for short-term borrowings and the ability to implement shareholder returns, including the increased dividend.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,995–¥2,113 at ±1% for the cost of equity, and ¥2,047–¥2,061 at ±0.1 for 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 for any specific investment action 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 financial results data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed financial results data. Investment decisions should be made at your own discretion and responsibility, after consulting with a professional as necessary.

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AI Financial Analysis

Executive Summary

Samco delivered a strong FY2026 Q3 earnings performance, with revenue growth translating into materially faster operating and net-profit growth. Cumulative Q3 revenue rose 18.8% year on year to ¥7.414bn. Operating income increased 33.7% to ¥1.863bn. Ordinary income rose 43.4% to ¥1.965bn. Net income rose 42.1% to ¥1.376bn. The gross margin was 49.3%, broadly stable and approximately 11bp above the prior-year level. The operating margin expanded by approximately 281bp to 25.1%, from 22.3% a year earlier. The net margin expanded by approximately 305bp to 18.6%, from 15.5% a year earlier. This margin expansion reflects positive operating leverage, as SG&A increased only 6.9%, substantially below revenue growth. Non-operating foreign-exchange gains of ¥73m also supported ordinary income and contributed to ordinary-income growth outpacing operating-income growth. The effective tax rate was 30.0%, leaving the tax burden at 0.700 and broadly consistent with a normal domestic tax profile. The annualized ROE of 12.5% is solid, although below the 15% level generally associated with excellent profitability. Liquidity is exceptionally strong, with ¥9.505bn of cash and a 309.6% current ratio. The balance sheet has limited financial debt, although all interest-bearing borrowings are short term and therefore require ongoing refinancing discipline. Working-capital efficiency remains the principal operating issue: annualized DSO is 65 days, DIO is 232 days, and the annualized cash-conversion cycle is 191 days. In particular, work in process represents 78.2% of inventory, indicating that execution through production and shipment conversion will be central to cash realization. Full-year guidance still requires a seasonally stronger Q4, but cumulative progress is broadly consistent with management's plan. The revised ¥75 per-share dividend implies a measured payout commitment that appears supported by profitability and the net-cash balance sheet.

Profitability Analysis

Annualized DuPont ROE is 12.5%, decomposed into an 18.6% net profit margin, 0.483x asset turnover, and 1.40x financial leverage. The primary source of ROE strength is the high net margin rather than balance-sheet leverage, as the 1.40x leverage factor is conservative. The largest year-on-year improvement was in operating profitability: operating income grew 33.7% against 18.8% revenue growth, expanding the operating margin by approximately 281bp to 25.1%. Gross margin remained very strong at 49.3%, indicating that the earnings improvement was not dependent on gross-margin sacrifice. SG&A grew 6.9%, well below sales growth, producing favorable operating leverage and indicating good cost absorption. Net margin rose approximately 305bp to 18.6%, aided by operating-margin expansion and the swing to ¥73m of foreign-exchange gains. Foreign-exchange gains equaled 3.9% of operating income, so a portion of the outperformance in ordinary income is market-sensitive rather than purely operational. The five-factor decomposition also indicates limited financing drag: the interest burden was 1.055 and interest coverage was 221.0x. The tax burden of 0.700, equivalent to a 30.0% effective tax rate, was normal and did not distort net-profit conversion. Annualized ROA implied by the reported DuPont factors is approximately 9.0%, reflecting strong earnings generation from the asset base, while the relatively modest 0.483x asset turnover is consistent with a production-equipment business carrying substantial land, production assets, and work in process. Sustaining the current margin profile depends on continued shipment execution and converting high WIP into revenue without cost overruns or discounting.

Growth Assessment

Revenue growth of 18.8% and operating-income growth of 33.7% demonstrate profitable growth rather than volume expansion at the expense of margins. Gross profit increased 19.1% to ¥3.653bn, broadly matching revenue growth, while the larger increase in operating income came from SG&A discipline. Revenue progress against FY2026 guidance is 68.7%, versus the standard 75% cumulative progress level at Q3. Operating-income progress is 70.8%, ordinary-income progress is 72.2%, and net-income progress is 71.7%; each is within 10 percentage points of the standard Q3 benchmark. Achieving the full-year forecast requires Q4 revenue of ¥3.371bn, operating income of ¥768m, and net income of ¥543m. The implied Q4 operating margin is 22.8%, below the cumulative Q3 margin of 25.1%, making the operating-income forecast achievable if planned deliveries and acceptance timing proceed normally. The order-to-cash cycle warrants close attention because annualized inventory days are 232 and WIP is heavily weighted at 78.2% of inventory. For a semiconductor and compound-semiconductor production-equipment supplier, customer capital-expenditure cycles, qualification timing, and delivery acceptance can create pronounced period-end revenue variability. The FY2026 full-year forecast calls for 15.4% revenue growth and 12.3% operating-income growth, implying that management is not extrapolating the cumulative Q3 pace into Q4.

Financial Health

Financial health is strong. Current assets of ¥14.980bn exceeded current liabilities of ¥4.838bn by ¥10.142bn, producing a 309.6% current ratio and a matching 309.6% quick ratio. Cash and deposits of ¥9.505bn represented 46.4% of total assets and covered ¥1.000bn of short-term loans by 9.50x. Interest-bearing debt is limited to ¥1.000bn, equivalent to approximately 6.8% of equity, while debt/capital is only 6.4%. Total liabilities/equity are 0.40x, well below the 2.0x level associated with aggressive leverage. Interest coverage of 221.0x confirms that interest expense is immaterial to earnings capacity. The principal maturity consideration is that 100% of interest-bearing debt is short term. This refinancing-risk flag stems from the debt maturity profile rather than weak liquidity: ample cash and working capital substantially mitigate near-term rollover risk, but the company should avoid allowing short-term facilities to become a structural funding source. Contract liabilities increased to ¥1.647bn from ¥437m, indicating higher customer advances or order-related prepayments and providing partial operating funding. Accounts receivable declined 37.8% to ¥1.772bn while electronic receivables were ¥209m, a favorable balance-sheet movement that supports collections despite the reported 65-day annualized DSO. Accounts payable increased 75.1% to ¥1.455bn, which improves supplier financing but should be monitored to ensure the increase reflects normal procurement timing rather than delayed settlement. Cash increased 36.1% to ¥9.505bn, reinforcing resilience against cyclical demand volatility. Investment securities increased 110.3% to ¥548m; the amount remains only 2.7% of total assets and does not alter the conservative capital structure.

Notable B/S Changes

Cash and deposits: +¥2.522bn (+36.1%) to ¥9.505bn - materially strengthens liquidity and provides ample coverage for ¥1.000bn of short-term borrowings. Accounts receivable: -¥1.127bn (-37.8%) to ¥1.772bn - favorable reduction in outstanding trade receivables, although annualized DSO remains elevated at 65 days. Accounts payable: +¥624m (+75.1%) to ¥1.455bn - increases supplier-financing support for production activity; monitor payment normalization and procurement timing. Investment securities: +¥287m (+110.3%) to ¥548m - a large percentage increase from a low base, but still only 2.7% of total assets and not material to overall risk. Contract liabilities: +¥1.211bn (+277.3%) to ¥1.647bn - indicates a higher level of customer advances or order-related prepayments, supporting funding but increasing the importance of delivery execution. Work in process: +¥493m (+24.7%) to ¥2.491bn - near the 25% significance threshold and already the dominant inventory component; reinforces the need to monitor production completion and shipment conversion.

Cash Flow Quality

The working-capital profile is the key determinant of earnings conversion. Annualized DSO of 65 days exceeds the 60-day warning level, indicating slower collection than the preferred manufacturing benchmark. The root cause of the receivables alert is the length of the collection cycle relative to annualized sales; this can reflect milestone billing and customer acceptance procedures that are common in capital-equipment sales. Its impact is that reported profit may take longer to translate into deployable cash, particularly if shipment acceptance becomes back-end loaded. Annualized DIO of 232 days is substantially above the 90-day warning threshold. The inventory alert is driven mainly by ¥2.491bn of work in process, compared with raw materials of ¥515m and finished goods of ¥178m. Work in process accounts for 78.2% of inventory, well above the 40% warning threshold. This high-WIP-ratio flag points to production-cycle duration, equipment customization, or shipment/acceptance bottlenecks rather than an accumulation of finished goods. For a specialized manufacturing-equipment producer, elevated WIP can be normal during active order fulfillment, but it increases execution risk because delayed completion, specification changes, or customer acceptance delays can tie up capital and pressure margins. The annualized cash-conversion cycle of 191 days exceeds the 120-day warning level, combining high inventory days with elevated receivable days despite the increase in accounts payable. The impact is reduced operating flexibility and greater sensitivity of liquidity to order timing, even though the present cash balance provides a substantial buffer. The 75.1% increase in trade payables provides some offset to the inventory build, but supplier-credit utilization should remain aligned with procurement and production activity. Product-warranty provision was only ¥18m, or approximately 0.2% of cumulative revenue, indicating no evident material warranty-cost burden.

Dividend Sustainability

Management has revised its dividend outlook upward, with full-year DPS forecast at ¥75. Based on forecast EPS of ¥238.91, the dividend payout ratio is approximately 31.4%. This is comfortably below the 60% sustainability benchmark and leaves substantial earnings retention for working capital, capacity needs, and balance-sheet resilience. The implied aggregate dividend is approximately ¥603m based on 8.043 million issued shares, compared with forecast net income of ¥1.919bn. Retained earnings were ¥10.605bn at Q3 and total equity was ¥14.650bn, providing a substantial capital cushion. Cash and deposits of ¥9.505bn also exceed short-term borrowings by 9.5x. The absence of a Q2 dividend indicates that shareholder distributions are concentrated in the year-end payment, consistent with the full-year DPS forecast. Dividend sustainability nevertheless remains linked to conversion of the elevated WIP balance into customer deliveries and collections. The projected payout level appears prudent relative to profitability, capital structure, and liquidity.

Risk Assessment

Business risks include Semiconductor and compound-semiconductor equipment demand is cyclical and depends on customers' capital-expenditure plans, technology transitions, and equipment qualification schedules., Annualized inventory days of 232 and a WIP ratio of 78.2% create production-execution risk. The root cause is the concentration of ¥2.491bn in partially completed equipment; customized equipment can remain in WIP pending completion, installation, or acceptance. This may be characteristic of project-based capital equipment, but the level materially exceeds manufacturing benchmarks and raises the risk of delayed shipment, cost overruns, or inventory write-downs., Annualized DSO of 65 days exceeds the 60-day warning level. The root cause is a collection cycle extending beyond the preferred benchmark, potentially due to contractual milestones or customer acceptance. Although receivables declined year on year, prolonged collections can delay cash realization if customer capex conditions weaken., The ¥73m foreign-exchange gain supported ordinary income. Currency movements are relevant to an export-oriented equipment supplier and could reverse, making ordinary-income growth more volatile than operating-income growth..

Financial risks include All ¥1.000bn of interest-bearing debt is short term, triggering the refinancing-risk flag. The root cause is the 100% short-term debt ratio, versus the 40% warning threshold. Liquidity materially mitigates the risk because cash is ¥9.505bn and cash/short-term debt is 9.50x, but reliance on short-term funding should remain controlled., The annualized 191-day cash-conversion cycle exceeds the 120-day warning threshold. The root cause is the combination of long production-cycle inventory and above-benchmark receivable days. The impact is higher working-capital funding needs and greater sensitivity to delays in delivery and collection., Accounts payable rose 75.1% year on year to ¥1.455bn. While this supports liquidity and may reflect higher procurement for production, a persistent increase faster than operating activity could indicate increasing dependence on supplier credit..

Key concerns include Monitor whether high WIP converts to completed shipments and receivables without gross-margin erosion., Monitor Q4 delivery and acceptance timing, as the full-year forecast requires ¥3.371bn of Q4 revenue and ¥768m of Q4 operating income., Monitor DSO, DIO, and the cash-conversion cycle alongside the balance of contract liabilities, which was ¥1.647bn at Q3., Monitor the sustainability of foreign-exchange gains, which were a meaningful contributor to the gap between operating and ordinary income..

Investment Implications

Key takeaways include Revenue, operating income, and net income increased 18.8%, 33.7%, and 42.1% year on year, respectively., Operating-margin expansion to 25.1% was driven by stable gross margin and SG&A growth of only 6.9%., Annualized ROE of 12.5% is supported by high margins and conservative leverage rather than debt amplification., The company has strong liquidity, including ¥9.505bn of cash, a 309.6% current ratio, and 221.0x interest coverage., Working-capital execution is the central issue, with 232 annualized inventory days, 65 annualized receivable days, a 191-day annualized cash-conversion cycle, and WIP representing 78.2% of inventory., The ¥75 FY2026 dividend forecast implies a 31.4% payout ratio based on forecast EPS, leaving a meaningful earnings-retention buffer..

Metrics to watch include Q4 revenue, operating margin, and achievement of the ¥10.785bn full-year revenue forecast, Work-in-process balance and WIP share of inventory, Annualized DIO, DSO, and cash-conversion-cycle trends, Contract-liability conversion into revenue and delivery acceptance, Foreign-exchange gains or losses and their contribution to ordinary income, Short-term borrowing balance and cash/short-term-debt coverage.

Regarding relative positioning, Samco exhibits above-benchmark profitability for a manufacturing company, with a 25.1% operating margin, 18.6% net margin, and 12.5% annualized ROE. Its financial structure is more conservative than that of highly leveraged equipment manufacturers, but its working-capital cycle is materially weaker than standard manufacturing benchmarks because of the high WIP concentration and extended inventory duration.