TOREX SEMICONDUCTOR (6616) FY2026 FY Earnings Report

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Executive Summary

The current fiscal year marked a return to profitability from the operating loss and net loss recorded in the previous fiscal year, with improved gross margin and SG&A expense reductions, in addition to revenue growth, driving the recovery in profitability. Revenue was ¥25.07B (+4.7% YoY), while Operating Income was ¥1.08B (compared with a ¥0.63B loss in the previous fiscal year). Ordinary Income improved significantly to ¥1.27B (+144.5%), and Net Income to ¥1.16B (compared with a ¥2.36B loss in the previous fiscal year). In addition to revenue growth, the decline in the cost-of-sales ratio and a 10.5% reduction in SG&A expenses raised the Operating Income margin from negative 2.6% in the previous fiscal year to 4.3%.

Factors Affecting Performance

【Revenue】Revenue increased 4.7% YoY to ¥25.07B. By region, North America and Europe posted strong growth of +21.9% and +11.3%, respectively, while Japan, which accounted for 69.3% of the sales mix, grew +4.8% and remained the main driver of consolidated growth. Asia grew only +1.1%, indicating differences in growth rates across regions.

【Profit and Loss】Operating Income turned profitable at ¥1.08B, compared with a ¥0.63B loss in the previous fiscal year. The gross margin improved from 22.0% in the previous fiscal year to 25.4%, while SG&A expenses declined 10.5% YoY to ¥5.29B, generating operating leverage. Ordinary Income exceeded Operating Income by ¥0.18B, due to ¥0.36B in non-operating income, including a ¥0.16B foreign exchange gain. This should be viewed separately from the improvement in the core business. Extraordinary gains and losses nearly offset one another, comprising a ¥0.13B gain and a ¥0.12B loss, resulting in a limited impact on Net Income. The previous fiscal year's net loss included an impairment loss of ¥1.12B, and the absence of this non-recurring loss in the current fiscal year also contributed to the return to profitability. Overall, the results reflect higher revenue and higher profit.

Segment Analysis

The Japan segment drove the majority of consolidated profit, with Revenue of ¥17.37B (69.3% of the total, +4.8% YoY) and Operating Income of ¥0.84B (+197.0% YoY, 4.8% margin). Asia was the least profitable of the four regions, with Revenue of ¥5.68B (+1.1% YoY) and Operating Income of ¥0.10B (1.8% margin). Europe posted the highest margin among all regions, with Revenue of ¥1.37B (+11.3% YoY) and Operating Income of ¥0.11B (8.2% margin). North America remained small in scale, with Revenue of ¥0.66B, but recorded the highest revenue growth rate at +21.9%; Operating Income was ¥0.04B (6.6% margin). Although the Company remains highly dependent on sales in Japan, Europe and North America have both high growth and relatively strong profitability, suggesting room to diversify earnings sources.

Key Financial Metrics

【Profitability】Operating Income margin improved significantly to 4.3% (negative 2.6% in the previous fiscal year), while Net Income margin improved to 4.6% (negative 9.8% in the previous fiscal year). However, both remain in the early stages of a return to profitability, and profitability levels remain low. 【Cash Flow Quality】Operating Cash Flow (OCF) was ¥3.13B, or 2.7 times Net Income of ¥1.16B, indicating that earnings were supported by cash generation. Free Cash Flow (FCF) was ¥0.77B. 【Capital Efficiency】ROE was 6.2% and the Equity Ratio was 52.4%; capital efficiency was constrained by the low asset turnover ratio of 0.70x. 【Financial Soundness】Current assets of ¥21.74B compared with current liabilities of ¥8.02B indicate a strong liquidity position, while cash and deposits of ¥9.63B substantially exceeded short-term borrowings of ¥1.90B. Although the Company carries interest-bearing debt, including long-term borrowings of ¥7.85B, its interest coverage capacity remains adequate.

Cash Flow Analysis

Operating Cash Flow (OCF) was ¥3.13B, down 6.9% from ¥3.36B in the previous fiscal year; however, the previous fiscal year included the non-cash impairment loss of ¥1.12B, so this cannot be characterized as a simple deterioration. In the current fiscal year, the increase in trade receivables resulted in a cash outflow of ¥0.83B, partially offset by a ¥0.34B increase in trade payables. Investing Cash Flow was negative ¥2.36B, of which capital expenditures of ¥1.43B were below depreciation and amortization of ¥1.97B, representing a level slightly below maintenance investment. Financing Cash Flow was negative ¥0.95B, reflecting share repurchases of ¥0.19B and dividend payments. FCF was ¥0.77B, sufficient to cover the current fiscal year's dividends and share repurchases.

Quality of Earnings

The recovery in earnings during the current fiscal year was supported by improvements in the core business, including the return to profitability at the operating level, gross margin improvement, and SG&A expense reductions. Ordinary Income exceeded Operating Income by ¥0.18B, due to non-operating income including a ¥0.16B foreign exchange gain. As this income is susceptible to currency conditions, it should be distinguished from recurring earnings power. Extraordinary gains and losses nearly offset one another, comprising a ¥0.13B gain (including ¥0.11B in subsidy income) and a ¥0.12B loss (including ¥0.09B in head office relocation expenses), resulting in a limited impact on Net Income. OCF was 2.7 times Net Income, indicating good earnings quality in terms of cash conversion.

Earnings Forecast and Guidance

For the fiscal year ending March 2027, the Company forecasts Revenue of ¥28.00B (+11.7% YoY), Operating Income of ¥1.30B (+19.8% YoY), and Ordinary Income of ¥1.30B (+2.5% YoY). Although the projected growth rate in Operating Income exceeds the revenue growth rate, the planned growth in Ordinary Income slows considerably, which may indicate that the forecast does not assume a repeat of non-operating income such as the foreign exchange gain recorded in the current fiscal year. The forecast Operating Income margin is 4.6%, representing only a limited improvement from the current fiscal year's actual result of 4.3%; the Company's plan assumes revenue-driven profit growth rather than significant margin expansion.

Shareholder Returns

The annual dividend was ¥56 per share (¥28 interim and ¥28 year-end), doubling from ¥28 in the previous fiscal year. Cash dividend payments totaled ¥0.60B, resulting in a Payout Ratio of 51.2% relative to current fiscal year Net Income of ¥1.16B. Including ¥0.19B in share repurchases, total shareholder returns were approximately ¥0.79B, resulting in a Total Return Ratio of approximately 68% relative to Net Income. Dividends were covered by FCF of ¥0.77B, and the Company plans to maintain the same dividend of ¥56 per share in the next fiscal year's forecast.

Risk Factors

1. Business concentration risk: The Japan segment accounts for 69.3% of Revenue, creating a structure in which fluctuations in domestic capital investment and semiconductor inventory adjustments could have a substantial impact on consolidated performance.

2. Working capital risk: Trade receivables increased 23.2% YoY to ¥5.03B, outpacing revenue growth. Although inventories declined, they remain at a high level, making improvements in collection and inventory efficiency future issues.

3. Financial leverage risk: The Company carries interest-bearing debt of ¥9.75B, with long-term borrowings of ¥7.85B accounting for 21.9% of total assets. When the Operating Income margin remains low, sensitivity to interest rate increases and refinancing terms becomes relatively high.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Although the Company returned to profitability, both the Operating Income margin and Net Income margin remain below the industry median, leaving room for further improvement in profitability.

Growth and Capital Efficiency

The revenue growth rate exceeded the industry median, indicating relatively solid top-line performance.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. Operating Income turned around from a loss in the previous fiscal year to ¥1.08B, confirming a recovery in the core business through gross margin improvement and SG&A expense reductions. However, the Operating Income margin of 4.3% remains below the industry median of 7.6%, leaving substantial room for improvement in profitability.

2. OCF was ¥3.13B, or 2.7 times Net Income, providing strong cash support for earnings. Meanwhile, trade receivables increased 23.2% YoY, outpacing revenue growth, and trends in working capital efficiency will determine future cash-generation capacity.

3. The next fiscal year's forecast calls for higher revenue and higher Operating Income, but growth in Ordinary Income is limited. Whether the Company can achieve Ordinary Income growth without relying on the foreign exchange gain recorded in the current fiscal year will be a key focus.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,641–¥1,735 at Cost of Equity ±1%; ¥1,684–¥1,689 at ω ±0.1.

Notes:

• Because forecast ROE is below the Cost of Equity, the theoretical value is below Book Value Per Share.

(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; 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. 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 a professional as necessary.

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