SEMITEC Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥12.70B
• Operating Income: ¥1.91B
• Net Income: ¥1.46B
• EPS: ¥139.58

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Verdict: SEMITEC’s FY2026 Q2 was a solid but slightly softer quarter marked by margin compression and lower ordinary profit, offset by robust liquidity and healthy ROIC. Revenue declined 0.7% YoY to 126.96, while operating income fell 10.3% YoY to 19.14 and ordinary income dropped 15.1% to 17.96. Net income decreased 9.2% YoY to 14.58, with EPS at 139.58 JPY. Gross margin was 38.4%, operating margin 15.1%, ordinary margin 14.2%, and net margin 11.5%. Using the disclosed YoY rates, operating margin likely compressed by roughly 160 bps YoY (from ~16.7% to 15.1%) and net margin by about 110 bps (from ~12.6% to 11.5%). EBITDA was 24.76 (EBITDA margin 19.5%), with depreciation and amortization at 5.62. Non-operating items were a net drag (income 0.75 vs expenses 1.92), lowering ordinary income; however, profit before tax was lifted to 19.83 by likely extraordinary gains (not itemized), indicating some non-recurring support to bottom line. The effective tax rate was 26.4%, broadly normal. Cash generation was decent with operating cash flow of 13.10, equating to an OCF/NI ratio of 0.90x—slightly below 1.0 but above our 0.8 caution threshold. The balance sheet remains exceptionally strong: current ratio 496%, quick ratio 433%, D/E 0.31x, and equity ratio about 76%. Shareholder returns were active with financing cash outflows of -18.63, including share repurchases of -10.66, while the implied payout ratio is a modest 31.2%. ROE stands at 6.4% on low leverage (1.31x), with ROIC of 10.6% indicating healthy underlying investment efficiency. Overall, near-term profitability softened on operating leverage and non-operating headwinds, but financial resilience, buybacks, and above-target ROIC underpin the outlook. Visibility on capex and investing cash flows is limited due to unreported items, a key constraint for assessing FCF durability. Looking ahead, stabilization of margins and confirmation that the extraordinary gains are one-time will be important for earnings quality. Monitoring demand trends in core sensor end-markets and inventory discipline will be critical to margin recovery in 2H.

Profitability Analysis

ROE decomposition (DuPont): ROE 6.4% = Net profit margin 11.5% × Asset turnover 0.422 × Financial leverage 1.31x. The largest change driver YoY appears to be net margin compression (operating income -10.3% vs revenue -0.7%), implying weaker operating leverage; estimated operating margin contracted ~160 bps and net margin ~110 bps. Business drivers: softer top line, likely pricing/mix pressure and higher cost base (SG&A 29.64) reduced operating profitability; non-operating expenses exceeded income (net -1.17) and were partially offset by extraordinary gains, which elevated PBT above ordinary income. Sustainability: the non-operating drag could persist if FX/financial costs continue, while the extraordinary gains are by nature one-time; margin pressure should ease if demand normalizes and cost controls tighten, but recovery hinges on pricing and utilization. Flags: operating expense growth outpaced revenue (implied by margin compression), suggesting negative operating leverage; keep watch if SG&A remains sticky with flat sales. Overall, ROE is being supported primarily by net margin, with low leverage intentionally capping ROE—improvements will likely have to come from better asset turnover and margin stabilization.

Growth Assessment

Revenue declined slightly (-0.7% YoY) to 126.96, suggesting subdued end-market demand or pricing pressure. Operating income fell 10.3% YoY to 19.14, indicating negative operating leverage on a largely flat top line. Ordinary income decreased 15.1% YoY to 17.96 due to net non-operating expenses, while net income fell 9.2% to 14.58, cushioned by an extraordinary gain that boosted PBT to 19.83. EBITDA margin of 19.5% remains healthy for a precision sensor manufacturer, but operating margin compression to 15.1% signals near-term pressure. ROIC at 10.6% implies solid project and capital allocation efficiency versus a 7–8% benchmark. Given the modest revenue decline and lower profitability, short-term growth is constrained; however, a strong balance sheet provides capacity for R&D, capex, or M&A to re-accelerate growth. Outlook will hinge on normalization in key applications (automotive/medical/industrial sensors), pricing discipline, and FX. Non-operating volatility and one-off gains create some noise in the trend; core growth should be assessed on operating profit trajectory excluding special items.

Financial Health

Liquidity is exceptionally strong: current ratio 496% and quick ratio 433%, with working capital of 172.35. Cash and deposits of 102.51 exceed long-term loans of 5.93 by a wide margin; short-term loans were unreported but near-term coverage is ample with cash + receivables of 145.54 versus current liabilities of 43.52. Solvency is conservative: D/E 0.31x and an estimated equity ratio of ~76% (229.16/301.11). Interest coverage is very strong at 58.27x (EBIT/interest), implying minimal refinancing risk. No explicit off-balance sheet obligations were disclosed. There is no warning on Current Ratio (<1.0) or D/E (>2.0). Maturity mismatch risk appears low given the cash-rich profile and limited debt.

Cash Flow Quality

OCF was 13.10 versus net income of 14.58, yielding an OCF/NI ratio of 0.90x—slightly below 1.0 but above the 0.8 caution threshold, suggesting acceptable earnings quality with some working capital consumption. Free cash flow cannot be computed due to unreported investing CF and capex. Financing CF of -18.63 includes share repurchases of -10.66, indicating active capital returns funded by the strong cash position. With OCF of 13.10 and an implied dividend payout of about 4.55 (31.2% of NI), cash generation appears sufficient to cover dividends; coverage of both dividends and buybacks depends on investing outflows not disclosed. No clear signs of working capital manipulation can be inferred from available point-in-time balances; however, the OCF/NI below 1.0 implies some cash conversion pressure, likely from receivables or inventory build.

Dividend Sustainability

The calculated payout ratio is 31.2%, consistent with a conservative policy. Based on NI of 14.58, implied dividends are ~4.55, which are covered ~2.9x by OCF of 13.10. FCF coverage cannot be assessed due to unreported capex/investing CF; however, the large net cash position provides a buffer. Share repurchases totaled 10.66 in the period, demonstrating flexibility for additional shareholder returns. Absent a significant step-up in capex or a sharp decline in OCF, the current dividend level appears sustainable; outlook on policy stability is favorable given low leverage and healthy ROIC.

Risk Assessment

Business Risks:

• Demand softness or pricing pressure in key sensor end-markets (auto/medical/industrial), evidenced by -0.7% YoY revenue.
• Margin compression from negative operating leverage and potentially sticky SG&A.
• Supply chain and component cost volatility affecting gross margin.
• FX fluctuations impacting non-operating line and export competitiveness.

Financial Risks:

• Earnings quality sensitivity to non-operating and extraordinary items (PBT > ordinary income indicates one-time gains).
• Cash conversion risk if working capital continues to build (OCF/NI at 0.90x).
• Potential increase in shareholder returns (buybacks) outpacing cash generation if investing needs rise (capex unreported).

Key Concerns:

• Ordinary income declined 15.1% YoY, outpacing the -0.7% revenue change.
• Estimated operating margin compression of ~160 bps YoY to 15.1%.
• Non-operating expenses outweighed income (net -1.17), partially masked by extraordinary gains lifting PBT.
• Limited disclosure on capex and investing cash flows constrains FCF visibility.

Investment Implications

Key Takeaways:

• Core profitability softened despite stable sales, with operating margin at 15.1% and ordinary profit down 15.1% YoY.
• Earnings quality is acceptable (OCF/NI 0.90x) but trails net income; watch cash conversion.
• Balance sheet is exceptionally strong (equity ratio ~76%, D/E 0.31x), supporting ongoing returns and investment.
• ROIC of 10.6% exceeds the 8% excellence benchmark, indicating efficient capital deployment.
• Shareholder returns are active (buybacks -10.66) alongside a conservative dividend payout (~31%).

Metrics to Watch:

• Operating margin trajectory and SG&A efficiency in 2H.
• Ordinary income vs PBT gap to isolate one-time gains and non-operating volatility.
• OCF/NI and working capital trends (receivables and inventories).
• Capex and investing CF disclosure to assess FCF durability.
• End-market demand indicators in automotive/medical sensors and FX sensitivity.

Relative Positioning: Compared to domestic precision/electronic component peers, SEMITEC combines above-benchmark ROIC with a very conservative balance sheet and mid-teens operating margins; however, recent margin compression and ordinary profit decline slightly weaken near-term earnings momentum.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis