SEMITEC (6626) FY2026 Q3 Earnings Report

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Executive Summary

For the cumulative Q3 period of FY2026, the Company posted lower earnings as profit margins declined while revenue remained flat. Revenue was ¥19.13B (up +0.1% YoY), essentially in line with the same period of the prior year, while Operating Income was ¥2.85B (down -8.7%), Ordinary Income was ¥2.90B (down -12.4%), and Net Income was ¥2.24B (down -4.5%), with all three measures declining. The primary factors were a higher cost ratio and increases in SG&A expenses and R&D expenses. Fixed-cost increases without accompanying revenue growth coincided with stagnant top-line growth.

Factors Driving Earnings Changes

【Revenue】Revenue was ¥19.13B, essentially flat at +0.1% YoY. By region, Other Asia grew +5.7% and North America grew +5.5%, while Greater China declined -5.7% and Japan also declined -0.7%, resulting in divergent regional performance. The decline in Greater China may reflect demand trends in the Company’s core market.

【Profit and Loss】The gross profit margin was 38.3%, down from 39.1% in the same period of the prior year, confirming an increase in the cost ratio. SG&A expenses were ¥4.48B (+3.3%), exceeding revenue growth, while R&D expenses also increased to ¥0.86B (+15.2%, equivalent to 4.5% of revenue). As a result, the Operating Income margin declined by approximately 1.5pt to 14.9% from 16.4% in the same period of the prior year. In non-operating items, foreign exchange gains of ¥0.11B partially supported Ordinary Income, but Ordinary Income still declined 12.4% due in part to an increase in non-operating expenses. Extraordinary income of ¥0.19B (a non-recurring factor) lifted profit before tax, reducing the decline in Net Income to -4.5%, narrower than the declines at the Operating Income and Ordinary Income levels. Overall, although revenue did not decline, the Company recorded lower earnings without revenue growth—in effect, a structure close to “higher revenue but lower earnings.”

Segment Analysis

Segment profit (total of reported segments: ¥3.02B) was highest in Other Asia at ¥1.30B (43.3% composition ratio), followed by Greater China at ¥1.23B (40.7%) and North America at ¥0.76B (25.3%), with the three overseas regions driving profits. Japan, meanwhile, posted a loss of ¥0.28B, widening from a loss of ¥0.22B in the same period of the prior year. Other Asia recorded higher revenue but segment profit declined -8.4%, indicating lower profitability, whereas Greater China improved profit by +7.9% despite lower revenue. Differences in product mix and cost control are evident across regions. The continued loss in Japan remains a structural constraint on consolidated profitability.

Key Financial Indicators

【Profitability】The Operating Income margin of 14.9% (16.4% in the same period of the prior year) and Net Income margin of 11.7% (12.3% in the same period of the prior year) both declined, but remained in the double digits on an absolute basis. 【Cash Conversion Quality】Annualized DSO was 63 days, DIO was 134 days, and CCC was 163 days, all exceeding generally recognized warning levels. Finished-goods inventory was particularly high at ¥3.01B, accounting for more than half of total inventory, while inventory days of 70 indicate sensitivity to demand and shipment timing. 【Capital Efficiency】Annualized ROE was 12.5%, decomposed into Net Income margin of 11.7% × total asset turnover of 0.82x × financial leverage of 1.30x, indicating low reliance on leverage and returns driven primarily by profitability. 【Financial Soundness】With an Equity Ratio of 76.9% (74.4% in the same period of the prior year), a current ratio exceeding 481%, and interest-bearing debt of ¥0.48B (-40.6% YoY), the Company has an extremely conservative financial structure and low short-term liquidity risk.

Cash Flow Analysis

Although no cash flow statement has been disclosed, an analysis of fund movements based on changes in the balance sheet indicates that cash and deposits were ¥9.65B, down ¥2.49B (-20.8%) from ¥12.14B in the same period of the prior year. Meanwhile, investment securities increased from ¥0.20B to ¥0.66B, and the deduction for treasury stock expanded from ¥1.40B to ¥3.06B, suggesting that capital allocation to share repurchases and asset management was one factor behind the decline in cash. Long-term borrowings decreased from ¥0.81B to ¥0.48B, and the reduction of interest-bearing debt also progressed. From a working-capital perspective, DSO of 63 days, DIO of 134 days, and CCC of 163 days indicate that funds remain tied up in inventory and accounts receivable for extended periods. If this trend continues while revenue remains flat, it could weigh on future cash-generation capacity.

Quality of Earnings

Comprehensive income was ¥2.78B versus Net Income of ¥2.24B, with the primary factor behind the difference being foreign currency translation adjustments of +¥0.54B. Given the high proportion of overseas revenue, fluctuations in the yen exchange rate can readily create a divergence between comprehensive income and Net Income. At the Ordinary Income level, foreign exchange gains of ¥0.11B represented the primary non-operating income item and were equivalent to 3.9% of Operating Income (¥2.85B), a scale that does not materially distort the assessment of core earning power. Extraordinary income of ¥0.19B (a non-recurring factor) increased profit before tax, but should not be regarded as a recurring source of earnings. Overall, the quality of Operating Income is under structural pressure from higher costs and SG&A expenses, while reliance on non-recurring factors such as foreign exchange gains and extraordinary income has increased slightly.

Earnings Forecast and Guidance

Progress against the full-year Company forecast (Revenue: ¥23.38B, Operating Income: ¥3.00B, Ordinary Income: ¥2.92B, Net Income: ¥2.24B) was 81.8% for Revenue, 95.0% for Operating Income, 99.4% for Ordinary Income, and 100.0% for Net Income. Compared with the standard progress rate at the end of Q3 (approximately 75%), all profit-related metrics are significantly ahead of schedule. The incremental amounts required in Q4 are only ¥0.15B for Operating Income, ¥0.02B for Ordinary Income, and effectively zero for Net Income. Meanwhile, the full-year forecast itself anticipates lower revenue (-7.7% YoY), lower Operating Income (-23.3%), and lower Ordinary Income (-28.0%), suggesting that management had already assumed a slowdown from the second half onward. Given the extent to which progress is ahead of schedule, the potential for an upward revision to the full-year forecast will be a key area of focus.

Shareholder Returns

The full-year dividend forecast is ¥47 per share, and the Payout Ratio against the full-year forecast EPS of ¥225 is approximately 20.9%, indicating a low dividend burden relative to earnings. The Q2 dividend was ¥0, with distributions concentrated in the year-end dividend. The deduction for treasury stock increased by ¥1.66B YoY, indicating progress in share repurchases; however, this capital policy should be evaluated separately from the Payout Ratio. Viewed solely from the perspective of dividends, the level of shareholder returns is conservative. The financial base of ¥9.65B in cash and deposits and ¥0.48B in interest-bearing debt provides sufficient capacity to support continued dividend payments for the time being.

Risk Factors

1. Inventory and working-capital accumulation: Annualized DIO was 134 days and CCC was 163 days, both exceeding generally recognized warning levels (DIO above 90 days and CCC above 120 days). Finished-goods inventory was ¥3.01B, accounting for more than half of total inventory. If demand fluctuations or product obsolescence occur, this could result in inventory write-downs and reduced capital efficiency.

2. Expansion of losses in the domestic segment: The Japan segment posted an Operating Loss of ¥0.28B, widening from ¥0.22B in the same period of the prior year. While the three overseas regions are generating profits, delays in improving domestic profitability could continue to constrain consolidated earnings growth.

3. Structural decline in profitability: The Operating Income margin declined by approximately 1.5pt from 16.4% to 14.9%, while both the cost-of-sales ratio and SG&A ratio increased. If this trend continues in a flat-revenue environment, declining fixed-cost absorption could place further pressure on profit margins.

Industry Benchmark (For Reference; Company Analysis)

Industry Benchmark (manufacturing)

Profitability and Returns

The Company’s Operating Income margin and Net Income margin both substantially exceed the industry median, placing its profitability among the higher-performing companies in the industry.

Growth and Capital Efficiency

The Company’s revenue growth rate is below the industry median, placing its growth profile at a relative disadvantage within the industry compared with its high level of profitability.

Source: Company analysis

Key Points of Focus in the Results

1. Progress against the full-year earnings forecast has reached 95.0% for Operating Income, 99.4% for Ordinary Income, and 100.0% for Net Income, significantly exceeding the standard progress pace of approximately 75%. The assumptions underlying Q4 performance and whether the full-year forecast will be revised will be key points of focus in future earnings disclosures.

2. While the three overseas regions (Other Asia, Greater China, and North America) support all segment profit, losses in the Japan segment are expanding. The asymmetry of the regional earnings structure should be continuously monitored as a structural characteristic of consolidated profitability.

3. Despite high financial soundness, reflected in an Equity Ratio of 76.9% and a current ratio exceeding 480%, working-capital efficiency indicators such as DSO, DIO, and CCC remain at warning levels. The gap between profitability and financial stability on the one hand and capital efficiency on the other will be an important point to monitor in future earnings data.

Theoretical Share Price (Reference Value)

Sensitivity: ¥2,316–¥2,452 at ±1% for the cost of equity, and ¥2,381–¥2,383 at ±0.1 for ω.

Notes:

• Since progress of Net Income against the full-year forecast (100%) exceeds the standard level (75%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies with progress ahead of schedule tend to exceed their forecasts; the adjustment may be excessive for businesses with strong seasonality).
• Since forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the end of the quarter are used (there is a timing difference relative to the full-year forecast).

(Calculation model: Residual Income Model (Ohlson-type; explicit five-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 forecast 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 a professional adviser as necessary.

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