| Metric | Current Period | Same Period of Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥7987.4B | ¥6343.1B | +25.9% |
| Operating Income | ¥1926.8B | ¥613.0B | +214.3% |
| Profit Before Tax | ¥2547.8B | ¥-1692.9B | +250.5% |
| Net Income | ¥2176.3B | ¥-1753.2B | +224.1% |
| ROE | 7.6% | -7.2% | - |
The most important takeaway from this earnings report is that the Company achieved significant increases in revenue and earnings due to a recovery in demand and an improved product mix, with net income turning profitable from a loss in the previous year. Revenue was ¥7,987.4B (+25.9% YoY), while operating income was ¥1,926.8B (+214.3% YoY; operating margin of 24.1%), and the gross margin improved to 58.6%. Net income attributable to owners of the parent was ¥2,173.3B (compared with a loss of ¥1,753.4B in the previous year), marking a return to profitability, with higher financial income also contributing. The recovery in demand in the industrial, infrastructure, and IoT fields, together with progress in fixed-cost absorption, was the primary driver of the increases in revenue and earnings.
【Revenue】Revenue was ¥7,987.4B (+25.9% YoY). By segment, the industrial, infrastructure, and IoT fields led overall growth with an increase of +38.1%, while the automotive field also remained solid, rising +13.4%. According to the PDF materials, yen depreciation and an improved product mix contributed to revenue growth in both fields.
【Profit and Loss】Operating income was ¥1,926.8B (+214.3%), and the operating margin improved to 24.1%, up +14.5pt from 9.7% in the previous year. While the gross margin rose to 58.6% (55.9% in the previous year, +2.8pt), the SG&A ratio declined to 34.1% (41.6% in the previous year, -7.5pt), reflecting progress in fixed-cost absorption. Profit before tax was ¥2,547.8B, returning to profitability from a loss of ¥1,692.9B in the previous year. The approximately ¥621B difference from operating income resulted from financial income of ¥730.2B exceeding financial expenses of ¥106.6B, indicating a considerable boost from non-operating factors. The effective tax rate remained low at 14.6%, supporting final profit. Impairment losses of ¥24.2B (¥137.4B in the previous year) were a temporary factor but were small at 1.1% of net income, limiting their impact on the earnings structure. In conclusion, the Company achieved increases in both revenue and earnings.
The core business is the industrial, infrastructure, and IoT field, which accounts for 51.6% of the revenue mix. It generated revenue of ¥4,122.1B (+38.1%), operating income of ¥1,318.3B (+96.4%), and a margin of 32.0%, making it the largest driver of overall profit expansion. The automotive field, which accounts for 44.9% of the mix, generated revenue of ¥3,586.8B (+13.4%), operating income of ¥1,260.6B (+50.8%), and a margin of 35.1%, securing the highest margin among the segments. The other category, accounting for 3.4% of the mix, generated revenue of ¥274.6B (+46.6%), operating income of ¥144.3B (+102.2%), and a margin of 52.6%, the highest level among the segments, although its scale is small. Total segment operating income of ¥2,723.2B exceeded consolidated operating income of ¥1,926.8B by approximately ¥796B, indicating adjustments for company-wide expenses, intersegment eliminations, and other items. The primary driver of earnings growth was the substantial increase in profit in the industrial, infrastructure, and IoT field, while the high margin in the automotive field provided support.
Profitability: ROE 7.6% (negative in the previous year due to a net loss), operating margin 24.1% (9.7% in the previous year), net margin (on an attributable-to-owners-of-the-parent basis) 27.2% (△27.6% in the previous year)
Cash flow quality: Operating CF/net income 1.18x (healthy at 1.0x or above), FCF ¥1,812.7B
Investment efficiency: Capital expenditures/depreciation and amortization 0.45x (an investment restraint phase at below 1.0x)
Financial soundness: Equity Ratio 62.5% (58.5% in the previous year), current ratio 184.6%
Operating CF was ¥2,569.5B, or 1.18x net income attributable to owners of the parent of ¥2,173.3B, indicating solid cash backing for earnings. Investing CF was △¥756.8B, mainly due to capital expenditures of ¥428.1B. Financing CF was △¥1,195.2B, primarily reflecting dividend payments of ¥508.0B. FCF, calculated as operating CF plus investing CF, was ¥1,812.7B, comfortably exceeding total dividends and capital expenditures of ¥936B. Cash generation can be assessed as strong.
As the Company applies IFRS, there is no concept of Ordinary Income. The approximately ¥621B difference between profit before tax of ¥2,547.8B and operating income of ¥1,926.8B was primarily due to financial income of ¥730.2B (9.1% of revenue) exceeding financial expenses of ¥106.6B. Financial income exceeds 5% of revenue, and its significant contribution to profit before tax warrants attention. Operating CF was 1.18x net income attributable to owners of the parent, indicating good earnings quality from an accrual perspective. Impairment losses of ¥24.2B were a temporary factor but were small at 1.1% of net income, limiting their overall impact on earnings quality.
The Company did not disclose a full-year earnings forecast in this earnings report and has continued its practice of presenting a range-based forecast for the following quarter on a quarterly basis. According to the PDF materials, the revenue forecast for 2026 Q3 is ¥4,300B (±¥75B, +28.7% YoY), with a gross margin of 57.5% and an operating margin of 32.5% expected. Although comparison based on a standard progress rate is difficult, the most recent quarter (2Q26) exceeded the midpoint of the forecast range, and the plan assumes continued revenue growth.
Dividend payments based on the cash flow statement for the current period were ¥508.0B, resulting in a Payout Ratio of 23.4% against net income attributable to owners of the parent of ¥2,173.3B. The Payout Ratio for the same period of the previous year cannot be calculated because net income was negative. As the specific amount of share repurchases is not clear from the available data, this section reports only the Payout Ratio. With an Equity Ratio of 62.5% and FCF of ¥1,812.7B, the Company has ample financial capacity, and dividends are strongly backed by cash generation.
【Short Term】The earnings briefing scheduled for July 31, 2026, and the progress toward achieving the Company’s 2026 Q3 earnings forecast (revenue of ¥4,300B ±¥75B) will be key points of focus.
【Long Term】Key medium- to long-term events include progress toward the phased shutdown of the 6-inch line at the Takasaki Factory and the policy of closing it over the next 2–3 years, portfolio optimization following completion of the timing business transfer, and progress on the medium-term plan toward the 2035 aspiration (targeting a sixfold increase in market capitalization).
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 24.1% | 11.0% (7.5%–31.6%) | +13.2pt |
| Net Margin | 27.2% | 8.2% (4.2%–23.8%) | +19.1pt |
Both the Company’s operating margin and net margin are significantly above the industry median and rank among the higher levels within the industry.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 25.9% | 11.4% (-1.7%–36.1%) | +14.5pt |
The revenue growth rate also exceeds the industry median but does not reach the upper end of the IQR (36.1%), placing the Company at a mid-range level among high-growth companies.
※Source: Company analysis
Goodwill impairment risk: Goodwill is ¥20,163.0B, representing 44.2% of total assets and 70.6% of net assets. As goodwill is not amortized under IFRS, a deterioration in profitability could result in a one-time loss being recognized through impairment testing, with a correspondingly significant impact on capital.
Increase in working capital: Accounts receivable increased to ¥2,072.1B (¥1,691.2B in the previous year, +22.5%), while inventories increased to ¥2,121.3B (¥1,859.0B in the previous year, +14.1%). Although the growth rates are generally in line with revenue growth (+25.9%), developments in collection and inventory efficiency require monitoring.
Interest-bearing debt and interest rate/foreign exchange risk: Interest-bearing debt, comprising long-term borrowings of ¥9,100.9B and borrowings and other liabilities classified as current liabilities of ¥2,478.2B, totals approximately ¥11,579B and exceeds cash and cash equivalents of ¥3,760.2B. Although financial income of ¥730.2B exceeds financial expenses of ¥106.6B, this balance may fluctuate due to changes in the interest rate and foreign exchange environment.
The sharp improvement in the operating margin from 9.7% in the previous year to 24.1% was driven by fixed-cost absorption, as evidenced by the improvement in the gross margin (+2.8pt) and the decline in the SG&A ratio (-7.5pt). At the same time, the contribution of financial income to profit before tax (approximately ¥621B) was significant, and the improvement in operating profitability should be distinguished from the financial income factor.
The Equity Ratio improved to 62.5% from 58.5% in the previous year, and the financial foundation remains solid. Capital expenditures/depreciation and amortization was 0.45x, a restrained level, and trends in investment will be important for assessing future production capacity and supply capabilities.
The structure in which goodwill accounts for 70.6% of net assets means that the impact of impairment could be relatively substantial when the business environment changes, making this an ongoing point of review when assessing financial quality.
This report is an earnings analysis document automatically generated by AI through integrated analysis of XBRL earnings summary data and PDF earnings briefing materials. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own responsibility, and, where necessary, after consulting with a professional.
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