EIZO Corporation FY2027 Q1 Earnings Report

Quick View

Executive Summary

In Q1 of the fiscal year ending March 2027, operating income turned profitable from a loss in the same period of the previous year, while both ordinary income and net income increased substantially. Revenue was ¥200.3B (¥173.4B in the previous year, +15.5%), and operating income was ¥8.1B, representing a return to profitability from a loss of ¥-1.0B in the previous year. Ordinary income was ¥15.7B (¥6.9B in the previous year, +129.0%), and net income was ¥12.2B (¥3.1B in the previous year, +295.8%). The factors behind the earnings growth included operating leverage driven by an improved gross margin and control of SG&A expenses, in addition to an increase in non-operating income, mainly from dividend income of ¥7.3B.

Factors Affecting Performance

【Revenue】Revenue was ¥200.3B, representing a year-on-year increase of +15.5%. The Group is effectively a single-segment company primarily engaged in the development, production, and sale of visual equipment and related products; factors behind changes by segment have not been disclosed.

【Profit and Loss】Gross profit was ¥69.4B (+18.8%), and the gross margin improved by +89bp from the previous year to 34.6%. SG&A expenses were limited to ¥61.3B (+3.3%), substantially below the 15.5% growth in revenue. As a result, the SG&A ratio improved by -360bp to 30.6%, demonstrating operating leverage. Accordingly, operating income was ¥8.1B, representing a return to profitability from an operating loss of ¥-1.0B in the same period of the previous year. Ordinary income was ¥15.7B, supported by ¥8.4B in non-operating income, including ¥7.3B in dividend income. Net income was ¥12.2B after recording ¥3.6B in income taxes and other taxes. In conclusion, the Company achieved revenue and profit growth.

Key Financial Indicators

【Profitability】The operating margin was 4.0%, improving from -0.6% in the previous year, while the net profit margin was 6.1%, improving from 1.8% in the previous year. ROE was 0.6% and can be decomposed into a net profit margin of 6.1% × total asset turnover of 0.075x (quarterly basis) × financial leverage of 1.34x; the low asset turnover was a factor weighing on ROE.【Cash Quality】Comprehensive income was ¥655.3B, substantially exceeding net income of ¥12.2B, primarily due to an increase of +¥639.2B in valuation difference on investment securities. The increase in ordinary income also included a contribution from non-operating dividend income of ¥7.3B.【Investment Efficiency】Investment securities amounted to ¥1576.3B, representing 59.0% of total assets (¥2671.5B), and this asset composition is depressing total asset turnover.【Financial Soundness】The equity ratio was 74.8%, slightly down from 77.2% in the previous year but remaining at a high level. Liquidity was ample, with a current ratio of 430.7% and a quick ratio of 345.3%. Against interest-bearing debt of ¥61.6B, the Debt/Capital ratio was 3.0% and interest coverage was 15.2x, indicating low financial risk.

Cash Flow Analysis

As cash flow statement data has not been disclosed, cash trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥235.98B, up from ¥203.52B in the previous year. Meanwhile, investment securities were ¥1576.3B, an increase of +¥931.8B (+144.6%) from ¥644.4B in the previous year, indicating a further shift in the asset composition toward the investment portfolio. Accounts receivable were ¥167.5B, down from ¥201.4B in the previous year; inventories were ¥162.2B, slightly up from ¥150.4B; and accounts payable were ¥44.0B, down from ¥50.0B. Net assets were ¥1998.5B, an increase of +¥629.2B from ¥1369.3B in the previous year, primarily due to an increase in the valuation difference on securities.

Earnings Quality

Of ordinary income of ¥15.7B, non-operating income accounted for ¥8.4B (4.2% of revenue), the majority of which was dividend income of ¥7.3B. Thus, non-operating income on a scale nearly equivalent to operating income of ¥8.1B boosted profit at the ordinary income level. This dividend income was generated from investment securities (¥1576.3B) and should be evaluated separately from the earnings power of the core business. Comprehensive income was ¥655.3B, substantially exceeding net income of ¥12.2B; most of this difference (¥639.2B) consisted of unrealized gains from the fair-value measurement of investment securities that are not reflected in current-period net income. Accounts receivable declined from the previous year, while inventories increased slightly, and no significant distortion was observed from an accrual perspective.

Earnings Forecast and Guidance

Progress toward the full-year forecast was 23.6% for revenue (¥200.3B/¥850.0B) and 24.5% for operating income (¥8.1B/¥33.0B), representing standard levels for Q1 (benchmark: 25%). Progress for ordinary income was 34.2% (¥15.7B/¥46.0B), ahead of the other indicators, apparently due to the timing of recognition of non-operating income. Net income progress was 18.7% (¥12.2B/¥65.0B), somewhat behind, likely reflecting differences in the timing of the tax burden. As of the current quarter, no revisions have been made to the earnings or dividend forecasts.

Shareholder Returns

Against the full-year EPS forecast of ¥167.60, the dividend forecast is ¥115.00, resulting in a payout ratio of 68.6% (¥115.00/¥167.60). The dividend paid in the previous year was ¥55. Ample liquidity and financial soundness, supported by cash and deposits of ¥235.98B and an equity ratio of 74.8%, provide a foundation for dividend funding. Data on share repurchases has not been disclosed.

Risk Factors

1. Sensitivity to investment securities market conditions: Investment securities were ¥1576.3B, accounting for 59.0% of total assets and increasing by +¥931.8B from the previous year. Fluctuations in equity markets could have a significant impact on net assets (¥1998.5B) and deferred tax liabilities (¥434.9B).

2. Low capital efficiency: ROE remained at 0.6%, while the composition in which investment securities account for more than half of assets is depressing total asset turnover (0.075x). Although the operating margin of 4.0% improved from the previous year, the absolute level of profitability remains limited.

3. Product warranty costs: The provision for product warranties was ¥14.6B, equivalent to 7.3% of revenue (improved from 8.4% in the previous year). Trends in quality-related costs could affect the gross margin going forward.

Industry Benchmark (Reference, Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Both the operating margin and net profit margin were below the industry median, indicating that profitability is relatively less competitive within the industry.

Growth and Capital Efficiency

The revenue growth rate exceeded both the industry median and the upper quartile (14.7%), indicating that top-line growth is relatively strong within the industry.

※Source: Compiled by the Company

Key Points from the Results

1. Return to operating profitability: The shift from an operating loss of ¥-1.0B in the same period of the previous year to operating income of ¥8.1B indicates the emergence of operating leverage, driven by an improved gross margin (+89bp) and restrained growth in SG&A expenses (+3.3%, below the +15.5% growth in revenue).

2. Factors boosting ordinary income and net income: The substantial increase in ordinary income (+129.0%) included a contribution from non-operating income, primarily dividend income of ¥7.3B. This was approximately equivalent in scale to operating income (¥8.1B).

3. Variation in guidance progress: Progress for ordinary income of 34.2% was ahead of revenue (23.6%), operating income (24.5%), and net income (18.7%), apparently due to timing differences in non-operating income and the tax burden.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type, explicit five-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥3,934–¥4,155 at ±1% for the cost of equity, and ¥4,010–¥4,063 at ±0.1 for ω.

Notes:

• Normalized EPS calculated from ordinary income and other figures is used to exclude the impact of temporary earnings items (the Company’s forecast EPS is ¥167.6).
• 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 from the full-year forecast).

(Calculation model: Residual income model / Interest rate reference month: 2026-06 / This value does not forecast or guarantee the future share price)

---

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 available earnings data. Investment decisions should be made at your own responsibility, after consulting with professionals as necessary.

---End of Report---