NIHON DEMPA KOGYO CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

The first quarter of FY2027 saw increases in both revenue and profit, with the improvement in the product mix centered on crystal oscillators driving higher profitability as the most important highlight. Revenue was ¥15.32B (¥12.72B in the prior year, YoY +20.5%), Operating Income was ¥1.24B (¥0.78B in the prior year, YoY +58.8%), and Net Income was ¥0.78B (¥0.47B in the prior year, YoY +65.1%). The Operating Income margin improved to 8.1% (6.1% in the prior year), indicating that positive operating leverage accompanying revenue growth accelerated profit growth.

Factors Affecting Performance

【Revenue】Revenue was ¥15.32B, representing a 20.5% year-on-year increase. By product category, crystal oscillators grew significantly to ¥3.14B (20.5% of total, +64.8% year-on-year), while crystal resonators remained solid at ¥10.89B (71.0% of total, +15.4%). Other products declined slightly to ¥1.30B (-6.2%). The increase in the sales mix of oscillators, a high-value-added product area, drove overall revenue growth.

【Profit and Loss】Cost of sales was ¥10.85B (+19.2%), slightly below the rate of revenue growth, and the gross margin improved to 29.2% (28.4% in the prior year). SG&A expenses increased to ¥2.65B (+17.2%), below the pace of revenue growth. As a result of positive operating leverage, Operating Income was ¥1.24B (+58.8%), and the Operating Income margin was 8.1% (6.1% in the prior year). Financial expenses increased to ¥0.26B (¥0.13B in the prior year), weighing on Profit Before Tax, but Net Income rose substantially to ¥0.78B (+65.1%). In conclusion, the Company achieved increases in both revenue and profit, with product-mix improvement and cost control contributing to enhanced profitability.

Segment Analysis

The Group operates an integrated manufacturing and sales business for crystal-related products as a single business, and since it has only one reportable segment, an operating profit and loss analysis by business segment is not applicable. Trends in sales by product category are as described in the 【Revenue】 section, with growth in crystal oscillators increasing their sales mix.

Key Financial Indicators

【Profitability】The Operating Income margin improved to 8.1% (6.1% in the prior year), while the Net Income margin improved to 5.1% (3.7% in the prior year), and the gross margin also increased to 29.2% (28.4% in the prior year). 【Cash Flow Quality】Operating Cash Flow (OCF) was ¥3.38B, reaching 4.3 times Net Income of ¥0.78B, indicating strong cash-generation capacity relative to earnings. 【Investment Efficiency】ROE was 2.4%, and the Equity Ratio was 42.5% (41.8% in the prior year). Revenue relative to total assets remained low, making improvement in asset efficiency a future challenge. 【Financial Soundness】Current assets of ¥44.37B compared with current liabilities of ¥14.47B resulted in a high current ratio of approximately 307%. Short-term borrowings declined substantially to ¥0.20B (¥1.33B in the prior year), indicating reduced reliance on short-term funding.

Cash Flow Analysis

Cash flow from operating activities was ¥3.38B (+9.4% year-on-year). This was substantially above Net Income, reflecting the addition of ¥1.05B in depreciation and amortization and other items to Profit Before Tax of ¥0.99B. An increase in accounts receivable of ¥0.65B and an increase in inventories of ¥0.22B pressured cash flow, but these were offset by an increase in accounts payable of ¥0.73B and the collection of ¥1.73B in consumption tax receivables and other items. Cash flow from investing activities was positive at ¥1.01B. Although capital expenditures of ¥0.50B and investment in intangible assets of ¥0.40B were incurred, proceeds from the withdrawal of time deposits of ¥0.80B and government subsidies received of ¥1.11B contributed positively. Cash flow from financing activities was negative ¥1.86B, due to repayments of long-term borrowings of ¥1.33B and dividend payments of ¥0.30B. As a result, free cash flow was ¥4.39B, providing ample coverage for dividends and capital expenditures.

Earnings Quality

Current-period earnings were primarily driven by EBIT of ¥1.24B from the core business, while non-operating financial expenses of ¥0.26B weighed on Profit Before Tax. Other operating income of ¥0.30B may include recognition related to government subsidies. Although this indicates the presence of non-recurring elements and warrants attention, its ratio to revenue was limited to approximately 2%, so the impact was limited. Since OCF reached 4.3 times Net Income and accruals (the difference between Net Income and OCF) were negative, the consistency between accounting earnings and actual cash generation was high, and earnings quality can be assessed as favorable.

Earnings Forecast and Guidance

The full-year plan calls for Revenue of ¥62.50B, Operating Income of ¥5.20B, and Net Income of ¥3.20B (+54.9% year-on-year). As of Q1, progress rates were 24.5% for Revenue, 23.8% for Operating Income, and 24.3% for Net Income, all close to the simple progress rate of 25%. The earnings forecast was revised during the quarter, and demand trends and product-mix developments from the second quarter onward will be key to achieving the full-year plan.

Shareholder Returns

The Company’s forecast annual dividend is ¥30 per share, with no revision to the dividend forecast during the quarter. Based on the total annual dividend relative to the full-year Net Income forecast of ¥3.20B (calculated using the effective number of shares after excluding treasury stock from approximately 23,129 thousand issued shares), the Payout Ratio is estimated to be in the low 20% range. Dividend payments during the quarter were ¥0.30B, providing ample headroom relative to free cash flow of ¥4.39B. No share repurchases were conducted, with shareholder returns centered on dividends.

Risk Factors

1. Demand cycle risk: Although the strong growth of crystal oscillators (YoY +64.8%) is driving performance, if demand for smartphones, automotive applications, and industrial equipment slows, the improvement in the 8.1% Operating Income margin could reverse due to deterioration in the product mix.

2. Working capital accumulation risk: Accounts receivable increased to ¥14.62B (¥13.798B in the prior year), while inventories rose to ¥12.75B (¥12.44B in the prior year), resulting in low asset turnover relative to Revenue of ¥15.32B. The effectiveness of inventory and credit management will affect the sustainability of cash generation.

3. Interest burden risk: Financial expenses increased to ¥0.26B (¥0.13B in the prior year), resulting in interest coverage of approximately 4.7 times EBIT of ¥1.24B. Since long-term borrowings of ¥24.62B account for a core portion of the capital structure, changes in the interest-rate environment may affect earnings.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Return

Profitability is slightly below the industry median but exceeds the lower bound of the IQR, indicating room for improvement within the industry.

Growth and Capital Efficiency

The Revenue growth rate significantly exceeds both the industry median and the upper bound of the IQR, indicating strong growth within the industry.

※Source: Compiled by the Company

Key Earnings Highlights

1. The expansion in the sales mix of crystal oscillators (15.0% in the prior year → 20.5% in the current period) is driving improvements in the gross margin and Operating Income margin. The qualitative change in the product mix is a key earnings highlight as the primary factor behind the improvement in the earnings structure.

2. OCF reached 4.3 times Net Income, indicating high earnings quality. However, accounts receivable and inventories continue to increase, and capital efficiency has room for improvement, as indicated by low asset turnover and ROE of 2.4%.

3. Progress toward the full-year plan for Revenue, Operating Income, and Net Income was close to the simple progress rate of 25%. In light of the earnings forecast revision, the sustainability of product-mix improvement and trends in working capital management will be key monitoring points.

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 model with an explicit five-year fade period). It is not a forecast of the market share price or a recommendation to take any specific investment action.

Sensitivity: ¥1,422–¥1,507 at cost of equity ±1%, and ¥1,463–¥1,465 at ω ±0.1.

Note:

• 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: 2026-07 / This value does not predict or guarantee the future share price)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release 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, and you should consult a professional as necessary.

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