Quick View
| Metric | Current Period | Same Period of Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥376.6B | ¥302.7B | +24.4% |
| Operating Income | ¥28.7B | ¥19.8B | +44.8% |
| Ordinary Income | ¥31.3B | ¥20.2B | +55.1% |
| Net Income | ¥24.7B | ¥16.3B | +51.8% |
| ROE | 2.7% | 1.8% | - |
Executive Summary
The Company posted higher revenue and higher earnings, driven by increased revenue in the Energy Business and improved profitability in its core businesses. Revenue was ¥376.6B (+24.4% year on year), Operating Income was ¥28.7B (+44.8%), Ordinary Income was ¥31.3B (+55.1%), and Net Income attributable to owners of the parent was ¥23.97B (+50.5%). The increase in Operating Income outpacing revenue growth was primarily attributable to the realization of operating leverage through improved profit margins in Functional Materials and Optical Systems. Meanwhile, although Energy, the largest revenue segment, recorded substantial revenue growth, its profit margin declined, indicating that the quality of growth is not uniform.
Factors Affecting Performance
【Revenue】Revenue was ¥376.6B, up +24.4% year on year. By segment, Energy was ¥153.3B (+46.7%), accounting for approximately seven-tenths of the Company-wide increase in revenue and serving as the largest growth driver. Functional Materials followed at ¥96.0B (+22.5%), and Optical & Systems at ¥92.1B (+17.4%); both businesses achieved increases in revenue and earnings. In contrast, the Value Co-Creation Business recorded a decline in revenue to ¥36.2B (-14.9%).
【Profit and Loss】Operating Income was ¥28.7B (+44.8%), and the Operating Income margin improved by approximately 1.1pt year on year to 7.6%. Functional Materials improved significantly, with Operating Income of ¥9.5B (+210.5%) and a profit margin of 9.9% (3.9% in the same period of the prior year), while Optical & Systems also expanded to Operating Income of ¥11.3B (+101.4%) and a profit margin of 12.3% (7.2% in the same period of the prior year). In contrast, Energy recorded Operating Income of ¥7.6B, down -15.2% year on year, and its profit margin declined from 8.6% to 5.0%. The Value Co-Creation Business also recorded a substantial decline in Operating Income to ¥0.3B. Ordinary Income exceeded Operating Income by ¥2.5B, with non-operating income such as dividend income of ¥1.6B and foreign exchange gains of ¥0.6B contributing to the result. The ¥0.4B extraordinary loss was a loss on disposal and sale of fixed assets, with a minor impact. In conclusion, the Company achieved higher revenue and higher earnings.
Segment Analysis
Optical & Systems generated revenue of ¥92.1B (24.5% composition ratio) and Operating Income of ¥11.3B, maintaining a profit margin of 12.3%, the highest level company-wide, and serving as a core business accounting for 39.4% of total segment profit. Functional Materials generated revenue of ¥96.0B and Operating Income of ¥9.5B, with its profit margin improving to 9.9% and its contribution to profits reaching 33.1%. Energy has the largest revenue scale company-wide at ¥153.3B, but Operating Income was ¥7.6B and its profit margin remained at 5.0%, a significant decline from 8.6% in the same period of the prior year. The Value Co-Creation Business contracted to revenue of ¥36.2B and Operating Income of ¥0.3B, suggesting a decline in its ability to absorb fixed costs. Overall, high-margin Optical & Systems and Functional Materials are driving company-wide profitability, while the quantitative expansion of Energy is diluting the overall profit margin.
Key Financial Metrics
【Profitability】The Operating Income margin was 7.6%, improving from 6.6% in the same period of the prior year, while the Net Income margin expanded to 6.6% from 5.4% in the same period of the prior year. The gross margin was 24.9%, and the SG&A expense ratio was 17.3%.【Cash Quality】Accounts receivable of ¥319.1B and inventories of ¥235.7B accounted for approximately 63% of current assets, indicating that working capital has accumulated alongside revenue growth.【Investment Efficiency】ROE was 2.7% (based on quarterly actual results); it should be noted that the annualized level based on quarterly profit may exceed the disclosed actual figure. Total assets were ¥1853.4B, an increase of +2.7% from the prior year.【Financial Soundness】The Equity Ratio improved to 50.3% from 48.2% in the same period of the prior year, while cash and deposits stood at ¥275.6B against long-term borrowings of ¥340.0B. Net assets increased +3.3% from the prior year to ¥932.0B.
Cash Flow Analysis
Rather than relying on direct figures disclosed in the cash flow statement, an examination of funding trends based on changes in the balance sheet shows that cash and deposits decreased to ¥275.6B from ¥315.6B in the same period of the prior year, while accounts receivable increased to ¥319.1B (¥281.1B in the prior year) and inventories increased to ¥235.7B (¥201.4B in the prior year). This suggests that the accumulation of working capital accompanying revenue growth may have pressured cash levels. Accounts payable increased to ¥168.2B (¥159.4B in the prior year), but this was insufficient to absorb the increases in accounts receivable and inventories. Long-term borrowings were ¥340.0B, slightly down from ¥345.0B in the same period of the prior year, confirming a trend toward reducing interest-bearing debt. Going forward, the pace of revenue growth and the efficiency of working capital turnover are expected to determine the Company’s cash-generation capacity.
Quality of Earnings
The current quarter’s profit started with Operating Income of ¥28.7B, and the ¥2.5B difference between this and Ordinary Income of ¥31.3B was primarily attributable to non-operating income such as dividend income of ¥1.6B, interest income of ¥0.6B, and foreign exchange gains of ¥0.6B; income outside the core business remained limited in scale. The ¥0.4B extraordinary loss resulted from the disposal and sale of fixed assets and was a temporary factor, with a minor impact on Net Income. Total non-operating income of ¥5.0B represented only 1.3% of revenue, indicating that the primary source of earnings remains Operating Income from the core business and that earnings quality can be considered sound. Meanwhile, comprehensive income of ¥42.6B exceeded Net Income of ¥24.7B by ¥18.6B, with valuation-related other comprehensive income, such as valuation differences on securities and foreign currency translation adjustments, making a significant contribution. This divergence was attributable to market fluctuations; therefore, Net Income and Operating Income should be the primary focus when assessing recurring earnings power. In addition, increases in accounts receivable and inventories suggest delays in cash conversion relative to accounting profit, indicating that a certain gap may have emerged between accrual-based earnings and cash flows.
Earnings Forecasts and Guidance
The progress rates against the Full-Year plan were 26.3% for revenue, at ¥376.6B/¥1430.0B, and 28.7% for Operating Income, at ¥28.7B/¥100.0B; both exceeded the standard quarterly progress rate of 25%. The Full-Year plan calls for higher revenue and higher earnings, with revenue growth of +10.5% and Operating Income growth of +26.7%, while the Q1 revenue growth rate of 24.4% is tracking well above the pace assumed in the Full-Year plan. No revision has been made to the earnings forecast. The Operating Income margin assumed in the Full-Year plan is 7.0%, and the Q1 actual figure of 7.6% is slightly above this level. If the decline in Energy’s profit margin during its revenue expansion continues, consistency with the Full-Year profit margin plan will need to be monitored in subsequent quarters.
Shareholder Returns
The Full-Year forecast for dividend per share is ¥56.00, with no revision made. Based on forecast EPS of ¥181.76, the forecast Payout Ratio is 30.8%, which does not represent an excessive burden as a dividend-only payout level. Basic EPS for Q1 was ¥65.03 (¥36.94 in the prior year, +76.0%), indicating a certain degree of headroom in dividend-paying capacity based on Full-Year progress. The financial base of net assets of ¥932.0B and cash and deposits of ¥275.6B also supports the Company’s ability to pay dividends.
Risk Factors
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Deterioration in Energy Business profitability: While revenue expanded to ¥153.3B, up +46.7% year on year, Operating Income remained at ¥7.6B, down -15.2%, and the profit margin declined from 8.6% to 5.0%. If the decline in the profit margin of the business serving as the primary driver of company-wide revenue growth continues, it will exert downward pressure on the company-wide margin.
-
Accumulation of working capital: Accounts receivable of ¥319.1B and inventories of ¥235.7B both increased from the same period of the prior year, and lengthening collection and inventory cycles accompanying revenue growth may affect cash-generation capacity.
-
Declining profitability of the Value Co-Creation Business: Revenue declined -14.9% year on year to ¥36.2B, while Operating Income deteriorated substantially by -85.6% to ¥0.3B, causing the profit margin to decline to 0.9%. If the decline in fixed-cost absorption capacity continues, the risk of deterioration in this business’s earnings will increase.
Industry Benchmark (For Reference; Compiled by the Company)
Industry Benchmark (manufacturing)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Income margin | 7.6% | 8.7% (4.2%–14.3%) | −1.1pt |
| Net Income margin | 6.6% | 7.1% (3.2%–10.6%) | −0.5pt |
The Operating Income margin and Net Income margin are slightly below the industry medians but remain within the IQR ranges.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue growth rate (year on year) | 24.4% | 6.2% (-1.1%–14.6%) | +18.2pt |
The revenue growth rate is significantly above the industry median, representing a high level of growth within the industry.
※Source: Compiled by the Company
Key Points from the Earnings Results
-
The improvement in the profit margins of Optical & Systems and Functional Materials to 12.3% and 9.9%, respectively, and their central role in driving company-wide earnings growth suggest a structural shift toward high-margin businesses within the business portfolio.
-
While the Energy Business is the largest driver of company-wide revenue growth, its profit margin has declined 3.6pt from the prior year, making the balance between quantitative expansion and profitability a key focus going forward.
-
The Q1 progress rate against the Full-Year plan was 28.7% for Operating Income and exceeded standard progress even on a Net Income basis. Together with the working capital movements reflected in increases in accounts receivable and inventories, the conversion of earnings growth into cash will be an area to monitor going forward.
Theoretical Share Price (Reference Value)
| Scenario | Theoretical Share Price |
|---|---|
| bear (bearish) | 2,346円 |
| base (base case) | 2,396円 |
| bull (bullish) | 2,436円 |
| Calculation Assumption | Value |
|---|---|
| Book value per share (BPS) | 2,528円 |
| Adjusted forecast EPS | 199.9円 |
| Cost of equity r | 9.77%（10-year government bond 2.77% + equity risk premium 6.00% + size premium 1.00%） |
| Persistence coefficient of residual income ω / Explicit forecast period | 0.62 / 5 years |
| Assumed Payout Ratio | 30.8% |
| Forecast EPS confidence adjustment | ×1.100（based on progress ahead of the Full-Year forecast） |
| implied PBR / PER | 0.95x / 12.0x |
Sensitivity: 2,330円〜2,466円 at ±1% for the cost of equity, and 2,391円〜2,399円 at ±0.1 for ω.
Notes:
- Because Net Income progress against the Full-Year forecast (36%) exceeds the standard level (25%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies ahead of forecast progress tend to outperform their forecasts; the adjustment may be excessive for businesses with strong seasonality).
- Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
- Net assets at the end of the quarter are used (there is a timing difference from the Full-Year forecast).
- Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.
（Calculation model: Residual Income Model (Ohlson-type, explicit 5-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 predict or guarantee future share prices）
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 as necessary.
---End of Report---
AI Financial Analysis
Executive Summary
Maxell delivered a strong FY2027 Q1 earnings result, with broad revenue growth and a material improvement in operating profitability. Revenue rose 24.4% year on year to ¥37.67bn. Operating income increased 44.8% to ¥2.87bn, outpacing sales growth. Ordinary income grew 55.1% to ¥3.13bn, supported by a higher operating profit and an improved non-operating balance. Profit attributable to owners increased 50.5% to ¥2.40bn. The operating margin expanded by approximately 107 basis points year on year to 7.6% from 6.6%. Net profit margin improved by approximately 110 basis points to 6.4% from 5.3%. Gross margin, however, declined by approximately 55 basis points to 24.9%, indicating that the operating-margin expansion was driven principally by SG&A leverage rather than improved gross profitability. SG&A expenses rose 13.7%, substantially below the 24.4% increase in sales. The SG&A-to-sales ratio consequently declined to 17.3% from 18.9% a year earlier. Optical & System was the largest contributor to segment operating income and represents the core business in the quarter, generating ¥1.13bn of segment profit. Functional Components & Materials and Optical & System delivered substantial profit growth, while Energy and Value Co-creation posted lower segment profits despite the overall group expansion. Q1 revenue reached 26.3% of full-year guidance and operating income reached 28.7%, both moderately ahead of the standard 25% first-quarter run rate. Full-year guidance remains unchanged, implying management is retaining a prudent outlook despite the favorable start. Balance-sheet liquidity is sound, with a 181.9% current ratio and cash of ¥27.56bn. The principal operating issue is working-capital intensity, as receivable days of 77 and inventory days of 76 are both above the stated 60-day warning level. Goodwill exposure is limited relative to equity and assets, reducing M&A-related impairment sensitivity. Overall, the quarter demonstrates improving operating leverage and earnings momentum, while the durability of the recovery will depend on margin retention, energy-segment normalization, and conversion of sales growth into cash collection.
Profitability Analysis
The reported annualized ROE is 10.3%, placing Maxell at the lower end of the 10-15% good benchmark range. The annualized DuPont decomposition is net profit margin of 6.4%, asset turnover of 0.813x, and financial leverage of 1.99x. Profitability is therefore supported by a reasonable net margin and moderate balance-sheet leverage, rather than exceptionally high asset utilization. The most significant year-on-year earnings driver was operating leverage: revenue increased 24.4% while SG&A rose only 13.7%. Gross margin declined to 24.9% from 25.5%, a 55-basis-point deterioration, suggesting that product mix, input costs, or pricing did not provide the main source of improvement. Nevertheless, the SG&A ratio fell by roughly 160 basis points to 17.3%, more than offsetting the gross-margin pressure and lifting the operating margin by about 107 basis points to 7.6%. The annualized EBIT margin of 7.6% remains below the 8% threshold generally associated with a good profitability profile, but the direction of travel is favorable. The tax burden was normal at 0.776, equivalent to a 19.9% effective tax rate. The interest burden of 1.075 reflects net non-operating income exceeding interest costs, aided by dividend income of ¥0.16bn, interest income of ¥0.06bn, and foreign-exchange gains of ¥0.06bn. Interest coverage of 20.23x indicates that financing costs are readily serviceable. Segment profitability was mixed: Energy revenue rose 47.3% to ¥15.25bn but segment profit declined 15.2% to ¥0.76bn, compressing its margin to 5.0% from 8.6%. Functional Components & Materials revenue increased 22.5% to ¥9.60bn and segment profit more than tripled to ¥0.95bn, with margin expanding to 9.9% from 3.9%. Optical & System revenue grew 17.4% to ¥9.21bn and segment profit doubled to ¥1.13bn, producing the highest segment profit and a 12.3% margin. Value Co-creation revenue declined 14.9% to ¥3.62bn and segment profit fell to ¥0.03bn from ¥0.22bn, reducing its margin to 0.9%.
Growth Assessment
Top-line growth was strong at 24.4%, led by Energy, Functional Components & Materials, and Optical & System. Energy was the largest segment by revenue at ¥15.25bn, accounting for 40.5% of consolidated sales, but its lower profit indicates that sales growth has not yet translated fully into segment-level earnings. Functional Components & Materials and Optical & System were the principal drivers of the group operating-profit increase, together contributing ¥2.08bn, or 72.5%, of aggregate segment operating income. Optical & System is the core business based on its largest operating-income contribution of ¥1.13bn. The decline in Value Co-creation sales and profit is a drag on the breadth of the recovery and warrants monitoring. Q1 sales of ¥37.67bn represent 26.3% of the ¥143.0bn full-year sales forecast, only 1.3 percentage points above the standard 25% progress rate. Q1 operating income of ¥2.87bn represents 28.7% of the ¥10.0bn full-year target, 3.7 percentage points ahead of the standard progress rate. These progress rates do not constitute a deviation of more than 10 percentage points from normal first-quarter seasonality. To achieve full-year guidance, the company must generate ¥105.34bn of revenue and ¥7.13bn of operating income over the remaining nine months. The unchanged forecast calls for full-year revenue growth of 10.5% and operating-income growth of 26.7%, which is less demanding than the Q1 sales growth rate but still requires preservation of the improved cost structure. The ¥0.40bn extraordinary loss was modest at approximately 1.7% of profit attributable to owners, so reported earnings remain predominantly supported by ordinary business performance.
Financial Health
Liquidity is healthy, with current assets of ¥87.86bn against current liabilities of ¥48.31bn, resulting in a current ratio of 181.9%. The quick ratio of 133.1% also indicates that short-term obligations can be met without relying on inventory liquidation. Working capital totaled ¥39.55bn. Cash and deposits of ¥27.56bn covered short-term loans of ¥3.00bn by 9.19x. Interest-bearing debt was ¥37.00bn, comprising ¥3.00bn of short-term loans and ¥34.00bn of long-term loans, so the debt structure is predominantly long term. This maturity structure reduces near-term refinancing pressure, and current assets exceed current liabilities by a wide margin. Debt-to-equity was 0.99x, at the conservative-to-moderate boundary and well below the 2.0x level that would signal aggressive leverage. Debt-to-capital was 28.4%, also below the 40% investment-grade benchmark. Interest coverage of 20.23x provides a substantial buffer against earnings volatility or higher funding costs. Equity increased to ¥93.20bn from ¥90.18bn a year earlier, supported by ¥4.26bn of comprehensive income. Treasury stock became less negative by ¥12.08bn to negative ¥7.30bn, materially changing the equity composition. Retained earnings declined by ¥9.09bn to ¥57.37bn despite current-period profit, making shareholder distributions and other capital movements important items to monitor in subsequent statements. Goodwill of ¥6.03bn represented only 6.5% of equity and 3.3% of assets, while total intangible assets represented 5.4% of assets; these levels do not indicate balance-sheet dependence on acquired intangible value. Asset retirement obligations of ¥0.30bn equaled approximately 0.3% of total liabilities, a limited environmental-obligation burden.
Notable B/S Changes
Treasury stock: improved by ¥12.08bn to negative ¥7.30bn (+62.3%) - a material change in the equity composition; monitor subsequent treasury-share and capital-allocation actions. Retained earnings: decreased by ¥9.09bn to ¥57.37bn (-13.7%) - notable reduction despite Q1 profitability; monitor the relationship between future earnings, shareholder distributions, and equity movements.
Cash Flow Quality
The balance-sheet evidence points to elevated working-capital absorption risk. Accounts receivable increased by ¥3.85bn year on year to ¥31.91bn, while inventories increased by ¥3.43bn to ¥23.57bn. Receivable days were 77, triggering the HIGH_RECEIVABLE_DAYS quality alert because the collection cycle exceeds the 60-day warning threshold. For a manufacturing company, this may reflect a sales mix tilted toward longer-credit customers, shipment timing near quarter end, or slower customer collections; in each case, it raises the risk that reported sales growth converts into cash more slowly than earnings. The impact on the investment case is that continued receivable expansion could constrain internally generated funding even while accounting profits rise. Inventory days were 76, also triggering the HIGH_INVENTORY_DAYS quality alert because inventory remains above the 60-day warning threshold. The increase in inventories alongside rapid revenue growth may be consistent with production preparation and higher activity, but it also exposes the company to demand-forecast, inventory-valuation, and obsolescence risk if end-market momentum slows. The impact is particularly relevant because gross margin declined year on year, limiting the buffer against potential inventory markdowns or unfavorable product mix. Trade payables increased by ¥0.88bn to ¥16.82bn, materially less than the increases in receivables and inventories. Accordingly, supplier financing has not offset the expansion in operating working capital to the same extent. The quarter's modest ¥0.40bn extraordinary loss does not materially undermine earnings quality, and non-operating income of ¥0.50bn was only 1.3% of revenue. Dividend income, interest income, foreign-exchange gains, and equity-method earnings together supported ordinary income but did not dominate operating earnings.
Dividend Sustainability
The full-year dividend forecast is ¥56.00 per share, with no dividend revision announced. Against forecast EPS of ¥181.76, the implied dividend payout ratio is approximately 30.8%. This is comfortably below the 60% sustainability benchmark. Q1 basic EPS was ¥65.03, equivalent to 35.8% of the full-year EPS forecast before considering quarterly seasonality. The payout framework appears supported by earnings expectations, provided the company delivers its unchanged full-year operating-income target of ¥10.0bn. The meaningful reduction in retained earnings and change in treasury stock make capital allocation, including distributions and treasury-share actions, important to monitor. The available balance-sheet liquidity and strong interest coverage support financial flexibility for ordinary shareholder returns.
Risk Assessment
Business risks include Energy segment profitability risk: Energy sales rose 47.3% to ¥15.25bn, but segment profit declined 15.2% to ¥0.76bn and margin compressed by about 367 basis points to 5.0%. Sustained cost, pricing, or product-mix pressure in the largest revenue segment could limit consolidated margin expansion., Working-capital and demand risk: DSO of 77 days and inventory days of 76 days both exceed the 60-day warning threshold. Slower customer collections or an inventory correction would weaken conversion of growth into liquidity and could lead to valuation losses if demand slows., Portfolio execution risk: Value Co-creation revenue declined 14.9% and its segment margin fell to 0.9%, while group profit growth is concentrated in Functional Components & Materials and Optical & System., Manufacturing-cycle risk: The company remains exposed to changes in component demand, customer order patterns, input costs, foreign-exchange movements, and product-cycle volatility. The Q1 gross-margin decline demonstrates sensitivity to factors not fully offset by sales growth..
Financial risks include Leverage is manageable but material: Interest-bearing debt totaled ¥37.00bn and D/E was 0.99x. Long-term loans account for ¥34.00bn, making earnings resilience and refinancing conditions relevant despite strong 20.23x interest coverage., Capital-allocation monitoring risk: Retained earnings decreased by ¥9.09bn year on year and treasury stock changed by ¥12.08bn. Future capital returns should remain compatible with earnings generation and working-capital needs., Foreign-exchange sensitivity: Q1 included ¥0.06bn of foreign-exchange gains, and forecast disclosures identify exchange rates as a factor that can cause actual results to diverge from guidance..
Key concerns include Highest priority: the combination of elevated receivable and inventory days, because both can impair cash conversion if revenue momentum decelerates., High priority: Energy's sharp profit-margin decline despite strong sales growth, because Energy is the largest revenue segment., Moderate priority: the sustainability of SG&A leverage, which was the primary source of consolidated operating-margin expansion while gross margin declined., Moderate priority: achieving the unchanged full-year forecast while maintaining segment profitability and controlling working-capital growth..
Investment Implications
Key takeaways include Revenue, operating income, ordinary income, and profit attributable to owners all grew by more than 24%, with operating income increasing 44.8%., The operating margin improved to 7.6%, driven by SG&A leverage, although the gross margin declined to 24.9%., Optical & System was the core business by operating-income contribution, while Functional Components & Materials delivered the strongest margin expansion., Liquidity, debt maturity structure, and interest coverage are sound, with no current-ratio or excessive-leverage warning., Receivable days of 77 and inventory days of 76 are the principal quality and cash-conversion concerns., Q1 operating-income progress of 28.7% is ahead of the standard 25% pace, while unchanged guidance indicates management caution..
Metrics to watch include Energy segment margin and operating income, Gross margin and SG&A-to-sales ratio, Receivable days, inventory days, and the pace of working-capital growth, Optical & System and Functional Components & Materials revenue and segment-profit momentum, Progress toward ¥143.0bn in full-year revenue and ¥10.0bn in operating income, Retained-earnings movements, treasury-share changes, and dividend execution.
Regarding relative positioning, Maxell's annualized 10.3% ROE, 7.6% operating margin, 181.9% current ratio, 0.99x D/E ratio, and 20.23x interest coverage indicate a financially sound manufacturer with improving profitability. Its margin profile is improving but remains below the strongest manufacturing profitability benchmarks, and its working-capital efficiency is weaker than the stated receivable- and inventory-day thresholds.