Maxell,Ltd. FY2027 Q1 Earnings Report

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Executive Summary

The first quarter delivered higher revenue and profits, accompanied by improved profit margins, as the major segments generally expanded. Revenue was ¥376.6B (+24.4% YoY), Operating Income was ¥28.7B (+44.8%), and Ordinary Income was ¥31.3B (+55.1%). Net Income (consolidated, including non-controlling interests) was ¥24.7B (+51.8%), of which Net Income attributable to owners of the parent was ¥24.0B (+50.5%). The primary driver of revenue growth was double-digit revenue growth in all three segments—Energy, Functional Materials, and Optical Systems. Profit growth was driven by an improved business mix resulting from significant profit growth in Optical Systems and Functional Materials.

Factors Affecting Performance

【Revenue】The primary driver of revenue growth was the Energy Business (¥153.3B, +46.7%, composition ratio 40.7%). Functional Materials (¥96.0B, +22.5%, composition ratio 25.5%) and Optical Systems (¥92.1B, +17.4%, composition ratio 24.5%) also recorded double-digit revenue growth. In contrast, the Value Co-Creation Business was the only segment to post a decline in revenue, at ¥36.2B (▲14.9%, composition ratio 9.6%), contrasting with the company-wide revenue growth trend.

【Profit and Loss】Operating Income was ¥28.7B (+44.8%), while the Operating Income margin improved to 7.6% from 6.6% in the same period of the previous year, an improvement of +1.0pt. Although the gross margin declined slightly to 24.9% from 25.5%, the Operating Income margin improved as the SG&A expense ratio declined to 17.3% from 18.9%, resulting in fixed-cost dilution. By segment, Optical Systems posted Operating Income of ¥11.3B (+101.4%, margin 12.3%), while Functional Materials posted ¥9.5B (+210.5%, margin 9.9%), with both recording significant profit growth and leading company-wide earnings growth. In contrast, despite revenue growth, Energy posted a decline in Operating Income to ¥7.6B (▲15.2%, margin 4.9%), while the Value Co-Creation Business also declined sharply to ¥0.3B (▲85.6%), clearly demonstrating that the segment mix is influencing the company-wide margin. Non-operating income and expenses improved due to the recognition of foreign exchange gains of ¥0.6B and equity-method investment income of ¥1.0B, causing Ordinary Income to rise to ¥31.3B (+55.1%), exceeding the growth rate of Operating Income. The extraordinary loss of ¥0.4B (loss on disposal and sale of fixed assets) was a temporary factor and had a limited impact. In conclusion, the current period recorded higher revenue and profits.

Segment Analysis

Optical Systems generated revenue of ¥92.1B (+17.4%) and Operating Income of ¥11.3B (+101.4%), with a margin of 12.3%, the highest profitability among all segments and the central contributor to profit growth. Functional Materials generated revenue of ¥96.0B (+22.5%) and Operating Income of ¥9.5B (+210.5%), with its margin improving significantly to 9.9%, representing a turnaround from the low-profitability structure of the previous year. Energy expanded to become the largest segment in terms of scale, with revenue of ¥153.3B (+46.7%); however, Operating Income declined to ¥7.6B (▲15.2%) and its margin fell to 4.9% (equivalent to 6.7% in the previous year), indicating that revenue growth coexisted with deteriorating profitability. The Value Co-Creation Business declined to revenue of ¥36.2B (▲14.9%) and Operating Income of ¥0.3B (▲85.6%), with its margin falling to 0.9%, making it the least dynamic of the four segments. The improvement in the company-wide Operating Income margin was largely attributable to a mix effect: despite the expansion in scale, the relative contribution of the less profitable Energy and Value Co-Creation businesses declined, while the contribution of the more profitable Optical Systems and Functional Materials businesses increased.

Key Financial Indicators

【Profitability】The Operating Income margin improved to 7.6% from 6.6% in the same period of the previous year, an improvement of +1.0pt. The Net Income margin, based on Net Income attributable to owners of the parent, improved to 6.4% from 5.3%, an improvement of +1.1pt. ROE was 2.7% on a quarterly basis, exceeding approximately 1.8% in the same period of the previous year calculated using the same methodology. 【Cash Quality】Days sales outstanding (DSO) were 77 days (84 days in the previous year), days inventory outstanding (DIO) were 76 days (81 days in the previous year), and days payable outstanding (DPO) were 54 days (64 days in the previous year). The cash conversion cycle shortened slightly to 99 days from 101 days, indicating that working-capital efficiency actually improved despite the revenue growth. 【Investment Efficiency】The significant increase in revenue exceeded the increase in total assets (+2.7%), indicating that asset efficiency is improving alongside earnings growth. 【Financial Soundness】The Equity Ratio was 50.3%, up +2.1pt from 48.2% in the same period of the previous year. Short-term liquidity was sound, with a current ratio of 181.9% and a quick ratio of 133.1%. Interest-bearing debt totaled approximately ¥392.8B, comprising long-term borrowings of ¥340.0B and short-term borrowings and other debt of ¥52.8B. The interest-bearing debt-to-equity ratio remained at a low 0.42x against equity of ¥932.0B, while interest coverage was 20.2x, indicating strong resilience to interest expense.

Cash Flow Analysis

Cash and deposits were ¥275.6B, a decrease of ¥40.0B (▲12.7%) from ¥315.6B at the end of the same period of the previous year. Accounts receivable increased to ¥319.1B (+13.9%) and inventories increased to ¥235.7B (+17.0%) alongside revenue growth; however, DSO and DIO were 77 days and 76 days, respectively, shortening from 84 days and 81 days in the previous year, indicating improved working-capital turnover efficiency relative to the expansion in sales. Although accounts payable increased to ¥168.2B (+5.5%), DPO shortened to 54 days from 64 days in the previous year, suggesting that shorter payment terms may have somewhat increased funding requirements. Treasury stock was ¥72.99B, a significant decrease from ¥193.74B in the same period of the previous year. Capital surplus and retained earnings also declined accordingly, suggesting that capital policies, such as the cancellation of treasury stock, affected movements in cash and equity accounts. Long-term borrowings were largely unchanged at ¥340.0B, while short-term borrowings of ¥30.0B were newly recorded, indicating partial use of short-term financing. Overall, the increase in working capital accompanying earnings growth and the implementation of capital policies pushed down the cash balance; however, the Equity Ratio improved to 50.3%, and the stability of the financial foundation was not impaired.

Quality of Earnings

The majority of profits were generated by recurring operating activities. The extraordinary loss of ¥0.4B (loss on disposal and sale of fixed assets) amounted to only approximately 1.7% of Net Income attributable to owners of the parent, indicating a limited impact from temporary factors. Non-operating income was ¥4.97B, accounting for approximately 1.3% of revenue and comprising dividend income of ¥1.55B, foreign exchange gains of ¥0.62B, equity-method investment income of ¥1.0B, and other items. Dependence on any specific temporary item was not high. In the same period of the previous year, a foreign exchange loss of ¥2.01B was recorded in non-operating expenses; therefore, the reversal to a foreign exchange gain in the current period was one factor driving the growth rate of Ordinary Income (+55.1%) above that of Operating Income (+44.8%). The effective tax rate was 19.9% (Profit Before Tax of ¥30.9B and income taxes of ¥6.1B), increasing from the previous year; however, the expansion in the profit level supported growth in Net Income. Comprehensive Income was ¥42.6B, exceeding Net Income of ¥24.7B, with foreign currency translation adjustments of ¥7.2B and valuation differences on available-for-sale securities of ¥11.0B contributing to the increase, reflecting the expansion of unrealized gains including market-related factors. The divergence between Net Income and Comprehensive Income was positive, but the difference is susceptible to fluctuations in foreign exchange and securities markets and should be distinguished from recurring earnings power.

Earnings Forecast and Guidance

Progress against the Full-Year plan was 26.3% for revenue (¥376.6B/¥1,430.0B), 28.7% for Operating Income (¥28.7B/¥100.0B), and 35.8% for Net Income attributable to owners of the parent (¥24.0B/¥67.0B), all exceeding the quarterly benchmark of 25%. The particularly high progress in Net Income is likely attributable to the recognition of foreign exchange gains and the high-profitability mix of Optical Systems and Functional Materials. Neither the earnings forecast nor the dividend forecast was revised during the quarter, and the Full-Year plan remains unchanged.

Shareholder Returns

The annual dividend forecast is ¥56 (¥25 in the previous fiscal year), resulting in a Payout Ratio of approximately 30.8% against forecast Full-Year EPS of ¥181.76. As of Q1, there had been no revision to the dividend forecast, and the plan remains unchanged. Treasury stock declined significantly from ¥193.74B in the same period of the previous year to ¥72.99B, accompanied by decreases in capital surplus and retained earnings, suggesting that capital policies such as the cancellation of treasury stock were implemented. Net Income progress was 35.8%, exceeding the Full-Year plan on a quarterly basis, indicating a high level of coverage for the current dividend plan.

Risk Factors

1. Profitability disparities among segments: Despite revenue growth of +46.7% in the Energy Business, Operating Income declined by ▲15.2%, and its margin fell to 4.9% (equivalent to 6.7% in the previous year). The fact that expansion in scale has not directly translated into improved profitability requires monitoring.

2. Volatility in non-operating income and expenses: The current period included a foreign exchange gain of ¥0.62B, which boosted Ordinary Income, whereas the same period of the previous year included a foreign exchange loss of ¥2.01B. Non-operating income and expenses are therefore structurally susceptible to fluctuations depending on foreign exchange market conditions.

3. Slowing momentum in the Value Co-Creation Business: As revenue declined by ▲14.9%, Operating Income fell sharply by ▲85.6% to ¥0.32B (equivalent to ¥2.22B in the previous year), and the margin declined to 0.9%, confirming weakness in the business’s earnings foundation.

Industry Benchmark (Reference; Compiled by the Company)

Profitability and Return

Growth and Capital Efficiency

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. The Operating Income margin improved from 6.6% in the previous year to 7.6%. A notable feature is that the expansion of the high-profitability Optical Systems and Functional Materials segments lifted company-wide profitability through an improved business mix.

2. Progress against the Full-Year plan was 26.3% for revenue, 28.7% for Operating Income, and 35.8% for Net Income, all exceeding the quarterly benchmark of 25%. Progress in Net Income was particularly high.

3. Declining profitability in the Energy and Value Co-Creation businesses is a drag on the improvement in the company-wide margin. The profitability disparity among segments will be a key point of focus in understanding future structural changes.

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 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥2,337–¥2,474 at ±1% for the Cost of Equity, and ¥2,400–¥2,407 at ±0.1 for ω.

Notes:

• Because Net Income progress against the Full-Year forecast (36%) exceeds the standard benchmark (25%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies ahead of plan tend to exceed their forecasts. For businesses with strong seasonality, the adjustment may be excessive).
• Because 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 discrepancy relative to the Full-Year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Model: Residual Income Model / Interest Rate Reference Month: 2026-06 / This value does not forecast 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 disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting with a professional as necessary.

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