JAPAN ELECTRONIC MATERIALS CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥12.32B
• Operating Income: ¥2.66B
• Net Income: ¥1.35B
• EPS: ¥134.39

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Japan Electronic Materials Co., Ltd. (6855) delivered solid FY2026 Q2 results with clear signs of operating leverage and improved profitability amid a recovering semiconductor cycle. Revenue rose 25.2% YoY to ¥12.322bn, reflecting healthy demand for probe cards and related test interfaces. Gross profit reached ¥4.260bn, implying a gross margin of 34.6%, which is consistent with an improved mix and better capacity utilization. Operating income increased 29.6% YoY to ¥2.657bn, pushing the operating margin to 21.6%, evidencing positive operating leverage. Ordinary income was ¥2.448bn, and net income rose 26.0% YoY to ¥1.698bn, with a reported net margin of 13.8%. DuPont analysis indicates ROE of 5.87%, driven by a 13.78% net margin, 0.302x asset turnover, and 1.41x financial leverage. Liquidity appears ample with a current ratio of 419% and working capital of ¥21.674bn, supported by a low debt burden (liabilities/equity of 0.41x) and very strong interest coverage (≈190x). Operating cash flow, however, was ¥0.737bn (OCF/NI = 0.43), indicating weak earnings-to-cash conversion this period, likely due to working capital investment consistent with higher sales. Depreciation of ¥0.567bn (≈17.6% of EBITDA) signals moderate capital intensity; actual capex and investing cash flows were not disclosed in this dataset. Financing cash outflow of ¥0.926bn suggests debt repayment and/or shareholder returns, but dividend details were not disclosed. Several balance sheet and cash items (e.g., cash & equivalents, inventories, equity ratio, investing CF, DPS, share counts) show as zero and should be treated as unreported rather than true zero. Based on available data, profitability momentum and balance sheet strength are evident, but cash flow quality requires monitoring. The outlook hinges on semiconductor test demand, customer capex cycles, and the company’s ability to convert earnings into cash as growth normalizes.

Profitability Analysis

ROE_decomposition: ROE 5.87% = Net margin 13.78% × Asset turnover 0.302 × Financial leverage 1.41. Implied ROA ≈ 4.16% (NI ¥1.698bn / Assets ¥40.8bn), consistent with DuPont (13.78% × 0.302 ≈ 4.16%). margin_quality: Gross margin 34.6% (¥4.260bn/¥12.322bn) and operating margin 21.6% (¥2.657bn/¥12.322bn) indicate solid cost control and mix. EBITDA margin is 26.2% (¥3.224bn), with D&A at ¥0.567bn. Net margin 13.78% reflects minimal interest burden (¥14m) and a normalized tax expense; the provided ‘effective tax rate 0.0%’ appears unreported. operating_leverage: Revenue +25.2% YoY vs operating income +29.6% YoY indicates positive operating leverage and modest margin expansion. Ordinary income trails operating profit due to non-operating items, but interest is immaterial, so core operations drive profitability.

Growth Assessment

revenue_sustainability: Top-line growth of 25.2% YoY likely reflects semiconductor test demand recovery; sustainability will depend on customer capex, node transitions, and probe card content per wafer. profit_quality: Expansion in operating profit outpaced sales, pointing to scale benefits and mix. However, OCF/NI at 0.43 suggests growth has not yet translated fully into cash, likely due to working capital needs. outlook: Assuming stable industry demand and normalization of working capital, earnings quality could improve in subsequent quarters. Watch for orders, book-to-bill, and utilization trends to gauge run-rate growth.

Financial Health

liquidity: Current assets ¥28.463bn vs current liabilities ¥6.789bn yields a current ratio of 419%. Quick ratio is shown equal to current ratio due to unreported inventories; true quick ratio may be lower. Working capital is ¥21.674bn. solvency: Total liabilities ¥11.944bn vs equity ¥28.907bn implies liabilities/equity of 0.41x and assets/equity of 1.41x. Interest coverage is ~189.8x (EBIT/interest), indicating very low refinancing risk. capital_structure: Low leverage with strong equity base (equity ¥28.907bn). Equity ratio is shown as 0.0% but is unreported in this dataset; based on totals, the implied equity ratio would be high.

Cash Flow Quality

earnings_quality: OCF ¥0.737bn vs NI ¥1.698bn gives OCF/NI of 0.43, below a typical 0.8–1.0 comfort range for mid-cycle. EBITDA-to-OCF conversion is ~23% (¥0.737bn/¥3.224bn), pointing to working capital build or timing effects. FCF_analysis: Free cash flow is shown as 0 due to unreported investing cash flows/capex; true FCF cannot be determined. Depreciation at ¥0.567bn suggests ongoing capital needs; capex trajectory remains a key unknown. working_capital: Current asset build relative to current liabilities supports growth but likely weighed on OCF. Inventories and receivables details are unreported, limiting analysis of turns and DSO/DPO.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio are shown as 0.0 but are unreported; no conclusion on payout level can be drawn from this dataset. FCF_coverage: FCF coverage cannot be assessed due to missing investing cash flows. Financing CF of -¥0.926bn could reflect dividends and/or debt repayment or buybacks, but details are not disclosed. policy_outlook: Given low leverage and strong profitability, capacity for distributions appears adequate, subject to actual cash generation and capex plans. Confirm company’s stated policy and year-to-date dividends once disclosed.

Risk Assessment

Business Risks:

• Semiconductor cycle sensitivity impacting probe card demand and utilization.
• Customer concentration and timing of major customers’ capex programs.
• Technology transition risk (advanced nodes, new packaging) requiring R&D and capex.
• Pricing pressure and competitive dynamics in probe cards and test interfaces.
• Product mix volatility affecting gross margins.
• Supply chain constraints and lead times for specialty materials/components.
• Export controls and geopolitical restrictions affecting China-related demand.

Financial Risks:

• Weak OCF-to-earnings conversion this period due to working capital build.
• Potential capex uptick could pressure FCF if growth accelerates.
• FX exposure (e.g., USD/JPY, KRW/JPY) affecting margins and translation.
• Limited visibility on cash balance and inventories due to unreported items.

Key Concerns:

• Sustainability of 25%+ revenue growth as semiconductor demand normalizes.
• Improvement in OCF/NI ratio toward historical norms.
• Visibility on capex/investing cash flows and inventory management once disclosed.

Investment Implications

Key Takeaways:

• Strong YoY growth with operating leverage: revenue +25.2%, operating income +29.6%.
• Healthy margins: gross 34.6%, operating 21.6%, EBITDA 26.2%, net 13.8%.
• Low leverage and robust interest coverage (~190x) underpin financial resilience.
• Earnings-to-cash conversion weak this period (OCF/NI 0.43), likely working-capital related.
• Key cash flow and inventory data were not disclosed; monitor forthcoming filings.
• Implied share count ≈ 12.6m based on NI and EPS, given share data unreported.

Metrics to Watch:

• Order trends/book-to-bill and capacity utilization.
• OCF/NI and EBITDA-to-OCF conversion.
• Capex and investing cash flows; FCF trajectory.
• Receivables and inventories once disclosed (DSO, turns).
• Gross margin mix and pricing discipline.
• FX sensitivity and hedging impacts.

Relative Positioning: Within probe card and semiconductor test peers, the company exhibits above-average margins and low leverage, indicative of solid competitive positioning; near-term differentiation will hinge on sustaining mix/technology advantages and converting growth into cash.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
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