HORIBA (6856) FY2026 Q1 Earnings Report

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Executive Summary

Revenue increased across all three segments, led primarily by Advanced Materials & Semiconductor, but Operating Income did not grow at the same pace, indicating declining profitability despite higher revenue. Revenue was ¥845.3B (up +17.6% YoY), Operating Income was ¥124.8B (up +6.2%), Ordinary Income was ¥127.3B (up +9.5%), and Net Income was ¥86.6B (up +6.7%). The Operating Margin was 14.8%, down approximately 1.6pt from 16.3% in the same period of the previous year, mainly due to deteriorating margins in the core segment.

Factors Affecting Results

【Revenue】Revenue of ¥845.3B represented a +17.6% YoY increase. By segment, Advanced Materials & Semiconductor was the largest and fastest-growing pillar at ¥441.6B (52.2% of total, YoY +18.8%), followed by Energy & Environment at ¥305.0B (36.1%, YoY +18.0%) and Bio & Healthcare at ¥98.7B (11.7%, YoY +11.5%), with all three segments contributing to revenue growth.

【Earnings】Operating Income of ¥124.8B (YoY +6.2%) grew substantially more slowly than revenue. The primary factor was that segment profit in Advanced Materials & Semiconductor, which generates 91.6% of Operating Income, declined to ¥114.3B (YoY △2.6%), with its margin falling approximately 5.7pt from 31.6% to 25.9%. In contrast, Energy & Environment posted a significant increase in profit to ¥17.1B (YoY +127.3%), while Bio & Healthcare continued to report an Operating Loss of ¥6.7B, although the loss narrowed from ¥7.3B in the previous year. Ordinary Income exceeded Operating Income by ¥2.5B, as Interest Income of ¥5.5B exceeded Interest Expense of ¥2.1B and Foreign Exchange Losses of ¥1.2B. Extraordinary gains and losses consisted of a gain of ¥0.4B and a loss of ¥0.2B, for a net amount of only ¥0.2B, resulting in a limited impact on Net Income of ¥86.6B. Overall, the Company posted higher revenue and profit, but earnings growth was sluggish relative to revenue growth due to declining profitability in the core business.

Segment Analysis

Advanced Materials & Semiconductor reported revenue of ¥441.6B (52.2% of total, YoY +18.8%) and profit of ¥114.3B (YoY △2.6%, margin 25.9%). Despite higher revenue, its margin declined from 31.6% in the previous year, making it the primary cause of the deterioration in the Company-wide margin. Energy & Environment recorded revenue of ¥305.0B (36.1% of total, YoY +18.0%) and profit of ¥17.1B (YoY +127.3%, margin 5.6%), showing a marked improvement, with its margin rising approximately 2.7pt from 2.9% in the previous year. Bio & Healthcare generated revenue of ¥98.7B (11.7% of total, YoY +11.5%) but recorded an Operating Loss of ¥6.7B (previous year △¥7.3B); although the loss continued, it narrowed. While profit generation remains heavily concentrated in Advanced Materials & Semiconductor, improved profitability in Energy & Environment represents a positive change from the perspective of diversifying profit sources.

Key Financial Metrics

【Profitability】The Operating Margin of 14.8% declined from 16.3% in the same period of the previous year, while the Net Profit Margin of 10.2% also declined from 11.3%. The Gross Profit Margin remained high at 43.8%, indicating that value added has been maintained.【Cash Quality】Ordinary Income exceeded Operating Income by only ¥2.5B, indicating a limited contribution from net financial income to earnings. The net amount of Extraordinary Gains and Losses was ¥0.2B, indicating limited reliance on nonrecurring factors.【Investment Efficiency】ROE was 2.5% (based on quarterly results; approximately 10% on an annualized basis), a level achieved under a conservative capital structure with an Equity Ratio of 67.3%. Basic EPS was ¥206.13 (YoY +6.6%).【Financial Soundness】Against Cash and Deposits of ¥1,508.6B, Interest-Bearing Debt—comprising Short-Term Borrowings, Long-Term Borrowings, and Bonds—remained at approximately ¥400B. With an Equity Ratio of 67.3%, the Company’s financial foundation is robust.

Cash Flow Analysis

Although the Statement of Cash Flows has not been disclosed, the funding position is analyzed based on trends in the Balance Sheet. Cash and Deposits declined to ¥1,508.6B from ¥1,623.4B in the same period of the previous year, while working capital items such as Accounts Receivable of ¥796.0B and Inventories of ¥319.2B may have contributed to the retention of funds. Property, Plant and Equipment increased to ¥1,370.1B from ¥1,321.5B in the previous year, suggesting that capital expenditures have continued, including Construction in Progress of ¥131.8B. Short-Term Borrowings declined from ¥121.9B in the previous year to ¥89.8B, indicating progress in reducing Interest-Bearing Debt. Overall, although the allocation of funds to working capital and capital expenditures associated with business expansion has somewhat reduced the cash balance, the Company’s strong equity base and cash position continue to support financial stability.

Earnings Quality

Most profit was generated from the core business, while Extraordinary Gains and Losses consisted of a gain of ¥0.4B and a loss of ¥0.2B, for a net amount of only ¥0.2B. Accordingly, the results can be viewed as a straightforward reflection of recurring earnings power. Of Non-Operating Income of ¥7.4B, the principal item was Interest Income of ¥5.5B, while dividend income from cross-shareholdings was negligible. Non-Operating Expenses of ¥4.8B mainly comprised Interest Expense of ¥2.1B and Foreign Exchange Losses of ¥1.2B, with net financial income contributing to a ¥2.5B increase in Ordinary Income. Comprehensive Income was ¥115.7B, exceeding Net Income of ¥86.6B, mainly due to Foreign Currency Translation Adjustments of ¥22.1B. This difference resulted from the yen-denominated valuation of overseas assets and must be assessed separately from the earnings power of the core business. Overall, the impact of nonrecurring factors was limited, and earnings quality can be assessed as relatively high.

Earnings Forecast and Guidance

The Company’s Full-Year forecast is Revenue of ¥3,730B (YoY +12.0%), Operating Income of ¥680B (YoY +28.2%), and Ordinary Income of ¥685B (YoY +26.3%), and the earnings forecast was revised during the current quarter. Q1 progress rates were 22.7% for Revenue, 18.4% for Operating Income, and 18.6% for Ordinary Income, all below the 25% benchmark based on simple linear progress. In particular, the progress rate for Operating Income was lower than that for Revenue, indicating that achievement of the Full-Year plan depends on a recovery in profitability toward the second half of the fiscal year, particularly an improvement in the profitability of Advanced Materials & Semiconductor.

Shareholder Returns

The Full-Year dividend forecast is ¥490 per share, with no revision to the dividend forecast during the current quarter. Based on the Full-Year forecast EPS of ¥1,154.88, the Payout Ratio is approximately 42.4%, below 60%. Given Retained Earnings of ¥2,605.9B and Cash and Deposits of ¥1,508.6B, the Company appears to have substantial capacity in terms of dividend resources.

Risk Factors

1. Risk of declining profitability in the core business: Advanced Materials & Semiconductor is the core business, accounting for 91.6% of Operating Income, but its segment margin declined approximately 5.7pt from 31.6% in the previous year to 25.9%. The Company’s overall earnings are highly sensitive to supply-demand and pricing trends in this business.

2. Risk of working capital retention: Accounts Receivable of ¥796.0B and Inventories of ¥319.2B (Raw Materials of ¥379.4B, Work in Process of ¥263.8B, and Finished Goods of ¥319.2B) represent a considerable proportion of total assets, and cash collection and inventory management during a period of sales expansion may become challenges.

3. Continued losses in the Bio & Healthcare Business: This segment recorded an Operating Loss of ¥6.7B against revenue of ¥98.7B. Although the loss narrowed from the previous year, it continues. Progress in absorbing fixed costs will be a key focus going forward.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The Company’s Operating Margin and Net Profit Margin both significantly exceed the industry median, placing its profitability in the upper tier of the industry.

Growth and Capital Efficiency

The Revenue Growth Rate also significantly exceeds the industry median, placing the Company among the industry’s upper-tier group in terms of growth.

※Source: Compiled by the Company

Key Points in the Earnings Results

1. Revenue increased across all three segments, indicating broad-based growth, but the increase in Operating Income (+6.2%) fell short of sales growth (+17.6%). The primary factor was the decline in the margin of Advanced Materials & Semiconductor, which accounts for more than 90% of Operating Income; profitability trends in this business will be the key determinant of future Company-wide earnings.

2. The improvement in the Energy & Environment margin (2.9%→5.6%) and the narrowing of losses in Bio & Healthcare indicate structural changes showing that profit sources are gradually becoming more diversified.

3. The Q1 progress rate against the Full-Year plan was 18.4% for Operating Income, below the Revenue progress rate of 22.7%. The extent to which profitability recovers in the second half of the year will therefore be a key point of focus in the earnings data.

Theoretical Share Price (Reference Value)

Sensitivity: ¥9,366–¥9,915 at Cost of Equity ±1%, and ¥9,600–¥9,686 at ω±0.1.

Notes:

• Net assets as of 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 / This is a mechanically calculated value based solely on publicly disclosed data; it 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.)

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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 a professional as necessary.

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AI Financial Analysis

Executive Summary

FY2026 Q1 was a solid top-line quarter for HORIBA, although profit growth lagged revenue growth because of margin compression. Revenue increased 17.6% year on year to ¥84.5bn. Operating income rose 6.2% to ¥12.5bn. Ordinary income increased 9.5% to ¥12.7bn, supported by a lower net financial cost burden. Net income attributable to owners rose 6.7% to ¥8.7bn, or ¥206.13 per share. The gross margin declined 317bp year on year to 43.8% from 47.0%. The operating margin declined 159bp to 14.8% from 16.4%, remaining within the upper end of the stated good-profitability range but below the 15% excellent threshold. SG&A expense rose 11.5%, slower than revenue growth, which indicates that operating overhead discipline partly mitigated the gross-margin decline. The Advanced Materials & Semiconductor segment remained the earnings engine, contributing ¥11.4bn of segment profit, equivalent to roughly 92% of consolidated operating income. Energy & Environment improved substantially, while Bio & Healthcare remained loss-making despite revenue growth. Net non-operating income was positive, with ¥547m of interest income more than offsetting ¥212m of interest expense and ¥118m of foreign-exchange losses. Extraordinary gains and losses were immaterial, resulting in earnings that were principally generated from operating activities rather than asset sales. Comprehensive income of ¥11.6bn exceeded net income, principally reflecting positive foreign-currency translation and securities valuation movements. The balance sheet remains highly liquid, with ¥150.9bn of cash and deposits, a 294.2% current ratio, and only 8.7% debt-to-capital. However, the quality-alert metrics indicate a long operating cash cycle, including high receivable days, high inventory days, and a 230-day cash conversion cycle. The full-year forecast implies a significant acceleration in the remaining quarters, as Q1 progress was 22.7% for revenue, 18.4% for operating income, and 17.8% for net income. Management has revised its forecast, making delivery in Advanced Materials & Semiconductor and a turnaround in Bio & Healthcare central to the FY2026 outlook.

Profitability Analysis

Annualized DuPont ROE is 10.1%, comprising a 10.2% net profit margin, 0.660x asset turnover, and 1.49x financial leverage. Profitability is therefore driven primarily by a strong margin profile rather than aggressive leverage; the 1.49x leverage factor is conservative and consistent with a 67.2% capital adequacy ratio. The 10.2% net margin meets the excellent benchmark, while annualized ROE sits at the lower boundary of the good 10-15% range. The principal quarterly deterioration was margin rather than balance-sheet efficiency: gross margin fell 317bp and operating margin fell 159bp year on year. Gross profit increased 9.7%, materially below the 17.6% revenue increase, indicating higher product costs, mix effects, or both. SG&A rose 11.5%, below revenue growth, providing positive operating leverage at the overhead level; nevertheless, this was insufficient to fully offset gross-margin dilution. The tax burden was 0.679, reflecting a 32.1% effective tax rate, while the interest burden was 1.022 because profit before tax modestly exceeded EBIT. Interest coverage of 58.87x confirms that financing costs are not a constraint on profitability. Segment mix remains important: Advanced Materials & Semiconductor generated a 25.9% segment margin, versus 5.6% in Energy & Environment and a negative 6.8% margin in Bio & Healthcare. The sustainability of group margin depends on preserving semiconductor-related profitability and narrowing the Bio & Healthcare loss.

Growth Assessment

Revenue growth was broad-based across all three disclosed segments. Advanced Materials & Semiconductor revenue increased 18.8% year on year to ¥44.2bn and remained the core business by operating-income contribution. Energy & Environment revenue rose 18.0% to ¥30.5bn, while segment profit more than doubled to ¥1.7bn from ¥0.8bn; its margin improved to 5.6% from 2.9%. Bio & Healthcare revenue increased 11.5% to ¥9.9bn, but its segment loss narrowed only modestly to ¥0.7bn from ¥0.7bn and the margin remained negative. Advanced Materials & Semiconductor segment profit declined 2.6% to ¥11.4bn despite revenue expansion, with its margin falling to 25.9% from 31.6%; this was the main driver of consolidated margin pressure. Q1 revenue represents 22.7% of the ¥373.0bn full-year forecast, 2.3 percentage points below the 25% seasonal reference level. Operating-income progress is 18.4% against the ¥68.0bn forecast, 6.6 percentage points below the reference level. Net-income progress is 17.8% against the ¥48.5bn forecast, also indicating that the plan relies on a stronger remainder of the year. The forecast calls for 12.0% revenue growth and 28.2% operating-income growth for the full year, requiring operating-margin recovery after the Q1 decline. Positive revenue momentum and the Energy & Environment recovery support the outlook, but the Q1 semiconductor margin trend and the persistent Bio & Healthcare loss are the principal execution variables.

Financial Health

Financial health is strong. Current assets of ¥339.8bn exceeded current liabilities of ¥115.5bn by ¥224.3bn, producing a 294.2% current ratio and ¥224.3bn of working capital. The 266.6% quick ratio shows that liquidity does not depend on inventory monetization. Cash and deposits of ¥150.9bn were 16.80x short-term loans of ¥9.0bn, providing substantial coverage of near-term borrowing. Debt-to-equity was a conservative 0.49x and debt-to-capital was only 8.7%, both well below cautionary thresholds. Interest coverage was exceptionally strong at 58.87x. Short-term loans declined 26.3% year on year to ¥9.0bn from ¥12.2bn, reducing refinancing exposure and improving the near-term debt profile. Long-term loans were ¥24.0bn, and current liabilities also included ¥15.0bn of the current portion of bonds payable; the large cash balance and current-asset surplus support this maturity requirement. Contract liabilities of ¥24.3bn represent customer advances that provide an element of operating funding. Goodwill was only ¥1.9bn, or 0.5% of equity and 0.4% of assets, leaving the balance sheet with minimal acquisition-value or impairment dependence. Equity declined 1.1% year on year to ¥344.7bn despite positive Q1 comprehensive income, while the equity ratio remained robust at 67.2%.

Notable B/S Changes

Short-term loans: -¥3.2bn (-26.3% YoY) to ¥9.0bn - reduced short-term borrowing improves refinancing flexibility and reinforces the conservative liquidity profile. Construction in progress: -¥8.6bn (-39.4% YoY) to ¥13.2bn - indicates completion, capitalization, or a reduced level of projects under construction; subsequent depreciation and capital-investment trends should be monitored. Buildings and structures: +¥12.6bn (+20.1% YoY) to ¥75.4bn - expansion of the fixed-asset base may support capacity and operational infrastructure, but increases the importance of asset utilization and depreciation absorption.

Cash Flow Quality

The available period data supports an assessment of working-capital risk but does not provide operating, investing, or financing cash-flow totals. Quality alerts identify receivable days of 86 days, above the 60-day warning threshold, suggesting relatively slow cash collection for a manufacturing business. A separate inventory-days alert shows 185 days, substantially above the 90-day warning threshold, and another alert indicates 61 days, just above the 60-day benchmark; under both disclosed methodologies, inventory efficiency requires monitoring. The disclosed 230-day cash conversion cycle is materially above the 120-day warning threshold and indicates that a sizeable amount of capital is tied up between procurement, production, shipment, and collection. This long cycle can make reported earnings less cash-convertible during periods of rapid sales growth, even where accounting profitability remains strong. The inventory composition includes ¥37.9bn of raw materials, ¥26.4bn of work in process, and ¥31.9bn of finished goods; raw materials plus work in process indicate meaningful production-cycle capital absorption. Product-warranty provisions totaled ¥3.6bn, equal to 4.2% of Q1 revenue according to the quality alert, above the 3% warning threshold. The elevated warranty ratio may reflect the installed base and product mix, but it also warrants monitoring for quality costs, field-service expense, and potential margin pressure. No material extraordinary item distorted Q1 net income: gains on asset sales were ¥38m and fixed-asset disposal losses were ¥22m. Interest income of ¥547m was significant relative to net financing expense and reflects the benefit of the company's cash-rich balance sheet rather than a non-recurring operating gain.

Dividend Sustainability

The full-year dividend forecast is ¥490 per share, unchanged in the disclosed dividend revision information. Against forecast EPS of ¥1,154.88, the implied dividend payout ratio is approximately 42.4%. This is below the 60% sustainability benchmark and leaves room for retained earnings, investment, and balance-sheet flexibility. Q1 basic EPS was ¥206.13, representing 17.8% of the full-year EPS forecast; dividend coverage therefore depends on the expected earnings acceleration over the remaining three quarters. Retained earnings were ¥260.6bn and cash and deposits were ¥150.9bn, providing substantial balance-sheet support for the proposed distribution. The conservative debt-to-capital ratio of 8.7% further reduces financing pressure on dividends. The principal factor to monitor is conversion of earnings into operating cash given the elevated receivable, inventory, and cash-conversion-cycle indicators. No share buyback amount is disclosed, so a total return ratio cannot be calculated.

Risk Assessment

Business risks include Advanced Materials & Semiconductor: revenue grew 18.8%, but segment profit fell 2.6% and margin compressed 570bp to 25.9%; further pricing, product-mix, or cost pressure in the core earnings segment would have a high impact on consolidated profit., Bio & Healthcare: segment revenue increased 11.5%, yet the business posted a ¥0.7bn operating loss and a negative 6.8% margin; failure to improve utilization, product mix, or cost absorption would continue to dilute consolidated returns., Working-capital intensity: disclosed alerts of 86 receivable days, inventory days of 185 days under one methodology and 61 days under another, and a 230-day cash conversion cycle create elevated execution risk if demand slows or customer collection weakens., Product quality and warranty exposure: the 4.2% warranty ratio exceeds the 3% warning level, creating risk of higher service, repair, replacement, and reputational costs., Industry cycle and technology demand: semiconductor and advanced-materials instrumentation demand can be affected by customer capital-expenditure cycles, technology transitions, export controls, and supply-chain disruptions., Foreign-exchange exposure: Q1 recorded ¥118m of foreign-exchange losses, and overseas operations make earnings and equity sensitive to currency movements..

Financial risks include Margin recovery risk: full-year operating-income guidance requires 28.2% growth despite Q1 operating income growing only 6.2% and margin declining 159bp., Cash-conversion risk: a long cash conversion cycle could constrain internally generated funding during a period of revenue expansion., Debt maturity management: current liabilities include ¥15.0bn of current bonds payable, although this risk is substantially mitigated by ¥150.9bn of cash and deposits., Tax-rate sensitivity: the Q1 effective tax rate was 32.1%, slightly reducing conversion of pre-tax earnings into net income..

Key concerns include Highest priority: restoration or stabilization of Advanced Materials & Semiconductor margins, given its roughly 92% contribution to consolidated operating income., High priority: evidence that Bio & Healthcare can move toward break-even while maintaining sales growth., High priority: improvement in receivable collection, inventory discipline, and the cash conversion cycle., Moderate priority: whether the elevated warranty ratio declines without requiring incremental provisions., Moderate priority: achievement of the forecast acceleration implied by sub-25% Q1 revenue and sub-20% operating-profit progress..

Investment Implications

Key takeaways include Q1 delivered strong 17.6% revenue growth and positive profit growth, but profitability trailed sales because the gross margin declined 317bp., Advanced Materials & Semiconductor is the core business, with ¥44.2bn revenue and ¥11.4bn segment profit, but its margin declined to 25.9%., Energy & Environment showed the strongest improvement in segment earnings, while Bio & Healthcare remained loss-making., The balance sheet is a material strength, combining a 67.2% equity ratio, 294.2% current ratio, ¥150.9bn cash balance, and low debt-to-capital., The main financial-quality issue is operating-capital intensity, reflected in elevated receivable days, inventory days, and a 230-day cash conversion cycle., The forecast dividend implies a manageable 42.4% payout ratio based on full-year EPS guidance..

Metrics to watch include Advanced Materials & Semiconductor segment margin and order/demand trends, Bio & Healthcare segment loss and path toward break-even, Consolidated gross margin and operating margin versus Q1 levels, Receivable days, inventory days, and cash conversion cycle, Warranty provision as a percentage of revenue, Q2 and subsequent progress versus the ¥373.0bn revenue and ¥68.0bn operating-income forecasts, Foreign-exchange effects on ordinary income and comprehensive income.

Regarding relative positioning, HORIBA combines high-margin analytical and semiconductor-related instrumentation exposure with a conservatively financed balance sheet and very limited goodwill risk. Relative to the stated benchmarks, liquidity, debt capacity, interest coverage, and net margin are strong, while annualized ROE is adequate rather than exceptional and manufacturing working-capital efficiency and warranty intensity are the principal relative weaknesses.