HORIBA,Ltd. FY2026 Q2 Earnings Report

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Executive Summary

The company reported higher revenue and earnings, with both Revenue and Operating Income achieving double-digit growth. Expanding demand in the Advanced Materials & Semiconductor Business drove performance. Revenue was ¥1,798.5B (+20.8% year on year), Operating Income was ¥304.9B (+39.3%), Ordinary Income was ¥314.2B (+39.5%), and Net Income was ¥218.1B (+37.5%). The Operating Income margin improved to 17.0%, with operating leverage taking effect due to a decline in the SG&A ratio. Meanwhile, progress against the full-year forecast was 47.1% for Revenue and 43.6% for Operating Income, slightly below the standard 50% progress benchmark, suggesting a shipment structure weighted toward the second half.

Factors Affecting Performance

【Revenue】Revenue was ¥1,798.5B, representing a 20.8% year-on-year increase. By segment, the Advanced Materials & Semiconductor Business led overall performance with Revenue of ¥999.6B (55.6% composition ratio, +31.9% YoY), while Energy & Environment generated ¥583.8B (+7.5%) and Bio & Healthcare generated ¥215.1B (+14.1%), with all segments reporting higher Revenue.

【Profit and Loss】Operating Income was ¥304.9B (+39.3% year on year), and the Operating Income margin improved to 17.0%. The Gross Profit margin was maintained at 44.9%, while the SG&A ratio declined, resulting in economies of scale from higher Revenue. Non-operating income and expenses resulted in net income of ¥9.3B, mainly from interest and dividend income, while extraordinary income and expenses resulted in a net loss of ¥3.5B, including business restructuring expenses, with both having only a minor impact. Ordinary Income was ¥314.2B (+39.5%), and Net Income was ¥218.1B (+37.5%), resulting in higher Revenue and earnings.

Segment Analysis

The Advanced Materials & Semiconductor Business is the core business, accounting for the majority of company-wide profit, with Revenue of ¥999.6B (+31.9% YoY), Operating Income of ¥301.8B (+33.9%), and a profit margin of 30.2%. Energy & Environment recorded Revenue of ¥583.8B (+7.5%) and Operating Income of ¥10.8B (+111.6%), expanding its profit and improving its profit margin to 1.8%. Bio & Healthcare recorded Revenue of ¥215.1B (+14.1%), while its operating result was a loss of ¥7.7B; however, the loss narrowed from ¥11.5B in the previous year. The company remains highly dependent on the Advanced Materials & Semiconductor Business for company-wide Operating Income, indicating continued business concentration.

Key Financial Indicators

【Profitability】The Operating Income margin of 17.0% and Net Income margin of 12.1% both improved from the previous year (14.7% and 10.7%, respectively). The decline in the SG&A ratio contributed to margin improvement while the Gross Profit margin was maintained at 44.9%. 【Cash Flow Quality】Operating Cash Flow (OCF) was ¥334.1B, or 1.53 times Net Income of ¥218.1B, indicating strong cash generation. However, an increase in inventories (-¥25.4B) was a factor weighing on working capital. 【Investment Efficiency】ROE was 6.0% and the Equity Ratio was 67.2%, indicating room for improvement in capital efficiency, with profit growth appearing somewhat slower than the pace of total asset expansion. 【Financial Soundness】Interest-bearing debt was limited relative to cash and deposits of ¥1,693.1B. The Equity Ratio of 67.2% was maintained at the same level as the previous year, indicating a stable financial foundation.

Cash Flow Analysis

Cash flow from operating activities was ¥334.1B (+11.9% year on year), calculated from a subtotal of ¥386.6B, including ¥73.8B in depreciation and amortization, after reflecting an increase in inventories of ¥25.4B and income taxes paid of ¥62.1B. Cash flow from investing activities was negative ¥88.1B, mainly due to capital expenditures of ¥110.5B, while Free Cash Flow was secured at a strong level of ¥246.0B. Cash flow from financing activities was negative ¥204.4B, mainly due to dividend payments and other items. However, given the scale of OCF and FCF, the company has a structure that allows it to sufficiently fund dividends and growth investments through internal funds.

Earnings Quality

Non-operating income was ¥17.1B, remaining below 1% of Revenue and consisting primarily of recurring items such as dividend income of ¥2.2B. Extraordinary income was ¥0.9B and extraordinary losses were ¥4.4B, including ¥2.9B in business restructuring expenses, resulting in only a slight net loss and a limited impact on Net Income. The difference between Ordinary Income of ¥314.2B and Net Income of ¥218.1B was attributable to income taxes of ¥92.7B. The effective tax rate was generally within a reasonable range, and the limited impact of temporary factors on earnings suggests that the current-period increase in profit was high-quality earnings driven by operating activities. Comprehensive Income was ¥319.3B, exceeding Net Income of ¥218.1B, with foreign currency translation adjustments of ¥57.2B and valuation differences on securities of ¥44.9B contributing to the increase.

Earnings Forecast and Guidance

Progress for the first half against the full-year forecast (Revenue of ¥3,820.0B, Operating Income of ¥700.0B, and Ordinary Income of ¥710.0B) was 47.1% for Revenue, 43.6% for Operating Income, and 44.3% for Ordinary Income, slightly below the simple 50% benchmark. Contract liabilities (advances received) increased to ¥263.1B from ¥235.8B in the previous year, confirming the accumulation of orders already received. The delayed progress may reflect a structure in which shipments and acceptance inspections are weighted toward the second half. During the quarter, the earnings and dividend forecasts were revised, and the full-year outlook was revised upward.

Shareholder Returns

The interim dividend was ¥150 per share, and the full-year dividend forecast was revised to ¥790 (base dividend of ¥210, special dividend of ¥190, and ¥240 commemorative dividend for reaching a market capitalization of ¥1T). Based on the base dividend of ¥210, the Payout Ratio against forecast full-year EPS of ¥1,189.87 was approximately 17.6%; on a ¥790 basis including the special and commemorative dividends, it was approximately 66.4%. Against Free Cash Flow of ¥246.0B, dividend payments during the first half were ¥155.3B, indicating that dividends are sufficiently covered by cash flow. Share repurchases were negligible.

Risk Factors

1. Segment concentration risk: The Advanced Materials & Semiconductor Business accounts for 55.6% of Revenue and approximately 99% of Operating Income, creating a structure in which demand trends in this business are directly linked to company-wide performance.

2. Deterioration in working capital efficiency: Inventories increased to ¥308.8B, continuing to rise from the previous year. The increase in inventories had a negative impact of ¥25.4B against the ¥386.6B subtotal of OCF. Progress in collections and inventory reduction will affect future cash-generation capacity.

3. Foreign exchange and market fluctuation risk: A foreign exchange loss of ¥2.1B was incurred, while investment securities increased to ¥236.9B (+38.3% year on year), leaving the company susceptible to valuation fluctuations associated with market movements.

Industry Benchmark (Reference; Company Research)

Industry Benchmark (manufacturing)

Profitability and Returns

Both the Operating Income margin and Net Income margin exceed the industry median, placing profitability among the higher levels within the industry.

Growth and Capital Efficiency

The Revenue growth rate is approximately twice the industry median and is at a high-growth level near the upper bound of the IQR.

※Source: Company research

Key Points from the Financial Results

1. The Operating Income margin improved to 17.0% from the previous year, confirming operating leverage resulting from a lower SG&A ratio. The high profitability of the Advanced Materials & Semiconductor Business (30.2% profit margin) remains central to company-wide earnings and is a point to note in terms of the business mix.

2. Contract liabilities (advances received) increased to ¥263.1B, suggesting an accumulation of orders already received. The possibility that shipments and acceptance inspections are weighted toward the second half may explain why full-year progress is slightly below the 50% benchmark.

3. Working capital expanded due to increases in inventories and trade receivables. Although OCF of ¥334.1B was secured at 1.53 times Net Income, asset efficiency (ROE of 6.0%) has remained sluggish relative to the high Equity Ratio.

Theoretical Stock Price (Reference Value)

This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade period). It is not a forecast of the market price or a recommendation of any specific investment action.

Sensitivity: ¥9,803–¥10,354 at a ±1% change in the cost of equity, and ¥10,042–¥10,119 at a change of ±0.1 in ω.

Notes:

• Amortization of goodwill of ¥14.5 per share is added back to earnings (to account for a non-cash expense and comparability with IFRS companies).
• Net assets as of the end of the quarter are used (there is a time lag relative to the full-year forecast).
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual income model / Interest rate reference month: 2026-07 / This value does not predict or guarantee the future stock price)

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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, and, where necessary, after consulting with a professional.

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