| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥361.7B | ¥423.3B | -14.5% |
| Operating Income / Operating Profit | ¥-1.7B | ¥21.9B | -60.1% |
| Ordinary Income | ¥0.0B | ¥26.1B | -99.9% |
| Net Income / Net Profit | ¥90.8B | ¥60.5B | +50.0% |
| ROE | 4.9% | 5.1% | - |
For FY2026, Revenue was ¥361.7B (YoY -¥61.6B, -14.5%), Operating Income was ¥-1.7B (YoY -¥23.6B, -107.8%), Ordinary Income was ¥0.0B (YoY -¥26.1B, -99.9%), and Net Income was ¥90.8B (YoY +¥30.3B, +50.0%). Although core operations experienced lower sales and turned to an operating loss, recognition of investment securities sale gains of ¥151.5B drove a large increase in Net Income. Declining revenue and a sharp drop in gross margin (15.2%, down roughly 330bp from an estimated 18.5% prior year) caused the operating result to fall into a loss of ¥-1.7B; contributions from non-operating and special items reduced Ordinary Income to effectively zero, and Net Income became dependent on the one-off gain from investment securities sales. Comprehensive Income was ¥839.1B, substantially exceeding Net Income, mainly due to recognition of ¥739.6B in valuation differences on available-for-sale securities. Investment securities doubled to ¥2,143.5B (84.0% of total assets), indicating a material shift of the asset mix toward market-linked holdings.
[Revenue] Revenue was ¥361.7B (YoY -14.5%), a significant decline. The company operates as a single business segment (total solutions for LSI design, development, and production); segmental breakdowns are not disclosed, but the primary cause of the revenue decline is estimated to be weaker demand driven by semiconductor cycle fluctuations. Accounts receivable decreased to ¥112.2B (YoY -27.9%), declining faster than sales, indicating simultaneous progress in collections and sales contraction. Inventories rose materially to ¥39.4B (+68.0%), suggesting either inventory build ahead of anticipated demand recovery or a supply-demand mismatch. Inventory composition is Finished Goods ¥39.4B, Work in Process ¥5.8B, Raw Materials ¥2.1B, with the increase concentrated in Finished Goods.
[Profitability] Cost of goods sold was ¥306.6B, producing a Gross Profit of ¥55.1B and a Gross Margin of 15.2% (down ~330bp from an estimated 18.5% prior year), indicating a marked deterioration in profitability. SG&A was ¥56.9B (slightly up from ¥56.4B prior year), reflecting insufficient expense adjustments to lower revenue, resulting in Operating Income of ¥-1.7B (Operating Margin -0.5%) and an operating loss. Non-operating income included interest income ¥2.3B, foreign exchange gains ¥1.1B, and investment partnership gains ¥0.3B, totaling ¥7.5B, while non-operating expenses were ¥5.7B (interest expense ¥0.2B, foreign exchange losses ¥0.7B, etc.), compressing Ordinary Income to virtually zero (¥0.0B, prior year ¥26.1B). In special gains and losses, the company recorded Investment Securities Sale Gains of ¥151.5B, while recognizing Special Losses of ¥15.8B (Loss on Disposal of Fixed Assets ¥14.1B, Valuation Loss on Investment Securities ¥0.6B, etc.), expanding Profit Before Tax to ¥135.7B. After corporate taxes of ¥42.6B (effective tax rate 31.4%), Net Income was ¥90.8B (YoY +50.0%), but largely dependent on the one-off investment securities sale gain, indicating a significant deterioration in recurring earnings power. In conclusion, the underlying structure is effectively declining revenue and earnings with a temporary boost from special gains.
[Profitability] Operating Margin fell into loss at -0.5% (prior year 5.2%), driven primarily by the sharp decline in Gross Margin to 15.2% (down ~330bp from an estimated 18.5%). SG&A ratio rose to 15.7% (prior year 13.3%) due to delayed expense adjustments to lower sales. Net Profit Margin is high at 25.1%, but depends on the one-off Investment Securities Sale Gains of ¥151.5B and thus lacks sustainability. ROE is 4.9% (prior year 4.9%) flat on the surface, but the quality of Net Income has materially changed and ROE on core operations has fallen sharply. [Cash Quality] Operating Cash Flow / Net Income is 0.57x, indicating weak cash conversion of profits; Operating Cash Flow remained limited at ¥53.0B while Net Income depended on special gains. Operating CF / Revenue turned positive to 14.6% (prior year -8.8%), supported by a ¥43.3B decrease in trade receivables, while an inventory increase of ¥3.0B absorbed cash. [Investment Efficiency] Total Asset Turnover declined to 0.14x (prior year 0.28x), mainly due to total assets expanding to ¥2,551.6B (YoY +70.2%) driven by increased investment securities. CapEx / Depreciation is 2.84x, indicating material growth/renewal investment; Construction in Progress rose to ¥13.8B (prior year ¥7.2B), reflecting ongoing investment plans. [Financial Soundness] Equity Ratio is high at 72.8% (prior year 78.6%), with a conservative debt-to-equity (debt-to-capital) multiple of 0.37x. Current Ratio is 279.5% and Quick Ratio 248.9%, indicating very strong short-term liquidity. Cash and deposits of ¥152.9B (YoY -26.6%) fell due to share buybacks and other shareholder returns, but the working capital cushion of ¥231.2B remains ample.
Operating Cash Flow turned positive to ¥53.0B (prior year ¥-37.3B). Operating CF subtotal was ¥61.0B, with decreases in trade receivables of ¥43.3B and increases in trade payables of ¥20.8B contributing cash, while an increase in inventories of ¥3.0B absorbed cash. After payment of corporate taxes of ¥10.2B, Operating CF was ¥53.0B. Investing CF was a net inflow of ¥100.7B, driven primarily by proceeds from sale of investment securities of ¥161.8B, offset by ¥19.1B in capital expenditures and ¥65.1B in investment securities purchases, resulting in a large net positive. Financing CF was ¥-180.1B, mainly due to shareholder returns of ¥147.0B in share buybacks and ¥23.9B in dividends. Free Cash Flow was ¥153.6B (Operating CF ¥53.0B + Investing CF ¥100.7B) and ample, but reliant on the one-off investment securities sale, limiting repeatability. Cash and deposits declined to ¥152.9B (YoY -26.6%), consistent with cash movements including time deposit placements/withdrawals and shareholder returns.
Of Net Income ¥90.8B, Investment Securities Sale Gains of ¥151.5B constitute the majority, indicating a marked deterioration in recurring earnings power. Operating Income was a loss of ¥-1.7B and Ordinary Income shrank to effectively zero (¥0.0B). Non-operating income of ¥7.5B (interest income ¥2.3B, foreign exchange gains ¥1.1B, etc.) is limited at 2.1% of sales and insufficient to materially support Ordinary Income. Special losses of ¥15.8B (Loss on Disposal of Fixed Assets ¥14.1B, Valuation Loss on Investment Securities ¥0.6B) indicate one-off costs. Comprehensive Income of ¥839.1B far exceeded Net Income ¥90.8B, driven by Other Comprehensive Income of ¥748.3B (Valuation Differences on Available-for-Sale Securities ¥739.6B, Foreign Currency Translation Adjustments ¥6.3B). Expansion of Valuation Differences on Available-for-Sale Securities reflects market value increases of Investment Securities ¥2,143.5B (84.0% of total assets), and together with an increase in Deferred Tax Liabilities of ¥564.2B this has impacted assets, liabilities and equity. Operating CF / Net Income at 0.57x indicates weak cash realization and lower quality of Net Income. Restoring recurring earnings power is the top priority for the next fiscal year.
Full Year guidance forecasts Revenue ¥420.0B (YoY +16.1%), Operating Income ¥25.0B, Ordinary Income ¥20.0B, and Net Income ¥270.0B. Revenue plan assumes a ¥58.3B (+16.1%) increase from this period’s ¥361.7B, premised on inventory adjustments and demand recovery. Operating Income of ¥25.0B implies a ¥26.7B improvement from this period’s loss (¥-1.7B), contingent on gross margin recovery and SG&A optimization. Ordinary Income ¥20.0B is planned ¥5.0B below Operating Income ¥25.0B, incorporating expected non-operating expenses. Net Income ¥270.0B significantly exceeds this period’s ¥90.8B; back-calculating from the EPS forecast of ¥1,804.70 suggests assumptions on shares outstanding may differ and it is unclear whether special gains are assumed. Progress rate is 86.1% for Revenue (¥361.7B / ¥420.0B), but Operating Income is in loss, requiring substantial improvement in H2. Dividend guidance ¥260 (¥+10 increase from this period’s ¥250) signals a policy to maintain a sustainable payout; payout ratio projected at 45.7% on this period’s basis.
Year-end dividend was ¥250, resulting in a Payout Ratio of 51.3% (Net Income ¥90.8B, Total Dividends ¥23.9B, weighted average shares outstanding 1,605k). Compared with Total Dividends ¥23.9B, Operating CF ¥53.0B and FCF ¥153.6B indicate sufficient cash capacity for dividend payments. Share buybacks totaled ¥147.0B, and combined with dividends ¥23.9B total shareholder returns were ¥170.9B (well above Net Income ¥90.8B). Total Return Ratio was 188.2%, a high level, and covered by FCF ¥153.6B. However, current FCF depended on the one-off sale of investment securities, so from the next fiscal year onward balancing core cash generation and investment securities disposal policy will be important. Treasury shares increased to 409k shares (prior year 190k), raising the treasury-to-outstanding share ratio to 21.5%. Full year dividend guidance ¥260 (+¥10) indicates confidence in business recovery and continuation of shareholder returns.
Risk of continued weak core profitability: Operating Margin -0.5% and Gross Margin 15.2% (down ~330bp YoY) show rapid deterioration in core profitability. If semiconductor cycle volatility, adverse product mix, or higher costs persist, achieving the full year plan (Operating Income ¥25.0B) will be difficult. SG&A at ¥56.9B shows insufficient adjustment to lower sales and cost stickiness worsens operating leverage.
Market valuation risk of investment securities: Investment Securities ¥2,143.5B (84.0% of total assets) indicate a large shift toward market-linked asset composition, and market declines could sharply reduce valuation differences and alter Deferred Tax Liabilities, pressuring equity. Valuation Differences on Available-for-Sale Securities ¥1,289.3B (69.4% of equity) materially increases volatility of Comprehensive Income and equity.
Inventory write-down / obsolescence risk: Inventories rose markedly to ¥39.4B (+68.0% YoY); if supply-demand mismatch or demand forecast errors occur, risk of inventory valuation losses or obsolescence increases. Days Sales Outstanding of 113 days is prolonged, and strengthening receivables management is a key issue.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | -0.5% | 7.8% (4.6%–12.3%) | -8.2pt |
| Net Profit Margin | 25.1% | 5.2% (2.3%–8.2%) | +19.9pt |
Operating Margin is 8.2pt below the industry median, indicating core profitability underperformance. Net Profit Margin is 19.9pt above the industry median but is driven by one-off Investment Securities Sale Gains and diverges from recurring earnings power.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -14.5% | 3.7% (-0.4%–9.3%) | -18.2pt |
Revenue growth is 18.2pt below the industry median, showing significant contraction and relative underperformance, strongly affected by the semiconductor cycle.
※ Source: Internal aggregation
Restoring core profitability is the highest priority: With Operating Margin -0.5% and Gross Margin 15.2%, recovery of gross margin and optimization of SG&A are essential to achieve the full year plan (Revenue +16.1%, Operating Income ¥25.0B). Prolonged receivables days of 113 and 68.0% inventory increase indicate supply-demand mismatch and room to strengthen collections, making working capital improvement key to expanding Operating CF.
Increased market sensitivity of the investment securities portfolio: Investment Securities ¥2,143.5B (84.0% of total assets) and Valuation Differences on Available-for-Sale Securities ¥1,289.3B (69.4% of equity) show a substantial shift to market-linked assets, materially increasing volatility of Comprehensive Income and equity. Accumulation of Deferred Tax Liabilities ¥564.2B further links changes in market conditions directly to the financial statements. Recovery of core cash generation and transparency on investment securities sale/management policy will determine financial stability and sustainability of shareholder returns.
Sustainability of shareholder returns depends on core cash flows: Total shareholder returns ¥170.9B (Dividends ¥23.9B + Share Buybacks ¥147.0B) were covered by FCF ¥153.6B this year, but FCF relied on a one-off sale of investment securities. Operating CF remained ¥53.0B, so sustaining the full year dividend guidance ¥260 (+¥10) requires recovery of cash generation from core operations. Liquidity and leverage are healthy (Equity Ratio 72.8%, Current Ratio 279.5%), so near-term financial risk is limited, but mid-to-long-term sustainability of shareholder returns depends on restoring core profitability.
This report is an earnings analysis document automatically generated by AI based on XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company from publicly available financial statements. Investment decisions are your responsibility; consult a professional advisor as needed.