OPTEX GROUP (6914) FY2026 Q1 Earnings Report

Quick View

Executive Summary

In addition to higher revenue, progress in absorbing fixed selling, general and administrative expenses resulted in an earnings increase, with Operating Income substantially outpacing revenue growth. Revenue was ¥18.30B (+21.3% YoY), Operating Income was ¥2.98B (+59.3%), Ordinary Income was ¥3.17B (+94.5%), and Net Income was ¥2.24B (+26.1%). Results were driven by the rapid expansion of the IA Business (Industrial Automation) and improved margins across the segments, although it should be noted that foreign exchange gains contributed to the increase in Ordinary Income.

Factors Affecting Performance

【Revenue】Revenue was ¥18.30B, up +21.3% YoY. By segment, IndustrialAutomation recorded the strongest growth at ¥9.34B (+33.8%), with FA-related business up +29.5%, inspection lighting-related business up +26.3%, industrial PC-related business up +34.2%, and automation equipment-related business surging +112.1%, albeit from a small base. SensingSolution maintained stable growth at ¥8.89B (+13.1%), supported by security-related business (+12.7%) and social and environmental-related business (+21.7%). ElectronicsManufacturingService remained at ¥1.53B (+11.4%).

【Profit and Loss】Operating Income was ¥2.98B (+59.3%), and the Operating Income margin improved by approximately 3.9pt YoY to 16.3%. The increase in earnings growth above the revenue growth rate was primarily attributable to operating leverage from the sharp increase in IA Business profit (¥0.52B→¥1.49B). Ordinary Income rose +94.5% to ¥3.17B, supported not only by higher Operating Income but also by improved non-operating income and expenses, including foreign exchange gains of ¥0.11B. After recording extraordinary losses of ¥0.05B (including valuation losses on investment securities), Net Income increased +26.1% to ¥2.24B, below the growth rate of Operating Income. In conclusion, the Company achieved higher revenue and earnings, with the growth rate of earnings substantially exceeding the revenue growth rate as a notable feature.

Segment Analysis

The IndustrialAutomation Business led company-wide profit growth, reporting revenue of ¥9.34B (+33.8%) and Operating Income of ¥1.49B (+188.8%), with a margin of 15.9% (a substantial increase from the same period of the previous year, based on ¥0.59B). The SensingSolution Business recorded revenue of ¥8.89B (+13.1%) and Operating Income of ¥1.77B (+11.0%), generating the highest margin company-wide at 19.9%; however, profit growth was below revenue growth, indicating limited operating leverage. ElectronicsManufacturingService generated revenue of ¥1.53B (+11.4%) and an Operating Loss of ¥0.04B, reduced from the ¥0.14B loss in the same period of the previous year. Although the segment remained loss-making, it showed an improvement trend.

Key Financial Indicators

【Profitability】The Operating Income margin of 16.3% and Net Income margin of 12.2% both improved from the same period of the previous year (12.4% and 11.8%, respectively). The gross margin remained high at 54.5%.【Cash Quality】Accounts receivable of ¥13.36B and inventories of ¥7.18B were the major components of assets, confirming a trend toward higher working capital accompanying revenue expansion.【Investment Efficiency】ROE (cumulative quarterly basis) was 3.9%, suggesting high capital efficiency commensurate with the level of profitability on an annualized basis.【Financial Soundness】The Company maintained a conservative capital structure, with an Equity Ratio of 74.0%, interest-bearing debt of ¥4.91B, and cash and deposits of ¥23.38B.

Cash Flow Analysis

As a cash flow statement has not been disclosed, funding trends are assessed based on changes in the balance sheet. Cash and deposits were ¥23.38B, an increase from ¥22.88B in the same period of the previous year, indicating greater financial flexibility. Meanwhile, accounts receivable of ¥13.36B and inventories of ¥7.18B (raw materials ¥10.05B, work in process ¥4.42B, and finished goods ¥7.18B) remained high alongside revenue growth, indicating continued funds tied up in working capital. Accounts payable were ¥3.80B, up from ¥3.50B in the previous year, indicating increased utilization of trade payables. Current assets of ¥60.19B were approximately 3.9 times current liabilities of ¥15.40B, providing substantial short-term liquidity. Going forward, the extent to which revenue growth translates smoothly into cash conversion will be a key focus.

Earnings Quality

The core of current-period earnings was Operating Income of ¥2.98B, with the Company’s underlying earning power, supported by a gross margin of 54.5%, serving as the primary source of profitability. The ¥0.19B difference between Ordinary Income of ¥3.17B and Operating Income was primarily attributable to non-operating income, including foreign exchange gains of ¥0.11B. Total non-operating income of ¥0.21B was equivalent to only 1.2% of revenue, indicating limited dependence. Extraordinary losses of ¥0.05B (valuation losses on investment securities of ¥0.02B and loss on disposal and sale of fixed assets of ¥0.01B) were temporary factors that weighed on Net Income. Comprehensive Income was ¥2.44B, slightly exceeding Net Income of ¥2.24B, with foreign currency translation adjustments of ¥0.18B making a positive contribution; the gap between Net Income and Comprehensive Income was small. Overall, because the high Ordinary Income growth rate (+94.5%) includes foreign exchange gains, it is appropriate to evaluate sustainable earnings power based on Operating Income.

Earnings Forecast and Guidance

The full-year earnings forecast is Revenue of ¥69.00B (+4.7% YoY), Operating Income of ¥8.80B (+7.9%), and Ordinary Income of ¥8.80B (+10.0%), with no revisions to the earnings forecast or dividend forecast for the current quarter. Q1 results represented 26.5% of the full-year Revenue forecast, 33.9% of the Operating Income forecast, and 36.1% of the Ordinary Income forecast, all exceeding the simple progress benchmark of 25%. In particular, progress for Operating Income and Ordinary Income was high, indicating a solid start against the plan as of Q1. However, the growth rates assumed in the full-year plan (Revenue +4.7%, Operating Income +7.9%) are substantially below the Q1 actual growth rates (+21.3%, +59.3%), indicating that the plan incorporates a slowdown in growth toward the second half of the fiscal year, which warrants attention.

Shareholder Returns

The full-year dividend forecast is ¥65.00 per share. Based on the average number of shares outstanding during the period of 35,622 thousand shares, the forecast total dividend is approximately ¥2.32B, implying a Payout Ratio of approximately 35.1% against the full-year Net Income forecast of ¥6.60B. Compared with the previous year’s actual dividend of ¥25 per share, the plan represents a substantial dividend increase. The financial foundation of an Equity Ratio of 74.0% and cash and deposits of ¥23.38B supports the sustainability of dividend payments.

Risk Factors

1. Inventory and receivables accumulation risk: Inventories of ¥7.18B and accounts receivable of ¥13.36B remained high alongside revenue growth, creating risks of inventory valuation losses and collection delays if demand fluctuates.

2. Segment concentration risk: Operating Income is concentrated primarily in the IndustrialAutomation Business (¥1.49B) and the SensingSolution Business (¥1.77B), which together account for the majority of total segment profit. This structure makes company-wide earnings susceptible to fluctuations in the capital investment cycle of the manufacturing industry.

3. Factors affecting non-operating income and expenses: Foreign exchange gains of ¥0.11B contributed to the 94.5% increase in Ordinary Income, meaning that exchange rate fluctuations may become a factor affecting future changes in Ordinary Income.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Return

The Company’s profitability substantially exceeds the industry median and is positioned at a high level within the industry.

Growth and Capital Efficiency

The Revenue growth rate also substantially exceeds the industry median, indicating growth in the top tier of the industry.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. The Operating Income margin improved by approximately 3.9pt YoY to 16.3%, while Operating Income growth of +59.3% exceeded the Revenue growth rate of +21.3%. The sharp increase in IA Business profit was the primary driver.

2. Q1 progress against the full-year plan was 33.9% for Operating Income and 36.1% for Ordinary Income, exceeding the standard benchmark of 25%. However, the growth rates assumed in the full-year plan are more moderate than the Q1 actual growth rates, making performance trends in the second half of the fiscal year a key focus.

3. The expansion of working capital accompanying increases in accounts receivable and inventories requires monitoring from the perspective of funding efficiency during a period of revenue growth.

Theoretical Stock Price (Reference Value)

Sensitivity: ¥1,688–¥1,786 at Cost of Equity ±1%, and ¥1,733–¥1,740 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 / Mechanically calculated solely from publicly available data; this is not a forecast of the market price or a recommendation of any specific investment action, and does not predict or guarantee future stock prices.)

---

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 available earnings data. Investment decisions should be made at your own responsibility, after consulting a professional as necessary.

---End of Report---

---

AI Financial Analysis

Executive Summary

FY2026 Q1 was a strong start, with revenue growth translating into substantial operating-profit expansion and progress ahead of the company’s full-year operating-income plan. Revenue increased 21.3% YoY to ¥18.30bn. Operating income rose 59.3% to ¥2.98bn, lifting the operating margin to 16.3% from 12.4% a year earlier, an expansion of 388bp. Gross profit increased 23.0% to ¥9.98bn, and the gross margin improved by 75bp to 54.5%. SG&A expenses grew 12.2%, materially below revenue growth, demonstrating favorable operating leverage. Net income attributable to owners rose 26.1% to ¥2.24bn, and basic EPS was ¥62.92. The comparatively slower net-income growth versus operating-income growth principally reflects a ¥0.91bn gain on sale of investment securities recorded in the prior-year quarter, whereas the current quarter contained a net extraordinary loss of ¥0.04bn. Ordinary income nevertheless nearly doubled, rising 94.5% to ¥3.17bn, supported by a reversal from a ¥0.29bn FX loss last year to a ¥0.11bn FX gain this year. The foreign-exchange gain equaled approximately 3.8% of operating income and contributed meaningfully to below-operating-line earnings. The SS business remained the largest contributor to segment profit, while the IA business was the main incremental earnings driver. IA’s segment margin recovered sharply as revenue growth was broad-based across FA, inspection lighting, industrial PCs, and automation equipment. The balance sheet remains highly liquid, with a 390.9% current ratio, net cash of ¥18.68bn, and debt representing only 7.9% of capital. The company has achieved 26.5% of full-year revenue guidance, 33.9% of operating-income guidance, and 34.0% of net-income guidance in Q1. This Q1 operating-income progress is 8.9 percentage points above the standard 25% quarterly run rate, although it is not more than 10 percentage points above that benchmark. Full-year guidance and the dividend forecast were unchanged, suggesting management has not yet incorporated the favorable first-quarter momentum into formal expectations. The principal operational offset to the strong earnings picture is elevated working-capital duration, particularly production-related inventory, which warrants close monitoring as sales scale.

Profitability Analysis

The reported annualized DuPont ROE is 15.6%, comprising a 12.2% net profit margin, 0.942x annualized asset turnover, and 1.35x financial leverage. This is an attractive return profile because it is driven primarily by a high profit margin and efficient asset utilization rather than aggressive balance-sheet leverage. The largest positive change visible in the quarter was operating profitability: the operating margin expanded 388bp YoY to 16.3%, above the 15% level generally associated with excellent profitability. Gross margin increased to 54.5% from approximately 53.8%, while SG&A rose only 12.2% against 21.3% revenue growth; this combination generated meaningful operating leverage. The 5-factor DuPont metrics reinforce the low-financial-risk profile: the tax burden was 0.716 and the interest burden was 1.049, while interest coverage was an exceptionally strong 165.7x. The interest burden above 1.0 reflects net non-operating financial income rather than financing pressure. SS generated revenue of ¥8.88bn, up 13.1% YoY, and segment profit of ¥1.77bn, up 10.9%; its margin eased 38bp to 19.9% from 20.3%. IA generated revenue of ¥9.17bn, up 31.3%, and segment profit of ¥1.49bn, up 188.8%; its margin expanded about 850bp to 16.3% from 7.4%. SS is the core business by segment-profit contribution, but IA accounted for most of the consolidated segment-profit increase and is the key driver of the quarter’s margin uplift. EMS revenue was broadly flat at ¥0.24bn while its segment loss narrowed to ¥0.04bn from ¥0.14bn, modestly reducing the drag on group earnings. Within IA, FA revenue rose 29.5% to ¥2.76bn, inspection-lighting revenue rose 26.3% to ¥4.39bn, industrial-PC revenue rose 34.2% to ¥1.54bn, and automation-equipment revenue more than doubled to ¥0.48bn. The sustainability of the margin improvement will depend on whether IA’s higher sales base and mix persist, as well as whether SS can defend its still-high segment margin. JGAAP goodwill amortization can reduce operating profit relative to IFRS comparables, but goodwill is only ¥1.04bn, or 1.8% of equity, indicating no material M&A-accounting distortion evident from the balance sheet.

Growth Assessment

Revenue growth was broad-based across the principal operating categories. In SS, security-related revenue increased 12.7% to ¥5.54bn, automatic-door revenue increased 9.6% to ¥2.15bn, and social/environment-related revenue increased 21.7% to ¥1.19bn. In IA, the strongest growth came from automation equipment, industrial PCs, FA, and inspection lighting, consistent with robust demand for factory automation and machine-vision-related solutions. The group’s 21.3% revenue growth exceeded the 4.7% YoY growth embedded in full-year guidance, indicating that the annual plan appears conservatively phased or assumes demand normalization later in the year. Q1 revenue progress was 26.5% versus the standard 25% pace, only modestly ahead of the seasonal benchmark. Operating-income progress was stronger at 33.9% of the full-year plan, reflecting the material margin expansion in IA and disciplined cost growth. Net-income progress was also 34.0% of the annual forecast. The quality of operating growth is supported by the fact that the increase in operating profit of ¥1.11bn exceeded the improvement in non-operating income before the effect of foreign exchange. However, ordinary-income growth benefited from a ¥0.11bn FX gain, compared with a ¥0.29bn FX loss a year earlier, so this portion of the improvement should not be extrapolated as recurring operating performance. Current-period net income also included only a small net extraordinary loss of ¥0.04bn, whereas the prior-year comparison included a ¥0.91bn investment-security sale gain; therefore, the 26.1% YoY net-income increase understates the underlying operational improvement but makes direct headline net-income comparisons less representative. Management maintained full-year sales guidance of ¥69.0bn, operating-income guidance of ¥8.8bn, ordinary-income guidance of ¥8.8bn, and net-income guidance of ¥6.6bn. The unchanged forecast leaves scope for upward revision if IA demand and the current cost discipline continue, but the company has not formally revised expectations.

Financial Health

Financial health is strong. Current assets of ¥60.19bn covered current liabilities of ¥15.40bn, producing a current ratio of 390.9% and working capital of ¥44.79bn. The quick ratio was 344.2%, confirming that liquidity is supported by highly liquid assets rather than inventory alone. Cash and deposits were ¥23.38bn, compared with interest-bearing debt of ¥4.91bn, resulting in net cash of ¥18.48bn. Debt-to-equity was conservative at 0.35x, debt-to-capital was only 7.9%, and interest coverage was 165.7x. The capital adequacy ratio was 73.5%, underpinned by owners’ equity of ¥57.07bn. Short-term borrowings were ¥3.30bn and represented 67.3% of interest-bearing debt; this is the source of the refinancing-risk alert because the short-term debt ratio exceeds the 40% threshold. However, the practical maturity-mismatch risk is low because cash covered short-term loans by 7.09x and total current assets were almost four times current liabilities. Short-term loans declined by ¥0.50bn YoY and long-term loans declined by ¥0.20bn, indicating deleveraging rather than increased refinancing dependence. Goodwill was ¥1.04bn, equivalent to 1.3% of total assets and 1.8% of equity, while total intangible assets were only 2.7% of assets. Accordingly, balance-sheet value is not materially dependent on acquired intangible assets or goodwill retention. Defined-benefit obligations of ¥1.62bn and directors’ retirement-benefit provisions of ¥0.21bn are manageable relative to the equity base and liquidity.

Notable B/S Changes

Provision for bonuses: -¥0.44bn (-34.5% YoY) to ¥0.83bn — a significant reduction in accrued bonus obligations, likely reflecting payment timing and/or revised accrual requirements; it contributed to lower current liabilities. Construction in progress: -¥0.06bn (-27.8% YoY) to ¥0.15bn — indicates a smaller ongoing construction pipeline at quarter end. Interest-bearing debt: -¥0.70bn (-12.5% YoY) to ¥4.91bn — short-term loans declined ¥0.50bn and long-term loans declined ¥0.20bn, reinforcing the net-cash balance-sheet profile. Owners’ equity: +¥1.36bn (+2.4% YoY) to ¥57.07bn — retained profitability and positive comprehensive income strengthened the capital base.

Cash Flow Quality

The balance-sheet evidence points to a potentially demanding cash-conversion profile despite the high reported accounting profitability. Accounts receivable were ¥13.36bn, equivalent to reported annualized DSO of 67 days, above the 60-day alert threshold and above the sub-45-day manufacturing efficiency benchmark. The root cause is that receivables remain large relative to the annualized Q1 revenue run rate, even though the absolute receivables balance declined ¥0.53bn YoY. The impact is that a portion of reported revenue and profit remains tied up in customer collections, increasing sensitivity to collection timing and customer credit conditions. The reported annualized finished-goods inventory metric indicates DIO of 79 days, above the 60-day benchmark. Separately, the quality alert identifies DIO of 238 days when a broader production-inventory measure is used, and the reported annualized cash conversion cycle is 263 days. This broader inventory measure is consistent with the manufacturing inventory composition disclosed on the balance sheet, including raw materials of ¥10.05bn and work in process of ¥4.42bn in addition to finished goods of ¥7.18bn. The root cause of the 238-day DIO and 263-day cash conversion cycle alerts is therefore capital tied up across the production cycle, rather than finished goods alone. The context is important: factory-automation, inspection-lighting, security, and automatic-door products can require component stocking and project-related work in process, but the duration remains high against the stated manufacturing benchmarks. The impact is reduced cash flexibility if inventory turns slow, demand weakens, or components become obsolete; it also raises the risk of future write-downs or discounting. Trade payables of ¥3.80bn imply supplier financing that only partly offsets receivables and inventory, leaving the working-capital cycle extended. Management’s ability to convert the Q1 earnings acceleration into durable cash generation should therefore be assessed through future receivables collection and reductions in raw-material and work-in-process balances.

Dividend Sustainability

The full-year dividend forecast is ¥65 per share, unchanged from the company’s forecast. Against forecast EPS of ¥185.28, the implied dividend payout ratio is approximately 35.1%. This is comfortably below the 60% sustainability benchmark and leaves substantial retained earnings capacity for working capital, investment, and shareholder returns. Retained earnings were ¥447.77bn? No, retained earnings were ¥44.78bn, which provides a substantial equity cushion relative to the anticipated annual dividend commitment. The company’s strong liquidity, net-cash position of approximately ¥18.48bn, low debt-to-capital ratio, and very high interest coverage further support dividend capacity. The key condition for continued dividend resilience is management of the long operating working-capital cycle, because extended inventory and receivable balances can absorb liquidity even when accounting earnings are strong. No dividend revision was announced alongside the Q1 results.

Risk Assessment

Business risks include Factory automation and inspection-lighting demand are cyclical and linked to customers’ capital-expenditure plans. IA delivered 31.3% revenue growth and 188.8% segment-profit growth in Q1, so a slowdown in manufacturing investment would disproportionately affect the principal source of incremental earnings., The broader production-inventory DIO alert of 238 days and cash conversion cycle of 263 days indicate substantial capital committed to raw materials and work in process. This creates risks of slower turnover, component obsolescence, inventory valuation losses, and margin pressure if demand or product mix changes., Annualized DSO of 67 days exceeds the 60-day warning threshold. The risk is delayed collection and higher working-capital absorption, notwithstanding the ¥0.53bn YoY reduction in receivables., Foreign-exchange effects remain material: a ¥0.11bn FX gain supported current ordinary income, versus a ¥0.29bn loss in the prior year. The ¥0.11bn gain equaled about 3.8% of operating profit, so currency moves can affect reported earnings outside core operations., SS remains the largest segment-profit contributor, but its margin declined modestly to 19.9%. Sustaining group profitability requires preserving SS pricing and mix while the IA recovery matures..

Financial risks include The 67.3% short-term debt ratio exceeds the 40% refinancing-risk alert threshold. Its root cause is the concentration of ¥3.30bn of ¥4.91bn interest-bearing debt in short-term loans. The impact is limited by cash of ¥23.38bn and a 7.09x cash-to-short-term-debt ratio, but debt maturity concentration should remain monitored., The extended working-capital cycle can reduce internally available liquidity during periods of growth or demand weakness, despite a current ratio of 390.9% and net cash., The effective tax rate was 28.3%, and the tax burden ratio was 0.716. Tax is not currently a financial-stress factor, but tax normalization limits the extent to which pre-tax earnings growth converts to net-income growth..

Key concerns include The most material near-term operating issue is cash conversion: both the 238-day broader production-inventory DIO alert and 263-day CCC alert are well above the 90-day and 120-day reference thresholds, respectively., IA’s exceptional margin recovery was the principal driver of Q1 upside. The durability of this recovery is central to whether the Q1 operating-income pace can be maintained., Below-operating-line earnings benefited from FX improvement, while the prior-year comparison included a large investment-security disposal gain. Investors should focus on operating income and segment margins rather than headline ordinary-income growth alone., The refinancing-risk alert is not a balance-sheet solvency concern at present, but maintaining the large cash buffer or extending debt maturities would preserve the current conservative risk profile..

Investment Implications

Key takeaways include Revenue rose 21.3% and operating income rose 59.3%, with the operating margin expanding 388bp to 16.3%., The annualized 15.6% ROE is supported by a 12.2% net margin and 0.942x asset turnover, not high leverage; financial leverage is only 1.35x., SS is the core segment by profit contribution, while IA is the main growth and margin-expansion engine, with segment profit rising from ¥0.52bn to ¥1.49bn., Q1 operating-income progress of 33.9% of full-year guidance is ahead of the 25% standard pace, while management retained its full-year forecast., Balance-sheet risk is low given net cash, 73.5% capital adequacy, 7.9% debt-to-capital, and 165.7x interest coverage., Working-capital duration is the main counterweight to the earnings strength, particularly the reported 238-day broader production-inventory DIO and 263-day cash conversion cycle..

Metrics to watch include IA segment revenue growth and segment margin, especially demand trends in FA, inspection lighting, industrial PCs, and automation equipment., SS segment margin, which declined 38bp YoY despite continued revenue growth., Annualized DSO of 67 days, broader production-inventory DIO of 238 days, finished-goods DIO of 79 days, and the 263-day cash conversion cycle., Receivables, raw-material, work-in-process, and finished-goods balances relative to revenue growth., FX gains or losses relative to operating income., Progress against the ¥69.0bn sales, ¥8.8bn operating-income, and ¥6.6bn net-income full-year forecasts., The proportion of short-term debt and any refinancing or maturity-extension actions..

Regarding relative positioning, The company combines above-benchmark profitability, an annualized ROE above 15%, and a net-cash, high-liquidity balance sheet. Relative to typical manufacturing benchmarks, its financial leverage and goodwill exposure are notably conservative, while its working-capital efficiency is weaker, particularly when raw materials and work in process are incorporated into inventory-cycle measures.