Lasertec Corporation FY2026 FY Earnings Report

Financial Highlights

• Net Sales: ¥230.49B
• Operating Income: ¥105.26B
• Net Income: ¥77.48B
• EPS: ¥862.99

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

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AI Financial Analysis

Executive Summary

Verdict: Solid profitability with margin resilience despite a cyclical revenue dip, but cash conversion weakened meaningfully due to working capital outflows. Revenue declined 8.3% YoY to 230,485 million JPY, with operating income down 14.3% to 105,259 million JPY and net income down 8.5% to 77,485 million JPY. Gross profit was 136,479 million JPY, yielding a gross margin of 59.2%, up about 30 bps YoY. Operating margin printed at 45.7%, compressing roughly 320 bps from the prior year’s 48.9%. Net margin was 33.6%, essentially flat YoY (down ~10 bps), supported by improved non-operating items, notably 2.068 billion JPY in FX gains. ROE was a robust 31.4% (DuPont: 33.6% net margin × 0.685 asset turnover × 1.36x leverage), with the decline vs last year mainly from lower asset turnover and de-leveraging, not margins. Operating cash flow fell to 48.54 billion JPY, 0.63x of net income, pressured by a 211.2 billion JPY decline in advances received and higher tax payments. Free cash flow was strong at 46.66 billion JPY, comfortably funding 29.49 billion JPY in dividends and 12.00 billion JPY in buybacks. The balance sheet remains conservative: current ratio 341.7%, D/E 0.36x, and net cash position anchored by 91.50 billion JPY in cash and deposits. Inventory remains heavy (DIO 651 days) with a high WIP mix (73%), consistent with long-lead, high-spec tools but a drag on cash conversion. R&D intensity was 7.1% of sales, aligning with a technology-led roadmap and supporting medium-term competitiveness. EBITDA margin was 47.7%, underscoring structural profitability in an asset-light model (PPE 8.7% of assets; intangibles 0.4% of assets). Non-operating income was modest at 26.59 billion JPY, well below 5% of revenue, indicating limited reliance on non-core items. Equity increased to 246,850 million JPY, driven by retained earnings and valuation gains, while treasury stock grew via buybacks. Management guides for FY2027 growth (sales +25.8%, OP +18.8%), implying volume recovery and operating leverage normalization. Forward implications: watch cash conversion and advances received trends for OCF normalization, monitor inventory/WIP digestion as EUV/advanced-node inspection shipments ramp, and expect margins to remain structurally high with R&D underpinning product leadership.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 33.6% × 0.685 × 1.36x ≈ 31.4%. Versus the prior year, net margin was nearly flat (~33.7% to 33.6%), asset turnover declined meaningfully (~0.76 to 0.69), and financial leverage decreased (~1.57x to 1.36x). The largest change driver was lower asset turnover, reflecting slower sales and a larger asset base tied to inventories and cash. Business reason: shipment timing and a pullback in advances received reduced sales velocity relative to assets in a long-cycle, build-to-order portfolio. Sustainability: as order intake converts to shipments, turnover should improve; the de-leveraging trend is intentional and likely to persist given ample cash. Operating leverage turned slightly negative: revenue fell 8.3% while SG&A rose to 31.22 billion JPY, compressing operating margin by ~320 bps; this looks cyclical rather than structural given stable gross margin (+30 bps). R&D spending of 16.29 billion JPY (7.1% of sales) supports long-term product moat and should underpin mid-cycle margins.

Growth Assessment

Top line contracted 8.3% to 230.5 billion JPY as shipment timing softened, but gross margin improved to 59.2%, evidencing pricing power and favorable mix. Operating income declined 14.3% to 105.3 billion JPY on modest SG&A growth and lower operating leverage. Net income decreased 8.5% to 77.5 billion JPY, aided by a swing to non-operating gains (notably FX). The FY2027 guidance targets sales of 290.0 billion JPY (+25.8% YoY) and operating income of 125.0 billion JPY (+18.8%), implying recovery in wafer/reticle inspection demand at advanced nodes. EBITDA margin of 47.7% underscores resilient unit economics; with R&D intensity at 7.1%, the product roadmap remains well funded. Execution priority is converting a high WIP balance into revenue and cash; normalization of advances received should aid OCF. Overall, revenue recovery appears cyclical rather than structural, with margins likely to remain high given competitive positioning in leading-edge inspection.

Financial Health

Liquidity is very strong: current ratio 341.7% and quick ratio 341.7%, underpinned by 91.5 billion JPY in cash and 26.96 billion JPY in receivables versus 86.37 billion JPY in current liabilities. Capital structure is conservative with D/E of 0.36x and equity ratio of 73.3%. There is no maturity mismatch risk evident: cash and receivables exceed current liabilities, and advances received provide additional operating funding flexibility. Asset base is asset-light (PPE 8.7% of total assets) with minimal intangibles (0.4% of assets). Asset retirement obligations are 2.57 billion JPY, equating to about 2.9% of total liabilities, manageable within the balance sheet. Working capital remains elevated with large inventories; accounts payable increased to 12.53 billion JPY (+30.5% YoY), which modestly offsets inventory funding needs.

Notable B/S Changes

Treasury Stock: -9.76 → -129.77 (100M JPY) (-1229.6%) - Buybacks executed, modestly reducing equity and boosting EPS. Investment Securities: 10.07 → 15.38 (100M JPY) (+52.7%) - Higher financial asset holdings, slight increase in market exposure. Intangible Assets: 24.51 → 12.51 (100M JPY) (-49.0%) - Lower software and intangibles; minimal IP carried on B/S. Accounts Payable: 96.06 → 125.34 (100M JPY) (+30.5%) - Increased supplier credit partially offsets inventory funding. Retained Earnings: 2,066.21 → 2,529.75 (100M JPY) (+22.4%) - Strong internal capital generation after dividends. Advances Received: 643.88 → 442.84 (100M JPY) (-31.2%) - Reduction in customer prepayments, a headwind to OCF.

Cash Flow Quality

OCF was 48.54 billion JPY, 0.63x net income, below the 0.8 threshold due to a 21.12 billion JPY reduction in advances received and higher tax payments (43.45 billion JPY). Cash conversion (OCF/EBITDA) was 0.44x, indicating significant working capital absorption from inventory build/WIP and order timing. Free cash flow was 46.66 billion JPY after 1.49 billion JPY in CapEx and 0.30 billion JPY in intangible additions, reflecting low capital intensity. No signs of aggressive working capital management were observed; the main driver was the normalization of customer prepayments (advances received). With dividends of 29.49 billion JPY and buybacks of 12.00 billion JPY, FCF covered total shareholder returns at ~1.13x, and dividends alone at ~1.58x. Expect OCF to improve if advances received stabilize and WIP converts to shipments.

Dividend Sustainability

Total DPS was 329 JPY, translating to a payout ratio of roughly 38–40% against EPS of 862.99 JPY, within a sustainable range. Dividend cash outflow of 29.49 billion JPY was covered 1.50x by FCF. Including buybacks (12.00 billion JPY), the total return ratio was ~53.5% of net income and ~89% of FCF, still covered. Balance sheet capacity is ample for stable to progressive dividends given net cash and low leverage. Underinvestment signals from CapEx/Depreciation (0.32x) reflect low capital intensity rather than funding constraints; R&D remains robust, supporting long-term earnings capacity. Guidance DPS of 351 JPY suggests a modest increase aligned with earnings growth expectations.

Risk Assessment

Business risks include Semiconductor cycle sensitivity: advanced-node inspection demand can soften with foundry/logic capex cycles, High WIP and long build cycles increase execution and delivery-timing risk, Customer concentration in leading-edge fabs heightens order volatility, Currency fluctuation risk impacts non-operating results and competitiveness.

Financial risks include OCF/Net income at 0.63 and OCF/EBITDA at 0.44 indicate weak cash conversion in the period, Elevated inventory (DIO 651 days) ties up working capital and can pressure cash in downturns, CapEx/Depreciation of 0.32x could imply deferred replacement capex if sustained.

Key concerns include Long cash conversion cycle of 646 days driven by high WIP (73% of inventory), Advance payments from customers decreased by 201.0 hundred million JPY, reducing operating cash inflow support, Accruals ratio of 8.6% is above the high-quality threshold (<5%), pointing to moderate accrual reliance.

Investment Implications

Key takeaways include Margins remain best-in-class: 59.2% GM, 45.7% OP margin, 47.7% EBITDA margin, ROE at 31.4% is driven by exceptional margins despite lower turnover and leverage, Cash conversion weakened due to working capital headwinds, but FCF still covered dividends and buybacks, Balance sheet strength provides resilience and optionality for R&D and shareholder returns, FY2027 guidance implies healthy demand recovery and margin durability.

Metrics to watch include Advances received trajectory and WIP conversion into shipments, Inventory days and WIP ratio normalization, OCF/Net income and OCF/EBITDA recovery toward >0.8 and >0.7, respectively, R&D intensity maintenance around 6–8% to support product leadership, Order intake/backlog versus revenue for visibility into shipment ramps.

Regarding relative positioning, Within semiconductor production equipment peers, the company exhibits superior structural profitability and capital efficiency (asset-light, minimal intangibles), offset by weaker period cash conversion due to long-cycle WIP and timing of customer prepayments.