Lasertec (6920) FY2026 Q2 Earnings Report

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Executive Summary

Although revenue and operating income declined during the period, ordinary income and net income increased, with non-operating income driving bottom-line growth while core operations remained almost flat. Revenue was ¥1,282.6B (-0.6% YoY) and operating income was ¥629.9B (-1.1% YoY), both roughly in line with the previous year. However, ordinary income, including a foreign exchange gain of ¥17.8B, increased to ¥651.3B (+4.3% YoY), while net income increased to ¥457.4B (+5.6% YoY). The operating margin remained extremely high at 49.1%, but declined slightly from the previous year as an increase in SG&A expenses (+25.9%) partially offset the improvement in gross margin (59.6% versus 57.7% in the previous year).

Factors Affecting Earnings

【Revenue】Revenue was ¥1,282.6B, down 0.6% year on year, and remained broadly flat. Although segment-level disclosure is unavailable, the business appears to have limited consistency in growth, with performance likely to be significantly affected by customers’ capital investment cycles and acceptance timing.

【Profit and Loss】Cost of sales decreased to ¥517.7B at a faster pace than the decline in revenue, improving the gross margin to 59.6%. Meanwhile, SG&A expenses increased 25.9% year on year to ¥135.0B, resulting in a slight decline in operating income to ¥629.9B (-1.1% YoY). In non-operating items, a foreign exchange gain of ¥17.8B and a gain on sales of securities of ¥2.2B were recorded. Consequently, ordinary income increased to ¥651.3B (+4.3% YoY), and net income increased to ¥457.4B (+5.6% YoY). In conclusion, this was a decline-in-revenue, increase-in-income earnings profile, supported by non-operating income, despite only minor fluctuations in core operating performance.

Key Financial Indicators

【Profitability】The operating margin was 49.1%, slightly below 49.4% in the same period of the previous year, while the gross margin improved by approximately 190bp to 59.6%. The net margin improved to 35.7% from 33.6% in the same period of the previous year, indicating that non-operating income pushed up the bottom-line margin.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥248.3B, and its ratio to net income of ¥457.4B remained at 0.54x, indicating weak cash-generation capacity relative to reported earnings. This divergence was attributable to an increase in inventories, particularly work in process, and a decrease in advances received.【Investment Efficiency】Annualized ROE was high at 40.6%, primarily reflecting the high profit margin under a low-leverage structure characterized by total asset turnover of 0.83x and financial leverage of 1.37x. Capital expenditures were ¥5.4B, substantially below depreciation and amortization of ¥23.2B, indicating a low level of investment; CapEx/depreciation and amortization was only 0.23x.【Financial Soundness】The equity ratio improved significantly to 72.8% from 63.7% in the same period of the previous year. The current ratio was 328.1% and the debt-to-equity ratio was 0.37x, indicating strong financial resilience. Cash and deposits totaled ¥805.0B, providing ample short-term payment capacity.

Cash Flow Analysis

OCF was ¥248.3B, a substantial increase from ¥60.0B in the same period of the previous year. However, its ratio to net income of ¥457.4B remained at 0.54x, indicating that the conversion of earnings into cash remains a challenge. The primary factors were a ¥282.4B decrease in advances received and an increase in inventories, mainly work in process, while the collection of accounts receivable generated a cash inflow of ¥57.3B. Investing Cash Flow (ICF) amounted to only ¥4.7B in outflows, and capital expenditures of ¥5.4B remained substantially below depreciation and amortization of ¥23.2B. As a result, Free Cash Flow (FCF) of ¥243.6B was secured. Financing Cash Flow (FCF) amounted to ¥313.3B in outflows, primarily due to share repurchases of ¥120.0B and dividend payments. Cash and cash equivalents decreased by ¥55.9B during the period, but the period-end balance of ¥805.0B still represents a substantial liquidity buffer.

Earnings Quality

The increases in ordinary income and net income were supported by non-operating income of ¥21.6B, including a foreign exchange gain of ¥17.8B and a gain on sales of securities of ¥2.2B. In contrast to the nearly flat operating income from core operations, part of the earnings growth therefore includes temporary factors that cannot necessarily be regarded as recurring. Non-operating income was equivalent to 1.7% of revenue. Although limited in scale, it resulted in ordinary income exceeding operating income by ¥21.4B. The effective tax rate was stable at approximately 29.8%, with no significant distortion in the conversion from profit before tax to net income. However, the fact that OCF was only 0.54x net income warrants attention from an accrual perspective. The divergence between accounting earnings and cash earnings, accompanied by changes in inventories and advances received, is a key focus in evaluating earnings quality. Comprehensive income was ¥469.4B, slightly above net income of ¥457.4B, with a foreign currency translation adjustment of ¥13.8B serving as a positive factor.

Earnings Forecast and Guidance

The full-year company forecasts are revenue of ¥2,200.0B (-12.5% YoY), operating income of ¥1,000.0B (-18.6% YoY), and ordinary income of ¥1,000.0B (-16.3% YoY), representing a plan that incorporates a substantial slowdown in the second half. Progress against first-half results was 58.3% for revenue, 63.0% for operating income, and 65.1% for ordinary income, all exceeding the simple mid-year benchmark of 50%. Nevertheless, achieving the full-year plan requires second-half revenue of ¥917.4B and operating income of ¥370.1B. This assumes a second-half operating margin of 40.3%, approximately 8.8pt below the first-half margin of 49.1%. This suggests that the plan incorporates factors such as changes in project mix, higher expenses, and the absence of the foreign exchange gains that contributed during the first half.

Shareholder Returns

The Q2 dividend was ¥132.00 per share, and total dividends based on the average number of shares outstanding during the period were approximately ¥118.7B, resulting in a payout ratio of 27.2% against net income. Including share repurchases of ¥120.0B, total shareholder returns were approximately ¥238.7B, resulting in a Total Return Ratio of approximately 52.2% against net income. The full-year dividend forecast is ¥329.00 per share, implying a forecast payout ratio of approximately 41.0% against the company’s forecast EPS of ¥801.89. Dividend coverage against FCF of ¥243.6B was approximately 1.96x. Given cash and deposits of ¥805.0B and a low debt-to-equity ratio of 0.37x, shareholder returns during the period were sufficiently funded by internally generated cash.

Risk Factors

1. Inventory and Cash Conversion Risk: Work in process amounted to ¥1,147.2B and accounted for the majority of inventories, while the OCF/net income ratio remained at 0.54x. The long manufacturing and acceptance cycles delay cash conversion, and fluctuations in inventories and advances received could have a significant impact on future cash flow.

2. Second-Half Earnings Volatility Risk: The full-year company plan assumes a second-half operating margin of 40.3%, approximately 8.8pt below the first-half result of 49.1%. Revenue was down -0.6% year on year, indicating limited consistency in growth, and earnings are susceptible to fluctuations caused by customers’ capital investment cycles and acceptance timing.

3. Reliance on Non-Operating Income: The increases in ordinary income and net income were partly supported by non-operating income, including a foreign exchange gain of ¥17.8B. Depending on currency movements, non-operating income may contract going forward, potentially affecting the earnings growth trend.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The profitability metrics are substantially above the industry median and stand out as exceptionally high within the industry.

Growth and Capital Efficiency

The revenue growth rate is below the industry median, indicating a relatively weak position in terms of growth.

※Source: Compiled by the Company

Key Earnings Highlights

1. The operating margin of 49.1%, net margin of 35.7%, and annualized ROE of 40.6% indicate profitability substantially above the industry median. A distinguishing feature is that these levels are achieved under low leverage, with a debt-to-equity ratio of 0.37x.

2. OCF/net income remained at 0.54x, indicating a divergence between high accounting earnings and cash-generation capacity. The primary factors were an increase in inventories, particularly work in process, and a decrease in advances received. The extent to which earnings are converted into cash requires ongoing monitoring.

3. The full-year plan anticipates a decline in revenue and earnings (revenue -12.5%, operating income -18.6%), with conservative assumptions for the second half despite strong first-half progress. The next focus will be how second-half actual results develop relative to the plan.

Theoretical Share Price (Reference Value)

Sensitivity: ¥4,635–¥4,919 at ±1% in the cost of equity, and ¥4,709–¥4,873 at ±0.1 in ω.

Notes:

• Because net income progress against the full-year forecast (64%) exceeds the standard benchmark (50%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies ahead of schedule tend to exceed forecasts; the adjustment may be excessive for businesses with strong seasonality).
• Net assets as of the quarter-end have been used (there is a time lag relative to the full-year forecast).

(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 and does not constitute a forecast of the market share price or a recommendation of any specific investment action, nor does it 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 release 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 with professionals as necessary.

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