TAIYO YUDEN CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

In Q1, Ordinary Income and Net Income, which had been at low levels in the same period of the previous year, improved substantially, resulting in higher revenue and higher profit, with Net Income returning to profitability. Revenue was ¥939.0B (¥848.1B in the previous year, +10.7%), Operating Income was ¥48.2B (¥31.4B in the previous year, +53.3%), Ordinary Income was ¥42.6B (¥2.6B in the previous year), and Net Income was ¥25.0B (¥-8.8B in the previous year). The main factors behind the increase in profit were cost absorption resulting from an improvement in the gross margin (22.8%, +1.3pt from 21.4% in the previous year), and a shift from a foreign exchange loss in the previous year to a foreign exchange gain of ¥2.7B in the current period.

Factors Affecting Business Performance

【Revenue】The Company's Revenue, which consists of a single Electronic Components Business segment, was ¥939.0B, representing a 10.7% increase year on year.

【Profit and Loss】Cost of sales was contained at ¥725.0B (cost ratio 77.2%, compared with 78.6% in the previous year), and gross profit improved to ¥213.9B (gross margin 22.8%, +1.3pt from 21.4% in the previous year). SG&A expenses were ¥165.8B (SG&A ratio 17.7%, largely unchanged from the previous year), increasing at a slower pace than Revenue. Consequently, Operating Income increased substantially to ¥48.2B (Operating Income margin 5.1%, +1.4pt from 3.7% in the previous year). In non-operating items, non-operating income of ¥7.0B, including a foreign exchange gain of ¥2.7B, was offset by non-operating expenses of ¥12.6B, primarily consisting of interest expense of ¥5.2B, resulting in Ordinary Income increasing to ¥42.6B (¥2.6B in the previous year). After recording extraordinary losses of ¥4.9B, mainly losses on the disposal and sale of fixed assets (a temporary factor), Profit Before Tax was ¥37.7B. After deducting income taxes and other taxes of ¥12.7B (effective tax rate 33.7%), Net Income returned to profitability at ¥25.0B (¥-8.8B in the previous year). Revenue, Operating Income, Ordinary Income, and Net Income all increased year on year.

Key Financial Indicators

【Profitability】The Operating Income margin improved to 5.1%, up +1.4pt from 3.7% in the same period of the previous year. The gross margin also improved to 22.8% (21.4% in the previous year, +1.3pt), while the Net Income margin returned to profitability at 2.7% (previous year -1.0%).【Cash Quality】Cash and deposits were ¥985.3B, maintaining a substantial level equivalent to 8.7 times short-term borrowings of ¥113.7B. Comprehensive income of ¥64.3B exceeded Net Income of ¥25.0B by ¥39.3B, primarily due to foreign currency translation adjustments of +¥39.4B.【Investment Efficiency】ROE (on a quarterly basis) was 0.7%, EPS was ¥19.82 (¥-7.02 in the previous year), and BPS was ¥2,827.24 (¥2,754.19 in the previous year, +2.7%).【Financial Soundness】The Equity Ratio rose to 59.7%, up +3.7pt from 56.0% in the previous year. The current ratio was 305.8%, and the interest coverage ratio was 9.25x, indicating a sound level of payment capacity.

Cash Flow Analysis

Reviewing funding trends based on changes in the balance sheet, cash and deposits were ¥985.3B, broadly unchanged from ¥1000.7B in the same period of the previous year, down ¥-15.4B (-1.5%). Accounts receivable were ¥899.2B (+4.1%), while inventories (the total of finished goods, raw materials, and work in process) were ¥1283.7B (+2.0%). Both increased at a slower pace than the +10.7% growth in Revenue, indicating that collection and inventory efficiency relative to Revenue was instead improving. Property, plant and equipment was ¥2845.2B (-1.9%), and construction in progress was ¥173.0B (-12.0%), suggesting that investment projects are progressing toward completion and capital expenditures are running below depreciation and amortization. Financially, long-term borrowings decreased to ¥730.0B (-14.3%), while convertible bond-type bonds with stock acquisition rights were reduced to ¥277.3B (-45.4%). At the same time, both capital stock and capital surplus increased by more than ¥115B, suggesting that the conversion of bonds into shares progressed. Retained earnings were ¥2224.6B, down ¥-31.2B from ¥2255.8B in the same period of the previous year. Taking into account Net Income of ¥25.0B for the current period, this suggests that dividend payments were made during the same period.

Earnings Quality

The core of recurring earnings was Operating Income of ¥48.2B. Against non-operating income of ¥7.0B, including a foreign exchange gain of ¥2.7B and interest income of ¥2.5B, non-operating expenses of ¥12.6B, primarily consisting of interest expense of ¥5.2B, were recorded, resulting in Ordinary Income of ¥42.6B. Foreign exchange gains are a volatile item, as the Company recorded a foreign exchange loss in the previous year; therefore, this volatility should be considered when assessing recurring earnings power. Extraordinary losses of ¥4.9B (losses on the disposal and sale of fixed assets) represented 13.0% of Profit Before Tax of ¥37.7B and were a temporary factor. Excluding this item, the recurring earnings level would have been higher. After deducting income taxes and other taxes of ¥12.7B (effective tax rate 33.7%), Net Income was ¥25.0B. Comprehensive income was ¥64.3B, exceeding Net Income by ¥39.3B. The primary reason for the difference was a valuation increase of +¥39.4B from foreign currency translation adjustments due to yen depreciation. The fact that this is a non-cash accounting fluctuation is an important consideration when assessing earnings quality.

Earnings Forecasts and Guidance

Q1 progress against the full-year company forecast was 22.1% for Revenue (¥939.0B/¥4240.0B), 10.7% for Operating Income (¥48.2B/¥450.0B), 10.2% for Ordinary Income (¥42.6B/¥420.0B), and 8.6% for Net Income (¥25.0B/¥290.0B), all below the 25% benchmark for evenly distributed quarterly progress. The full-year plan calls for Revenue growth of +19.3% year on year and Operating Income growth of +125.0%. Compared with Q1 results (Revenue +10.7%, Operating Income +53.3%), the plan assumes that growth will accelerate toward the second half of the fiscal year. The earnings forecast was revised during the current quarter, and the updated assumptions underlying the full-year outlook will be an important reference point when assessing progress in future quarters. No revision was made to the dividend forecast.

Shareholder Returns

The full-year dividend forecast is ¥90.00 per share, implying a Payout Ratio of approximately 41.1% based on forecast full-year EPS of ¥219.03. Compared with the previous year's actual dividend of ¥45, this represents a doubling based on the company forecast, while the dividend forecast itself has not been revised. Considering the Company's financial base, including an Equity Ratio of 59.7% and a current ratio of 305.8%, as well as cash and deposits of ¥985.3B, financial constraints on securing funds for dividends are not considered significant.

Risk Factors

1. Increase in interest burden: Interest expense increased to ¥5.2B, approximately double the ¥2.65B recorded in the same period of the previous year, and was the primary factor behind non-operating expenses of ¥12.6B. The interest coverage ratio of 9.25x indicates that near-term payment capacity is secured; however, if the period of rising interest rates continues, this could exert downward pressure on Ordinary Income.

2. Impact of foreign exchange fluctuations: The Company recorded a foreign exchange gain of ¥2.7B in the current period, boosting Ordinary Income. However, it recorded a foreign exchange loss in the same period of the previous year. Foreign exchange gains and losses are volatile depending on market conditions and require monitoring.

3. Occurrence of temporary losses: Extraordinary losses of ¥4.9B, primarily losses on the disposal and sale of fixed assets, were recorded, equivalent to 13.0% of Profit Before Tax of ¥37.7B. Although this was a temporary factor associated with asset replacement, continued losses of the same type could affect earnings quality.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

In terms of profitability and returns, both the Operating Income margin and Net Income margin are below the industry median, placing the Company at a relatively low level within the industry.

Growth and Capital Efficiency

The Revenue growth rate exceeds the industry median, placing the Company's Revenue growth among the relatively higher levels within the industry.

※Source: Compiled by the Company

Key Earnings Highlights

1. In addition to higher Revenue, both Ordinary Income and Net Income improved substantially and returned to profitability. The improvements of +1.3pt in the gross margin and +1.4pt in the Operating Income margin suggest a turning point in the profitability trend.

2. Convertible bond-type bonds with stock acquisition rights decreased to ¥277.3B (-45.4%), while both capital stock and capital surplus increased by more than ¥115B. This suggests that conversion into shares progressed, and the Equity Ratio rose from 56.0% to 59.7%.

3. Q1 progress against the full-year plan was 22.1% for Revenue, 10.7% for Operating Income, and 8.6% for Net Income, below the simple 25% benchmark. The plan is weighted toward the second half of the fiscal year, requiring continued monitoring of progress.

Theoretical Share 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). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥2,679–¥2,835 at ±1% in the cost of equity, and ¥2,752–¥2,757 at ±0.1 in ω.

Notes:

• Since forecast ROE is below the cost of equity, the theoretical value is below Book Value Per Share.
• Net assets as of the quarter-end are used (there is a timing gap relative to the full-year forecast).

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-07 / This value is not a forecast or guarantee of the future share price)

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This report is an earnings analysis document automatically generated by AI through analysis of 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 advisor.

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