Murata Manufacturing Co.,Ltd. FY2027 Q1 Earnings Report

Quick View

Executive Summary

The company reported higher revenue and higher profit, driven by expanding demand from data centers and improved profitability in the Components Business. Revenue was ¥5,022.6B (+20.7% YoY), Operating Income was ¥984.5B (+59.8%), Profit Before Tax was ¥1,092.3B (+75.3%), and Net Income was ¥813.5B (+63.8%). The Operating Income margin improved to 19.6%, up 4.8 points from 14.8% in the same period of the previous year, while the gross margin also increased to 45.8% (+4.3pt). In addition to revenue growth, the increase in profit was greater than the increase in revenue due to improvements in pricing and product mix, indicating a qualitative improvement in profitability.

Factors Affecting Performance

【Revenue】Revenue was ¥5,022.6B, up +20.7% YoY. The core Components Business led overall performance, with revenue increasing +28.5% due to expanding demand from data centers and mobility applications; capacitors increased +30.0%. The Devices & Modules Business grew only +6.2%; the increase in power modules was offset by a decline in demand for lithium-ion secondary batteries for power tools.

【Profit and Loss】Operating Income increased to ¥984.5B (+59.8%), and the margin improved to 19.6% from 14.8% in the previous year. The primary factors were operating leverage and improvements in pricing and product mix, which raised the gross margin from 41.5% to 45.8%. Financial income expanded to ¥115.8B (¥59.5B in the previous year, +94.7%), causing Profit Before Tax to increase +75.3%, exceeding the growth in Operating Income. However, the increase in the effective tax rate from 20.3% to 25.5% reduced Net Income growth to +63.8%. The Power Module Business incurred a temporary loss of approximately ¥30B related to an individual project (PJT drop), contributing to the widening loss in the Devices & Modules Business. In conclusion, the company reported higher revenue and higher profit.

Segment Analysis

The core business is the Components Business, which accounted for 69.0% of total revenue (¥3,467.6B), with Operating Income of ¥1,135.5B (+59.5%) and a margin of 32.7% (improved from 26.0% in the previous year). Expanding demand from data centers and mobility applications, together with growth in capacitors (+30.0%), was the primary driver of company-wide profit growth. Although revenue in the Devices & Modules Business was ¥1,514.3B (+6.2%), its Operating Loss widened to ¥129.0B (¥80.1B in the previous year, deterioration rate of -61.0%), and its margin deteriorated to -8.5% from -5.6% in the previous year. The loss on an individual project in the Power Module Business (approximately ¥30B) was one factor behind the widening loss, while the gap in profitability versus the Components Business (32.7pt difference) highlights the concentration of earnings across segments.

Key Financial Metrics

Profitability: ROE 2.9% (quarterly basis, approximately 2.0% in the same period of the previous year), Operating Income margin 19.6% (14.8% in the previous year)
Cash flow quality: OCF/Net Income 0.52x (below 1.0x, weighed down by an increase in working capital), FCF ▲¥328.8B
Investment efficiency: Capital expenditures/Depreciation and amortization 1.25x (above 1.0x, indicating a growth investment phase)
Financial soundness: Equity Ratio 85.9%, Current Ratio 5.47x

Cash Flow Analysis

OCF was ¥421.9B, only 0.52x Net Income of ¥813.5B, indicating limited cash backing for earnings. An increase in working capital (inventories -¥133.8B, accounts receivable -¥145.1B) and corporate income tax payments of ¥469.8B were the primary factors weighing on OCF. Investing CF was ▲¥750.7B, mainly due to capital expenditures of ¥570.7B and a net increase in time deposits of ¥189.7B. Financing CF was ▲¥675.8B, primarily reflecting dividend payments of ¥637.1B; share repurchases were only ¥0.04B. FCF was ▲¥328.8B, indicating that dividends and capital expenditures were not covered solely by OCF and were supplemented by drawing down cash on hand. Cash generation should be monitored, with progress in reducing inventories and accounts receivable expected to be a key focus going forward.

Earnings Quality

Net Income was ¥813.5B against Profit Before Tax of ¥1,092.3B, representing a gap within the range implied by the effective tax rate of 25.5% (20.3% in the previous year), with limited impact from special factors. Financial income of ¥115.8B was not excessive at 2.3% of revenue, but its +94.7% YoY growth increased Profit Before Tax growth (+75.3%) beyond both Operating Income growth (+59.8%). OCF before changes in working capital was ¥891.7B, exceeding Net Income; however, actual OCF declined to ¥421.9B due to increases in inventories and accounts receivable. Earnings quality therefore requires monitoring from an accrual perspective.

Earnings Forecasts and Guidance

The full-year forecast, revised during the current quarter, is Revenue of ¥21,100B, Operating Income of ¥4,300B (+52.6%), and Net Income of ¥3,380B (+44.5%). Q1 progress rates were 23.8% for revenue, 22.9% for Operating Income, and 24.1% for Net Income. Deviations from standard progress (Q1=25%) were minor, indicating a generally on-track start within the seasonal range. According to the PDF disclosure, quarterly orders reached a record high of ¥6,739B, and the BB ratio was 1.34, indicating that orders exceeded revenue. Leading demand indicators remain solid, particularly for the Components Business.

Shareholder Returns

The full-year dividend forecast remains unchanged at ¥70 per share (no revision to the dividend forecast during the current quarter). Based on projected full-year Net Income of ¥3,380B and the number of shares outstanding, total dividends are estimated at approximately ¥1,274B, implying a Payout Ratio of approximately 37.7%. The company separately plans to repurchase ¥1,500B of its own shares; if implemented, the Total Return Ratio would be approximately 82.1% (dividends + share repurchases / projected Net Income). The dividend payment of ¥637.1B during Q1 relates to the payment of dividends finalized for the previous fiscal period, while share repurchases during the current quarter were only ¥0.04B.

Catalysts

【Short Term】Progress in improving the individual project loss (PJT drop) related to power modules in the Devices & Modules Business, trends in reducing inventories and accounts receivable, and the validity of the foreign exchange assumption of ¥155/USD from Q2 onward.

【Long Term】Capacity expansion investment in the Components Business against the backdrop of expanding semiconductor demand from data centers, an increase in the capital expenditure plan (+¥50B versus the April forecast), and progress in executing the ¥1,500B share repurchase program.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The company is substantially above the manufacturing industry median, placing its profitability among the top tier of the industry.

Growth and Capital Efficiency

Revenue growth is also more than three times the industry median, demonstrating a high growth rate within the industry.

※Source: Compiled by the Company

Risk Factors

1. Decline in cash conversion: OCF/Net Income remained at 0.52x, attributable to increases in inventories of +¥185.6B (+3.6%) and accounts receivable of +¥200.2B (+6.1%). If inventories and accounts receivable are not reduced, the negative trend in FCF (▲¥328.8B in the current period) may continue.

2. Profitability of the Devices & Modules Business: The Operating Loss widened to ¥129.0B (¥80.1B in the previous year, -61.0%), and the margin deteriorated to -8.5% from -5.6% in the previous year. The individual project loss in power modules (approximately ¥30B) contributed to the deterioration, making improvement in the business’s profitability a company-wide earnings challenge.

3. External environment factors: According to the PDF disclosure, the full-year foreign exchange assumption was changed to ¥155/USD, implying a potential earnings impact if the yen appreciates. The impact of U.S. tariffs is expected to provide a positive contribution of +¥40B, including refunds; however, the possibility of advance orders driven by concerns over an increase in long-lead-time projects and supply constraints has been noted.

Key Takeaways from the Earnings

1. The Operating Income margin improved +4.8 points YoY to 19.6%, reaching a record-high level. The expansion in the margin of the core Components Business (26.0%→32.7%) was the primary driver. The somewhat higher concentration of earnings sources within the business portfolio should be noted as a structural characteristic.

2. Net Income growth (+63.8%) was below Profit Before Tax growth (+75.3%), primarily due to the increase in the effective tax rate (20.3%→25.5%).

3. OCF remained at 0.52x Net Income, with increases in inventories and accounts receivable weighing on cash generation. Although the progress rate against the full-year forecast (22.9–24.1%) is within the seasonal range, working capital trends toward the second half of the year will remain a key focus.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on 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: ¥1,673–¥1,772 at ±1% in the cost of equity, and ¥1,716–¥1,729 at ±0.1 in ω.

Notes:

• The EPS impact of approximately ¥9.2 per share from a ±¥5 movement in the assumed exchange rate has been reflected in the bear/bull scenarios.
• Net assets as of the quarter-end have been used (there is a timing difference relative to the full-year forecast).

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-06 / This value does not predict or guarantee the future share price)

---

This report is an earnings analysis document automatically generated by AI through an integrated analysis of XBRL earnings summary data and PDF earnings presentation materials. 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.

---End of Report---