Shimadzu Corporation FY2027 Q1 Earnings Report

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Executive Summary

Revenue and earnings increased in Q1, but the significant growth in ordinary income and net income was largely attributable to the one-off factor of foreign exchange gains. From the perspective of earnings quality, the pace of improvement at the operating level therefore warrants close monitoring. Revenue was ¥1306.0B (+10.3% YoY), operating income was ¥142.6B (+17.1%), ordinary income was ¥184.9B (+63.3%), and net income was ¥133.3B (+68.3%). The operating margin improved to 10.9% from 10.3% in the previous year, as the improvement in gross margin (46.1%, compared with 45.0% in the previous year) progressed at a faster pace than the increase in SG&A expenses. Meanwhile, the sharp increase in ordinary income was mainly due to foreign exchange losses in the previous year turning into foreign exchange gains of ¥33.8B in the current period, creating a divergence from the growth rate of operating income.

Factors Affecting Business Performance

【Revenue】Revenue was ¥1306.0B, representing a 10.3% YoY increase. By segment, Measurement Instruments, the largest segment, recorded ¥803.2B (61.5% of total, +6.0%), which was relatively modest, while Industrial Equipment at ¥207.6B (+23.2%) and Medical Equipment at ¥169.1B (+23.5%) posted strong growth. Aircraft Equipment also expanded steadily to ¥110.3B (+11.4%). By region, growth was particularly notable in Europe at ¥139.9B (¥108.8B in the previous year, +28.5%) and the Americas at ¥214.3B (¥180.0B in the previous year, +19.1%), while China at ¥242.4B (+4.3%) slowed relatively.

【Profit and Loss】Operating income was ¥142.6B (+17.1%), driven by an improvement in gross margin to 46.1% from 45.0% in the previous year. SG&A expenses were ¥460.0B, increasing 12.0% YoY and outpacing revenue growth; however, the benefit from the improved gross margin absorbed this increase, raising the operating margin to 10.9% from 10.3% in the previous year. Ordinary income was ¥184.9B (+63.3%), substantially exceeding the growth in operating income, because non-operating income increased to ¥45.3B from ¥8.1B in the previous year. Foreign exchange gains of ¥33.8B were the primary factor, compared with foreign exchange losses recorded in the previous year. Extraordinary gains and losses were almost neutral (extraordinary gain of ¥0.2B and extraordinary loss of ¥0.1B), with a limited impact. Net income was ¥133.3B (+68.3%), while the tax rate remained at a normal level of 27.9%. In conclusion, both revenue and earnings increased.

Segment Analysis

Based on segment profit before amortization of goodwill and other items, Measurement Instruments recorded external revenue of ¥803.2B (61.5% of total, +6.0%), segment profit of ¥76.7B (¥90.4B in the previous year, -15.2%), and a margin of 9.6% (11.9% in the previous year), meaning that the core segment shifted to lower earnings. Medical Equipment recorded external revenue of ¥169.1B (+23.5%) and segment profit of ¥11.1B, turning profitable from a loss of ¥△7.2B in the previous year. Industrial Equipment recorded external revenue of ¥207.3B (+23.2%), segment profit of ¥38.2B (¥26.6B in the previous year, +43.5%), and a margin of 18.4% (15.8% in the previous year), representing substantial earnings growth. Aircraft Equipment recorded external revenue of ¥110.3B (+11.4%), segment profit of ¥27.5B (¥20.5B in the previous year, +33.9%), and a margin of 24.9% (20.7% in the previous year), expanding while maintaining high profitability. Earnings growth in the highly profitable Industrial Equipment and Aircraft Equipment segments offset the decline in the core Measurement Instruments segment. By region, growth in Europe and the Americas drove overall performance.

Key Financial Indicators

【Profitability】The operating margin improved by +0.6pt to 10.9% from 10.3% in the previous year, the net profit margin improved by +3.5pt to 10.2% from 6.7%, and the gross margin improved by +1.1pt to 46.1% from 45.0%. 【Cash Quality】Cash and deposits increased to ¥1536.3B, while investment securities increased to ¥334.4B. Since non-operating income includes foreign exchange gains of ¥33.8B, the growth in ordinary income and net income partly depends on non-operating factors. 【Investment Efficiency】ROE was 2.3% (quarterly figure). Against total assets of ¥7304.7B, net income remained at ¥133.3B, indicating that the company’s substantial asset base is restraining capital efficiency. 【Financial Soundness】The equity ratio was 78.7%, improving from 76.6% in the previous year. Net assets were ¥5751.6B against total assets of ¥7304.7B, maintaining a high level of equity capital.

Cash Flow Analysis

Cash and deposits were ¥1536.3B, down -8.2% from ¥1673.2B in the previous year, while investment securities increased by +64.3% to ¥334.4B (¥203.6B in the previous year), suggesting that a portion of excess funds may have shifted into securities investments. Inventories were ¥906.7B (¥864.5B in the previous year, +4.9%), growing at a slower pace than revenue (+10.3%), indicating a relative improvement in inventory efficiency. Trade receivables were ¥1374.0B (¥1563.3B in the previous year, -12.1%), showing that receivables declined even as revenue increased and that collection conditions remain favorable. Contract liabilities accumulated to ¥448.3B (¥412.5B in the previous year, +8.7%), indicating an increase in advance payments that will contribute to future revenue recognition. The equity ratio rose to 78.7% from 76.6% in the previous year, further strengthening the financial foundation.

Earnings Quality

The significant growth in ordinary income and net income was primarily attributable to a sharp increase in non-operating income, requiring some caution from the perspective of earnings quality. Non-operating income was ¥45.3B (¥8.1B in the previous year), of which foreign exchange gains of ¥33.8B were the largest contributor (foreign exchange losses were recorded in the previous year). Excluding this foreign exchange factor, the underlying growth at the ordinary income level may have remained close to the operating income growth rate of +17.1%. Extraordinary gains and losses were almost neutral (net gain of +¥0.1B), with a limited impact as a one-off factor. Comprehensive income was ¥211.4B, exceeding net income of ¥133.3B by ¥78.1B, primarily due to the recognition of valuation differences on securities of ¥65.7B. The increase in unrealized gains on securities indicates an increase in asset value, but represents an unrealized component not reflected in net income for the period and should therefore be distinguished from realized gains and losses.

Earnings Forecast and Guidance

Progress against the full-year forecast was 21.1% for revenue, 17.8% for operating income, 22.8% for ordinary income, and 22.6% for net income. All were below the standard quarterly progress benchmark of 25%. The full-year ordinary income forecast is ¥810.0B, representing a planned decline of -2.1% YoY, and may incorporate the reversal of non-operating factors such as the foreign exchange gains realized in Q1. Contract liabilities accumulated to ¥448.3B (up +8.7% from ¥412.5B in the previous year), which is expected to contribute to revenue recognition in the second half of the fiscal year. The company disclosed that it had revised its earnings forecast for the current quarter (“Yes”), while no revision was made to its dividend forecast (“No”).

Shareholder Returns

The full-year dividend forecast is ¥70.00 per share. Based on forecast EPS of ¥204.19, the payout ratio is approximately 34.3%. In light of the financial foundation represented by an equity ratio of 78.7% and cash and deposits of ¥1536.3B, dividend sustainability can be assessed as relatively high. No revision to the dividend forecast was made during the current quarter.

Risk Factors

1. Foreign exchange sensitivity: The substantial increase in ordinary income (+63.3%) was primarily attributable to foreign exchange gains of ¥33.8B recorded in non-operating income (foreign exchange losses were recorded in the previous year). If foreign exchange trends reverse, ordinary income could experience a reversal.

2. Declining profitability in the core segment: Segment profit in Measurement Instruments, which accounts for 61.5% of total revenue, declined by -15.2% YoY. Recovery in this segment’s earnings will be a challenge for sustained improvement in company-wide profitability.

3. Valuation volatility of investment securities: Investment securities increased to ¥334.4B (+64.3%), and valuation differences on securities of ¥65.7B were recorded as other comprehensive income. If market prices fluctuate, the impact on net assets and comprehensive income could increase.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Return

Both the operating margin and net profit margin exceeded the industry median, placing the company’s profitability among the higher levels within the industry.

Growth and Capital Efficiency

The revenue growth rate exceeded the industry median and demonstrated a high level of growth within the industry.

Source: Compiled by the Company

Key Points from the Earnings Results

1. The substantial increases in ordinary income and net income (+63.3% and +68.3%) were primarily attributable to the non-operating one-off factor of foreign exchange gains. The divergence from operating income growth (+17.1%) is therefore an important point in assessing earnings quality.

2. By segment, Industrial Equipment (segment profit +43.5%) and Aircraft Equipment (+33.9%) maintained high profitability and led earnings growth, while the core Measurement Instruments segment (-15.2%) recorded lower earnings. This demonstrates the impact of changes in the segment mix on the company-wide earnings structure.

3. Full-year progress rates for revenue of 21.1% and operating income of 17.8% were below the standard 25%. However, contract liabilities accumulated to ¥448.3B (+8.7%), making the trend in revenue recognition during the second half of the fiscal year an important point of focus.

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: ¥2,003–¥2,121 at a cost of equity capital of ±1%, and ¥2,059–¥2,064 at ω of ±0.1.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference relative to the full-year forecast).
• Since net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

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

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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 a professional as necessary.

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