HOYA CORPORATION FY2027 Q1 Earnings Report

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Executive Summary

This was a revenue and profit growth quarter, with profit growth exceeding revenue growth, driven by the expansion of high-margin products in the core Information & Communications Business and improved profitability in the Life Care Business. Revenue was ¥2,557.4B (previous year: ¥2,204.1B, YoY+16.0%), Operating Income was ¥826.3B (previous year: ¥635.6B, YoY+30.0%), Profit Before Tax was ¥859.9B (previous year: ¥673.6B, YoY+27.7%), and consolidated Net Income was ¥658.4B (previous year: ¥514.0B, YoY+28.1%; of which ¥657.9B was attributable to owners of the parent, YoY+26.9%). The Operating Income margin improved to 32.3% from 28.9% in the previous year, a +3.4pt improvement, reflecting fixed-cost absorption associated with higher revenue and an improved mix of high-value-added products. Progress against the Full-Year earnings forecast was 49.1% for Revenue and 50.1% for Operating Income, substantially exceeding the standard quarterly progress rate of 25%.

Factors Affecting Earnings

【Revenue】Revenue increased by double digits to ¥2,557.4B (YoY+16.0%). The Information & Communications Business increased to ¥1,009.5B (YoY+22.7%), led by growth in LSI products such as EUV blanks and HDD substrates amid expanding AI-related demand. The Life Care Business also contributed, increasing to ¥1,547.9B (YoY+12.8%) on growth in eyeglass lenses, intraocular lenses, and artificial bone. Meanwhile, revenue from endoscopes continued to decline in the Chinese market, resulting in varying demand trends across businesses.

【Profit and Loss】Operating Income increased by 30.0% YoY to ¥826.3B, exceeding the revenue growth rate, and the Operating Income margin improved to 32.3% from 28.9% in the previous year. Another factor contributing to profit growth was the absence in the current period of the ¥19.1B impairment loss related to endoscopes recorded in the previous-year period. Profit Before Tax was ¥859.9B (YoY+27.7%), and consolidated Net Income was ¥658.4B (YoY+28.1%). The increase from Operating Income to Profit Before Tax was modestly boosted by non-operating items, including interest income and equity-method gains and losses. In conclusion, this was a quarter of revenue and profit growth.

Segment Analysis

The Information & Communications Business generated Operating Income (segment profit, or profit from ordinary operating activities) of ¥556.2B, accounting for 65.0% of the total and representing the core business. Its profit margin remained exceptionally high at 55.1% (previous year: 52.9%, +2.2pt), led by growth in EUV blanks for LSI applications and HDD substrates, supported by data-center investment and the expanding adoption of HAMR technology amid increasing AI-related demand. The Life Care Business generated Operating Income of ¥299.8B (35.0% of total, YoY+23.6%), with a profit margin of 19.4% (previous year: 17.7%, +1.7pt). Growth in eyeglass lenses, intraocular lenses, and artificial bone, together with structural reforms in the endoscope business, including cost rationalization, contributed to the improvement. The difference in profit margins between the two businesses (55.1% versus 19.4%) is attributable to the Information & Communications Business’s concentration on advanced semiconductor materials with high barriers to entry. The +30.0% increase in total-company Operating Income was supported by profit growth in both the Information & Communications Business (+27.8%) and the Life Care Business (+23.6%), with the Information & Communications Business leading overall growth in absolute profit terms.

Key Financial Metrics

Profitability improved, with quarterly ROE of 6.4% and an Operating Income margin of 32.3% (previous year: 28.9%). Cash quality was favorable, with Operating CF / consolidated Net Income at 1.06x, exceeding 1.0x and indicating solid cash backing for earnings. FCF was ¥628.9B. Investment efficiency, measured by capital expenditures / depreciation and amortization, was 0.7x, indicating an investment phase centered on maintenance. Financial soundness remained extremely strong, with an Equity Ratio of 78.0% (previous year: 78.4%) and a Current Ratio of approximately 4.9x, calculated as current assets of ¥9,512.4B divided by current liabilities of ¥1,938.0B.

Cash Flow Analysis

Operating CF was ¥700.0B (1.06x Net Income, +22.3% YoY), indicating favorable cash conversion of earnings. Investing CF was -¥71.1B, primarily due to capital expenditures of ¥113.1B, partially offset by the withdrawal of time deposits and other items. Financing CF was -¥882.4B, with dividend payments of ¥569.1B and share repurchases of ¥280.5B being the primary sources of cash outflow. FCF (Operating CF + Investing CF) was a robust ¥628.9B. However, against Operating CF before changes in working capital of ¥1,035.2B, income taxes paid of ¥337.7B and an increase in inventories of ¥19.8B reduced final Operating CF. The timing of taxes and inventory affected short-term cash conversion. Cash generation is assessed as strong.

Quality of Earnings

Against Profit Before Tax of ¥859.9B, consolidated Net Income was ¥658.4B, resulting in an effective tax rate of 23.4%, broadly in line with the previous year’s 23.7% and showing no significant divergence from the recurring tax structure. The difference between Net Income attributable to owners of the parent of ¥657.9B and consolidated Net Income of ¥658.4B consisted only of ¥0.4B attributable to non-controlling interests and was immaterial. Non-operating income comprised interest income of ¥27.6B and equity-method gains and losses of ¥2.4B, remaining below 1% of Revenue and not large enough to materially affect earnings quality. The ¥19.1B impairment loss related to endoscopes recorded in the previous-year period did not recur in the current period, meaning that part of the profit growth resulted from the elimination of a temporary factor. Operating CF of ¥700.0B exceeded Net Income of ¥658.4B, and earnings quality was favorable from an accruals perspective as well.

Earnings Forecast and Guidance

Progress against the Full-Year forecast was 49.1% for Revenue (¥2,557.4B out of ¥5,210.0B), 50.1% for Operating Income (¥826.3B out of ¥1,650.0B), and 50.3% for Net Income (¥658.4B out of ¥1,310.0B). All were progressing at a pace +24–25pt above the standard quarterly progress rate (Q1=25%). The earnings forecast was revised during the current quarter. The fact that quarterly earnings have reached nearly half of the Full-Year forecast may reflect AI-related demand growth in the Information & Communications Business and profitability improvements in the Life Care Business progressing faster than planned. The company also expects both businesses to continue delivering double-digit revenue and profit growth under its Q2 and first-half guidance.

Shareholder Returns

The ¥569.1B in dividends paid during Q1 (¥170.00 per share) corresponded to the year-end dividend for FY2026, while the dividend forecast for the current quarter remains undecided under the company’s policy. The year-end dividend is typically announced in late April to early May, and the interim dividend is announced at the earnings release in late October to early November. Share repurchases of ¥280.5B were conducted during the quarter, bringing total returns, including dividends and share repurchases, to ¥849.6B. In addition, a resolution was passed for a new share repurchase program with a maximum value of ¥2,000B and a maximum of 1,000万 shares (2.99% of issued shares) between August 2026 and March 2027. The company has indicated a policy of improving capital efficiency by reducing its net cash position.

Catalysts

【Short Term】Key items to monitor include progress under the ¥2,000B-scale share repurchase program starting in August 2026, progress in consolidating and integrating factories following the Japanese spin-off of the endoscope business (implemented on August 1), and the interim earnings announcement and interim dividend disclosure scheduled for late October to early November.

【Long Term】Longer-term factors affecting the business structure include progress in considering the transfer of the endoscope business to a third party and other strategic options, development of next-generation blanks for EUV High NA, and expansion of production capacity for CUPO (polarizing glass for optical transceivers) and its deployment in AR-related products.

Industry Benchmark (Reference; Company Analysis)

Industry Benchmark (manufacturing)

Profitability and Returns

Both the Operating Income margin and Net Income margin substantially exceed the manufacturing-industry median, placing the company among the industry’s top performers.

Growth and Capital Efficiency

The Revenue growth rate also substantially exceeds the industry median, placing the company among the industry’s leading group in both profitability and growth.

※Source: Company compilation

Risk Factors

1. Semiconductor cycle dependence: The Information & Communications Business accounts for 65.0% of total-company Operating Income on a segment-profit basis, creating a structure in which earnings are highly sensitive to demand trends for products such as EUV blanks for LSI applications.

2. Regional concentration of demand: Revenue declines in the Chinese market have continued for endoscopes, intraocular lenses, and chromatography media, and differences in the pace of demand recovery by region may affect earnings.

3. Uncertainty associated with business portfolio restructuring: The company has begun considering the transfer of the endoscope business to a third party and other strategic options, potentially resulting in future restructuring costs and impacts on profit and loss.

Key Earnings Takeaways

1. The Operating Income margin improved by +3.4pt to 32.3% from 28.9% in the previous year. Sustained high profitability in the Information & Communications Business (55.1% margin) and improved profitability in the Life Care Business (19.4% margin, versus 17.7% in the previous year) contributed to a structural increase in margins.

2. Progress against the Full-Year forecast reached 49.1% for Revenue and 50.1% for Operating Income, substantially exceeding the standard quarterly progress rate and confirming progress ahead of the first-half and Full-Year guidance.

3. The resolution for a ¥2,000B-scale share repurchase, the policy of reducing net cash, and the start of consideration of strategic options for the endoscope business are key earnings-report highlights as part of efforts to improve capital efficiency and review the business portfolio.

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

Sensitivity: ¥3,443–¥3,651 at ±1% for the cost of equity, and ¥3,532–¥3,565 at ±0.1 for ω.

Notes:

• Because progress in Net Income against the Full-Year forecast (50%) exceeds the standard rate (25%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies progressing ahead of plan tend to exceed their forecasts; adjustments may be excessive for businesses with strong seasonality).
• Net assets at the end of the quarter are used (there is a timing difference relative to the Full-Year forecast).

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-06 / This figure does not forecast or guarantee future share prices.)

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This report is an earnings analysis document automatically generated through AI-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 a professional as necessary.

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