ASAHI INTECC CO.,LTD. FY2026 FY Earnings Report

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Executive Summary

Asahi Intecc's fiscal year ended June 2026 resulted in higher revenue and earnings, accompanied by a significant improvement in profit margins. Revenue was ¥1454.2B (+21.2% YoY), Operating Income was ¥452.2B (+50.3%), Ordinary Income was ¥451.9B (+52.8%), and Net Income was ¥321.5B (+23.7%; the reduction in extraordinary losses from the previous year also contributed). The primary drivers of revenue growth were the dual growth engines of the Medical Business (+17.6%) and Device Business (+34.1%). The gross margin expanded to 70.4% (67.6% in the previous year), while the SG&A ratio was held almost flat, resulting in a substantial improvement in the Operating Income margin to 31.1% (25.0% in the previous year).

Factors Affecting Performance

【Revenue】Revenue was ¥1454.2B, up +21.2% YoY. By segment, the Medical Business generated ¥1268.0B (87.2% of total revenue, +17.6%), while the Device Business generated ¥353.9B (24.3% of total revenue, +34.1%; including intersegment internal sales). Both secured double-digit growth. By region, overseas expansion led growth, with China at ¥378.0B (¥288.2B in the previous year, +31.1%) and the United States at ¥321.3B (+21.8%); Japan remained at ¥208.4B (+10.4%).

【Profit and Loss】Operating Income was ¥452.2B (+50.3%), and the Operating Income margin improved by approximately 6.1pt from 25.0% in the previous year to 31.1%. As the gross margin expanded from 67.6% in the previous year to 70.4% and the SG&A ratio remained almost flat at 39.4%, a high proportion of the incremental revenue flowed through to Operating Income. Ordinary Income was ¥451.9B (+52.8%), with a limited impact from non-operating income and expenses (a net negative of ¥0.3B). Net Income was ¥321.5B (+23.7%). The reduction in impairment losses from ¥92.4B in the previous year to ¥10.6B in the current period contributed to this result. Meanwhile, Net Income growth relative to profit before tax was below the growth rate of Operating Income, reflecting an increase in the effective tax rate (the rate improved from 31.4% in the previous year to 28.1% in the current period, although it should be noted that the previous year's tax burden ratio was distorted by the impact of extraordinary losses). In conclusion, this was a period of higher revenue and earnings, with earnings growth exceeding revenue growth, demonstrating operating leverage.

Segment Analysis

The Medical Business was the company's primary earnings contributor, with revenue of ¥1268.0B (+17.6%), Operating Income of ¥461.9B (+38.1%), and a 36.4% profit margin. Its profit exceeded consolidated Operating Income (¥452.2B) in scale. The Device Business reported revenue of ¥353.9B (+34.1%), Operating Income of ¥84.8B (+83.5%), and a 24.0% profit margin, surpassing the Medical Business in both growth and profit growth, with a notable improvement in profitability. Both segments recorded higher revenue and earnings; however, corporate expense adjustments of negative ¥94.6B were deducted from consolidated profit, resulting in consolidated Operating Income of ¥452.2B versus combined segment profit of ¥546.8B. Although the revenue mix remains dependent on the Medical Business, the Device Business's high growth and improving profit margin merit attention as signs of diversification.

Key Financial Indicators

【Profitability】The Operating Income margin was 31.1%, improving from 25.0% in the previous year, while the Net Income margin rose substantially to 22.1% from 10.6% in the previous year. The gross margin expanded to 70.4% (67.6% in the previous year), and R&D expenses remained at a high level of investment at ¥133.7B (9.2% of revenue).【Cash Flow Quality】Operating Cash Flow (OCF) was ¥400.9B, almost flat at -1.1% YoY. Although the OCF-to-Net Income ratio was approximately 1.25x, indicating solid earnings support, growth in working capital (cash outflows of ¥15.3B from inventories and ¥15.9B from trade receivables) constrained OCF growth.【Investment Efficiency】ROE rose substantially to 18.4% from 8.4% in the previous year (reflecting Net Income growth and the accumulation of equity), while the Equity Ratio was 79.9% (77.9% in the previous year), balancing capital efficiency and financial soundness.【Financial Soundness】Liquidity remains strong, with current assets of ¥1215.7B against current liabilities of ¥321.2B and cash and deposits of ¥642.6B. Long-term borrowings have been reduced to ¥42.8B.

Cash Flow Analysis

Operating Cash Flow (OCF) was almost flat at ¥400.9B (¥405.4B in the previous year, -1.1%), lagging the pace of Net Income growth. This was attributable to cash outflows from increases of ¥15.3B in inventories and ¥15.9B in trade receivables exceeding the inflow from a ¥22.7B increase in trade payables, indicating an accumulation of working capital accompanying business expansion. Investing Cash Flow was -¥117.4B, including capital expenditures of ¥83.8B, which remained within depreciation and amortization of ¥88.0B, suggesting a restrained investment stance focused primarily on replacement investment. Financing Cash Flow was -¥199.7B, mainly due to share repurchases of ¥105.5B and dividend payments. Free Cash Flow (OCF + Investing Cash Flow) was secured at ¥283.6B, a level sufficient to support both shareholder returns and growth investment.

Quality of Earnings

The majority of current-period profit consisted of recurring earnings generated by operating activities, while non-operating income and expenses were limited to a net negative of ¥0.3B. Extraordinary income was primarily composed of gains on the sale of investment securities of ¥15.3B, while extraordinary losses mainly comprised impairment losses of ¥10.6B and valuation losses on investment securities of ¥1.6B. The net impact remained a negative of approximately ¥4.9B, limiting its effect on Net Income of ¥321.5B. As impairment losses of ¥92.4B accounted for most extraordinary losses in the previous year, the reduction in extraordinary losses in the current period supported Net Income growth. Comprehensive income was ¥400.6B, exceeding Net Income of ¥321.5B, mainly due to a positive foreign currency translation adjustment of ¥73.7B. This difference should not be interpreted as representing the underlying earnings power of the core business.

Earnings Forecast and Guidance

For the next fiscal year, ending June 2027, the company forecasts Revenue of ¥1617.9B (+11.3% YoY), Operating Income of ¥521.3B (+15.3%), and Ordinary Income of ¥526.0B (+16.4%). The plan assumes a slowdown from the current period's revenue growth (+21.2%) and earnings growth (+50.3%), and can be interpreted as a conservative assumption that the high operating leverage seen in the current period will not continue at the same level. Forecast EPS is ¥142.59 (+18.2% from actual EPS of ¥120.59 in the current period), while the dividend forecast is ¥49.91, representing an increase from ¥48.24 in the current period.

Shareholder Returns

The current-period dividend was ¥48.24 at fiscal year-end, consisting of an ordinary dividend of ¥42.21 and a commemorative dividend of ¥6.03; no interim dividend was paid. The Payout Ratio was 40.0%, calculated based on Net Income. In addition, the company conducted share repurchases of ¥105.5B. Combined with total dividends of ¥127.99B, the Total Return Ratio reached approximately 73.1% (¥233.5B / Net Income of ¥320.8B). Total returns represented approximately 82% of Free Cash Flow of ¥283.6B, indicating that returns were implemented within the scope of cash generation. For the next fiscal year, the company has announced a dividend increase plan, with a forecast dividend of ¥49.91.

Risk Factors

1. Segment concentration risk: The Medical Business accounts for 87.2% of revenue and the majority of segment profit, creating a structure that is susceptible to fluctuations in demand and pricing policies in that business.

2. Accumulation of working capital: Inventories and trade receivables each represented cash outflow factors exceeding ¥15B, causing OCF to grow relatively slowly compared with Net Income. Inventory and receivables turnover trends will be important factors affecting cash-generation capacity from the next fiscal year onward.

3. Foreign exchange and geographic concentration risk: Revenue from China was substantial at ¥378.0B (26.0% of total revenue), and a foreign exchange loss of ¥2.6B was recorded. The earnings structure is susceptible to overseas demand, including demand from China, and foreign exchange fluctuations.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The company has profitability levels substantially above the manufacturing industry median and ranks among the leaders within the industry.

Growth and Capital Efficiency

Revenue growth also substantially exceeds the industry median, positioning the company favorably in both profitability and growth.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. The improvement in the gross margin to 70.4% and the Operating Income margin to 31.1% resulted from the dual contributions of the Medical Business's high-margin product mix and improved profitability in the Device Business (24.0% profit margin, +83.5% earnings growth), confirming earnings improvement that is not dependent on a single segment.

2. The fact that OCF remained flat relative to Net Income growth was attributable to the accumulation of working capital through increases in inventories and trade receivables. Changes in cash efficiency during a period of revenue growth will be an important area to monitor going forward.

3. The Total Return Ratio reached approximately 73%, reflecting active share repurchases in addition to a Payout Ratio of 40.0%. Against the backdrop of financial soundness represented by an Equity Ratio of 79.9%, capital allocation continues to balance shareholder returns and growth investment (R&D ratio of 9.2%).

Theoretical Share Price (Reference Value)

Sensitivity: ¥924–¥980 at ±1% for the cost of equity, and ¥944–¥963 at ±0.1 for ω.

Notes:

• Goodwill amortization of ¥0.4/share has been added back to earnings (to account for a non-cash expense and comparability with IFRS companies).

(Calculation model: Residual Income Model (Ohlson-type; explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not 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 professionals as necessary.

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