| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥747.3B | ¥408.1B | +83.1% |
| Operating Income | ¥173.4B | ¥82.8B | +109.4% |
| Ordinary Income | ¥169.3B | ¥78.1B | +116.9% |
| Net Income | ¥117.0B | ¥54.4B | +114.9% |
| ROE | 15.8% | 8.4% | - |
For the cumulative Q3 of FY ending March 2026, Revenue was ¥747.3B (YoY +¥339.2B, +83.1%), Operating Income was ¥173.4B (YoY +¥90.6B, +109.4%), Ordinary Income was ¥169.3B (YoY +¥91.2B, +116.9%), and Net Income was ¥117.0B (YoY +¥62.6B, +114.9%), marking a more-than-doubling increase across all profit lines. Operating margin improved to 23.2% (YoY +2.9pt) and Net margin to 15.7% (YoY +2.3pt), indicating notable profitability improvement. Gross margin remained high at 27.8% (YoY +0.1pt). Revenue growth was driven by 3.6x expansion in the Supply Chain Support segment and demand recovery in Thin Films and Electronic Materials, and materially by sales of precious metals from raw material inventory (Other segment sales ¥165.6B, gross profit ¥32.7B). Profit growth was supported by SG&A dilution due to revenue expansion (SG&A ratio 4.6%, improved -2.8pt vs prior year 7.4%) and operating leverage from growth in high-value areas such as Thin Films, Fine Chemicals, and Recycling. ROE rose sharply to 15.8%, driven by improved total asset turnover (rapid revenue growth) and higher Net margin. However, working capital is substantial at ¥580.8B, and cash has halved from ¥130.5B to ¥57.6B due to deterioration in inventory days (540 days) and CCC (410 days), making conversion of profits into cash a key issue.
[Revenue] Revenue reached ¥747.3B (YoY +83.1%), a significant increase. By segment, Supply Chain Support expanded rapidly to ¥146.3B (YoY +255.6%), raising its revenue mix to 19.6%. Thin Films recovered to ¥118.5B (YoY +38.0%), and Electronics grew strongly to ¥74.1B (YoY +54.3%). Fine Chemicals & Recycling slightly declined to ¥186.4B (YoY -1.9%), while Thermal remained firm at ¥43.6B (YoY +21.7%). Other increased sharply to ¥178.4B (YoY +2392.0%), attributable to a one-time factor: to meet demand exceeding inventory for Supply Chain Support during the cumulative Q3 period, precious metal sales from raw material inventory (iridium & ruthenium) of ¥165.6B were executed. By region, overseas sales expanded materially: Asia (ex-Japan) ¥318.9B (YoY +241.3%) and Europe ¥151.5B (YoY +63.1%), confirming customer base expansion.
[Profitability] Operating Income was ¥173.4B (YoY +109.4%), growing faster than revenue. Gross margin slightly improved to 27.8% (from 27.7%, +0.1pt), and gross profit rose to ¥207.9B (YoY +84.0%) in line with revenue expansion. SG&A increased to ¥34.6B (YoY +14.0%) but SG&A ratio dropped materially to 4.6% (from 7.4%, -2.8pt), demonstrating positive operating leverage. Segment gross profit breakdown shows Thin Films at ¥60.3B and Fine Chemicals & Recycling at ¥64.2B as primary profit pillars; Other contributed ¥35.6B of gross profit (¥32.7B of which from precious metal sales), a significant one-time contribution. Ordinary Income was ¥169.3B (YoY +116.9%), slightly outpacing Operating Income. Non-operating items showed a net loss of ¥4.0B (prior year net loss ¥4.7B), modestly improved; foreign exchange gains of ¥18.2B boosted ordinary results, while interest expense ¥6.8B, foreign exchange losses ¥6.3B, and a net negative derivative valuation (gains ¥8.9B - losses ¥13.3B) partially offset the gain. Net Income was ¥117.0B (YoY +114.9%), broadly in line with Ordinary Income growth, after income taxes of ¥52.4B (effective tax rate 30.9%). In summary, revenue and profit growth were achieved, led by SG&A ratio improvement and expansion of high-margin Thin Films and Fine Chemicals & Recycling businesses driving operating profit surge.
Segment gross profit: Thin Films was ¥60.3B (from ¥34.6B, +74.3%) maintaining high profitability at a 50.9% margin and recording significant profit growth. Fine Chemicals & Recycling was ¥64.2B (from ¥49.4B, +29.9%) with a 34.4% margin, continuing stable profit generation. Electronics was ¥18.4B (from ¥16.2B, +13.6%) with a 24.9% margin, healthy. Thermal was ¥13.5B (from ¥12.0B, +12.5%) with a 31.1% margin, steady. Supply Chain Support turned profitable at ¥15.8B (from ¥0.3B), but at a lower margin of 10.8% compared with other segments, indicating a need to improve profitability as scale expands. Other was ¥35.6B (from ¥0.6B), a sharp increase showing a 20.0% margin, but ¥32.7B of this was from precious metal sales out of inventory and thus limited in repeatability. The structure shows Thin Films and Fine Chemicals & Recycling functioning as the dual profit engines, Supply Chain Support in a scale-up phase, and Other boosted temporarily by inventory liquidation gains.
[Profitability] Operating margin was 23.2% (up +2.9pt from 20.3%) and Net margin was 15.7% (up +2.3pt from 13.4%), marking clear profitability improvement. Gross margin was 27.8% (up +0.1pt), while SG&A ratio fell sharply to 4.6% (from 7.4%, -2.8pt), showing fixed-cost dilution and operating leverage from revenue expansion. ROE reached 15.8% (substantially higher than prior year). DuPont decomposition: Net margin 15.7% × Total Asset Turnover 0.596 × Financial Leverage 1.69 ≒ 15.8%, indicating that higher turnover from rapid revenue growth and margin improvement were main drivers. [Cash Quality] Inventory days lengthened to 540 days (material deterioration) and CCC extended to 410 days, with inventory and receivables buildup (inventory ¥87.8B, +112% YoY; receivables ¥66.3B, +92% YoY) causing cash to decline to ¥57.6B (YoY -56%). Non-operating income was ¥9.4B (1.3% of sales) and limited in scale, but foreign exchange gains of ¥18.2B bolstered ordinary results, partially offset by a net negative derivative valuation. [Investment Efficiency] Total asset turnover improved to 0.596x (from about 0.33x prior year) due to rapid revenue expansion, but inventory and receivables increases raised total assets (¥1,254.0B, YoY +1.2%), reducing cash generation efficiency. Construction in progress rose to ¥44.0B (from ¥18.6B, +136%), indicating progress on capacity-enhancing capex. [Financial Soundness] Equity Ratio improved to 59.0% (up +7.0pt from 52.0%), strengthening the balance sheet. Current ratio 248% and quick ratio 226% indicate ample liquidity. Short-term borrowings were sharply reduced to ¥10.0B (from ¥134.0B, -92.5%), shifting to long-term borrowings of ¥103.4B (from ¥102.7B, slight increase) to mitigate rollover risk. Interest-bearing debt was reduced to ¥118.2B (from ¥149.6B, -21.0%), and interest coverage was very high at 25.6x (Operating Income ¥173.4B ÷ interest expense ¥6.8B). D/E ratio is 0.16x (interest-bearing debt ¥118.2B ÷ equity ¥740.3B) and Debt/Capital is 13.8% (interest-bearing debt ¥118.2B ÷ (interest-bearing debt ¥118.2B + equity ¥740.3B)), reflecting a conservative capital structure.
During the cumulative Q3 period, receivables increased from ¥34.5B to ¥66.3B (+¥31.8B, +92.2%) and inventories rose from ¥41.5B to ¥87.8B (+¥46.3B, +111.9%), resulting in thick working capital of ¥580.8B (receivables ¥66.3B + inventories ¥87.8B - payables ¥240.8B + other working capital ¥687.5B). Consequently, cash and deposits decreased from ¥130.5B to ¥57.6B (-¥72.9B, -55.9%), with CCC of 410 days and inventory days of 540 days significantly lengthened. On the investing side, construction in progress increased from ¥18.6B to ¥44.0B (+¥25.4B, +136%), indicating progressing capital expenditures. On the financing side, short-term borrowings were compressed from ¥134.0B to ¥10.0B (-¥124.0B, -92.5%) while long-term borrowings slightly increased from ¥102.7B to ¥103.4B, elongating funding maturities. Inventory and receivables accumulation tied up cash amid rapid revenue growth, so going forward inventory reduction and optimization of collection terms will be required to improve cash conversion. There is risk of widening divergence between Operating Cash Flow and Net Income, making quarterly monitoring of inventory days (DIO) and CCC important.
Core recurring earnings center on Thin Films, Fine Chemicals & Recycling, and Electronics; however, note that Other segment’s gross profit of ¥32.7B from precious metal sales out of raw material inventory (about 15.7% of total gross profit ¥207.9B) temporarily boosted total gross profit. This inventory liquidation gain was executed to meet a sudden demand surge and is assessed to have limited repeatability in subsequent periods. Non-operating items showed a net loss of ¥4.0B (−2.3% vs Operating Income), modest in scale; foreign exchange gains of ¥18.2B raised ordinary results, offset partly by interest expense ¥6.8B, foreign exchange losses ¥6.3B, and net negative derivative valuation (gains ¥8.9B - losses ¥13.3B = -¥4.4B). Netting FX gains and losses yields a positive contribution of ¥11.9B to ordinary income, but sensitivity to FX volatility is high. The gap between Ordinary Income ¥169.3B and Net Income ¥117.0B is due to income taxes of ¥52.4B, with an effective tax rate of 30.9% within a normal range. From an accrual perspective, large working capital buildup (inventory +¥46.3B, receivables +¥31.8B) increases the degree to which profit recognition precedes cash inflow, raising the risk that Operating Cash Flow may lag Net Income. Long inventory days of 540 and CCC of 410 suggest delayed cash realization of profits; inventory compression and optimization of collection terms will be key to improving earnings quality.
Full Year (FY) outlook: Revenue ¥960.0B (YoY +67.3%), Operating Income ¥225.0B (YoY +135.9%), Ordinary Income ¥220.0B (YoY +134.3%), Net Income ¥150.0B (forecast EPS ¥609.95). Progress at cumulative Q3: Revenue 77.8% (standard Q3 progress 75% +2.8pt), Operating Income 77.0% (+2.0pt), Ordinary Income 77.0% (+2.0pt), Net Income 78.0% (+3.0pt), all above standard progress and progressing smoothly. Upside drivers include stronger-than-expected demand recovery in high-value areas such as Thin Films and Electronics, and gross profit uplift from precious metal sales from inventory (¥32.7B) during the period. However, precious metal sales are a one-time factor with limited repeatability toward year-end. The buildup of inventory and receivables warrants caution on the cash side; progress on inventory compression toward the year-end will be a factor that strengthens plan attainment certainty. Some reliance on FX gains (net +¥11.9B in cumulative Q3) and potential variability in derivative valuations remain volatility factors. Overall, plan attainment probability is high, but maintenance of core margins after the drop-off of inventory liquidation gains and normalization of working capital will be key evaluation criteria from next period onward.
Full Year dividend forecast is ¥155 (paid as a single year-end dividend). With forecast EPS ¥609.95, the payout ratio is about 25.4%, a conservative level with high sustainability. No interim dividend was paid at the end of Q2; policy is to concentrate dividend at year-end. With Net assets ¥740.3B, Equity Ratio 59.0%, Interest-bearing debt ¥118.2B and Debt/Capital 13.8%, the financial base is solid and dividend resilience is well supported. Although cash balances halved to ¥57.6B YoY, liquidity and debt tolerance remain strong (current ratio 248%, interest coverage 25.6x), and there is no concern about dividend-paying capacity. A note indicates a revision to the dividend forecast, but the full-year level of ¥155 is conservative relative to profit growth and leaves room for potential future increases. No share buyback has been disclosed; shareholder return is concentrated on dividends.
Deterioration in working capital efficiency and cash conversion risk: Inventory days 540 and CCC 410 have lengthened materially. Receivables +¥31.8B and inventories +¥46.3B buildup caused cash balances to decline by ¥72.9B (−55.9% YoY). There is a possibility Operating Cash Flow may fall below Net Income; inventory compression and optimization of collection terms are immediate priorities. Considering the risk of inventory valuation declines in adverse markets, normalization of working capital is key to financial stability.
Dependence on one-off earnings and risk of profitability normalization: Gross profit of ¥32.7B (approx. 15.7% of total gross profit) from precious metal sales recorded in Other is a one-time uplift. Repeatability is limited; if inventory liquidation gains disappear, gross margin and operating margin may normalize downward. Continued growth in high-value areas (Thin Films, Fine Chemicals & Recycling) is a prerequisite for maintaining profitability.
FX and precious metal price volatility and P&L fluctuation risk: Non-operating items included FX gains ¥18.2B and FX losses ¥6.3B for a net +¥11.9B contribution to Ordinary Income. Derivative valuation resulted in a net negative (gains ¥8.9B - losses ¥13.3B = -¥4.4B). Sensitivity to volatility is high. With rising overseas sales ratio (Asia + Europe combined ¥469.9B, 62.9% of revenue), FX impacts are larger, making hedge policy management important. Prices of precious metals (iridium, ruthenium, etc.) directly affect revenue and gross margin; managing inventory positions is key to risk mitigation.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 23.2% | 8.9% (5.4%–12.7%) | +14.3pt |
| Net Margin | 15.7% | 6.5% (3.3%–9.4%) | +9.2pt |
Both Operating and Net margins significantly exceed industry medians, with differentiation in high-value areas and pricing power as profit sources.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 83.1% | 2.8% (-1.5%–8.8%) | +80.3pt |
Revenue growth is well above industry median, driven by rapid expansion of Supply Chain Support and demand recovery in Thin Films and Electronic Materials.
※Source: Company tabulation
Structural improvement in profitability and high likelihood of meeting full-year plan: Operating margin 23.2% (YoY +2.9pt) and Net margin 15.7% (YoY +2.3pt) show marked improvement and remain well above industry median. SG&A ratio improved from 7.4% to 4.6% (-2.8pt), demonstrating operating leverage from revenue expansion. Progress toward the full-year plan is strong, with Q3 cumulative progress for revenue and profits at about 77% vs standard Q3 progress (75%). Continued growth in high-value areas (Thin Films, Fine Chemicals & Recycling) is the core earnings driver and indicates structural margin improvement.
Limited repeatability of inventory liquidation gains and focus on normalizing working capital: Gross profit ¥32.7B from precious metal sales in Other is a one-off and unlikely to repeat, making maintenance of core margins after this effect a key evaluation axis. Working capital efficiency deterioration (inventory days 540, CCC 410) led to cash declines of -55.9% YoY; inventory compression and optimization of collection terms to improve cash conversion are critical. The widening gap risk between Operating Cash Flow and Net Income makes quarterly monitoring of DIO and CCC important.
Strong financial position and investment capacity: Equity Ratio 59.0%, Current Ratio 248%, Interest Coverage 25.6x indicate strong financial health. Short-term borrowings were compressed from ¥134.0B to ¥10.0B (-92.5%), reducing rollover risk. Construction in progress ¥44.0B (YoY +136%) shows capex progress for medium-term capacity expansion. Payout ratio ~25.4% is conservative and sustainable, and thick equity (Net assets ¥740.3B) supports a balance of investment capacity and shareholder returns.
This report is an earnings analysis document automatically generated by AI based on XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by our firm from public financial statements. Investment decisions are your responsibility; please consult a professional adviser as necessary.