LINTEC Corporation FY2027 Q1 Earnings Report

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Executive Summary

The results reflected both revenue and profit growth, with the growth rate of operating income exceeding that of revenue, indicating improved profitability. Revenue was ¥8.318B (+7.9% YoY), operating income was ¥0.687B (+18.4%), ordinary income was ¥0.714B (+27.2%), and net income attributable to owners of the parent was ¥0.540B (+41.3%). The operating margin improved to 8.3% from 7.5% in the previous year, an increase of +0.7pt, while the gross margin also rose to 26.0% (25.2% in the previous year, +0.7pt). The primary factors driving the higher profit growth rate were the increased proportion of high-margin products in the Electronics and Optical-Related Business segment and the shift from recording foreign exchange losses in the previous year to recording foreign exchange gains.

Factors Affecting Business Results

【Revenue】All three segments recorded revenue growth, led by the Electronics and Optical-Related Business (¥2.554B, +12.2% YoY), which drove overall company growth. The Printing Materials and Industrial Materials-Related Business generated ¥4.837B (+7.2%), representing the largest revenue mix at 58.1%, while the Paper and Converting Materials-Related Business recorded ¥1.305B (+0.5%), reflecting modest growth. The primary drivers of revenue growth were expanding demand for the Electronics and Optical-Related Business and an improved product mix.

【Profit and Loss】Operating income increased to ¥0.687B (+18.4% YoY), and the operating margin improved to 8.3% (7.5% in the previous year, +0.7pt). While the gross margin improved to 26.0% (+0.7pt), the SG&A ratio remained nearly flat at 17.7% (17.7% in the previous year), indicating positive operating leverage. Ordinary income was ¥0.714B (+27.2%), exceeding the growth rate of operating income, as non-operating income included a foreign exchange gain of ¥0.015B (compared with a foreign exchange loss recorded in the previous year). Extraordinary income of ¥0.005B (including gains on the sale of investment securities) was a minor, temporary factor relative to net income. Net income was ¥0.540B (+41.3% YoY). In conclusion, the company delivered revenue and profit growth, with profit growth outpacing revenue growth.

Segment Analysis

The Electronics and Optical-Related Business generated revenue of ¥2.554B (+12.2% YoY) and operating income of ¥0.576B (+21.5%), with a remarkably high margin of 22.5%, making it the company’s core business and accounting for 83.8% of total company operating income of ¥0.687B. The Printing Materials and Industrial Materials-Related Business recorded revenue of ¥4.837B (+7.2%), the largest revenue mix at 58.1%, but remained a low-margin business with operating income of ¥0.0799B and a 1.7% margin. The Paper and Converting Materials-Related Business posted revenue of ¥1.305B (+0.5%), operating income of ¥0.030B, and a 2.3% margin, indicating limited growth. The revenue mix and profit mix diverge significantly, creating a structure in which overall company earnings are highly sensitive to trends in the Electronics and Optical-Related Business.

Key Financial Indicators

【Profitability】The operating margin was 8.3%, improving by +0.7pt from 7.5% in the previous year, while the net margin also improved to 6.5% from 4.9%, an increase of +1.5pt. The improvement originated from the gross margin, which rose to 26.0% (25.2% in the previous year, +0.7pt), while the SG&A ratio was contained at nearly the same level of 17.7%, indicating that expense growth was controlled relative to revenue growth.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥0.347B, down -29.1% YoY, resulting in a ratio of only 0.64x relative to net income of ¥0.540B. The primary factor was an increase of ¥0.210B in trade receivables and ¥0.059B in inventories, respectively, which absorbed working capital. The pace of cash conversion was therefore somewhat slower than the growth in earnings.【Investment Efficiency】ROE was 2.1% (quarterly result), while capital expenditures of ¥0.286B were only 0.86x depreciation and amortization of ¥0.334B, indicating a level of investment centered on maintenance and replacement.【Financial Soundness】The equity ratio remained high at 75.9% (75.1% in the previous year), while long-term borrowings declined to ¥0.079B (¥0.190B in the previous year), indicating limited dependence on interest-bearing debt.

Cash Flow Analysis

Operating Cash Flow (OCF) was ¥0.347B, representing a -29.1% YoY decline rather than ¥0.347B in the previous year → ¥0.347B. Although the subtotal before changes in working capital, including depreciation and amortization of ¥0.334B, was secured at ¥0.606B, increases of ¥0.210B in trade receivables and ¥0.059B in inventories absorbed cash. Even after partial offset by a ¥0.211B increase in trade payables, the final OCF amounted to only ¥0.347B after corporate income tax payments of ¥0.262B. Investing Cash Flow was -¥0.355B, of which capital expenditures accounted for ¥0.286B, indicating that investment was primarily maintenance and replacement-oriented. Financing Cash Flow was -¥0.498B, with dividend payments representing the main cash outflow. As a result, free cash flow (OCF + Investing Cash Flow) was slightly negative at -¥0.008B, indicating that the current period was one in which increased working capital weighed on cash-generation capacity.

Earnings Quality

The current period’s earnings growth was primarily driven by recurring factors, namely improvements in the gross margin and SG&A ratio. Extraordinary income of ¥0.005B was minor relative to net income of ¥0.540B, indicating a low degree of dependence on temporary factors. Non-operating income of ¥0.037B comprised a foreign exchange gain of ¥0.015B, dividends received of ¥0.005B, and other income of ¥0.007B. The shift from recording a foreign exchange loss in the previous year contributed to the increase in ordinary income, although the foreign exchange gain is by nature subject to reversal depending on market conditions. Comprehensive income was ¥0.658B, exceeding net income of ¥0.540B, with the primary difference being a foreign currency translation adjustment of +¥0.128B. This divergence reflects valuation differences arising from the conversion of overseas assets into yen and does not itself represent the earning power of the core business. The fact that OCF was only 0.64x net income was attributable to working capital factors, namely increases in trade receivables and inventories. Although there are no significant concerns regarding the quality of earnings reported in the income statement itself, the pace of conversion into cash was relatively slow.

Earnings Forecast and Guidance

Progress against the full-year plan was 24.3% for revenue (¥8.318B/¥34.200B), 25.0% for operating income (¥0.687B/¥2.750B), 26.0% for ordinary income (¥0.714B/¥2.750B), and 27.7% for net income (¥0.540B/¥1.950B), with profit items primarily exceeding the standard progress level of 25%. Neither the earnings forecast nor the dividend forecast was revised during the current quarter, and results remain within the company’s plan. Profit progress exceeding revenue progress suggests that the increased proportion of high-margin products in the Electronics and Optical-Related Business and improved non-operating income have had a positive impact relative to the plan.

Shareholder Returns

The full-year dividend forecast is ¥120 per share, implying a payout ratio of approximately 40.3% against forecast EPS of ¥297.79. Compared with the previous fiscal year’s annual dividend of ¥55, this represents a significant planned dividend increase. No share repurchases were recorded during Q1 (the company repurchased ¥5.24B in the same period of the previous year). Shareholder returns during the current period therefore consisted solely of dividends, with no confusion between the total return ratio and the payout ratio. Given cash and deposits of ¥5.475B and an equity ratio of 75.9%, there are no apparent concerns regarding the company’s ability to pay dividends.

Risk Factors

1. Concentration of segment earnings: The Printing Materials and Industrial Materials-Related Business accounts for 58.1% of revenue, while its operating margin is only 1.7%. The Electronics and Optical-Related Business, which represents 30.7% of the revenue mix, generates 83.8% of total company operating income of ¥0.687B. Accordingly, demand fluctuations in this segment have a significant impact on company-wide earnings.

2. Lower cash conversion due to increased working capital: OCF was ¥0.347B, down -29.1% YoY, and represented only 0.64x net income of ¥0.540B. The primary factors were increases of +¥0.210B in trade receivables and +¥0.059B in inventories. Continued expansion of working capital could weigh on free cash flow.

3. Temporary nature of non-operating income: Foreign exchange gains accounted for ¥0.015B of total non-operating income of ¥0.037B, representing a reversal from the foreign exchange loss recorded in the previous year. Depending on foreign exchange market trends, results could again shift toward a loss.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Both the operating margin and net margin are slightly below the industry median, but each remains within the IQR range.

Growth and Capital Efficiency

The revenue growth rate exceeded the industry median by +1.7pt, indicating a relatively faster pace of revenue growth.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. The growth rate of operating income (+18.4%) exceeded that of revenue (+7.9%), confirming positive operating leverage from a +0.7pt improvement in the gross margin while the SG&A ratio remained flat. Continued improvement in margins and demand trends in the Electronics and Optical-Related Business remain key areas of focus.

2. By segment, the Electronics and Optical-Related Business generates 83.8% of operating income, while the Printing Materials and Industrial Materials-Related Business accounts for 58.1% of the revenue mix but has only a 1.7% margin, indicating increasing polarization in the earnings structure.

3. OCF remained at only 0.64x net income, with increases in trade receivables and inventories weighing on cash generation. Whether this increase in working capital is corrected over the full year will be a key point in assessing cash flow quality.

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: ¥3,862–¥4,085 at ±1% for the cost of equity, and ¥3,971–¥3,972 at ±0.1 for ω.

Notes:

• Goodwill amortization of ¥71.2 per share has been added back to earnings (as a non-cash expense and to facilitate comparability with IFRS companies).
• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the end of the quarter are used (there is a timing difference relative to the full-year forecast).
• Because 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 forecast 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 available earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting a professional advisor as necessary.

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