SANSHIN ELECTRONICS (8150) FY2026 FY Earnings Report

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Executive Summary

Driven by increased revenue in the Device Business and high-profit growth in the Solutions Business, the Company posted higher revenue and earnings, with operating leverage taking effect. Revenue was ¥1723.7B (up +9.5% year on year), Operating Income was ¥69.1B (up +19.4%), Ordinary Income was ¥60.8B (up +23.2%), and Net Income was ¥49.5B (up +42.7%). The fact that Net Income recorded the largest growth among the profit indicators was attributable to the one-time gain on the sale of fixed assets of ¥10.8B; therefore, the actual pace of core business growth is more accurately captured by the growth rates of Operating Income and Ordinary Income.

Factors Behind Performance Changes

【Revenue】Revenue was ¥1723.7B (up +9.5% year on year). Both businesses contributed to the revenue increase: the Device Business (87.2% of total revenue) grew by +7.9%, while the Solutions Business (12.8%) grew by +22.6%. By region, Japan grew by +26.7% and Other Asia by +27.4%, while China declined by -15.1%, indicating divergent demand trends across regions.

【Profit and Loss】Operating Income was ¥69.1B (up +19.4%), and the Operating Margin improved to 4.0% (3.7% in the previous year). In addition to the improvement in the gross margin to 10.7% (10.5% in the previous year), as the increase in cost of sales (+9.4%) slightly trailed revenue growth, the SG&A ratio declined to 6.7% (6.8% in the previous year), confirming operating leverage. Ordinary Income was ¥60.8B (up +23.2%); however, foreign exchange losses of ¥5.8B were recorded in non-operating expenses, restraining the growth in Ordinary Income. Net Income was ¥49.5B (up +42.7%), boosted by net extraordinary gains of +¥8.1B, including an extraordinary gain on the sale of fixed assets of ¥10.8B. Segment profit (based on Ordinary Income and loss) declined by -2.8% in the Device Business, whose profit margin remained at 1.8%, while the Solutions Business posted a +56.6% increase in profit and a high profit margin of 15.3%, generating 55.7% of total segment profit and serving as the main source of profit. Revenue and earnings increased.

Segment Analysis

The Device Business generated revenue of ¥150.2B (up +7.9% year on year) and segment profit of ¥26.9B (down -2.8%), with a profit margin of 1.8%. Although it is the largest business, accounting for 87.2% of total revenue, its profit margin is low and its contribution to profit growth is limited. The Solutions Business generated revenue of ¥22.1B (up +22.6%) and segment profit of ¥33.8B (up +56.6%), with a high profit margin of 15.3%. While accounting for 12.8% of total revenue, it accounted for 55.7% of segment profit. The improvement in the Company-wide profit margin has been achieved through high-profit growth in the Solutions Business offsetting the Device Business’s low-margin structure, and future changes in the business mix will determine the direction of the Company-wide margin. Note that segment profit is based on Ordinary Income and loss, and its calculation basis differs from that of consolidated Operating Income.

Key Financial Indicators

【Profitability】The Operating Margin of 4.0% (3.7% in the previous year) and Net Profit Margin of 2.9% (2.2% in the previous year) both improved, while the gross margin also improved slightly to 10.7% (10.5% in the previous year). However, the EBIT margin remains low at 4.0%, indicating limited earnings-buffering capacity against price and foreign exchange fluctuations.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥57.0B, or 1.15 times Net Income of ¥49.5B, indicating solid cash backing for earnings. While increases in accounts receivable of ¥423.9B and inventories of ¥209.7B constrained OCF, an increase in accounts payable of ¥32.9B offset this impact.【Investment Efficiency】ROE was 10.8%, formed by the combination of a Net Profit Margin of 2.9%, total asset turnover of approximately 1.9 times, and financial leverage of approximately 2.0 times. Asset turnover and leverage were the primary supports for profitability.【Financial Soundness】The Equity Ratio improved to 50.5% (48.2% in the previous year), and cash and deposits amounted to ¥96.8B. Interest-bearing debt consisted solely of short-term borrowings of ¥197.5B, and the Company’s high dependence on short-term funding requires monitoring.

Cash Flow Analysis

Operating Cash Flow (OCF) was ¥57.0B, up +43.3% year on year, securing cash generation exceeding Net Income of ¥49.5B. In terms of working capital, increases in accounts receivable of ¥20.8B and inventories of ¥5.8B put pressure on funds, but the increase in accounts payable of ¥32.9B absorbed this impact, mitigating the overall cash outflow. Investing Cash Flow generated ¥6.8B of cash, aided by proceeds of ¥11.5B from the sale of property, plant and equipment, while capital expenditures were small at ¥1.3B, remaining below depreciation and amortization of ¥3.1B. Free Cash Flow was ¥63.8B; however, given that it includes proceeds from asset sales, the Company’s recurring cash-generation capacity is more accurately captured on a post-capital-expenditure OCF basis, at approximately ¥55.8B. Financing Cash Flow was -¥65.9B, primarily due to the reduction of short-term borrowings and dividend payments, indicating progress toward streamlining the capital structure while maintaining a stable cash position.

Quality of Earnings

The increase in Net Income for the current period was supported by an extraordinary gain of ¥10.8B, including a gain on the sale of fixed assets of ¥10.8B, representing a one-time factor equivalent to approximately 21.8% of Net Income. Meanwhile, Operating Income, which reflects core earnings power, increased by +19.4% year on year, and Ordinary Income increased by +23.2%, confirming an upward earnings trend even excluding extraordinary gains and losses. Non-operating expenses included foreign exchange losses of ¥5.8B and interest expenses of ¥4.8B, weighing on Ordinary Income and exceeding non-operating income, including dividend income of ¥3.0B. OCF was 1.15 times Net Income, with no indication that earnings were excessively dependent on accrued but uncollected revenue; consistency between accounting profit and cash flow was favorable. As the gain on the sale of fixed assets is expected to fall away in the next period, comparisons of Net Income should focus on the underlying earnings trend excluding extraordinary gains and losses.

Earnings Forecast and Guidance

The forecast for the next period is Revenue of ¥1860.0B (up +7.9% year on year), Operating Income of ¥55.5B (down -19.7%), Ordinary Income of ¥50.0B (down -17.7%), and EPS of ¥294.05. The plan calls for continued revenue growth but lower earnings, reflecting a conservative incorporation of the disappearance of the gain on the sale of fixed assets that contributed to the current period, as well as the low-margin structure of the Device Business and foreign exchange and demand fluctuations. The decline from current-period Operating Income of ¥69.1B to the forecast ¥55.5B suggests a partial reversal of the improvement in the current-period Operating Margin of 4.0%. Sustaining growth in the Solutions Business and improving the profitability of the Device Business will be key to next-period performance.

Shareholder Returns

The annual dividend for the current period totaled 190 yen, comprising an interim dividend of 40 yen and a year-end dividend of 150 yen, resulting in a Payout Ratio of 47.4% (total dividends of ¥23.5B ÷ Net Income attributable to owners of the parent of ¥49.5B). No share repurchases were recorded, and shareholder returns are therefore evaluated solely on the basis of dividends. OCF of ¥57.0B was approximately 2.4 times total dividends, indicating that the current-period dividend was sufficiently supported by cash. The Company plans to reduce the dividend to 140 yen per share in the next period. The Payout Ratio against forecast EPS of ¥294.05 is expected to be approximately 47.6%, representing a policy designed to maintain a broadly similar Payout Ratio even after the decline in earnings.

Risk Factors

1. Concentration of revenue in the Device Business and profitability: The Device Business accounts for 87.2% of total revenue, while its segment profit margin is low at 1.8% and profit declined by -2.8% year on year. Changes in supply and demand for semiconductors and electronic components, as well as product mix fluctuations, could have a significant impact on the Company-wide profit margin.

2. Dependence on short-term borrowings for funding: Interest-bearing debt of ¥197.5B consists entirely of short-term borrowings, while cash and deposits of ¥96.8B amount to only approximately 0.49 times short-term borrowings. Although working capital assets equivalent to a current ratio of 183.8% are available, changes in refinancing conditions and short-term interest rates could affect funding terms.

3. Dependence on major customers and regions: Sales to Nintendo amounted to ¥297.5B, representing approximately 19.8% of Device Business revenue. Changes in Nintendo’s product cycle or procurement policy could directly affect performance. By region, sales in China declined by -15.1% year on year, and demand fluctuations within Asia also require monitoring.

Industry Benchmark (For Reference; Compiled by the Company)

Key Points from the Earnings Results

1. The primary driver of higher revenue and earnings was the Solutions Business’s strong growth (revenue +22.6%, segment profit +56.6%, profit margin 15.3%). A shift in the earnings structure is evident, with the business generating 55.7% of segment profit despite accounting for 12.8% of total revenue.

2. The increase in Net Income (+42.7%) includes an extraordinary gain of ¥10.8B (gain on the sale of fixed assets). The pace of core business growth is more accurately captured by Operating Income (+19.4%) and Ordinary Income (+23.2%). The next-period forecast calls for higher revenue but lower earnings, primarily due to the disappearance of the one-time factors in the current period.

3. Although the fact that all interest-bearing debt consists of short-term borrowings is offset to some extent by a current ratio of 183.8% and high interest coverage, it remains an item requiring ongoing monitoring as part of the funding structure.

Theoretical Share Price (Reference Value)

Sensitivity: ¥3,488–¥3,687 at ±1% for the cost of equity, and ¥3,580–¥3,589 at ±0.1 for ω.

Notes:

• Amortization of goodwill of 1.3 yen/share is added back to profit (to account for a non-cash expense and comparability with IFRS companies).
• As forecast ROE is below the cost of equity, the theoretical value is below book value per share.

(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; it is not a forecast of the market share price or a recommendation of any specific investment action, and 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 summary 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 discretion and responsibility, after consulting a professional as necessary.

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