TOYO Corporation FY2026 Q3 Earnings Report

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Executive Summary

All seven segments recorded increases in revenue or nearly so, and together with improved cost efficiency, this resulted in substantial increases in both revenue and earnings. Revenue was ¥28.41B (+21.2% year on year), Operating Income was ¥2.72B (+151.4%), Ordinary Income was ¥3.22B (+162.6%), and Net Income (consolidated net income) was ¥2.09B (+245.3%). The Operating Margin improved substantially to 9.6% from 4.6% a year earlier, while the gross margin increased to 44.6% (from 44.3% a year earlier) and the SG&A ratio declined to 35.0%. In addition to the effect of higher revenue, improved cost efficiency supported earnings growth. The growth rate of Ordinary Income (+162.6%) exceeded that of Operating Income (+151.4%), indicating that non-operating factors such as foreign exchange gains and gains on the management of investment partnerships also contributed to the increase in earnings.

Factors Affecting Results

【Revenue】Revenue was ¥28.41B (+21.2% year on year). By composition, Advanced Mobility and Information & Communications/Information Security each accounted for 23.5%, followed by Decarbonization/Energy at 16.5% and EMC/Large Antennas at 14.4%. In terms of growth, EMC/Large Antennas increased substantially by +43.7%, while Defense/Marine grew by +71.6%. Software Development Support was the only segment to record a slight decline in revenue, down -3.0%.

【Profit and Loss】Operating Income was ¥2.72B (+151.4% year on year), with the Operating Margin improving by +495bp to 9.6% from 4.6% a year earlier. Ordinary Income was ¥3.22B (+162.6%), with non-operating income of ¥0.53B, including a foreign exchange gain of ¥0.15B and gains on the management of investment partnerships of ¥0.17B, boosting income at the ordinary-income level. Extraordinary gains and losses were limited, consisting of a gain of ¥0.01B and an almost negligible loss, leaving Profit Before Tax at ¥3.23B, virtually in line with Ordinary Income of ¥3.22B. Consolidated Net Income of ¥2.09B increased +245.3% from ¥0.60B a year earlier, exceeding the growth rate of Ordinary Income. The decline in the effective tax rate from approximately 49% in the prior year to approximately 35.6% in the current period also contributed. In conclusion, the Company achieved higher revenue and earnings as actual revenue growth across all segments coincided with improved cost efficiency, resulting in an earnings growth rate substantially exceeding the revenue growth rate.

Segment Analysis

The core Advanced Mobility segment was the largest contributor in both scale and growth, with revenue of ¥6.69B (+24.8%), Operating Income of ¥1.01B (+247.3%), and a margin of 15.0%. EMC/Large Antennas recorded a substantial increase in earnings, with revenue of ¥4.10B (+43.7%) and Operating Income of ¥0.47B (+739.9%), reflecting a marked recovery from the low profitability recorded in the prior year. Defense/Marine achieved high growth, with revenue of ¥2.68B (+71.6%) and Operating Income of ¥0.24B (+327.1%), although its margin remained relatively low compared with other segments at 8.9%. Information & Communications/Information Security delivered stable growth, with revenue of ¥6.67B (+12.9%), Operating Income of ¥0.78B (+21.1%), and a margin of 11.7%. Decarbonization/Energy was essentially flat, with revenue of ¥4.69B (+1.4%), but maintained the highest margin among all segments at 19.9%. Software Development Support was the only segment to record a decline in revenue, at ¥1.81B (-3.0%), but remained highly profitable, with Operating Income of ¥0.33B (+16.3%) and a margin of 18.0%. Overall, Advanced Mobility, EMC, and Defense/Marine drove expansion in scale, while Decarbonization/Energy and the software-related businesses contributed high margins, demonstrating a clear division of roles among the segments.

Key Financial Indicators

【Profitability】The Operating Margin improved substantially to 9.6% from 4.6% a year earlier, while the Net Profit Margin (based on consolidated net income) improved to 7.3% from 2.6%. Trends in the gross margin, which was 44.6% (44.3% a year earlier), and the SG&A ratio, which declined to 35.0% (from 38.6%), also indicate improved cost efficiency. 【Cash Quality】Comprehensive Income of ¥2.44B exceeded consolidated Net Income of ¥2.09B by ¥0.35B, as positive changes in the valuation difference on securities of ¥0.24B and foreign currency translation adjustments of ¥0.09B were added as Other Comprehensive Income. 【Investment Efficiency】ROE, based on Net Income attributable to owners of the parent, was 7.2%. Against Total Assets of ¥41.96B and Net Assets of ¥29.16B, earnings growth from higher revenue and earnings contributed to improved capital efficiency. 【Financial Soundness】The Equity Ratio remained high at 69.5%, slightly down from 70.1% a year earlier. With Cash and Deposits of ¥4.25B versus Short-Term Borrowings of ¥1.60B, reduced by -40.7% from ¥2.70B a year earlier, the financial foundation remains conservatively structured.

Cash Flow Analysis

As detailed cash flow statement information is not included in the disclosed data, cash trends are analyzed based on changes in the balance sheet. Cash and Deposits increased +16.2% to ¥4.25B from ¥3.66B a year earlier, indicating an accumulation of funds. Meanwhile, Inventories increased substantially to ¥5.36B, up +41.5% from ¥3.79B a year earlier, suggesting that the accumulation of work in progress and inventories associated with business expansion is placing pressure on working capital. Contract Liabilities, by contrast, increased to ¥5.24B, up +44.9% from ¥3.62B a year earlier, indicating that increased customer advances are supporting the cash position through the advance collection of funds associated with orders. On the financing side, Short-Term Borrowings were reduced to ¥1.60B, down -40.7% from ¥2.70B a year earlier, indicating continued restraint in external funding through the use of internal funds and customer advances. Investment Securities increased to ¥3.34B, up +39.5% from ¥2.39B a year earlier, suggesting that a portion of surplus funds has been allocated to investments.

Quality of Earnings

In addition to Operating Income of ¥2.72B, which represents the earning power of the core business, non-operating income of ¥0.53B—including a foreign exchange gain of ¥0.15B, gains on the management of investment partnerships of ¥0.17B, dividend income of ¥0.03B, and other income of ¥0.15B—boosted Ordinary Income. This non-operating income was equivalent to approximately 1.9% of Revenue. Extraordinary gains and losses were limited, consisting of an extraordinary gain of ¥0.01B from the sale of fixed assets and an almost negligible extraordinary loss, and therefore had a limited impact on quarterly earnings. Corporate income taxes and other taxes were ¥1.15B against Profit Before Tax of ¥3.23B, resulting in an effective tax rate of approximately 35.6%. This substantial decline from approximately 49.2% in the prior year was also a factor behind Net Income growth of +245.3% exceeding Ordinary Income growth of +162.6%. Comprehensive Income of ¥2.44B exceeded consolidated Net Income of ¥2.09B by ¥0.35B, with market-value-related factors such as the valuation difference on securities and foreign currency translation adjustments having a positive impact. However, these items may fluctuate depending on market conditions and differ in nature from profit generated by the core business, which should be noted.

Earnings Forecast and Guidance

Progress against the full-year forecast was 72.8% for Revenue (¥28.41B/¥39.00B), 75.4% for Operating Income (¥2.72B/¥3.60B), 87.0% for Ordinary Income (¥3.22B/¥3.70B), and 80.0% for Net Income (on a basis attributable to owners of the parent) (¥2.081B/¥2.60B). While Operating Income progress remained approximately standard, in line with the elapsed-quarter ratio, Ordinary Income was progressing at a pace exceeding that of Operating Income, with non-operating factors such as foreign exchange gains and gains on the management of investment partnerships contributing to the increase. The full-year forecast had not been revised as of the current quarter, while the increase in Contract Liabilities (+44.9% year on year) provides support for revenue from the second half onward.

Shareholder Returns

An interim dividend of ¥30 has been paid, and the full-year forecast remains ¥70, unchanged. The Payout Ratio against the full-year forecast EPS of ¥120.66 is approximately 58.0% (¥70/¥120.66), and is at a similar level when based on the full-year forecast Net Income of ¥2.60B. Cash and Deposits of ¥4.25B exceed interest-bearing debt of ¥1.60B, representing a conservative financial structure with a certain degree of flexibility from the perspective of dividend funding.

Risk Factors

1. Changes in working capital efficiency: Inventories increased +41.5% year on year to ¥5.36B, while Contract Liabilities (customer advances) also increased +44.9% to ¥5.24B. The accumulation of work in progress and inventories associated with business expansion could result in funds becoming tied up in working capital, making the pace at which inventories are converted into sales a key monitoring point going forward.

2. Reliance on non-operating income: Of Ordinary Income of ¥3.22B, non-operating income accounted for ¥0.53B, including a foreign exchange gain of ¥0.15B and gains on the management of investment partnerships of ¥0.17B. The growth rate of Ordinary Income (+162.6%) exceeded that of Operating Income (+151.4%). These items are influenced by foreign exchange rates and investment partnership performance and have a non-recurring nature.

3. Reliance on short-term funding: Short-Term Borrowings were reduced to ¥1.60B, down -40.7% year on year, but interest-bearing debt is primarily short-term funding. Although Cash and Deposits of ¥4.25B exceed this amount and formal liquidity concerns are limited, the short-term bias of the funding structure warrants attention.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (trading)

Profitability and Returns

The Company’s profitability is substantially above the industry median, positioning it among the high-margin companies within the industry.

Growth and Capital Efficiency

The growth rate is more than four times the industry median, representing an outstanding pace of revenue growth within the industry.

※Source: Compiled by the Company

Key Takeaways from the Results

1. The Operating Margin improved by +495bp to 9.6% from 4.6% a year earlier, with both an increase in the gross margin and a decline in the SG&A ratio. Six of the seven segments recorded revenue growth, indicating broad-based earnings growth and a structure in which earnings expansion does not depend on any particular segment.

2. Ordinary Income progress of 87.0% exceeded Operating Income progress of 75.4%, reflecting a significant contribution from non-operating factors such as foreign exchange gains and gains on the management of investment partnerships. The sustainability from the next fiscal year onward of this non-recurring boost will depend on foreign exchange trends and investment performance.

3. Contract Liabilities (customer advances) increased +44.9% year on year to ¥5.24B, supporting revenue from the second half onward, while Inventories also increased +41.5%. The strength of orders and the accumulation of working capital are progressing in parallel, making the pace at which inventories are converted into sales a key determinant of earnings quality going forward.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on 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 to take any specific investment action.

Sensitivity: ¥1,295–¥1,368 for a ±1% change in the cost of equity, and ¥1,330–¥1,331 for a ±0.1 change in ω.

Notes:

• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end are used (there is a timing difference from 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 predict 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 responsibility, after consulting with professionals as necessary.

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