IBIDEN CO., LTD. 1Q Earnings Preview

Focus on Sustained High Growth in AI IC Package Substrates, Initial Phase of JPY 500B Investment Program, and Ceramics Segment Earnings Bottoming Out

PublishedJuly 31, 2026 at 15:30 GMT+9

Summary

The FY2027/3 1Q marks the first quarter of the fourth year under the mid-term management plan "Moving on to our New Stage 115 Plan." The key confirmation points are the order trend for high-performance IC package substrates for generative AI servers in the Electronics segment, and the ramp-up status of the large-scale capex program totaling approximately JPY 500B over three years. The company targets revenue of JPY 1T and operating income of JPY 300B (30% OPM) by FY2030, driving a transformation from a conventional package substrate manufacturer into a high-value-added infrastructure company for the AI era. The Ceramics segment saw operating income deteriorate -37.4% YoY in the prior fiscal year, and the keys to profit recovery are capturing demand for DPF and AFP in emerging markets and narrowing losses in the NEV business. Additionally, the prior year's net income was temporarily inflated by JPY 49.4B in gains on sales of investment securities, and investors should watch how this reversal manifests in this fiscal year's P&L, with particular attention to qualitative changes in extraordinary items.

Key Points for Next Quarter

Key Points & Focus	Implications
Electronics Segment Revenue Growth1Q Electronics segment revenue YoY growth rate	Can the company sustain the +23.4% full-year growth from the prior period? The full-year revenue plan of JPY 500B (+20.1%) is predicated on high growth in Electronics; confirming a pace exceeding +20% in 1Q would increase confidence in full-year target achievement
Capex and Depreciation BurdenElectronics segment capex actuals and incremental depreciation	Against prior-year Electronics segment depreciation of JPY 55.2B (including JPY 3.8B for idle fixed assets), the focus is on how much the additional burden from the JPY 500B investment program compresses margins
Ceramics Segment Profitability RecoveryCeramics segment OPM YoY trajectory	Full-year OPM declined to 9.3% (vs. 14.5% in the prior year). Confirm whether narrowing NEV business losses and emerging-market DPF orders contribute to a margin inflection
Operating Margin Level1Q actual vs. full-year consolidated OPM plan of 18.0%	The improvement from 14.9% in the prior year to the planned 18.0% assumes a rising mix of high-value-added products in Electronics. Exceeding the 16% level in 1Q would signal an improving trend
Financial Health and Capital EfficiencyEquity ratio and ROE trajectory	Prior year-end ROE was 12.2% with an equity ratio of 57.3%. Interest-bearing debt may re-expand during this heavy investment phase, raising questions about the balance between capital efficiency and financial soundness
Mid-Term Plan KPIsProgress toward "Revenue JPY 1T + 30% OPM" by FY2030	Prior-year revenue of JPY 416.2B represents approximately 42% of the mid-term plan's final-year target. Achieving this year's JPY 500B plan would reach 50%, marking a critical inflection point for medium- to long-term investment decisions
FX ImpactGap between assumed and prevailing exchange rates	The prior year recorded JPY 320M in FX gains. Confirm the impact of the recent yen appreciation trend on JPY-denominated results for the Electronics segment, which has a high overseas revenue ratio

Key Issues from Previous Results (FY2026/3 Full-Year Results)

The prior fiscal year delivered revenue of JPY 416,201M (+12.7%) and operating income of JPY 62,027M (+30.3%), with both top and bottom lines growing, powered by the Electronics segment riding the generative AI demand wave. Meanwhile, the Ceramics segment saw a sharp profit decline due to a slowdown in the automotive exhaust system market and rising fixed costs from EV-related operations, bringing the urgency of transforming the business portfolio from "volume" to "quality" into sharp focus. This fiscal year's plan calls for ambitious growth of revenue JPY 500B (+20.1%) and operating income JPY 90B (+45.1%), and the key question is whether this can be achieved alongside the large-scale investment program.

1. Electronics Segment: Sustainability of Orders for High-Performance IC Package Substrates for Generative AI

Prior Year
: Electronics segment revenue JPY 243,316M (+23.4%), OPM 18.6% (vs. 13.6% prior year). Manufacturing cost reductions at the Philippines plant also contributed
This Year's Verification
: The company expects demand growth across the full spectrum of high-performance IC package substrates, including general-purpose servers, in addition to AI-related growth. The competitive landscape for PC applications is expected to intensify, and the key question is whether generative AI growth can more than offset this headwind
Key Metrics
: 1Q Electronics segment revenue YoY growth rate (+20% as benchmark), segment OPM (continuation of improvement from 18.6%)

The Electronics segment posted strong results with revenue of JPY 243,316M (+23.4%) and operating income of JPY 45,248M (+68.5%). Generative AI server-related demand remained solid, and high-performance IC package substrates for general-purpose servers are also on a recovery trajectory.

2. Execution of JPY 500B Large-Scale Investment Program and Depreciation Burden

Prior Year
: Consolidated capex JPY 64.2B (vs. JPY 157.3B prior year). Construction in progress declined from JPY 202B to JPY 111.7B, as the prior year's major investments transitioned to the operational phase
This Year's Verification
: Year-by-year allocation of the JPY 500B investment and status of 1Q commencement. Potential for depreciation on new investments to weigh on operating income
Key Metrics
: Pace of increase in consolidated depreciation (JPY 66.2B in the prior year, +22.2% from JPY 54.2B), changes in construction in progress

The company announced a total investment of approximately JPY 500B in the Electronics segment over three years from FY2026 to FY2028. Electronics segment capex in the prior year was JPY 58B (down from JPY 146.7B in the prior year), but investment is expected to re-accelerate from this fiscal year.

3. Ceramics Segment Structural Reform and NEV Business Profitability Improvement

Prior Year
: Ceramics segment OPM declined to 9.3% (vs. 14.5% prior year). FGM (specialty carbon products) also saw revenue and profit declines due to weak power semiconductor demand and ongoing inventory adjustments
This Year's Verification
: Progress in capturing DPF+AFP demand for industrial vehicles in emerging markets (China/India). Narrowing of NEV business losses. Timing of completion of FGM inventory adjustments
Key Metrics
: Ceramics segment OPM YoY comparison (magnitude of deviation from 14.5% in the year-ago quarter), quarterly P&L trajectory of the NEV business

The Ceramics segment posted revenue of JPY 82,554M (-1.8%) and operating income of JPY 7,646M (-37.4%), a sharp profit decline. In addition to lower DPF and AFP orders, the NEV (EV battery safety components) business saw continued operating losses despite entering mass production, due to rising fixed cost burdens.

4. Structural Changes in Extraordinary Items and Quality of Net Income

Prior Year
: Of net income before tax of JPY 91,092M, extraordinary gains totaled JPY 59,281M and extraordinary losses JPY 29,011M, resulting in net extraordinary gains of approximately JPY 30.2B
This Year's Verification
: Remaining capacity for investment securities sales (prior year-end balance JPY 32.2B, down from JPY 58.7B at the prior year-end). Whether ongoing impairment risks exist
Key Metrics
: 1Q operating income guidance achievement rate against the full-year plan of JPY 90B, net income YoY comparison

The prior year recorded JPY 49,448M in gains on sales of investment securities and JPY 9,148M in subsidy income as extraordinary gains, while booking JPY 16,405M in impairment losses (including JPY 10.6B for IBIDEN Philippines). The company's plan for this fiscal year projects net income of JPY 58,000M (-9.0%), with the reversal of extraordinary items likely the primary driver of the decline.

5. Changes in Financial Position and Shareholder Returns

Prior Year
: Cash and cash equivalents declined from JPY 390.6B to JPY 292.9B. Financing cash flow was -JPY 157.5B (vs. -JPY 7.1B prior year), reflecting substantial outflows
This Year's Verification
: Financing approach for the large-scale investment (mix of internal funds vs. external financing). Sustainability of the annual dividend of JPY 35 per share (16.9% payout ratio)
Key Metrics
: Changes in interest-bearing debt balance (prior year-end: bonds JPY 60B + convertible bonds JPY 72.4B + long-term borrowings JPY 60B = JPY 192.4B), operating cash flow level

The prior year saw significant deleveraging through loan repayments (JPY 60B long-term + JPY 50B short-term) and JPY 40B in bond redemptions. The equity ratio improved from 45.3% to 57.3%. However, the JPY 500B investment program beginning this fiscal year may necessitate renewed fundraising.

Timely Disclosure & Industry Trends

2026/05/18
Conclusion of Research Facility Location Agreement with Gifu City - Plans to open a research facility in Gifu City (January 2028 opening) aimed at creating next-generation businesses in the GX and life sciences fields. A strategic step toward expanding the medium- to long-term new business portfolio. Conclusion of Location Agreement with Gifu City for Opening of Research Facility
2026/05/12
Mid-Term Management Plan Revision: Announced FY2030 Targets of "Revenue JPY 1T + Operating Income JPY 300B" - Raised the previous mid-term plan targets, setting 30% OPM as a long-term target. An ambitious goal reflecting accelerated growth in the Electronics segment, with significant implications for investment decisions. Business Outlook Including Mid-Term Management Plan
2026/05/11
Year-End Dividend Forecast Revision (Increase) - Revised year-end dividend upward from JPY 10 to JPY 15 per share (equivalent to JPY 60 annually on a pre-split basis). Enhanced shareholder returns reflecting strong business performance. Notice Regarding Revision of Year-End Dividend Forecast (Increase)
2026/05/11
Variance Between Full-Year Earnings Forecast and Actuals, and Impairment Loss - Conservatively revised the business plan for PC-related products at IBIDEN Philippines, booking JPY 10.6B in impairment losses. A disclosure highlighting structural challenges in the PC-related business. Notice Regarding Variance Between FY2026/3 Full-Year Consolidated Earnings Forecast and Actuals, and Impairment Loss

Previous Quarter Results (FY2026/3 Full-Year Actuals)

IBIDEN is a materials and components manufacturer operating across the Electronics segment (centering on IC package substrates), the Ceramics segment (primarily automotive exhaust system components and specialty carbon products), and Other businesses (construction, building materials, electric power, etc.). Under the mid-term management plan "Moving on to our New Stage 115 Plan" (FY2023–FY2027), the company is pursuing the capture of generative AI demand and transitioning its business portfolio toward higher value-added offerings. In the prior fiscal year, the Electronics segment's +23.4% revenue growth drove consolidated results, with OPM improving to 14.9% (vs. 12.9% prior year). The company has set long-term targets of revenue JPY 1T and 30% OPM by FY2030, making clear its commitment to accelerating growth investments.

Item	Amount	YoY	vs. Guidance	Notes
Revenue	JPY 416,201M	+12.7%	-	Electronics +23.4% drove growth; Ceramics -1.8%
Operating Income	JPY 62,027M	+30.3%	-	OPM 14.9% (vs. 12.9% prior year)
Recurring Profit	JPY 60,822M	+27.0%	-	JPY 3.8B depreciation on idle fixed assets booked in non-operating expenses
Net Income	JPY 63,713M	+89.0%	-	Includes JPY 49.4B gain on sales of investment securities + JPY 16.4B impairment losses
EPS	JPY 228.16	+89.0%	-	Adjusted for stock split (1:2)

Full-Year Guidance (FY2027/3): Revenue JPY 500,000M (+20.1%), Operating Income JPY 90,000M (+45.1%), Net Income JPY 58,000M (-9.0%)

IBIDEN CO.,LTD.