Key Positives From The 2Q Results
Electronics revenue rose 52.0% and operating income rose 96.7%. Company-wide OPM expanded to 22.9% (+6.2pt YoY). Demand for high-performance IC package substrates for generative AI and general-purpose servers was the main driver. Stable operations at the Ono Plant, which entered mass production last fiscal year, also contributed. The results confirm that much of the incremental revenue drops through to profit. Advances received rose sharply by JPY 118,796M, and operating CF reached JPY 193,178M.
- Electronics Margin Expansion: Electronics OPM rose to 29.0% (22.4% in the prior-year period). Production stability at the Ono Plant and a weaker yen drove the profit increase (company disclosure).
- Operating Leverage: Gross profit margin improved to 37.2% (+2.5pt). SG&A rose only 6.4%, so operating income growth outpaced revenue growth.
- Quarterly Earnings Momentum: Standalone 2Q (three-month) operating income was JPY 33,236M (+23.6% QoQ). OPM rose to 23.9% from 21.8% in 1Q, showing earnings power improving quarter by quarter (our estimates).
- Ceramics Recovery: Ceramics operating income also rose 40.4%. Drivers were a recovery in special carbon products (FGM) for semiconductor production equipment and higher volumes of safety components for EV batteries (NEV).
Key Concerns From The 2Q Results
Electronics accounted for 83.3% of total segment profit (78.2% in the prior-year period), deepening reliance on AI server-related demand (our estimates). The company cited the weaker yen as a profit driver in both Electronics and Ceramics. This makes FX sensitivity a risk if the yen reverses. Part of the DPF revenue growth reflects a "temporary increase in orders" in 1Q.
- Rising Fixed-Cost Burden: Depreciation rose to JPY 35,877M (+41.1%). With roughly JPY 1,510B of investment in Gama Cell6 still to come, the fixed-cost burden will keep rising.
- Idle Asset Depreciation: Depreciation on idle non-current assets, booked under non-operating expenses, was JPY 1,669M, following JPY 1,935M in the prior-year period. Management's plans for utilizing or disposing of idle equipment need clarification.
- AFP Margin Pressure: Catalyst carrier holding and sealing materials (AFP) posted higher revenue, but operating income fell on rising material costs (company disclosure). Inflation linked to the Middle East situation also persists.
- Working Capital Build: Inventories stood at JPY 82,722M, up 16.6% from the prior fiscal year-end (our estimates). Trade receivables also increased, inflating working capital.
- Ongoing Dilution: Diluted EPS was JPY 65.10 as of end-September. CB conversions are progressing, and 5,126,831 shares were issued after the period-end (10/1–10/21). Dilution will continue to weigh on per-share metrics.
Focus Areas / Items To Monitor Going Forward
- 2H Profit Requirement: The full-year plan implies 2H operating income of JPY 72,884M, requiring +21.2% growth versus 1H (our estimates). The key question is whether earnings can build further from the standalone 2Q level.
- Gama Cell6 Funding: How the Gama Cell6 investment (phased start-up from FY2029) fits into the funding plan.
- Ceramics Post-DPF Normalization: Ceramics profit levels once the temporary DPF order boost fades, and the segment's medium-term growth strategy.
- Capital Allocation: Funding allocation and assumed payback period for the roughly JPY 1,510B investment in Gama Cell6 and overseas plants.
- 2H Assumptions: FX assumptions for the 2H plan, as well as product mix and Ono Plant utilization rate assumptions.
- AI Demand Shift: Demand outlook for CPU substrates as AI shifts toward inference and agentic models, and the scale of planned capacity expansion.
Key Financial Highlights
| Item | Value | YoY |
|---|---|---|
| Revenue | JPY 262,546M | +34.3% |
| └ Standalone 2Q (3 Months) | JPY 139,327M | +42.1% |
| Gross Profit | JPY 97,705M | +43.9% |
| Gross Profit Margin | 37.2% | +2.5pt |
| SG&A | JPY 37,589M | +6.4% |
| Operating Income | JPY 60,116M | +84.6% |
| └ Standalone 2Q (3 Months) | JPY 33,236M | +122.5% |
| Operating Income Margin | 22.9% | +6.2pt |
| Depreciation | JPY 35,877M | +41.1% |
| Recurring Profit | JPY 61,009M | +88.9% |
| Extraordinary Losses | JPY 2,469M | -53.8% |
| Interim Net Income Attributable to Owners of Parent Company | JPY 38,574M | +74.8% |
| EPS | JPY 68.63 | +73.7% |
※ Standalone 2Q figures, margins and ratios are our estimates. EPS is retroactively adjusted for the 2-for-1 stock splits effective 2026/1/1 and 2026/10/1. Net income grew more slowly than operating income because the company sold cross-shareholdings last fiscal year.
Performance By Business Segment
Electronics rose to 65.7% of revenue (58.1% in the prior-year period) and accounted for most of the company-wide profit increase (our estimates).
Segment Performance Table
| Segment | Revenue | YoY | Operating Income | YoY | Margin |
|---|---|---|---|---|---|
| Electronics | JPY 172,540M | +52.0% | JPY 50,028M | +96.7% | 29.0% |
| Ceramics | JPY 46,156M | +16.3% | JPY 5,391M | +40.4% | 11.7% |
| Other | JPY 43,849M | +3.8% | JPY 4,623M | +42.2% | 10.5% |
| Adjustments | - | - | JPY 73M | - | - |
| Total | JPY 262,546M | +34.3% | JPY 60,116M | +84.6% | 22.9% |
※ Revenue is revenue from external customers. Margins are our estimates, using external customer revenue as the denominator. Electronics segment profit excludes JPY 1,669M of depreciation on idle non-current assets (company disclosure).
- Electronics (High-Performance IC Package Substrates): Revenue +52.0%, operating income +96.7%. Demand for generative AI and general-purpose servers remained firm, with Ono Plant production stability and the weaker yen also contributing.
- Special Carbon Products (FGM): Revenue and profit rose as strength in the semiconductor market drove a recovery in sales for semiconductor production equipment.
- Safety Components for EV Batteries (NEV): Revenue and profit rose on higher sales and production volumes.
- DPF: Under a build-to-order production model, a temporary increase in orders and the weaker yen lifted revenue and profit. Firm demand in certain markets, including Europe and India, provided support.
- Other Businesses: Operating income +42.2%. Contributors were large slope and landscaping projects at IBIDEN Greentec and higher orders in electronic component processing at IBIDEN Jushi.
Progress Versus Full-Year Guidance
1H progress against the revised full-year plan was 46.5% for revenue and 45.2% for operating income. The prior-year period showed 47.0% for revenue and 52.5% for operating income, so this year's plan is more 2H-weighted on operating income (our estimates). The 2H requirement of JPY 72,884M implies a quarterly average of JPY 36,442M, 9.6% above standalone 2Q's JPY 33,236M. Achieving the plan hinges on growing revenue while sustaining 2Q's 23.9% OPM.
| Item | Value (2Q Cumulative) | Full-Year Forecast | Progress Rate |
|---|---|---|---|
| Revenue | JPY 262,546M | JPY 565,000M | 46.5% |
| Operating Income | JPY 60,116M | JPY 133,000M | 45.2% |
| Recurring Profit | JPY 61,009M | JPY 134,500M | 45.4% |
| Net Income | JPY 38,574M | JPY 89,000M | 43.3% |
| EPS | JPY 68.63 | JPY 157.17 | 43.7% |
- Not applicable
Changes To Guidance
The company revised the full-year consolidated guidance announced on 2026/8/4. Revised operating income is JPY 133,000M (+114.4% YoY). Prior guidance figures and detailed reasons are provided in the same-day release, "Notice Regarding Revision of Full-Year Consolidated Earnings Forecast and Dividends of Surplus (Interim Dividend / Dividend Increase)."
- Revenue: New JPY 565,000M (+35.8% YoY)
- Operating Income: New JPY 133,000M (+114.4% YoY)
- Recurring Profit: New JPY 134,500M (+121.1% YoY)
- Net Income: New JPY 89,000M (+39.7% YoY)
- Reasons For Revision: 1H operating income rose 84.6%, supported by demand for high-performance IC package substrates, Ono Plant production stability and the weaker yen (company disclosure). Net income growth is smaller because of the high base created by JPY 59,281M of extraordinary gains in the prior fiscal year.
Commentary On Shareholder Returns
- Interim Dividend Increase: The interim dividend was raised to JPY 20 from the JPY 15 forecast, on a post-2026/1/1-split basis (JPY 10 on a post-2026/10/1-split basis).
- Year-End Dividend: The year-end dividend forecast is JPY 10 (post-2026/10/1-split basis). The split-adjusted annual dividend is JPY 20, up 33.3% from JPY 15 in the prior fiscal year (our estimates).
- Dividend Policy: The prior fiscal year's annual JPY 15 included a commemorative dividend. The dividend policy was revised on 2026/8/4.
- Treasury Share Disposal: The board resolved on the same day to dispose of treasury shares as restricted stock incentives for the employee stock ownership association.
Financial Position
Net cash expanded from the prior fiscal year-end, driven by the build-up of advances received and bond redemptions. Advances received inflated total assets, lowering the equity ratio to 53.5% (-3.8pt versus prior fiscal year-end). Financial soundness nonetheless remains high.
- Key Figures
- Leverage Metrics
| Item | Value | Additional Information |
|---|---|---|
| Cash and Deposits | JPY 420,487M | +42.2% versus prior fiscal year-end |
| Shareholders' Equity | JPY 603,333M | +9.7% versus prior fiscal year-end. Share capital and capital surplus rose on CB conversions |
| Interest-Bearing Debt | JPY 162,036M | -15.8% versus prior fiscal year-end. Sum of bonds, CBs and long-term borrowings (our estimates) |
| └ Bonds (Including Current Portion) | JPY 45,000M | JPY 60,000M at prior fiscal year-end |
| └ Convertible Bonds | JPY 56,036M | JPY 72,476M at prior fiscal year-end. JPY 11,500M face value converted after period-end |
| └ Long-Term Borrowings | JPY 61,000M | JPY 60,000M at prior fiscal year-end |
| Advances Received | JPY 199,746M | +146.8% versus prior fiscal year-end |
| Inventories | JPY 82,722M | +16.6% versus prior fiscal year-end. Sum of merchandise, work in process and raw materials |
| Free CF | JPY 144,292M | Operating CF JPY 193,178M − investing CF JPY 48,886M (our estimates) |
| EBITDA | JPY 95,993M | Operating income + depreciation. +65.5% YoY (our estimates) |
| Metric | Value | Notes |
|---|---|---|
| Net Debt/EBITDA | -1.55x | Net cash of JPY 258,451M divided by LTM EBITDA of JPY 166,347M. -0.80x at prior fiscal year-end (our estimates) |
| Debt/Equity | 0.27x | 0.35x at prior fiscal year-end (our estimates) |
| Interest Coverage Ratio | 140.5x | Operating income ÷ interest expense. 46.7x in the prior-year period (our estimates) |
| Equity Ratio | 53.5% | 57.3% at prior fiscal year-end (company disclosure) |
Disclosures Released Alongside The Earnings Announcement
- 2026/10/29Notice Regarding Revision of Full-Year Consolidated Earnings Forecast and Dividends of Surplus (Interim Dividend / Dividend Increase)
- 2026/10/29Notice Regarding Capital Expenditure for High-Performance IC Package Substrates (Acquisition of Non-Current Assets)
- 2026/10/29Notice Regarding Disposal of Treasury Shares as Restricted Stock Incentives for the Employee Stock Ownership Association
- 2026/10/29Supplementary Materials to Earnings Report (FY3/2027 2Q)
Major Announcements During The Quarter
- 2026/08/04Revised guidance alongside 1Q results
- 2026/08/04Resolved a 2-for-1 stock split effective 10/1. Also announced an adjustment to the CB conversion price, a revision to the year-end dividend forecast and a change in dividend policy
- 2026/10/01Disclosed Articles of Incorporation raising total authorized shares to 920 million following the stock split
- 2026/10/02Published Integrated Report 2026
Large-Shareholding Filings / Material Proposals Over The Past Year
- Sumitomo Mitsui Trust Bank: 9.3%→8.2% (2026/06/30). Purpose: strategic investment, and management of investment trusts and discretionary investment contracts. Stake had risen from 7.0% to 9.5% on 2025/11/14.
- Nomura Securities: 11.7%→11.4% (2026/05/29). Purpose: securities business inventory, cumulative investment business and management of trust assets. Stake rose from 6.5% to 10.8% on 2025/11/04 and has since remained above 10%.
- BlackRock Japan: 6.7%→7.2% (2026/05/29). Purpose: pure investment. Stake had risen from 5.0% to 6.7% on 2026/02/27.
- GIC Private Limited: 5.1%→3.8% (2026/02/25). Purpose: pure investment, with no plans to acquire management control.
- Mitsubishi UFJ Financial Group: New filing→5.0% (2026/02/09). Purpose: strategic investment, pure investment and trading securities.
- Mizuho Securities: 6.0%→4.9% (2026/01/30). Purpose: dealing, derivatives-related transactions, and investment trusts and discretionary investment.
- Daiwa Asset Management: 0.0%→5.2% (2025/11/14). Purpose: client funds under securities investment trusts and discretionary investment contracts, and trading inventory.
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