In FY26, the company will roll out 10+ new in-house lens products sequentially from 1H; will continue a 60% total payout ratio, while executing buybacks flexibly

Summary

FY25 results reflected a sharp decline in photographic OEM shipments, resulting in lower revenue and profit, while 4Q returned to a recovery trajectory with revenue and profit growth across all segments. At the briefing, management clearly positioned FY26 growth drivers as bringing forward the launch of 10+ new in-house brand products into 1H, and highlighted stepping up initiatives in Europe and China as central to the earnings recovery. On shareholder returns, the company explained it will not pre-allocate a buyback authorization at the start of FY26, but intends to maintain a 60% total payout ratio while flexibly determining timing and method. Regarding supply-side uncertainty, management stated higher component costs are already incorporated into the plan and will be offset through cost reductions, while rare-earth restrictions are expected to have limited impact at this point.

Key Points (Earnings Takeaways And Growth Actions)

• Management Strategy And Market View
  • The interchangeable lens market is seen as flat in unit terms, with value slightly higher on demand for higher value-added products; by region, Europe and Asia are expected to be positive, Japan and the US remain challenging, and China is viewed as flat with potential upside of +5% depending on W11
  • The photography business will accelerate the shift to an earnings model driven by in-house brand growth; OEM is assumed to be in an adjustment phase near term, while targeting an increase in the number of models under development over the medium to long term
  • The surveillance market is expected to grow steadily; automotive demand continues to expand on ADAS, but plans are conservative for China given intensifying pricing pressure as the number of players increases
  • The long-term vision has been refreshed to “Capture, Measure, Connect. Becoming a company that creates health for people and nature,” emphasizing a repositioning toward being recognized as a comprehensive optical sensing solution company
  • Reconfirmed the stance of keeping ROE above the cost of capital as a core KPI, while continuing to pursue both growth investment and shareholder returns
• Current Business Progress And Key Drivers
  • FY25 full-year: reduced demand for photographic OEM was the largest driver of profit decline; lower revenue reduced gross profit and pushed down operating income by JPY 1.3B
  • 4Q delivered revenue and operating income growth across all segments, signaling a recovery; in-house photography surpassed JPY 10B in quarterly revenue for the first time
  • Meanwhile, the briefing detailed specific factors behind profit deterioration in the photography segment from 3Q to 4Q: weak sales in Europe and China leading to higher inventories and a larger elimination of internal profits, increased impact from US tariffs, fiscal year-end factors, and higher SG&A such as advertising/promotional expenses and R&D
  • Surveillance & FA: despite a slight revenue decline, margin improved to ~14% on better mix and SG&A control, confirming a stronger earnings base
  • Mobility & Healthcare: clarified automotive revenue surpassed JPY 10B and medical revenue surpassed JPY 1B, marking a transition into a growth investment phase
• Key Strategic Initiatives And Changes
  • Committed to launching 10+ new in-house brand products in FY26, bringing forward releases to roll out sequentially from earlier in 1H versus the prior year’s 2H-heavy cadence
  • Presented a concrete regional recovery scenario for the in-house brand: Europe +10%, China +5%, Japan +5%, US +10%, distributor regions +5% (planned on a local-currency basis)
  • Surveillance & FA: explicitly stated as an FY26 mission to launch at least one new product theme in a new field, moving technologies into the commercialization phase
  • While maintaining a 60% total payout ratio, share repurchases will be managed flexibly with careful assessment of timing and method
  • On supply risk, explained the impact assessment of rare-earth restrictions: lenses avoid restrictions in processing steps; magnets are either below the regulated threshold and the company is advancing DY-free material adoption
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Outlook And Strategy

• Full-year plan targets revenue of JPY 91,000M and operating income of JPY 18,500M, delivering higher revenue and profit with an operating income margin of 20.3%
• Photography-related business plans revenue of JPY 63,000M and operating income of JPY 17,200M; assumes in-house brand grows to JPY 39.0B, while OEM edges down to JPY 24.0B
• Management explained that 1H in photography will be weighed down by continued OEM order declines; even with new product launches from 1H, the mix-driven uplift is structurally expected to be concentrated in 2H
• Surveillance & FA plans ~20% revenue growth to JPY 14,500M, with recovery drivers set as completion of ongoing FA inventory adjustment and catch-up from delays in new camera module model development
• Mobility & Healthcare plans revenue growth to JPY 13,500M, but assumes operating income margin declines to 18.5% due to customer cost-down requests and incubation investments
• Shareholder returns: plans to implement a 60% total payout ratio; share repurchases will be handled flexibly, considering timing and method
• Higher component costs are already incorporated into the plan, with a continued policy of offsetting via cost reductions
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Positive Factors

• Clearer policy to sequentially launch 10+ new in-house brand products from 1H, aiming for a sales recovery driven by new products
• Presented regional plans for the in-house brand—Europe +10%, China +5%, US +10%—clarifying recovery targets
• Surveillance & FA improved operating income margin to 13.9% in FY25; FY26 plan maintains margin in the 13% range, supporting earnings stability
• Automotive surpassed JPY 10B in revenue in FY25; FY26 plan calls for continued growth with revenue +9.5% on sustained ADAS demand
• Medical surpassed JPY 1B in revenue in FY25; FY26 plan also calls for continued high growth at +19.9%
• Reaffirmed commitment to maintaining a 60% total payout ratio; optimizing execution timing suggests room to improve capital efficiency
• Stated rare-earth restrictions are expected to have limited impact, relatively containing supply-side uncertainty

Concerns And Risks

• Photographic OEM order adjustments are expected to continue into FY26 1H, structurally weighing on 1H revenue and profit
• The company explained that weak sales in Europe and China led to higher inventories and greater internal profit eliminations, putting the certainty of demand recovery in focus
• US tariff impact was a driver of profit decline in FY25; while incorporated into FY26 planning, uncertainty remains around incremental impacts
• Bringing forward the launch of 10+ new products increases execution risk, including potential cost increases from parallel development, supply, and marketing
• Mobility & Healthcare plans margin compression despite revenue growth; intensifying customer cost-down demands could pressure profitability
• Even if component price increases are built into the plan, absorption via cost-down becomes more difficult if inflation exceeds assumptions
• The company recognizes intensifying competition and pricing pressure in China’s automotive market; the key issue is sustaining profitability rather than upside to the growth rate

Earnings Highlights

FY25 full-year revenue was JPY 85,071M and operating income was JPY 16,638M, marking lower revenue and profit. While profit was primarily pressured by reduced photographic OEM shipments, 4Q revenue was JPY 21,967M and operating income was JPY 3,251M, confirming a recovery with higher revenue and profit.

• Dividend (Annual): JPY 36.25 (+JPY 1.25 YoY)
• Payout Ratio: 49.8% (+10.0pts YoY)
• Total Payout Ratio: 84.1% (+30.1pts YoY)