KAGA ELECTRONICS CO.,LTD.

Business Details

Centers on the development, manufacturing, and sale of semiconductors and general electronic components, together with EMS (Electronics Manufacturing Service). Combines the multi-product, small-lot capability of an independent trading company with an EMS business leveraging overseas manufacturing bases in Malaysia, Turkey, Mexico, and elsewhere. In July 2025, Kyoei Sangyo Co., Ltd. was made a consolidated subsidiary through a tender offer, expanding the scale of operations. This is the largest segment, accounting for approximately 86% of consolidated revenue. Serves a wide range of end-use applications including automotive, medical, industrial equipment, and air conditioning equipment.

Recent Overview

Achieved 20.3% revenue growth driven by the consolidation of Kyoei Sangyo and aggressive spot sales.

The consolidation of Kyoei Sangyo Co., Ltd. as a subsidiary through the July 2025 tender offer contributed to revenue from the second quarter onward. In the component sales business, the company actively pursued spot sales (approximately ¥41,100 million) in response to memory supply-demand tightness for AI servers, contributing to revenue growth. In the EMS business, although demand slowed among certain automotive-related customers, capacity expansion at overseas bases paid off, with strong performance in air conditioning and medical equipment. As a result, revenue reached ¥568,834 million (up 20.3% year on year) and segment profit reached ¥19,304 million (up 14.0% year on year). In the fourth quarter alone, revenue accelerated to ¥184,942 million (up 46.0% year on year) and segment profit to ¥5,536 million (up 64.8% year on year).

Key Products

Growth Drivers

• Expansion of business scale through consolidation of Kyoei Sangyo Co., Ltd. as a subsidiary (tender offer conducted in July 2025, consolidated from the second quarter onward)
• Aggressive expansion of spot sales leveraging procurement capability as an independent trading company amid expanding memory demand for AI servers
• Expanded orders for air conditioning and medical equipment in the EMS business through aggressive capacity expansion at overseas manufacturing bases (Malaysia, Turkey, Mexico, etc.)
• Recovery in component sales as supply chain inventory adjustments continued to resolve
• Recovery in automotive-related demand amid progress in electrification and sophistication of automotive equipment

Risks

• Risk of revenue decline in FY2027 (ending March 2027) due to the drop-off of spot sales of certain semiconductor products (approximately ¥41,100 million) recorded in the prior period
• Risk of easing memory supply-demand tightness for AI servers and price volatility
• Risk of continued demand slowdown among certain automotive-related customers
• Risk of supply chain disruption and rising procurement costs due to uncertainty in US tariff policy
• Risk of profit pressure from rising wages and logistics costs at overseas manufacturing bases
• Foreign exchange risk (decrease in yen-denominated value of overseas revenue due to yen appreciation)
• Risk of rising resource prices and supply chain disruption due to geopolitical risks (Ukraine situation, Middle East situation)

Business Details

The Information Equipment Business is a segment that sells finished products such as personal computers, PC peripherals, consumer electronics, photo/video related products, and original brand products. Operates PC sales for educational institutions, PC sales for mass retailers, and security software sales for mobile devices. While relatively small at approximately 8.2% of consolidated group revenue of ¥658,941 million (FY2026, ending March 2026), the highly profitable security software sales support the profit margin.

Recent Overview

PC sales for educational institutions and mass retailers performed strongly across the board, with revenue up 27% and profit up 34%.

In FY2026 (ending March 2026), the Information Equipment Business achieved significant growth in both revenue and profit, with revenue of ¥54,182 million (up 27.0% year on year) and segment profit of ¥4,444 million (up 34.4% year on year). For educational institutions, capturing demand from the second phase of the GIGA School Program and expanding the number of contracted schools proved successful. For mass retailers, the effects of new AI PC products, replacement demand associated with the end of Windows 10 support, and rush demand anticipating rising memory prices combined to drive strong performance throughout the year. In the fourth quarter alone, growth accelerated further, with revenue of ¥20,530 million (up 30.8% year on year) and segment profit of ¥1,944 million (up 43.6% year on year).

Key Products

Growth Drivers

• Expansion of PC sales for educational institutions and continued increase in the number of contracted schools driven by renewal demand from the second phase of the GIGA School Program
• Emergence of replacement demand driven by the launch of new AI PC products and the end of Windows 10 support (October 2025)
• Capturing replacement demand and boosting revenue through the introduction of new security software products for mobile devices
• Improvement in segment profit margin through an increased sales ratio of highly profitable products (such as security software)
• Agile response to changes in market conditions, including rush demand anticipating rising memory prices

Risks

• Risk of lost sales opportunities due to changes in product lineups by major PC manufacturers
• Risk of dependence on the PC market demand cycle due to the temporary nature of policy-driven demand such as the GIGA School Program
• Risk of intensifying competition and price competition in sales to mass retailers
• Risk of rising procurement costs for imported finished products due to foreign exchange fluctuations
• Risk of a downturn following the end of one-off demand effects such as the end of Windows 10 support and new AI PC products

Business Details

Mainly focused on CG video production and planning/development of amusement-related products. Adopts an order-based service business model centered on contract CG video production for games and amusement equipment. Accounting for approximately 0.5% of consolidated group revenue, this is a small segment, and FY2026 (ending March 2026) saw a decline in both revenue and profit due to the drop-off of a large order recorded in the second half of the prior fiscal year. Although profitability became established from the second quarter onward, the impact of the operating loss in the first quarter weighed on full-year results.

Recent Overview

Revenue and profit declined in FY2026 (ending March 2026) due to the drop-off of a large order, with the first-quarter loss weighing on full-year results.

In FY2026 (ending March 2026), although the company actively pursued new order acquisition in CG video production for games and amusement equipment, revenue declined to ¥3,307 million (down 2.4% year on year) due to the drop-off of a large order recorded in the second half of the prior fiscal year. On the profit side, although profitability became established from the second quarter onward, the impact of the operating loss recorded in the first quarter remained, resulting in a significant decline in segment profit to ¥365 million (down 28.2% year on year). The segment accounts for only approximately 0.5% of consolidated group revenue.

Key Products

Growth Drivers

• Promotion of a contract sales expansion strategy in CG video production and acquisition of new large-scale orders
• Continued demand in the game and amusement equipment markets
• Stabilization of the profit base through the establishment of profitability from the second quarter onward
• Positioning as part of business portfolio strengthening under the group's mid-term management plan 2027

Risks

• Risk of seasonal fluctuation and order concentration as seen in the first-quarter operating loss
• Risk of earnings volatility inherent in the order-dependent business model, as demonstrated by the drop-off of the prior period's large order
• Risk of dependence on individual large orders given the segment's small scale of approximately 0.5% of consolidated group revenue, whereby the presence or absence of large orders greatly affects results
• Risk of demand fluctuation due to high sensitivity of the game and amusement markets to changes in consumer spending trends

Business Details

Operates electronics equipment repair and support, amusement equipment manufacturing and sales, and sporting goods sales as its main businesses. The PC and PC peripherals recycling/reuse business performed well, driven by demand for switching from Windows 10 to 11 and rising memory prices. The amusement equipment business for the US market showed some signs of slowing in the second half, but maintained revenue growth on a full-year basis.

Recent Overview

The recycling business performed strongly, and although the US amusement equipment business slowed in the second half, full-year revenue increased.

In FY2026 (ending March 2026), revenue reached ¥32,617 million (up 13.1% year on year) and segment profit reached ¥3,487 million (up 28.8% year on year). The PC and PC peripherals recycling/reuse business performed well, driven by demand for switching from Windows 10 to 11 and rising memory prices. The amusement equipment business for the US market showed some signs of slowing in the second half of the current fiscal year, but maintained revenue growth on a full-year basis. In the fourth quarter alone, revenue was ¥7,212 million (down 7.8% year on year), but profitability improved, with segment profit of ¥740 million (up 21.3% year on year).

Key Products

Growth Drivers

• Continued solid performance in the PC and PC peripherals recycling/reuse business, driven by demand for switching from Windows 10 to 11 and rising memory prices
• Maintained revenue growth on a full-year basis in the amusement equipment business for the US market
• Business portfolio diversification strategy under the group's mid-term management plan 2027

Risks

• Risk of demand fluctuation due to the slowdown in advance orders for US-bound amusement equipment (already apparent in the second half of FY2026, ending March 2026)
• Impact on export business from uncertainty in US tariff policy
• Foreign exchange risk (amusement business with a high proportion of sales to the US)
• Impact on the recycling business from PC market demand fluctuations following the completion of the Windows switching demand cycle
• Impact of memory price fluctuations on demand for the recycling/reuse business