Hirano Tecseed Q1 FY2026 Earnings Deep-Dive Report

Hirano Tecseed Co., Ltd. (Securities Code: 6245) , a leader in coating and chemical machinery, reported a significant decline in revenue and profit for the first quarter of fiscal year 2026 (April–June 2026). This downturn was primarily due to a reactionary decline in demand for North American electric vehicle (EV) equipment, which had previously been the company's primary growth driver. Conversely, the company is at a structural turning point, as evidenced by a sharp surge in orders (more than double year-on-year) for electronic material equipment, fueled by the rapid expansion of the AI and DX markets.

This report extracts 10 key topics from the released financial materials to provide a detailed analysis of the overall performance, segment-specific status, financial foundation, and future growth strategies and full-year outlook.

---

1. Overall Earnings and Highlights: A Contrast of Soaring Orders and Declining Results

For Q1 FY2026, consolidated net sales were 6,083 million yen (down 43.3% YoY) , operating profit was 147 million yen (down 82.0% YoY) , ordinary profit was 220 million yen (down 75.5% YoY) , and net profit attributable to owners of the parent was 163 million yen (down 74.5% YoY) .

While the bottom line was challenging, the leading indicator—new orders—surged to 7,105 million yen (up 112.5% YoY) .

[Significance and Data Context of Slide 6]

This slide is the most essential page as it summarizes the company-wide performance for Q1 FY2026 and clearly illustrates the underlying factors.

The significant decline in net sales and operating profit is directly attributed to lower factory production volumes, following the reduction in order backlogs for energy-related equipment (such as lithium-ion secondary batteries) , which had accounted for a large share of revenue until the previous fiscal year. Furthermore, the delivery of low-margin projects, combined with reduced production, pushed the operating profit margin down to 2.4% (compared to 7.7% in the same period last year) .

However, as noted in the commentary on the right, inquiries for manufacturing equipment for ceramic capacitors (MLCCs) and electronic substrates used in AI servers have risen sharply , leading to a dramatic recovery in orders. Visualizing the time lag between sluggish sales (a lagging indicator) and the surge in orders (a leading indicator) is crucial for understanding future performance trends.

---

2. Analysis of Operating Profit Fluctuations: Margin Compression and Mitigation Measures

The 673 million yen decrease in operating profit—from 821 million yen in the same period last year to 147 million yen—was primarily driven by a decline in gross profit (-1,059 million yen) due to lower sales in the core coating machinery business.

However, this decline was partially mitigated by the following factors:

• A reduction in sales commissions associated with lower sales (a 302 million yen improvement factor in the coating machinery segment's SG&A expenses).
• Profit growth in the chemical machinery equipment segment ( +95 million yen in gross profit ).
• Reductions in company-wide and general administrative expenses ( +35 million yen ).

While the burden of fixed costs due to lower capacity utilization temporarily pressured profits, the company's cost control measures and growth in the chemical machinery segment provided a structural buffer.

---

3. Deep-Dive Analysis by Segment

The company operates primarily through two reporting segments: "Coating Machinery Equipment" and "Chemical Machinery Equipment."

① Coating Machinery Equipment: EV Market Stagnation and Adjustment Phase

• Orders : 1,013 million yen (down 63.2% YoY)
• Net Sales : 4,673 million yen (down 50.2% YoY)
• Segment Profit : 355 million yen (down 68.0% YoY, 7.6% margin)

Amid the general stagnation in the EV market, while the company is successfully developing applications for stationary storage batteries, new large-scale investments in the energy sector are currently on hold. As a countermeasure, the company is aggressively promoting "modifications, maintenance, and parts sales for existing machinery," which offer shorter lead times and higher profit margins.

② Chemical Machinery Equipment: AI-Driven Order Explosion

• Orders : 5,602 million yen ( up 1,710.1% YoY / approx. 18x )
• Net Sales : 1,130 million yen (up 10.8% YoY)
• Segment Profit : 182 million yen (up 71.7% YoY, 16.1% margin)

[Significance and Data Context of Slide 14]

This slide is a critical document showing that orders and order backlogs for the chemical machinery equipment segment are experiencing a record-breaking vertical takeoff .

The line graph on the left (order backlog) shows that while the backlog hovered between 2,000 and 3,000 million yen throughout FY2024 and FY2025, it has taken a sharp upward trajectory toward Q1 FY2026.

This is driven by the explosive growth of high-performance AI servers following the widespread adoption of generative AI. Consequently, customer investment appetite for glass cloth processing machines and film-forming equipment for MLCCs , which are essential for semiconductor packaging and electronic substrates, has surged. With many requests for short-delivery lead times, the segment profit margin reached a very high level of 16.1% (+5.7 pts from the same period last year) .

---

4. Significant Structural Changes in Portfolio by Application and Region

Behind the financial figures, the company's business portfolio is undergoing a major shift from "energy-centric" to "electronic materials-centric."

Shift in Regional Composition

On a net sales basis, North America remains the largest at 43.3% (despite a 65.9% YoY decline), followed by Japan at 25.2% and East Asia at 22.4% . However, looking at the order backlog (32,672 million yen) , which represents future sales, the composition shows East Asia (excluding Japan) at 40.4% , Japan at 31.8% , and North America at 23.6% , indicating a shift toward a structure where the Asian region accounts for approximately 70%.

Evolution of Order Backlog by Application

[Significance and Data Context of Slide 20]

This slide visualizes how the composition of the company's order backlog (32,672 million yen) by application has changed over the past few years, making it the most important slide for interpreting the changing quality of future revenue sources .

As of Q1 FY2024, 76.8% of the order backlog was occupied by "energy-related" projects (such as EV batteries), indicating a high dependency on a specific sector. However, in Q1 FY2026, it has undergone a dramatic transformation:

• Electronic Materials : 9.2% in Q1 2024 → 32.2% (now the top application)
• Energy-Related : 76.8% in Q1 2024 → 25.1% (significant contraction)
• Other Applications : 23.9%

This data clearly demonstrates the success of the company in rapidly pivoting its advanced coating, drying, and thin-film technologies toward the AI, semiconductor, and electronic materials sectors to offset the impact of the EV market slowdown.

---

5. Financial Soundness: Equity Ratio Improvement to 73.6% and a Healthy BS

Analysis of the balance sheet (BS) reveals disciplined financial management in response to declining sales.

• Total Assets : 53,873 million yen (down 3,911 million yen from the end of FY2025)
  • In current assets, trade receivables and contract assets decreased by 6,084 million yen (progress in collection). Meanwhile, cash and deposits increased by 1,262 million yen.
• Liabilities : 14,245 million yen (down 4,139 million yen)
  • The company repaid/reduced short-term borrowings by 3,390 million yen, compressing interest-bearing debt.
• Net Assets : 39,627 million yen (up 227 million yen)

As a result, the equity ratio has further increased to 73.6% (+5.4 pts from the end of the previous fiscal year) , maintaining an extremely solid financial foundation in the volatile machinery sector.

---

6. Full-Year FY2026 Outlook, Strategy, and Shareholder Returns

The company has maintained its full-year consolidated earnings forecast for FY2026 (ending March 2027).

Full-Year Earnings Plan (YoY)

• Net Sales : 25,000 million yen ( down 22.6% YoY )
• Operating Profit : 1,500 million yen ( down 6.2% YoY )
• Ordinary Profit : 1,600 million yen ( down 6.3% YoY )
• Net Profit : 1,100 million yen ( down 16.2% YoY )
• ROE : 2.8%

Despite the plan for lower revenue, the operating profit margin is expected to improve by +1.0 pt to 6.0% from 5.0% in the previous fiscal year.

Basic Strategy for Margin Improvement

1. Margin improvement through portfolio shift : Capture the robust demand in AI/DX and promote the fulfillment of orders in the high-margin electronic materials sector.
2. Renegotiation of order prices : Implement price pass-throughs and profitability improvement negotiations in response to rising material costs and specification changes.
3. Securing high-value-added projects : Proactively propose high-margin projects such as equipment modifications and maintenance services to existing customers.

Shareholder Return Policy

Even while earnings are in an adjustment phase, the company maintains its commitment to shareholder returns. The annual dividend forecast is 84 yen per share (42 yen interim, 42 yen year-end) , maintaining the same level as the previous fiscal year.

---

Summary

Hirano Tecseed's Q1 FY2026 earnings represent a transition point where the temporary performance decline due to the digestion of past EV-related demand intersects with the rapid expansion of new demand for electronic materials driven by AI and DX.

While the company is forced to accept a short-term profit decline due to lower production volumes, the order backlog has recovered to over 32.6 billion yen , and its composition is evolving toward high-margin electronic materials. With a solid equity ratio (73.6%) and stable dividend maintenance, the company's return to a medium-to-long-term growth trajectory through business portfolio transformation is a key point to watch.