[In-Depth Earnings Analysis] MEC Company Ltd. (4971) H1 FY2026 Results: Riding the Wave of Generative AI and Semiconductor Package Demand to Achieve Significant Revenue and Profit Growth

MEC Company Ltd. (Securities Code: 4971), a leading manufacturer of chemicals for electronic circuit boards, has announced its financial results for the first half (H1) of the fiscal year ending December 2026. Driven by the global recovery in semiconductor demand and the growth of generative AI-related sectors, the company achieved significant year-on-year growth in both revenue and profit across all stages of the income statement.

This report provides a detailed analysis of the company's performance highlights, trends in core products, regional performance, and its mid-to-long-term growth strategy and capital expenditure plans, based on the released financial materials.

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1. Performance Highlights: Achieving Significant Revenue Growth and High Profit Margins

For the first half of FY2026 (cumulative), MEC reported revenue of 12,594 million yen (up 34.2% YoY) , operating profit of 4,135 million yen (up 69.4% YoY) , ordinary profit of 4,305 million yen (up 72.6% YoY) , and net profit attributable to owners of the parent of 3,039 million yen (up 60.5% YoY) .

Slide Commentary (Earnings Overview)

The slide above summarizes the consolidated income statement for the first half and the progress toward the full-year forecast. This data indicates not only top-line growth but also a dramatic improvement in profit margins . The gross profit margin rose from 61.8% in the same period last year to 63.6% , while the operating profit margin improved significantly by 6.8 percentage points , rising from 26.0% to 32.8% .

This performance is underpinned by the expansion of sales in the company's core high-value-added chemical products. Chemical product sales grew by 37.4% YoY to 12,402 million yen , serving as a powerful driver for overall revenue growth. Additionally, the depreciation of the yen contributed to the profit increase (a positive impact of +777 million yen on revenue and +472 million yen on operating profit).

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2. Product and Regional Analysis: Growth of the Flagship "CZ Series" and Overseas Markets

Sales Trends by Product

By product category, the "CZ Series," a line of super-roughening adhesion promoters for semiconductor package (PKG) substrates, performed exceptionally well. The sales growth rates for major products in the first half are as follows:

• EXE Series (Anisotropic Etching Agents) : +44.8% YoY
• CZ Series (Super-Roughening Adhesion Promoters) : +37.1% YoY
• V-Bond Series (Adhesion Promoters for Multilayer Electronic Boards) : +16.3% YoY
• SF Series (Selective Etching Copper Removal Agents) : -6.4% YoY

Slide Commentary (CZ Series Sales Trends)

The slide above shows the quarterly sales trend of the company's most important flagship product, the "CZ Series." From Q1 2024 to Q2 2026, it is evident at a glance that the series has maintained a steady upward growth trajectory on a quarterly basis. Notably, in the most recent Q2 2026 (April-June), sales reached 4,267 million yen , marking a record high.

The growth of the CZ series is driven by the increasing size and layer count of semiconductor package substrates . As substrates become larger and more complex, the volume of chemicals used per board naturally increases. Furthermore, the product mix has shifted toward higher-functionality types such as "CZ-8101" and "CZ-8201," establishing a virtuous cycle of growth in both volume and unit price .

Regional Trends and Overseas Sales Ratio

Regional sales trends reflect the global shift in electronic board production. The overseas sales ratio has reached 67.7% , and when including sales to overseas customers via domestic Japanese distributors, the effective overseas sales ratio stands at an impressive 82.7% .

Regionally, the increase in capacity utilization of semiconductor and electronic component manufacturing lines in Asia, particularly in Taiwan and China, contributed significantly to these results.

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3. Technological Innovation and New Frontiers: Addressing Advanced Semiconductors and Generative AI

The key to maintaining mid-to-long-term growth lies in technological innovation that addresses the "ultra-high density" and "low signal loss" requirements of electronic boards.

Slide Commentary (Expansion of Technology Domains)

This slide illustrates the company's technology roadmap, mapping the expansion from existing domains to new ones. For generative AI and data center semiconductors, demand is rapidly rising for "interposers," which are ultra-high-density relay boards placed between semiconductor chips and substrates, in addition to traditional PKG substrates.

In addition to physical roughening (such as the CZ series), which enhances adhesion through surface texture, the company is deploying the "AP Series," a chemical adhesion promoter that maintains surface smoothness while ensuring strong adhesion through chemical bonding. In ultra-high-frequency and high-density circuits where signal delay and attenuation must be prevented, this "smoothing x ultra-high adhesion" technology, along with hybrid CZ technology, serves as a strong differentiator in the market for generative AI semiconductors and high-frequency boards .

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4. Full-Year Outlook, Capital Expenditure, and Shareholder Returns

FY2026 Full-Year Consolidated Earnings Forecast

Following the strong performance in the first half, the company expects significant revenue and profit growth for the full year as follows:

• Revenue : 25,800 million yen ( +23.2% YoY )
• Operating Profit : 8,300 million yen ( +44.4% YoY )
• Ordinary Profit : 8,500 million yen ( +40.5% YoY )
• Net Profit : 6,000 million yen ( +19.3% YoY )
• Earnings Per Share (EPS) : 328.58 yen

The assumed exchange rates are 1 USD = 156.45 JPY, 1 TWD = 4.96 JPY, and 1 CNY = 22.58 JPY.

Capital Expenditure and Capital Allocation

To invest in future growth, the company is promoting capital expenditures, including the new construction plan for the Kitakyushu Plant . The planned capital expenditure for FY2026 is 3,985 million yen (of which 2,335 million yen is for the Kitakyushu Plant). While annual depreciation of approximately 280-300 million yen is expected after the plant becomes operational, this will build a supply system capable of meeting increasing global demand. Additionally, 1,741 million yen (6.7% of revenue) has been allocated to R&D to drive the development of next-generation chemicals.

Shareholder Returns and ROE Targets

The company maintains a clear shareholder return policy:

• Return Policy : Consolidated dividend payout ratio of 35% or higher and DOE (Dividend on Equity) of 4.0% or higher .
• FY2026 Dividend Forecast : Significant increase to an annual 110.00 yen (55.00 yen interim, 55.00 yen year-end) from 71.00 yen in the previous fiscal year.
• ROE Target : Against a target of 13-16% , the forecast for FY2026 is 17.5% , indicating that the company expects to maintain efficient management that exceeds its target levels.

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Summary

MEC's H1 FY2026 results demonstrate strong earnings expansion and high profit margins , centered on its flagship "CZ series" against the backdrop of rising demand for generative AI-related equipment and semiconductor packages. Through aggressive growth investments, such as the Kitakyushu Plant, and expansion into new domains (interposers and high-frequency boards) via the AP series, the company is further solidifying its indispensable position in the global electronic board manufacturing process.