Can record semiconductor orders at a record high as profit even after capacity expansion investment?

The semiconductor segment recorded revenue of ¥23,659 million and operating profit of ¥4,686 million in the fiscal year ended March 2026, with revenue up 11.0% year on year and operating profit up 12.5%. In the first quarter of the fiscal year ending March 2027, revenue increased to ¥7,051 million and operating profit to ¥1,586 million, up 22.5% and 59.1% year on year, respectively. The first-quarter operating margin was approximately 22.5%, above the full-year result of approximately 19.8%, making it important to determine whether this high profitability can be maintained in the first half.

Demand was strong, with first-quarter orders received of ¥11,826 million and an order backlog of ¥14,165 million, supported by AI-related demand and capital investment by semiconductor manufacturers. The backlog was equivalent to approximately 2.0 times revenue, but no year-on-year comparison or breakdown by delivery timing was provided. In the first half of the fiscal year ending March 2027, we want to confirm the increase in orders received and the backlog, the portion of the backlog that will convert to revenue in the current fiscal year, and the proportion attributable to advance orders.

Capacity expansion is also progressing. The earnings presentation materials indicate that flame-processing capacity in the semiconductor segment is expected to approximately double at full operation. Approximately ¥4 billion will be invested in expanding the production building at the Zao-Minami Plant, with operations scheduled to begin in January 2027. Capital investment in the fiscal year ended March 2026 totaled ¥3,810 million, mainly for the semiconductor production building, the Kitakata No. 2 Plant and the Vietnam plant. Personnel recruitment and training, start-up costs and depreciation may precede the contribution from the expanded capacity to revenue.

The full-year forecast for the fiscal year ending March 2027, updated on 2 November, was raised to revenue of ¥53,290 million and operating profit of ¥8,220 million, while depreciation and other expenses associated with new investment were cited as factors weighing on profit. In the first-half results, it will be necessary to determine whether the semiconductor segment's operating margin has fallen from approximately 22.5% in the first quarter to below 20%, the scale in millions of yen of the cost increase from capacity expansion investment, and whether the ¥14,165 million order backlog has been maintained.