TAIYO HOLDINGS CO.,LTD. Q2 FY2026 earnings call

• Overall Consolidated Performance

  • Consolidated first-half sales hit 67.8 billion yen (13% YoY increase), operating profit hit 15.1 billion yen (22% YoY increase)
  • First-half progress vs. August 2025 forecast was 105% for sales and 115% for operating profit, a strong result
  • Taiyo Ink Manufacturing's "Inspiration Space" showroom at its InnoValley R&D center won the 2025 Good Design Award, the company's second such award

• Capital Returns & Capital Structure

  • Announced a 20 yen per share increase to the interim dividend, returning a portion of above-expectation profit to shareholders
  • End-of-year dividend will be considered flexibly based on performance, aligned with the 100% consolidated total payout target
  • Approved a 1-for-2 stock split (effective December 1, 2025) to lower the minimum investment amount and improve accessibility for individual investors
  • Balance sheet: Cash and deposits decreased by ~5.5 billion yen primarily due to dividend payments; trade receivables increased by ~6.8 billion yen due to higher sales; total borrowings decreased as repayments exceeded new borrowing

• Strategic & Long-Term Goals

  • Mid-term management plan targets a 30% ROE, with 2031 March term targets of 180 billion yen consolidated sales and 47 billion yen operating profit
  • Electronics segment is pursuing profit improvement by raising the share of high-margin PKG substrate products, while reviewing profitability of low-margin general-use products
  • Healthcare & Pharmaceutical segment continues to drive growth at Taiyo Pharmatech with new and existing client contracts, and benefits from increased demand for Taiyo Pharma products due to competitor supply shortages

1. Electronics Business: First-half sales of 46.3 billion yen (9% YoY increase), operating profit of 13.7 billion yen (15% YoY increase). The strongest growth comes from PKG substrate products (led by memory demand), rigid high-function products for automotive and smartphone applications, and build-up substrate products. 61% of Electronics segment sales are generated in China, with South Korea recovering from a prior downturn. This segment accounts for approximately 68.3% of total consolidated first-half sales.

2. Healthcare & Pharmaceutical Business: First-half sales of 18.4 billion yen (22% YoY increase), operating profit of 2.4 billion yen (161% YoY increase), driven by a favorable product mix. Operating profit reached 90% of the full-year forecast in the first half, and the segment accounts for approximately 27.1% of total consolidated first-half sales. Taiyo Pharmatech (CDMO/manufacturing contract service) drove most growth, while Taiyo Pharma (proprietary drug sales) held steady at ~3 billion yen in sales for the half.

3. ICT&S Business: First-half sales increased 35% YoY (above forecast), but operating profit dropped 87% YoY due to a profit decline in its IT business, primarily from overstaffing in its personnel dispatch operations ahead of winning new contracts. This segment accounts for approximately 4.6% of total consolidated first-half sales.

• Full-year FY2026 March term guidance was revised upward, driven by better-than-expected performance in the Electronics segment and non-operating gains from subsidiary liquidation and CVC fund sale
• Second-half performance is currently expected to meet original plan, with no changes to second-half projections beyond the upward adjustment from first-half outperformance
• The Healthcare & Pharmaceutical segment is slightly behind plan in the first half, but management expects to make up all missed ground in the second half and achieve the full-year target, so no full-year guidance revision was made for this segment
• Management confirms that full-year operating profit for the Healthcare & Pharmaceutical segment is still achievable despite the first-half 90% progress rate

• The strong 5.8 yen YoY appreciation of the yen created a headwind for the export-focused Electronics segment
• No clear fourth-quarter demand outlook can be given for the Electronics segment at this time, even though current demand remains strong through the third quarter
• ICT&S business is underperforming relative to plan: its large personnel dispatch segment has higher fixed costs from pre-hiring staff ahead of winning new contracts, leading to a large operating profit decline
• DDR4 memory demand, which is a key driver of current PKG product growth, is expected to peak out within approximately 1 year as the product reaches end-of-life
• Healthcare & Pharmaceutical segment quarterly results can see temporary volatility from shifting production and shipment timing relative to annual plan

Q: What is driving the strong growth of PKG substrate products in China vs. South Korea? / A: PKG product growth has been consistently strong in China for the past 1-2 years, while South Korea has only recently recovered from a prior downturn. DDR4 memory demand is a key driver of growth in both regions, with South Korea's recovery led in large part by rebounding DDR4 demand.

Q: Is the strong Electronics segment performance expected to continue into the second half? / A: Current demand for PKG dry film products remains strong, so the third quarter is expected to be healthy. Management does not see any obvious near-term downside factors, but cannot provide a clear outlook for the fourth quarter at this time. Rigid high-function product demand also remains solid.

Q: Why did Healthcare & Pharmaceutical segment profit fall quarter-over-quarter, and what is the YoY trend? / A: Total segment sales fell 0.4 billion yen quarter-over-quarter, with profit down 0.3 billion yen. Both Taiyo Pharma and Taiyo Pharmatech saw lower sales, with Taiyo Pharmatech contributing a larger negative impact on profit. The decline is due to coincidental overlapping of multiple small factors, with no single core cause. YoY, Taiyo Pharma sales are lower but profit is up due to prior year impairment charges cutting annual amortization by ~1 billion yen full-year, while Taiyo Pharmatech has delivered large sales and profit growth YoY.

Q: What is the outlook for memory market demand for the company's products? / A: DDR4 demand is expected to peak out within roughly one year as it reaches end-of-life. NAND flash memory demand is expected to see structural long-term growth, which the company expects will offset the eventual decline in DDR4 demand. The company cannot break down current demand split between NAND and DRAM in detail.