HIRANO TECSEED CO.,LTD. Q2 FY2026 earnings call

Market Context and Strategic Reset

• When the original 2024-2027 mid-term management plan was released, long-term demand for EV lithium-ion battery coating equipment was expected driven by global EV promotion policies. Recent major market shifts including policy shifts in Europe and the US, US-China trade friction, US tariff policy uncertainty, and overcapacity of lithium-ion batteries in China have caused major customer capital expenditure to stall.
• The revised plan shifts focus from expanding production capacity to prioritizing profitability, and uses the current volatile market period to consolidate foundations for future growth.

Revenue Structure Reform

• Diversify revenue sources: Expand beyond energy and electronic materials to new areas such as perovskite solar cells to broaden the addressable market.
• Strengthen high-margin after-sales service: Leverage existing customer bases, expand sales offices, and upgrade the Technicum experimental facility to better support customer new material development and improve customer satisfaction.
• Cost structure reform: Overhaul high-cost structure by reviewing logistics costs via stricter process management, cutting sales commissions through strategic sales mix adjustments, reducing production costs via machine structure redesign, and improving production efficiency via lead time reduction, production digitalization, and frontloading.
• Improve organizational capability: Promote specialized talent development, technology transfer, system upgrades, and business standardization, while continuing to strengthen corporate governance.

Capital Allocation Update

• Shifted priority from capacity expansion for EV growth to prioritizing growth investments aligned with the new market environment. Key investments include Technicum test equipment upgrades, after-sales service expansion, new domain market entry, and sales office strengthening. Already completed investments in 3D design/BOM development and US talent development for trial operations.
• Maintain existing shareholder return policy: Target the higher amount between 3.5% DOE or 60% payout ratio. Will conduct opportunistic treasury stock purchases to improve capital efficiency and shareholder returns, balancing with required capital for growth investments.
• Prioritize investment return for base capital expenditures, only carry out necessary upgrades to existing facilities with proven returns.

Balance Sheet and PBR Improvement

• Management recognizes the sustained PBR below 1x as a major issue. Will pursue PBR improvement via earnings growth, shareholder returns, and active management of cash from business operations, policy-held stocks, and unnecessary asset sales.

1. Coating machine-related segment: Order backlog was 5.428 billion yen, a 10.697 billion yen decrease year-over-year. Net sales were 15.051 billion yen, a 5.578 billion yen decrease year-over-year, accounting for 82.9% of total company revenue. Segment profit was 1.67 billion yen, a 0.305 billion yen increase year-over-year. 2. Chemical machine-related segment: Order backlog was 1.389 billion yen, a 0.33 billion yen decrease year-over-year. Net sales were 2.309 billion yen, a 0.631 billion yen decrease year-over-year, accounting for 17.1% of total company revenue. Segment profit was 0.397 billion yen, a 0.153 billion yen increase year-over-year.

• Full year 2025 (fiscal 2026 ending March) revenue and operating profit guidance is maintained unchanged from the initial forecast, with no upward or downward revision.
• The revised mid-term plan targets operating profit to stay between 1.5 billion yen and 2.0 billion yen through 2026, and targets 3.0 billion yen in operating profit by 2027.
• The mid-term plan targets operating profit margin of 10% or higher and ROE of 8% or higher by 2027, and targets reaching PBR above 1x as soon as possible.
• The 3.5 billion yen 2027 after-sales service revenue target is maintained unchanged.

• Continued slowdown in the EV lithium-ion battery market, with customer capital expenditure plans delayed or canceled, leading to sustained order declines and large bulk order decision delays.
• Market growth trajectory for perovskite solar cell coating equipment remains uncertain, and the new market faces existing competition from established industry peers.
• Persistent raw material price inflation, and cost increases from customer-requested destination and specification changes, which pressure gross margins for the coating machine segment.
• The electronic material market (a key end market for chemical machine-related products) shows mixed sentiment with some customers holding back on capital expenditure, leading to soft sales in the segment.

Q: Will the EV-related order decline continue, and will growth in perovskite demand offset the EV revenue decline? What is the company's strategic response? / A: Currently there is no clear sign of recovery in EV battery demand, due to policy shifts, trade friction, and Chinese overcapacity. The company has experience serving a broad range of industries beyond EV batteries, and will target new orders from after-sales service and perovskite coating equipment via upgraded Technicum test facilities and strengthened sales capabilities. High-value EV battery lines have very thin profit margins due to intense competition, so the company will prioritize profitability over revenue size going forward. It does not expect perovskite to generate large revenue immediately, but will focus on securing high margins as a technological leader in this space. The mid-term plan targets 30 billion yen in total revenue by 2027.

Q: What is the current priority allocation for growth capital, and what are the plans for EV investment, after-sales expansion, and Technicum upgrades? / A: The priority of EV-related investment has dropped sharply due to major market changes. For after-sales expansion, the company is investing in personnel expansion and partnerships to build a full-service organizational structure. For Technicum upgrades, a new perovskite coating machine will be exhibited in Tokyo this coming January, and installed at the Technicum facility after spring next year. The company also plans to produce new small-scale test machines that support small-batch testing to reduce material preparation requirements for customers.

Q: What is the competitive landscape for perovskite coating technology, and what is the development status of the company's perovskite coating machine? / A: The company is developing its perovskite coating technology in collaboration with academic institutions. Its core advantages are high coating efficiency and support for mass production via roll-to-roll processing. Competitors do exist in this space. The company's perovskite coating machine is currently in manufacturing, and will be officially presented at the January 2026 Tokyo exhibition. No formal order updates can be shared at this time.

Q: How is the company progressing on the commitments in the revised mid-term plan, such as digital transformation? / A: The company has advanced development of digital twin technology for coating machines in collaboration with overseas academic partners. Digital twin records optimal operating parameters to enable automatic repeated production under the same conditions, improving customer productivity. This technology will be integrated into the new perovskite coating machine, and will also be installed at the Technicum facility for customer demonstration in the future.