6433.T

• Core Vision and Strategy
  • The long-term vision of becoming Asia No.1 in linear bushes for automation and labor saving remains unchanged. Management recognizes the need to add a new complementary vision, which is currently under bottom-up internal discussion.
  • The company has spent years expanding production capacity for flange-type linear bushes, a low market share segment (currently ~5%) limited by historical production constraints. Capacity expansion followed the 2017 lesson of being unable to meet sudden demand spikes, and involved 3-4 years of capital expenditure exceeding depreciation expense.
• Strategic Focus and Business Restructuring
  • Current near-term priority focuses on three core areas: precision parts processing, spherical bearings, and Z-tilt stages for semiconductor packaging. Longer-term growth initiatives include humanoid robot joint components (via KyoHA), non-racing precision machining, and advanced semiconductor packaging unit products.
  • Management is executing a scrap-and-build strategy: it has partially exited large straight-type product models to reallocate resources, and completed initial deliveries of value-added surface-treated flange-type products (currently awaiting repeat orders amid weak direct acting demand).
  • Key growth initiatives for high-margin products:
    • Z-tilt stage: Used for tilt misalignment correction in advanced semiconductor packaging (e.g. TSMC CoWoS), where even small tilts cause connection defects. The company has secured its first order and is focused on expanding sales.
    • Ultra-precision XYθ stage: Co-developed with Tokyo Electron Device, this product achieves sub-micron precision by repurposing Z-axis wedge actuator mechanisms horizontally to reduce ball screw wobble. A patent has been filed.
    • Spherical bearings: Short-term focus on semiconductor, racing simulator, and industrial applications; mid-to-long term focus on medical and humanoid robot applications leveraging the company's unique expertise.
• New Strategic Partnership
  • The company has joined KyoHA (Kyoto Humanoid Association), a new industry association aiming to revive Japan's humanoid robot industry. The company contributes its spherical bearing technology for robot joints, drawing on 20 years of research collaboration with association leader Professor Atsuo Takanishi of Waseda University. This is a long-term initiative with no immediate expected earnings impact.

• Full-year 2026 consolidated revenue guidance is downward revised to 1.6 billion yen, representing a 28.6% decrease year-over-year, with a full-year net loss expected. This brings revenue back to levels seen 10 years prior.
• The company's prior medium-term management plan targets are also downward revised, and a full review of the medium-term plan is currently underway.
• Capital expenditure policy has been adjusted: no new large capital expenditure plans have been set for next fiscal year, and any future investments will be evaluated based on business needs and maintenance requirements only.
• The WFE (semiconductor front-end) market is expected to see modest growth in 2024 and 2025, with a full recovery starting in the second half of 2026 through 2027. Management expects that past capacity investments will generate positive returns once PC, smartphone, and automotive semiconductor markets recover.
• Shareholder returns: The previously guided full-year dividend of 2 yen per share is revised to zero dividend, and the shareholder benefit program is changed from covering holders of 100+ shares to only holders of 1,000+ shares. All retained capital will be allocated to growth investments.

1. Direct Acting Equipment: 546 million yen in cumulative H1 revenue, 21.3% decrease year-over-year, accounting for 64.5% of total H1 consolidated revenue. Full-year 2026 guidance is 983 million yen, 28% decrease year-over-year. The segment remains in a prolonged demand adjustment with high inventory across the company and distribution channels.
2. Precision Parts Processing: 170 million yen in cumulative H1 revenue, 40.5% decrease year-over-year, accounting for 20.1% of total H1 consolidated revenue. Full-year 2026 guidance is 378 million yen, 44.3% decrease year-over-year. The decline was driven by regulation changes for Honda racing components that altered order volumes and schedules.
3. Unit Products: 130 million yen in cumulative H1 revenue, 35.6% increase year-over-year, accounting for 15.4% of total H1 consolidated revenue. Full-year 2026 guidance is 241 million yen, 21.3% increase year-over-year. Growth was driven by strong demand for spherical bearings in medical and semiconductor applications in the Chinese market, alongside solid demand for vacuum-related positioning stages.

• The demand recovery for direct acting equipment has been delayed far longer than expected, resulting in an unprecedented inventory buildup across the supply chain, which is weighing heavily on near-term earnings.
• The prolonged Ukraine conflict has driven sustained high prices for materials and energy, pushing up production costs amid already weak revenue.
• Recent geopolitical changes have created uncertainty for the company's fast-growing spherical bearing business in the Chinese market.
• Precision parts processing for racing applications has been delayed by regulation changes for Honda components, pushing expected revenue growth out further than planned.
• The company risks failing to meet Tokyo Stock Exchange listing requirements for market capitalization, which has forced a re-evaluation of previous growth plans built on expectations of large demand increases.
• Current deferred tax assets have been written down by 38 million yen due to the half-year loss, though management notes they may be re-established depending on full-year results.

Q: After 20 years of leadership, is there any past strategic move you would change if you could do it over, and what is your vision for developing new independently controlled business areas that do not rely on customer demand cycles? / A: Management confirms that now is exactly the right time to pursue new business development. The priority remains improving existing business first; the company has grown historically by following customer plans, which management agrees is too limiting. New initiatives like KyoHA are pursued in the spirit of Honda's entry into F1 — done because it is an interesting, meaningful challenge, while the company continues to solidify its existing business. Management emphasizes that new goals can only be achieved after first strengthening core operations.

Q: Will the company abandon its push for new growth initiatives to focus solely on struggling existing businesses? / A: Management reaffirms that improving existing business is the first priority, and launching completely new products in untapped markets is too much of an unnecessary gamble. The company will continue to pursue measured challenges but avoid reckless ungrounded risk. While this approach has been the company's strategy historically, management acknowledges that a gradual adjustment to this mindset is needed to enable new growth.