Teikoku Tsushin Kogyo Co.,Ltd. Q2 FY2026 earnings call

Core Competencies

• Core strengths include integrated in-house production from design, mold making, processing to assembly, covering both custom and general-purpose electronic components, supported by in-house core technologies: mold design/manufacturing, screen printing on PET film, insert molding, press processing, and automated assembly with built-in quality testing
• Second core strength is element technology (originated from the firm's founding fixed/variable resistor products, now extended to front operation blocks, various sensors, deployed across automotive, consumer, industrial, and medical markets)

New Product & New Market Development

• Leveraging core technology to expand into the medical/healthcare new market, with continuous trade show participation to build brand awareness and grow sales
• Developing high value-added, environmentally friendly products: achieved successful lab testing of circuit formation and component mounting on paper, for potential future business opportunities
• Supplying curved sensors and integrated units to high-end camera/lens manufacturers, aligned with the recovery in high-end mirrorless camera demand
• Mass-producing transparent electrode touch sensor panels (already adopted in rice cookers), targeting expansion to other home appliances and automotive applications
• Long-term growth targets focus on accelerating growth in new high-potential areas: automotive electronics (for EVs) and medical/healthcare (electrochemical sensors for POCT applications)

Financial Strategy & Capital Allocation

• Mid-term target is balancing capital return and financial soundness, suppressing excessive net asset growth, while prioritizing investments for future growth and maintaining stable shareholder returns
• For the current 5-year mid-term plan (2021-2026), total projected cash inflow is 16.2 billion yen (2.9 billion from asset sales + 13.3 billion from operating cash flow); projected cash outflow: 7.6 billion for capital expenditure, 2.7 billion for R&D, 5.2 billion for shareholder returns, 1.4 billion for treasury share purchases, with 2.1 billion carried over to the next mid-term plan
• Plans to reduce cross-held policy shares to below 10% of consolidated net assets by 2027
• Shareholder return policy: maintaining a full year dividend of 100 yen per share for 2025/2026; starting next fiscal year, the target consolidated payout ratio will be 50% or higher to suppress excessive net asset growth
• Capital expenditure priorities: new headquarter/R&D building construction, infrastructure expansion at the Thailand factory (layout reconfiguration, expanded clean room, full operation starting April 2026) to increase capacity, and new equipment investment for growing transparent electrode and door mirror sensor production at the Ako main factory, the firm's core element technology production base

Mid-term Plan Progress & Capital Market Strategy

• Current 5-year mid-term plan is in its final year; hitting the full year target will bring cumulative sales and operating profit to over 100% of the original plan target
• Current share price is sustained above 2,500 yen, PBR has risen gradually to near 1x, but 2026 projected ROE is 4.3%, below the 8% target; management will focus on three priorities: improving profitability, optimizing capital structure, and improving market multiple through enhanced IR and sustainability efforts
• Issued the first integrated report in 2025, and is sponsoring the 2027 International Horticultural Exposition (GREEN×EXPO 2027) aligned with its sustainability vision

For the 2026 March fiscal year first half, the electronic components segment (the firm's only operating segment) recorded total revenue of 8.494 billion yen, an increase year-over-year, with an operating profit of 656 million yen, a 220 million yen decrease year-over-year, for an operating margin of 7.7%. By market:

• Automotive: First half revenue was slightly down YoY, full year second half revenue is projected to increase, with projected combined automotive and AV market second half revenue of 3.8 billion yen
• AV Equipment: Strong growth driven by renewed demand for high-end digital cameras and mirrorless cameras, with camera-lens sensor sales growing; strong performance expected to continue in the second half
• Amusement: Demand has cycled, second half revenue projected at 1.1 billion yen
• Medical & Healthcare: Still small in scale, but growing steadily
• Home Appliance: Demand for water heater components has recovered, second half revenue projected at 1.2 billion yen By product category (all product lines grew revenue YoY in the first half, full year second half projections):
• Sensors: Second half revenue projected at 2.02 billion yen, with lower amusement segment demand offsetting growth
• ICB (custom products): Large second half growth expected from automotive and AV end markets, projected revenue of 2.68 billion yen
• Fixed resistors + mechanical components: Fixed resistor demand from water heater markets continues recovering, combined second half projected revenue of 2.33 billion yen

• Full year 2026 March fiscal year guidance is revised downward: from the original target of 17.0 billion yen sales and 1.5 billion yen operating profit, to 16.8 billion yen sales and 1.3 billion yen operating profit, with a steady operating margin of 7.7%
• Second half (full year less first half) projected sales are 8.305 billion yen, projected operating profit is 643 million yen
• Full year projected ordinary profit is 1.4 billion yen, based on an assumed exchange rate of 145 JPY/USD, with almost no net foreign exchange gain/loss expected in the second half
• The planned full year dividend per share is kept unchanged at 100 yen, maintaining the high payout orientation
• The cumulative sales and operating profit of the current 5-year mid-term plan is still projected to exceed 100% of the original target after the guidance revision

• Ongoing expansion of global trade tariffs between major economies (US and China) creates ongoing market uncertainty
• Domestic Japanese market faces continued weak consumer spending from persistent inflation and yen depreciation, leaving the outlook uncertain
• Sustained higher costs for raw materials, labor, and logistics could not be fully offset by the first half revenue increase and efficiency gains, leading to lower year-over-year operating profit
• Demolition costs for the old building to make way for the new headquarter/R&D building came in higher than originally budgeted, leading to a larger-than-expected decline in net profit for the first half

No formal Question and Answer section was included in the provided transcript.