6914.T

• Overall 2025 Performance: Optex Group achieved record full-year results with both revenue and profit growth, driven by strong performance in the SS segment. Gross margin improved from 50.4% to 52.1% YoY, and operating margin improved 1.1pp to 12.4%. Revenue was slightly below plan at 99.8% of target, but operating profit exceeded plan by 10% at 110% of target. Positive forex impacts from a stronger Euro contributed 0.19 billion yen to revenue growth and 0.1 billion yen to operating profit growth, and the business absorbed 0.4 billion yen in tariff impacts via improved contribution margin. - Long-term Growth Vision (to FY30/2030): The company targets 1,000 billion yen in consolidated revenue, 15%+ operating margin, and 15% ROE, with the core goal of sustained corporate value improvement. The SS business (Optex's founding business) is positioned as the core growth driver, while the IA business will shift to a structure balancing growth and profitability, with a balanced overall business portfolio between the two core segments. The expansion of the solution proposal business model is the central pillar of this growth strategy, leveraging cross-group technology and expertise to deliver high-value-added solutions that drive both growth and profitability. - 3-Year Mid-Term Plan (FY26-FY28): The SS business will lead revenue growth, with a target 6-7% average annual consolidated revenue growth. The company targets double-digit operating profit growth for both core segments, driving ~12% annual consolidated operating profit growth to improve profitability on the way to the FY30 target. - Portfolio Management Strategy: The company sets 5% minimum growth, 10% minimum profitability, and 15% target profitability for all business segments. Core cash cow businesses will continue to grow and improve profitability, while businesses facing growth or profitability challenges are classified as challenge businesses that will be reviewed without exceptions, including options for scaling back or exit, to strengthen the high-profit business structure by FY28. - Solution Proposal Business Progress: The solution business reached 15.8 billion yen in FY25, accounting for 24% of total revenue, up from less than 10% in the mid-2010s. The target is 25 billion yen by FY28, accounting for 31% of total revenue. Key initiatives across segments: - Security business: Offer end-to-end solutions including sensors, installation, operation, tracking cameras, maintenance, and remote monitoring for large facilities and data centers, with direct marketing engagement from the pre-installation phase. - FA business: Expand IO-Link network-based solutions that resolve connectivity and compatibility issues between sensors and upper-level devices, reducing on-site personnel dependency and driving increased sensor sales paired with IO-Link master sales. - Inspection lighting: Leverage the group company CCS's ~40% domestic market share to deliver full inspection solutions, combining lighting, power, lenses, cameras, software, AI, and robots to tune for improved inspection accuracy rather than just selling lighting components. - Shareholder Return: For FY25, the annual dividend is increased to 16 yen per share (5 yen interim, 11 yen year-end). For FY26, the annual planned dividend is 65 yen per share, a 9 yen increase from FY25. The dividend policy is revised, raising the target payout ratio from 30% to 35% and the target DOE from 3.0% to 3.5% or higher, to clarify a commitment to sustained shareholder returns.

• FY26 (December 2026) Consolidated Guidance: Revenue is targeted at 69 billion yen, a 4.7% YoY increase, driven by steady SS business growth and expanded high-margin product sales in FA and inspection lighting within IA. The guidance fully factors in full-year Trump tariff impacts (vs. ~6 months of impact in FY25) and the expected demand decline for vehicle battery automation equipment. Operating profit is targeted at 8.8 billion yen, a 640 million yen YoY increase, with an operating margin of 12.8%. This is a 0.3 billion yen upward revision from the prior rolling mid-term plan target of 8.5 billion yen. - Demand Outlook by Segment: - SS security: Continued demand growth driven by expanding AI and data center infrastructure investment. - Automatic doors: Steady domestic and overseas demand driven by safety, environmental, and remote management needs. - Social & Environment: Continued growth driven by parking lot digitalization and expanding demand for high-value-added solutions. - IA FA/inspection lighting: Demand is recovering centered on semiconductors, with the company focusing on core products and solution business to build differentiation. - Industrial PC: Inventory adjustments at semiconductor customers will conclude in FY26, leading to a firm performance outlook. - Automation equipment: The vehicle battery business will face challenging conditions, so the company is shifting significant resources to non-vehicle battery storage applications and other industries using existing injection technology, and will expand visual inspection equipment to offset revenue declines. - Sales Growth Drivers: The SS business is expected to add 2.2 billion yen in revenue, leading overall growth. Within IA, a 1.9 billion yen revenue decline in automation equipment will be offset by growth in FA, inspection lighting, and industrial PC, leading to a net 0.4 billion yen revenue increase for the full segment. A slight forecasted yen depreciation vs FY25 adds positive forex impact to the consolidated revenue target. - Profit Drivers: The company expects continued gross margin improvement from sales growth, product mix improvement, and active price optimization including tariff mitigation. The guidance factors in a 0.5 billion yen YoY increase in tariff-related costs and higher personnel expenses for solution business investment, resulting in the 640 million yen net operating profit increase. - Forex Assumptions: Guidance assumes 1 USD = 150 JPY and 1 EUR = 175 JPY. If current weaker-than-assumed yen levels persist, it will add additional operating profit from forex gains, while rapid yen appreciation would create downside risk to profit. Newly added forex sensitivity for both EUR and USD is provided to reflect the high sales share in the EMEA region.

Total consolidated revenue for FY2025 was 65.9 billion yen, with operating profit of 8.153 billion yen, an overall 4.1% year-over-year revenue increase and 14.5% year-over-year operating profit increase. 1. SS Business Segment (Sensing & Security): Total SS revenue grew 9.4% YoY, operating profit grew ~25% YoY, and operating margin reached 15.7%, a 2 percentage point improvement YoY. Sub-segment performance: - Security-related: Revenue grew 9% YoY, driven by strong demand for laser scan sensors for data centers (primarily in North America), expanding infrastructure facility sales in Europe, and concentrated large power facility projects in Japan's Q3. - Automatic door-related: Revenue grew 3% YoY. Overseas sales were flat YoY due to Trump tariff impacts and market weakness, while domestic growth was supported by special demand for passenger counting information systems from a subsidiary in H1 FY25. Optex holds ~50% domestic market share for automatic door sensors. - Social & Environment-related: Revenue grew ~24% YoY, led by vehicle detection sensors, with strong sales in both Japan (capturing replacement demand for underground loop coils) and North America (expanding demand for gate opening/closing applications). 2. IA Business Segment (Industrial Automation): Total IA revenue was nearly flat YoY, operating profit grew 1.7% YoY. The segment saw indirect Trump tariff impacts in H1, but order recovery emerged in Q4. Sub-segment performance: - FA-related: Revenue grew ~8% YoY. Domestic large projects/investments were delayed in the first half due to tariffs, but broad-based order growth for photoelectric sensors and inspection lighting drove a Q4 recovery; European sales grew after inventory adjustments concluded, and Chinese sales were firm on recovering capital investment. - Inspection lighting (formerly MVL): Revenue grew ~4% YoY. Domestic investment caution in semiconductor, electric/electronic, and automotive sectors eased in H2, with firm overseas sales for logistics applications in Europe/North America and strong semiconductor-related demand in Southeast Asia and China that contributed heavily to Q4 growth. - Industrial PC (formerly IPC): Revenue declined ~5% YoY due to inventory adjustments at semiconductor manufacturing equipment customers, but the segment secured large orders for co-developed tracking cameras via cross-business collaboration with the SS segment's security business. - Automation equipment (formerly MECT): Revenue declined ~15% YoY. Large secondary battery equipment projects were delivered largely as planned (with some pulled forward), but vehicle battery market oversupply led to a peak in capital investment demand for this segment. The business is highly sensitive to individual large project timing, creating ongoing uncertainty through FY26-FY27.

• The IA automation equipment segment faces high uncertainty due to vehicle battery market oversupply, with large expected demand declines for core vehicle battery injection equipment in FY26 and FY27, which is expected to push operating margin down from the recent ~10% level. The segment is highly dependent on large individual projects, creating ongoing volatility in performance. - Data center security projects have inherent information and decision process constraints on the customer side, so only visible committed projects are included in the current FY26 guidance, leaving upside potential but also uncertainty around final performance. - Full-year exposure to Trump tariffs in FY26 will increase related costs by 0.5 billion yen YoY, creating pressure on profitability if mitigation efforts are less effective than expected. - Sudden large yen appreciation would create negative operating profit impacts, as the guidance is based on specific yen-dollar and yen-euro exchange rate assumptions. - The IA industrial PC segment still faces residual softness from ongoing semiconductor manufacturing equipment inventory adjustments in FY25, with recovery dependent on inventory adjustment completion.

Q: What is the trend of the share of data center/key facility revenue within the security segment across FY24, FY25, and FY26?

A: After re-tabulating results, data center revenue accounted for ~5% of total security sales in FY24, grew to 10% in FY25 due to special demand, and is expected to grow further to 12-13% in FY26.

Q: Is data center sales growth concentrated in the US, or is it spreading to other regions?

A: The US accounts for more than half of current data center sales, and growth is gradually spreading to Europe, the Middle East, and Asia.

Q: SS segment operating margin is not projected to grow much from FY25 to FY26, even as the share of high-margin data center projects increases. Why is this the case?

A: Optex expects selling more high-value-added products will naturally lift operating margin over time, but the FY26 guidance uses a conservative assumption for data center projects. Due to customer information disclosure and decision process characteristics, there is limited visibility into future projects at the planning stage, so only currently confirmed projects are included in guidance. There is meaningful upside potential for revenue, profit, and margin if demand comes in stronger than currently expected.

Q: What changes have led to the stronger growth and profitability of the automatic door segment than previously expected?

A: Automatic doors are already a key cash cow for Optex with ~50% domestic market share. First, there is significant room for overseas expansion in Europe and the US, where door system designs differ and Optex still has low market share; the company plans to launch new products compatible with European standards to improve sales and margin. Second, even in the domestic market, there is room to lift margin by adding value beyond basic sensors, including meeting demand for remote monitoring. Optex will continue investing to improve scale and margin for this segment.

Q: Is the projected strong growth for the SS Social & Environment segment in Europe driven by parking lot digitalization demand?

A: 60% of the Social & Environment segment is vehicle detection business. Of the three core markets (Japan, US, Europe), Europe still has the largest remaining growth potential, so Optex is targeting share expansion in Europe including new product launches.

Q: What is driving the recent growth in domestic FA segment sales, and is this growth mostly driven by semiconductors?

A: Semiconductors do represent a large new growth opportunity, but they do not account for an extremely high share of current FA sales. The current growth is driven by a broad-based recovery in demand across traditional end markets including electric/electronic components and batteries, on top of incremental growth from semiconductor applications. Chinese market growth is a major contributor, driven by increased government support for domestic semiconductors that has led to a large increase in inquiries and orders; this growth builds on an existing solid base of traditional demand, rather than coming entirely from semiconductors.

Q: What is the current outlook for the European FA segment after inventory adjustments concluded? Is growth driven by Chinese demand or domestic European demand?

A: Optex does OEM supply to one major European customer, and most of that customer's sales are destined for the Chinese market. So the recovery in European-origin shipments reflects the recovery in the Chinese market. After growing ~26% YoY in FY25 (following large inventory cuts in FY24), growth is expected to slow to a single-digit percentage rate in FY26 now that inventory adjustments are complete.

Q: Is there a path to continued profitability improvement for industrial PC and automation equipment from FY25 to FY26, and can cross-business synergy help drive this improvement? What initiatives are in place for automation?

A: Both businesses have improved profitability over the past several years, reaching nearly 10% operating margin from previously low single-digit or unprofitable levels. For automation, margin improved to nearly 10% in FY25, but large expected declines in demand for core vehicle battery injection equipment will push margin lower in FY26 and FY27. For industrial PC, cross-business synergy with SS has already delivered results, including large orders for combined tracking camera and security sensor projects and cost savings from shared procurement functions. For automation, the visual inspection equipment business already leverages cross-group synergy combining sensors, cameras, robots, and lighting, but core automation projects have limited synergy with other businesses. To stabilize sales and improve profitability, Optex is prioritizing expanding the visual inspection business and developing new applications to replace lost vehicle battery equipment revenue, targeting higher margin opportunities that also leverage group synergy.

Q: Why is FY26 net profit guidance projected to be flat YoY despite growing operating profit? Is this a conservative assumption?

A: The flat forecast is entirely due to a one-off gain: FY25 included ~0.9 billion yen in securities sale gains that will not repeat in FY26. There are no other hidden factors dragging on net profit.

Q: Why did Optex raise the payout ratio and DOE target from the prior mid-term plan targets?

A: The revision reflects business characteristics, improved business performance, and a focus on improving capital efficiency, but the biggest driver was feedback from ongoing dialogue with shareholders, investors, and analysts during IR activities. After internal review, Optex concluded this higher target was appropriate to clarify its commitment to sustained shareholder returns.