8151.T

• Overall Fiscal 2025 Positioning

  • 2025 September is the first year of the medium-term management plan TY2027, positioned as a year of advance investment to hit 2027 targets. The full-year result outperformed the third quarter revised guidance due to one large overseas project closing at period end and higher-than-expected Q4 gross margin. Full-year gross margin hit 43.6%, up 0.3pp year-over-year, with Q4 margin reaching 44.7%.

• Key Growth Strategic Progress

  • Defense Business: Won multiple large projects amid expanding Japanese defense budgets, including the 2.7 billion yen ROV contract. Projects have multi-year lead times, and many products will generate recurring follow-on orders. Total defense sales across segments are projected to exceed 10 billion yen by 2029, with continued targeting of large 10s of billion yen projects.
  • Decarbonization/Energy Business: Agreed to OEM supply of in-house fuel cell/water electrolysis evaluation systems to France-based BioLogic, a global leader in electrochemical measurement, launching European sales in July 2025 and North American sales planned for 2026, targeting 1 billion yen in sales from this line by 2030; Eltel is scaling up mass production capacity. Also secured exclusive full-China distribution rights for BioLogic's battery charge-discharge evaluation systems after strong performance in the initial South China distribution rights, with expansion targeting automotive battery development clients to grow market share in China.
  • Advanced Mobility Business: Opened a new sales office and planned real-vehicle testing facility in Germany for Swedish subsidiary Rototest, which manufactures AD/ADAS evaluation systems, to expand solutions sales and contract testing services in the core European automotive market. Supports SkyDrive's flying car development with safety and durability evaluation facility construction, and has built a certification testing alliance with US partners to commercialize testing/certification support services for the eVTOL segment.
  • New Quantum Business: Became the domestic sales agent for Finland-based IQM, a leading superconducting quantum computer company, launching the business in August 2025. IQM offers a full on-premise product line from high-end performance models to entry-level models priced around 200 million yen per unit. The strategy prioritizes talent development and know-how accumulation to build competitive advantage, targeting a leading domestic position by 2030 when the quantum market is expected to mature, and will also actively expand into the quantum sensing segment.

• Financial and Capital Strategy

  • FY2025 cash flow from operating revenue was 1.75 billion yen, with 1.3 billion yen in new financing. Allocation: 1.3 billion yen to growth investment, 150 million yen to management base strengthening, 1.6 billion yen to shareholder returns. M&A remains an active priority for future large investment.

• Sustainability and Governance

  • Separated management decision/supervision functions from executive execution to clarify responsibility and strengthen corporate governance. Issued group human rights policy and updated supply chain procurement policies, and launched health-oriented workplace initiatives. Selected for the first time as a FTSE Blossom Japan Index constituent, and maintained a CDP Climate Change B score for the second consecutive year, targeting an A- score by 2027.

• Capital Cost and PBR Improvement

  • FY2025 ROE fell to 4.3% due to lower net income, with an end-period PBR of 1.23x. Estimates equity cost of capital at 6.1% to 6.5%, and will continue efforts to improve ROE, expand equity spread, and raise PBR to hit the 11% ROE target for FY2027.

• For the 2026 September fiscal year, management forecasts strong year-over-year growth driven by the large accumulated beginning-of-period order backlog and strong recent order momentum: it projects net sales of 39 billion yen, operating profit of 3.6 billion yen, ordinary profit of 3.7 billion yen, and net income of 2.6 billion yen. This would set a new all-time high for sales, and the highest operating profit in 20 years.
• For the medium-term TY2027 plan ending 2027 September, management maintains its original targets of sales of at least 45 billion yen, operating profit of 4.5 billion yen, and ROE of 11%.
• For shareholder returns, management maintains a target dividend payout ratio of 5% on equity (DOE). It confirms a FY2025 full-year dividend of 69 yen per share (DOE 5.3%), and plans a 1 yen increase to 70 yen per share for FY2026, marking 9 consecutive years of dividend increases, with a goal of continuing dividend increases going forward. Share buybacks will be considered as appropriate, balanced against growth investment needs.
• Long-term targets: Defense business is targeting over 10 billion yen in sales by 2029; the OEM fuel cell/water electrolysis evaluation system line is targeting 1 billion yen in sales by 2030; the quantum business targets a leading domestic market position by 2030.

1. Advanced Mobility Business: Sales decreased year-over-year, as large overseas AD/ADAS evaluation system projects and large domestic e-mobility projects were delayed to future periods due to customer-side issues. Segment profit also decreased sharply. Domestic vibration and noise measurement performed strongly. Order backlog increased significantly from both delayed large projects and new large order wins. 2. Decarbonization/Energy Business: While electrochemical measurement systems and low-temperature/magnetic measurement segments outperformed plans, overall sales decreased year-over-year due to a low beginning-of-period order backlog. Segment profit decreased due to lower sales and preemptive capacity expansion at subsidiary Eltel for hydrogen business growth. Order backlog increased, with continued strong performance from hydrogen-related and electrochemical businesses. 3. Information Communication/Information Security Business: Core network performance test products for major carriers outperformed plans, and vulnerability scanners and in-house developed Synesis large-capacity packet capture grew year-over-year. Cybersecurity had solid service provider performance and contributed strongly from a large government project. Sales declined due to customer-caused project delays and low beginning backlog, with segment profit falling due to lower revenue and new product development costs. Cybersecurity orders increased on large project wins, but information communication orders fell slightly on core product transition effects, leading to an overall lower order backlog. 4. EMC/Large Antenna Business: Sales decreased year-over-year due to low beginning backlog and customer-caused delays of large projects, but order backlog increased sharply from multiple large new orders. Segment profit decreased due to lower revenue and heavy new product development costs. 5. Other Businesses: (1) Ocean/Defense Business: Sales increased year-over-year due to solid defense equipment demand and early delivery of a large project originally scheduled for next period, but segment profit decreased due to one-time costs related to the won large project. Orders and order backlog more than doubled after multiple large project wins, including a 2.7 billion yen information collection ROV contract. (2) Software Development Support Business: Sales increased year-over-year due to solid performance from products for game and automotive clients, but segment profit decreased due to higher procurement costs from British pound appreciation and increased SG&A from hiring for new business expansion. Orders and order backlog increased year-over-year. Company-wide total orders hit a record high 40.151 billion yen, up 6.5 billion yen year-over-year, and total order backlog reached 24.625 billion yen, up 7.6 billion yen year-over-year.

• Project execution risk: Large projects are increasingly common in the company's business, and customer-side construction delays at system installation sites are a recurrent issue that caused multiple large domestic and overseas projects to be delayed from FY2025 to future periods, resulting in FY2025 lower revenue and profit than originally planned. Delays can shift revenue recognition across fiscal years and impact single-year performance.
• Foreign exchange risk: Sterling appreciation increased procurement costs for the software development support business, pressuring segment profits in FY2025, and ongoing exchange rate volatility could impact future procurement costs for international-sourced products.
• New business investment risk: The company has made preemptive investments in capacity and expansion for high-growth areas including hydrogen business and quantum computing, and these investments may not generate expected revenue or profit growth in future periods.
• Market and margin risk: While the company targets growth in new high-potential markets including quantum computing, eVTOL, and Chinese decarbonization technology, there is no guarantee that these new markets will develop as expected or that the company can capture projected market share.

Q: Are most of Toyo Technica's defense business products sold exclusively, and will the segment's profit margin improve over time? / A: Almost all defense products are sold exclusively, barring a small number of exceptions. A key feature of the defense business is that a successful, defect-free initial product delivery leads to follow-on expansion to other platforms like additional warships. Thanks to the exclusive sales model, profits are not expected to decline, and should improve over time as the business scales.

Q: Will all the delayed projects from FY2025 be recognized in the first half of FY2026, or is there a risk of further delays? / A: FY2025 had 2 delayed large overseas AD/ADAS projects, 2 delayed large domestic e-mobility projects, and multiple delayed EMC system projects, totaling around 2 billion yen in delayed sales. Some of these will be recognized in FY2026, while others will not be recognized until the following fiscal year. The answer did not note material further unexpected delay risk beyond the already announced timing shifts.

Q: Orders have grown strongly for the decarbonization/energy and EMC/large antenna segments. How will profit margins trend for these two businesses? / A: Management expects the decarbonization/energy business profit margin to stay flat or improve slightly from current levels. For the EMC/large antenna business, FY2025 had heavy development cost burdens that pressured margins, so management expects a substantial improvement in the segment's margin going forward as these one-time development costs subside.