MINEBEA MITSUMI Inc. Q2 FY2027 earnings call

• Financial Overview: Consolidated net sales reached a record high of 464.2 billion yen (+12.8% YoY). Operating income hit 31.8 billion yen (+17.8% YoY), and profit attributable to owners of the parent reached 29.7 billion yen (+67.9% YoY). Foreign exchange provided a positive impact of 33.6 billion yen on net sales year-on-year.
• Segment Drivers: PT excelled due to bearings and aircraft products; MLS grew via HDD spindle and fire motors; SE benefited from semiconductors but lagged in mechanical components; AS faced headwinds in China and Europe but remained stable through other applications.
• Operational Initiatives: The company is expanding capital expenditure allocation toward organic growth areas (five growth areas plus one) rather than M&A. New plants are opening, including the Yonago plant, Building 14 at the Philippines SEB plant, and a facility in Chennai, India, completing November 2027.
• Strategic Focus: Management emphasizes that while AI server demand is strong, the broader portfolio (robotics, autonomous driving, drones) provides resilience against market turbulence. They aim for a real operating margin of 10% by March 2029, noting they are currently on track with an 8.7% half-year margin.
• Dividend Policy: Maintains a basic policy of earmarking approximately 80 billion yen of cumulative operating cash flow over three years for stable dividends, with a dividend of 60 yen per share announced.

• Precision Technology (PT): Net sales of 84.8 billion yen (+3.3% QoQ), representing approximately 18.3% of total revenue. Operating income was 21.0 billion yen with a margin of 24.7%. Performance exceeded expectations, driven by strong demand for bearings and aerospace products.
• Motor, Lighting & Sensing (MLS): Net sales of 129.5 billion yen (+4.0% QoQ), representing approximately 27.9% of total revenue. Operating income was 9.7 billion yen with a margin of 7.5%. Performance exceeded expectations, supported by HDD spindle motors and fire motors for data centers/solar, though electronic devices declined.
• Semiconductor & Electronics (SE): Net sales of 160.4 billion yen (+19.5% QoQ), representing approximately 34.5% of total revenue. Operating income was 5.2 billion yen with a margin of 3.2%. Performance fell short of expectations in mechanical components and optical devices due to memory price surges and sluggish smartphone markets, despite semiconductor strength.
• Access Solutions (AS): Net sales of 88.3 billion yen (+4.6% QoQ), representing approximately 19.0% of total revenue. Operating income was 3.3 billion yen with a margin of 3.8%. Performance missed expectations primarily due to weakness in the Chinese market and European automotive slowdowns, offset by strong two-wheeler and industrial equipment demand.

• Full Year Forecast Revision: Revised net sales forecast for the fiscal year ending March 2027 downward to 890.8 billion yen (from previous estimates), with expected revenue decrease of ~38 billion yen in H2 due to lower optical device demand.
• Profit Outlook: Despite lower H2 revenue, full-year operating income is expected to improve. Excluding special valuation gains on Toshiba shares (~100 billion yen impact), underlying profit for the period is projected to increase significantly, reaching 91.6 billion yen compared to 3.8 billion yen in the prior year.
• Exchange Rate Assumption: Assumes an exchange rate of 155 yen to the US dollar for the second half of the fiscal year.
• Medium-Term Targets: Confirms the target of achieving a 10% real operating margin by March 2029. No specific rolling numbers will be provided until May next year, maintaining a conservative view for the near term.

• Market Volatility: Potential slowdown in AI server demand or broader economic turbulence affecting key regions like China and Europe.
• Supply Chain Disruptions: Risks related to logistics impacts, such as air freight delays from natural disasters (e.g., Thailand floods).
• Cost Pressures: Rising raw material costs (copper) and memory prices impacting margins in mechanical components and semiconductors.
• Execution Risk: Delays in integration processes, such as the postponed Panasonic Industries business transfer to March 1st, and ensuring new capacity utilization rates meet targets.
• Valuation Fluctuations: Significant volatility in profit figures due to fair value measurement of financial assets (Toshiba shares), requiring investors to focus on core operating income.

Q: Goldman Sachs asked if the PT forecast for the second half reflects risks given the shift toward higher-margin AI-related products, and why the medium-term corporate income target was raised.

A: Management stated the plan is conservative and aims to achieve promised numbers, using PT strength to offset potential weaknesses in SE and AS. Regarding the higher medium-term target, they indicated no specific numbers would be shared until May next year, citing current uncertainties like U.S. trade policies, though long-term outlook remains unchanged. / Q: Mizuho Securities inquired about the SE segment's performance regarding actuators, games, and semiconductors, and which segments drive next year's profit.

A: SE faces challenges in games due to soaring memory prices, but actuator volumes remain stable. Semiconductors are progressing well with Shiga plant profitability expected. For next year, PT (AI servers, robotics, aircraft) and MLS are identified as the primary profit drivers, while AS improvements depend on recovering European and Chinese markets. / Q: UBS asked about pricing power, specifically if ASP increases are factored into plans and how cost increases (copper) are handled.

A: Management clarified that no significant ASP increases (e.g., 10-20%) are included in the current midterm plan, especially for bearings and HDV motors. However, they are passing general motor raw material cost increases to customers. Semiconductor pricing varies by product type, but volume strategies often take precedence over pure price hikes. / Q: Nomura Securities questioned how the diversified portfolio mitigates risk if AI server demand slows down significantly.

A: CEO Kainuma expressed confidence that AI evolution will continue gradually without major slowdowns. He emphasized that even if AI servers slow, the company’s exposure to humanoid robots, autonomous driving, and drones provides sufficient diversification to sustain growth, making a scenario where all sectors slow simultaneously unlikely.