Securities Report - 58th Fiscal Period (2025/04/01 - 2026/03/31)

Aoi Electronics Co., Ltd. Securities Report - 58th Fiscal Period (2025/04/01 - 2026/03/31)

The company has filed its Securities Report for the 58th fiscal period (April 1, 2025 to March 31, 2026) with the relevant authorities in accordance with the Financial Instruments and Exchange Act.

This report aims to provide investors and other stakeholders with accurate and timely information regarding the company's financial position, operating results, and cash flow situation.

The contents are as follows:

Overview of Management Policies and Performance

The company's management policy for the current fiscal period focuses on advancing technological innovation for sustainable growth, expanding market share globally, and enhancing ESG (Environmental, Social, and Governance) initiatives. Special emphasis has been placed on developing next-generation semiconductor devices and high-reliability electronic components, with R&D expenditures increasing by 12% year-on-year.

Net sales reached 184.2 billion yen, up 8.5% from the previous year, while operating profit increased by 14.3% to 21.8 billion yen. This growth was driven by rising demand for automotive electronic control units (ECUs) and strong sales of power modules for data centers.

Financial Position Analysis

Total assets at the end of the period amounted to 231.0 billion yen (up 6.2% year-on-year), and net assets reached 142.0 billion yen (up 5.8%). The equity ratio remained healthy at 61.5%. Interest-bearing debt stood at 38.0 billion yen, with net interest-bearing debt at 12.0 billion yen, maintaining a conservative financial structure.

The current ratio was 132%, and the quick ratio was 98%, indicating solid short-term liquidity.

Segment Information

The company's operations are divided into the following three business segments:

- Electronic Devices: Sales of 98.0 billion yen (53.2% of total) - Power Systems: Sales of 52.0 billion yen (28.2%) - Automotive Electronics: Sales of 34.2 billion yen (18.6%)

The Electronic Devices segment performed well due to strong demand for compact, high-density components used in smartphones and IoT devices. The Power Systems segment benefited from high-efficiency power supplies for 5G base stations and servers. The Automotive Electronics segment grew due to increased demand for electric vehicles (EVs) and ADAS (Advanced Driver Assistance Systems).

Research and Development Activities

R&D expenses for the period reached 15.6 billion yen (8.5% of sales), with 70% allocated to next-generation technology development. Key projects include SiC (silicon carbide) power devices, GaN (gallium nitride) transistors, and AI-integrated sensors.

The company filed 98 patents during the period (42 overseas), continuing to strengthen its global intellectual property portfolio.

Human Resources and Organizational Structure

The consolidated number of employees was 2,150 (up 3.8% year-on-year), with technical staff accounting for 62% of the workforce, supporting the company's R&D capabilities. The ratio of female managers increased to 18.4% (from 16.7% the previous year), reflecting progress in diversity initiatives.

The board includes three external independent directors (37.5% of total), ensuring transparency in corporate governance.

ESG and Sustainability Initiatives

The company aims to reduce Scope 1 and 2 greenhouse gas emissions by 50% by 2030 compared to 2019 levels. Renewable energy currently supplies 42% of electricity at major domestic plants, with a target of over 60% by 2027.

The company is also enhancing human rights due diligence across its supply chain and improving product recyclability.

Outlook for the Next Fiscal Period

The forecast for the 59th fiscal period (April 1, 2026 to March 31, 2027) is as follows:

- Net Sales: 195.0 billion yen (up 5.9%) - Operating Profit: 23.5 billion yen (up 7.8%) - Operating Margin: 12.1%

Growth is expected from recovery in semiconductor demand, continued expansion in EV-related markets, and the launch of new products.

Risk Factors

Key risk factors identified include:

- Volatility in the global semiconductor market - Rising raw material prices (especially copper, gold, and rare metals) - Geopolitical risks disrupting supply chains - Currency fluctuations (yen depreciation increasing import costs) - International intellectual property litigation risks

The company is mitigating these risks through supply chain diversification, long-term pricing contracts, and enhanced foreign exchange hedging strategies.

Shareholder Return Policy

The year-end dividend is set at 32 yen per share (30 yen previously), resulting in an annual dividend of 62 yen per share (60 yen previously). The payout ratio is 35.2% (34.8% previously), maintaining a stable shareholder return policy.

The company intends to continue increasing dividends in line with profit growth.