MEC (4971 JP) reported FY26 Q1 (Dec year-end) earnings, coming in with OP of ¥2,079mil (+90.2% YoY) on sales of ¥6,128mil (+38.5% YoY). Given the strong Q1 performance, the 1H guidance was revised up from OP of ¥3,000mil (+22.9% YoY) on sales of ¥10,800mil (+15.1% YoY) to OP of ¥4,000mil (+63.9% YoY) on sales of ¥12,250mil (+30.5% YoY) and for the full-year, from FY26 OP of ¥6,500mil (+13.1% YoY) on sales of ¥22,500mil (+7.4% YoY) to OP of ¥7,600mil (+32.2% YoY) on sales of ¥24,500mil (+17.0% YoY). The revision to both the 1H and full-year guidance simply reflects the equivalent level of overshoot seen in Q1. Although demand for packages for advanced semiconductors and memory, to date, remains solid, MEC has kept a conservative outlook for the 2H given uncertainties surrounding (1) the supply and demand balance of materials for package substrates, (2) the potential impact from geopolitical risks especially in the Middle East and (3) costs for expanding production capacity that involves increasing its workforce. Consequently, the firm does not expect to achieve a 2H GPM similar to that of the first quarter.
