• Earnings momentum set to continue – Recording higher than expected profitability through high factory utilization and an improving sales mix, Q1 FY12/26 results were ahead of expectations, in our view. The core earnings driver was the Machine Tools segment, with robust demand in China for EDMs, driven by AI data center build-outs requiring electronic components and high-density optical systems. Our view is that we are mid-cycle in this infrastructure buildout and its related optical/networking expansion, pointing to further demand momentum for Sodick. However, inflation-related cost risks remain a focus, particularly in sustaining margin expansion and earnings progression.
