| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue | ¥373.3B | ¥362.5B | +3.0% |
| Operating Income | ¥28.8B | ¥27.4B | +5.3% |
| Ordinary Income | ¥31.1B | ¥30.0B | +3.6% |
| Net Income | ¥48.5B | ¥29.9B | +62.2% |
| ROE | 15.4% | 10.4% | - |
For the fiscal year ended March 2026, results were revenue ¥373.3B (YoY +¥10.9B +3.0%), Operating Income ¥28.8B (YoY +¥1.4B +5.3%), Ordinary Income ¥31.1B (YoY +¥1.1B +3.6%), and Net Income attributable to owners of the parent ¥46.7B (YoY +¥16.7B +55.7%), representing revenue and profit growth. The Plant Business drove substantial increases in both revenue and profit; gross margin improved to 21.7% (YoY +0.8pt) and Operating Margin rose slightly to 7.7% (+0.2pt). Net Income grew significantly YoY (+62.2%) primarily due to a special gain on sale of investment securities of ¥33.2B. Operating Cash Flow (OCF) turned to an inflow of ¥62.6B from a large outflow in the prior year, aided by a decrease in accounts receivable and an increase in contract liabilities. Cash and deposits increased by ¥64.3B to ¥108.2B, while executing ¥4.0B share buybacks and ¥11.0B dividends, substantially strengthening liquidity. Equity Ratio was 60.8% and ROE 15.4%, reflecting a balance of financial soundness and capital efficiency.
[Revenue] Revenue was ¥373.3B (YoY +3.0%), showing moderate growth. By segment, the Plant Business led with ¥138.3B (+20.0%) driven by large steel/non-ferrous metal projects. The Heat Treatment Business was ¥183.1B (-1.5%), a slight decline; demand in automotive, battery manufacturing, and air purification remained firm, but changes in project mix and progress of price pass-through impacted results. The Development Business was ¥19.8B (-16.6%), a double-digit decline as decarbonization, precision coating drying, and waste recycling projects are in early stages with large swings in orders/completions. Other segments were ¥80.2B (-1.8%). External customer revenue mix was Plant 37.0%, Heat Treatment 49.0%, Development 5.3%, Other 8.7%, with the Plant Business contribution rising.
[Profitability] Cost of sales was ¥292.2B (78.3% of revenue), resulting in gross profit ¥81.1B (Gross Margin 21.7%, improvement of +0.8pt from 21.0% a year earlier). Rising material costs were absorbed through price revisions and project selection, and a higher share of high-margin plant projects lifted gross margin. SG&A was ¥52.4B (SG&A ratio 14.0%, +0.6pt from 13.4% a year earlier), affected by forward allocation of personnel and development-related expenses. Operating Income was ¥28.8B (Operating Margin 7.7%, +0.2pt from 7.5%). By segment, Plant Business Operating Income was ¥16.8B (margin 12.1%, +74.1% YoY) and was the largest contributor; Heat Treatment Operating Income was ¥14.1B (margin 7.7%, -5.9% YoY), a slight decline though based on a stable earnings base. Development Business recorded an operating loss of ¥2.5B (margin -12.5%) due to upfront launch costs. Non-operating items included dividend income ¥2.4B and FX gains ¥0.2B, while interest expense ¥0.7B and FX losses ¥0.2B were recorded, resulting in net non-operating income of ¥2.3B. Ordinary Income was ¥31.1B (Ordinary Income Margin 8.3%, flat YoY). Extraordinary items included a gain on sale of investment securities ¥33.2B and impairment losses ¥0.1B, producing net extraordinary gains of ¥33.1B and expanding profit before tax to ¥64.3B. After taxes of ¥17.7B (effective tax rate 27.5%) and minority interests of -¥0.1B, Net Income attributable to owners of the parent was ¥46.7B (Net Margin 12.5%, +4.2pt from 8.3% prior year). The large YoY increase was mainly driven by the one-off special gain; core operating profitability improvement was limited to gross margin expansion. In conclusion: revenue and profit up (modest core operating profit growth + significant contribution from special gains).
The Plant Business achieved revenue ¥138.3B (+20.0%) and Operating Income ¥16.8B (+74.1%, margin 12.1%), realizing high growth and high profitability and becoming the group's largest profit-contributing segment. Progress on large plant projects in steel/non-ferrous metals, efficiency improvements in engineering, and price revisions pushed margins back into double digits for the first time in three years. The Heat Treatment Business had revenue ¥183.1B (-1.5%) and Operating Income ¥14.1B (-5.9%, margin 7.7%); while demand remains firm in automotive, battery manufacturing, and air purification, changes in project mix and delayed cost pass-through caused lower profits. Margin declined from 8.3% prior year; price pass-through and productivity improvements are key issues. The Development Business recorded revenue ¥19.8B (-16.6%) and an operating loss of ¥2.5B (margin -12.5%); losses continue due to upfront investments in new areas (decarbonization, precision coating drying, waste recycling), and timing/scale of monetization is uncertain. The Other segment had revenue ¥80.2B (-1.8%) and Operating Income ¥0.3B (-94.1%, margin 0.4%), with changes in subsidiary business mix impacting results.
[Profitability] Operating Margin 7.7% (up +0.2pt from 7.5%), Ordinary Income Margin 8.3% (flat from 8.3%), Net Margin 12.5% (up +4.2pt from 8.3%). Gross Margin 21.7% (up +0.8pt from 21.0%) driven by higher share of high-margin plant projects and price revisions. SG&A ratio 14.0% (up +0.6pt from 13.4%) influenced by prior allocation of personnel and development expenses. ROE 15.4% (up +4.7pt from 10.7%) mainly reflects the uplift in Net Income from special gains; sustainable capital efficiency improvement is limited to modest operational gains. ROA (on Ordinary Income basis) 6.2%, stable YoY.
[Cash Quality] OCF ¥62.6B exceeded Net Income ¥46.7B, with OCF/Net Income = 1.34x, indicating high cash quality. Reduction in accounts receivable +¥39.3B and increase in contract liabilities +¥7.0B improved working capital, reversing prior period large outflow. DSO (accounts receivable days) remained long at approximately 253 days, reflecting plant/engineering project invoicing and acceptance terms, and remains a credit management issue.
[Investment Efficiency] Total asset turnover 0.73x (down slightly from 0.74x). Capital expenditure ¥8.5B and depreciation ¥5.4B yield CapEx/Depreciation = 1.56x, indicating continued growth investment. Tangible fixed asset turnover 6.42x, showing an asset-light profile. Investment securities balance ¥53.3B (down ¥12.0B from ¥65.3B) compressed through sales.
[Financial Soundness] Equity Ratio 60.8% (up +2.3pt from 58.5%), Current Ratio 249.8%, Quick Ratio 249.8% — liquidity is very ample. Interest-bearing debt ¥44.5B vs. cash and deposits ¥108.2B gives net cash ¥63.7B. Debt/Equity 14.3%, Debt/EBITDA 1.30x, Interest Coverage 38.9x — strong debt resilience. Short-term borrowings were reduced by ¥6.5B YoY to ¥19.2B, lowering refinancing risk.
OCF was ¥62.6B (turnaround from -¥37.0B prior year) calculated from profit before tax ¥64.3B plus depreciation ¥5.4B yielding pre-working-capital CF ¥73.2B, then adjusted for working capital changes: decrease in accounts receivable +¥39.3B, increase in contract assets/liabilities +¥7.0B, decrease in trade payables -¥6.3B for net working capital inflow +¥40.0B, and corporate taxes paid -¥12.3B. Prior year outflow was due to a large increase in accounts receivable; this period saw improved working capital from project acceptance and collection cycles. Investing CF was a net inflow of ¥26.8B, with proceeds from sale of investment securities ¥37.3B far exceeding CapEx ¥8.5B, intangible asset acquisitions ¥1.2B, and investment securities purchases ¥0.1B. CapEx focused on production and development equipment for growth areas, maintaining investment above depreciation. FCF (OCF + Investing CF) was ¥89.4B, very healthy; excluding the one-off ¥37.3B sale proceeds, FCF was about ¥52.1B, still high. Financing CF was a net outflow of ¥25.7B, reflecting dividends ¥11.0B, share buybacks ¥4.0B, long-term debt repayments ¥9.0B, net reduction in short-term borrowings ¥3.7B, partially offset by new long-term borrowings ¥2.0B. Net increase in cash was ¥64.3B (including FX effect +¥0.5B), raising year-end cash and deposits to ¥108.2B. Capital allocation balanced shareholder returns and debt reduction while preserving ample liquidity, strengthening the financial base. The working capital improvement may be a one-off reversal; monitoring DSO trends and potential accumulation of contract liabilities is necessary going forward.
Ordinary Income ¥31.1B vs. Net Income attributable to owners of the parent ¥46.7B — the ¥15.6B difference is mainly due to the special gain on sale of investment securities ¥33.2B, indicating a significant one-off uplift. Non-operating income ¥3.2B (dividend income ¥2.4B, FX gains ¥0.2B) consists mainly of recurring financial income; non-operating income/Revenue = 0.8% indicates limited sustainable income sources. Comprehensive income ¥43.8B was ¥2.9B below Net Income (other securities valuation losses -¥5.6B negatively contributed; FX translation adjustments +¥0.6B, deferred hedge P&L +¥0.7B, retirement benefit adjustments +¥1.5B partially offset). Despite the realized sale gains, unrealized gains have shrunk and asset valuation environment has deteriorated. Accrual analysis shows OCF exceeded Net Income (OCF/Net Income = 1.34x), and working capital improvements supported cash generation, indicating cash-backed earnings quality. However, persistently high DSO (~253 days) reflects project-based recognition and indicates receivable stagnation risk and billing timing uncertainty. Operational margin improvements were limited to gross margin; SG&A grew faster than revenue, so a demand slowdown could reverse operating leverage. Overall, the Net Income expansion reliant on special gains has low reoccurrence probability; next year, operational operating income growth and working capital management will be key to earnings quality.
Full Year guidance: Revenue ¥403.0B (YoY +7.9%), Operating Income ¥36.2B (YoY +25.7%), Ordinary Income ¥37.2B (YoY +19.6%), Net Income attributable to owners of the parent ¥25.2B (YoY -46.1%). The planned operating profit increase assumes continued strong performance of the Plant Business and deeper cost efficiencies, absorbing SG&A increases and improving Operating Margin to 9.0% (+1.3pt). Net Income is projected to decline substantially as this period’s special gain ¥33.2B will not recur, although the core business is expected to maintain an upward trend. At the half-year end, progress rates reached Revenue 92.6%, Operating Income 79.5%, Ordinary Income 83.6%, indicating solid order and project progress. However, the timing of Development Business breakeven and the recovery speed of the Heat Treatment Business are keys to meeting guidance. Full year Operating Income ¥36.2B assumes a second-half build of +¥7.4B (+25.7%) from the first half Operating Income ¥28.8B. Downside risks include material price and FX fluctuations, delays in large plant project schedules, and rising labor/subcontract costs; upside from decarbonization and battery-related orders and additional contract liabilities exists. Dividend forecast is annual ¥180 (up ¥14 from ¥166 this year), with expected payout ratio 49.8% (on forecast EPS ¥361.31), reflecting a mid-to-long-term shareholder return stance.
A year-end dividend of ¥166 was paid, with payout ratio 27.7% (based on this period EPS ¥643.70, noting the elevated EPS due to special gains). Total dividends ¥11.0B vs. FCF ¥89.4B (including investment securities sales) gives coverage 8.1x; on recurring FCF (OCF ¥62.6B - CapEx ¥8.5B ≈ ¥54.1B) coverage is 4.9x, indicating very high dividend sustainability. Share buybacks of ¥4.0B were executed; combined with dividends ¥11.0B total shareholder return was ¥15.0B, with Total Return Ratio of 32.1% against Net Income ¥46.7B, a conservative level. Next fiscal year dividend forecast ¥180 represents +8.4% increase YoY; the expected payout ratio on forecast EPS ¥361.31 rises to 49.8%, reflecting adjustment to EPS after special gain loss and signaling a dividend-increase policy. With cash and deposits ¥108.2B and net cash ¥63.7B plus stable OCF, dividend sustainability and growth prospects are high, and the total return policy emphasizes balance between shareholder returns and growth investment.
Concentration risk in Plant Business projects: Plant Business Operating Income ¥16.8B (58% of group operating income) shows high dependence on large projects. Fixed-price contracts are exposed to material cost increases, schedule delays, and design changes that may compress margins. Long DSO (~253 days) and extended receivable cycles suggest complexity in acceptance/invoicing terms; large project schedule delays could impact liquidity and CF quality.
Continued losses and uncertain investment recovery in Development Business: Development Business Operating Loss ¥2.5B (margin -12.5%) persists; new fields (decarbonization, precision coating drying, waste recycling) require upfront investment with unclear timing/scale of monetization. SG&A ratio increase (+0.6pt) was partly due to prior allocation of development expenses; if revenue growth underperforms plan, operating leverage could reverse and pressure company-wide margins.
Risk of working capital re-expansion: This period’s working capital improvement (accounts receivable decrease +¥39.3B and contract liabilities increase +¥7.0B) was significant, but prior year saw accounts receivable increase -¥76.6B causing large OCF outflow. Project acceptance timing and advance payment conditions can cause large swings in working capital. Persistently high DSO (~253 days) reflects business characteristics but inadequate customer/project credit management or delayed progress billing could again create receivable accumulation and OCF deterioration.
Profitability & Returns
| Metric | Our Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.7% | 5.5% (3.5%–7.2%) | +2.2pt |
| Net Margin | 13.0% | 3.5% (2.5%–4.4%) | +9.5pt |
Operating Margin exceeds industry median by +2.2pt, driven by higher profitability in the Plant Business and price revisions. Net Margin significantly exceeds industry median due to gain on sale of investment securities, but sustainability is limited given dependence on special gains.
Growth & Capital Efficiency
| Metric | Our Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 3.0% | 9.8% (-2.1%–15.1%) | -6.9pt |
Revenue growth lags the industry median by -6.9pt, influenced by project cycle in large plant projects and declines in Heat Treatment and Development businesses. The company sits among slower-growing peers in the industry; achieving planned operating income growth and expanding the order pipeline are critical.
※ Source: Company compilation
High-margin shift in Plant Business is central to profit growth: Plant Business revenue +20.0% and Operating Income +74.1%, elevating Operating Margin to 12.1% and making it the largest profit contributor. Large steel/non-ferrous metal projects and engineering efficiency gains boosted gross margin and are driving expected Operating Margin improvement from 7.7% → plan 9.0%. Monitor order backlog, ratio of new orders/completed construction revenue, and progress rates of large projects to assess sustainability of the high-margin mix.
Core business growth after special gains is the focus: This period’s ROE 15.4% and Net Margin 12.5% are substantially influenced by the ¥33.2B gain on sale of investment securities. Next year’s Net Income forecast ¥25.2B implies a YoY drop of -46.1% reflecting loss of the special gain. On a core basis, Operating Income is planned to increase +25.7%, but SG&A growth outpacing revenue growth is a trend that raises the risk of operating leverage reversing in a demand slowdown. The timing of Development Business break-even and monetization visibility, and price pass-through/productivity improvements in Heat Treatment, are key to sustainable growth.
Stability of working capital management and cash generation: OCF ¥62.6B exceeds Net Income and is high quality, but it reflects a reversal from prior year outflow; DSO ~253 days remains elevated, pointing to challenges in acceptance and credit management. The potential to increase contract liabilities (advances) and manage AR aging is foundational to stable OCF and liquidity. Net cash ¥63.7B and retained flexibility after dividends and buybacks support a strong financial base, but delays in large plant project schedules or acceptance could again strain working capital and test CF quality and sustainability of ROE improvements.
This report was automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are compiled by the Company based on public financial statements and are provided for reference. Investment decisions are your own responsibility; consult a professional advisor as needed.