| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1416.6B | ¥1256.7B | +12.7% |
| Operating Income / Operating Profit | ¥148.4B | ¥130.4B | +13.8% |
| Ordinary Income | ¥162.5B | ¥138.1B | +17.7% |
| Net Income / Net Profit | ¥115.2B | ¥95.6B | +20.5% |
| ROE | 9.0% | 8.3% | - |
The fiscal results for the year ended March 2026 recorded Revenue ¥1,416.6B (YoY +160.0B +12.7%), Operating Income ¥148.4B (YoY +18.0B +13.8%), Ordinary Income ¥162.5B (YoY +24.4B +17.7%), and Net Income attributable to owners of the parent ¥115.2B (YoY +19.6B +20.5%), achieving both revenue and profit growth. Operating margin improved to 10.5% (up +0.1pt from 10.4% a year earlier), and net margin improved to 8.1% (up +0.5pt from 7.6%), indicating enhanced profitability. The core Repair Works (補修工事) segment performed solidly with Revenue ¥971.3B (+12.3%), while the Construction Works (建設工事) segment realized a significant profit improvement with Operating Income ¥29.7B (+94.7%). Non-operating items contributed to growth at the ordinary level, including Dividend Income ¥5.7B and Foreign Exchange Gains ¥3.4B, and Extraordinary Income ¥13.7B (Gain on Sales of Investment Securities ¥13.6B) lifted the bottom-line profit margin. Financial position remains stable with an Equity Ratio of 73.0% and ROE of 9.0%, but Operating Cash Flow turned negative at -¥58.2B, so the cash realization of earnings is a point of attention.
[Revenue] Revenue reached ¥1,416.6B (YoY +12.7%), achieving double-digit growth. By segment, Repair Works recorded ¥971.3B (+12.3%, 68.6% of total), and Construction Works recorded ¥445.3B (+13.7%, 31.4% of total), both showing revenue increases. Repair Works benefited from firm demand for periodic inspections and maintenance of various plant facilities, while Construction Works saw expansion in orders for equipment installation and retrofit projects. Gross profit was ¥255.7B (gross margin 18.1%), down 0.5pt from 18.6% a year earlier, but up ¥23.3B in absolute terms. The decline in gross margin was mainly due to a rise in cost ratio, reflecting upward pressure on materials and subcontracting costs.
[Profitability] SG&A expenses were ¥107.3B (SG&A ratio 7.6%), improving by 0.6pt from 8.2% a year earlier, demonstrating operating leverage. As a result, Operating Income rose to ¥148.4B (+13.8%, operating margin 10.5%), offsetting the gross margin decline. By segment, Repair Works maintained high profitability with Operating Income ¥161.1B (+3.8%, margin 16.6%), while Construction Works improved to ¥29.7B (+94.7%, margin 6.7%), roughly doubling from ¥15.2B a year earlier. Non-operating income/expenses contributed a net positive ¥14.1B, primarily from Dividend Income ¥5.7B, Foreign Exchange Gains ¥3.4B, and Equity-method Investment Income ¥1.4B. Ordinary Income grew to ¥162.5B (+17.7%), outpacing operating-level growth. Extraordinary items included Extraordinary Income ¥13.7B, mainly Gain on Sales of Investment Securities ¥13.6B, bringing Pre-tax Income to ¥176.0B (+19.7%). After deducting Income Taxes of ¥55.4B (effective tax rate 31.5%) and Non-controlling Interests of ¥1.6B, Net Income attributable to owners of the parent was ¥115.2B (+20.5%). In conclusion, the company achieved revenue and profit growth, with improved SG&A efficiency and contributions from non-operating and extraordinary items driving a significant increase in final profit margin.
The Repair Works segment secured stable, high-margin earnings with Revenue ¥971.3B (YoY +12.3%), Operating Income ¥161.1B (+3.8%), and Operating Margin 16.6%. As the core business representing 68.6% of revenue, Repair Works benefited from steady demand for periodic inspections and maintenance of various plant facilities. Although margin declined slightly from 17.9% a year earlier, it remains well above the company average. The Construction Works segment recorded Revenue ¥445.3B (+13.7%), Operating Income ¥29.7B (+94.7%), and Operating Margin 6.7%, improving by 2.8pt from 3.9% a year earlier. Project profitability for equipment installation and retrofit projects improved significantly, marking a strong earnings recovery. Both segments achieved revenue growth, with Repair Works providing a stable profit base and Construction Works acting as the growth driver. However, nearly 70% of revenue is concentrated in Repair Works, so high dependence on certain equipment groups and customer trends represents a portfolio concentration risk that should be monitored.
[Profitability] Operating margin of 10.5% improved by +0.1pt YoY, and the decline in gross margin to 18.1% (from 18.6%, -0.5pt) was absorbed by an improved SG&A ratio of 7.6% (from 8.2%, -0.6pt). ROE of 9.0% slightly declined from 9.2% last year but remains stable compared with the company’s historical levels. [Cash Quality] Operating Cash Flow / Net Income was -0.49x, with Operating Cash Flow turning negative at -¥58.2B. The main drivers were Income Tax payments of ¥46.1B and working capital changes; the subtotal of Operating CF (before working capital changes) was also weak at -¥17.6B. OCF/EBITDA was -0.36x, revealing short-term weakness in cash realization. [Investment Efficiency] Total Asset Turnover was 0.81x, roughly in line with the prior year. Capital Expenditure was ¥8.9B, only 62% of Depreciation ¥14.3B, indicating restrained renewal investment. [Financial Soundness] Equity Ratio 73.0% (from 74.2% last year, -1.2pt), Debt/EBITDA 0.54x, and Interest Coverage 123.7x indicate a very strong financial base. Current Ratio and Quick Ratio are both 450.9%, reflecting extremely ample liquidity. Long-term borrowings increased to ¥88.6B (from ¥67.3B, +31.7%) but leverage remains low.
Operating Cash Flow was -¥58.2B, widening from -¥25.3B a year earlier. The Operating CF subtotal (before working capital changes) was -¥17.6B, with Income Tax payments of ¥46.1B having a large impact. In working capital, Accounts Payable increased by ¥15.3B, contributing positively to cash flow, but overall cash outflows predominated when other items were included. Investing Cash Flow was positive ¥7.5B, as Proceeds from Sales of Investment Securities ¥15.6B exceeded Capital Expenditure ¥8.9B and Intangible Asset Investment ¥0.8B. Financing Cash Flow was -¥19.8B, as proceeds from long-term borrowings ¥32.0B were exceeded by Borrowing Repayments ¥20.4B and Redemption of Corporate Bonds ¥50.0B, with Dividend Payments ¥36.5B also contributing to outflows. Free Cash Flow (Operating CF + Investing CF) was -¥50.7B, indicating continued weakness in cash generation from operations. Cash and Deposits stood at ¥354.2B (down from ¥426.1B, -16.9%) but liquidity remains ample to cover dividend payments and short-term funding needs. However, if negative Operating CF persists, securing funds for sustainable shareholder returns and growth investments warrants caution.
Recurring earnings are centered on Operating Income ¥148.4B and Net Non-operating Income ¥14.1B, with Dividend Income ¥5.7B and Foreign Exchange Gains ¥3.4B as main items in non-operating income. Meanwhile, Extraordinary Income ¥13.7B, including Gain on Sales of Investment Securities ¥13.6B, was recorded as a one-off item; excluding this effect, Pre-tax Income would be around ¥162.3B, implying potential downward pressure on Net Income of roughly ¥10B on a simple calculation. Non-operating income of ¥18.9B is about 1.3% of Revenue, primarily consisting of Dividend Income and Foreign Exchange Gains, which are volatile and subject to market and FX conditions. The gap between Ordinary Income and Net Income is generally explained by the effective tax rate of 31.5% and Non-controlling Interests of ¥1.6B. From an accrual perspective, Operating CF at -¥58.2B is far below Net Income ¥115.2B, signaling delayed cash realization of earnings and a warning sign on quality. Working capital fluctuations, increases in Advance Receipts (Contract Liabilities ¥68.1B), and timing differences in tax payments appear to be the main causes; normalizing working capital and improving cash conversion in subsequent periods are key challenges.
Full Year guidance anticipates Revenue ¥1,600.0B (YoY +12.9%), Operating Income ¥174.0B (+17.3%), Ordinary Income ¥184.0B (+13.3%), and Net Income attributable to owners of the parent ¥116.0B (+0.7%). Operating margin is planned to improve to 10.9% (up +0.4pt from this period’s 10.5%), reflecting continued SG&A efficiency and improved segment-level profitability. Slower growth in Net Income is attributable to the absence of Gain on Sales of Investment Securities (Extraordinary Income ¥13.7B) recorded this fiscal year. EPS forecast is ¥190.16, and the dividend forecast is ¥75 (Payout Ratio approx. 39%), maintaining a stable shareholder return policy. Progress rates show Operating Income at ¥148.4B/¥174.0B = 85.3%, indicating generally favorable progress and a high probability of achieving full-year targets. However, Net Income is already at ¥115.2B/¥116.0B = 99.3%, so careful monitoring of the impact of extraordinary items and tax variability is required.
Year-end dividend is ¥70, resulting in an annual dividend of ¥70. Total dividends against Net Income ¥115.2B amount to approximately ¥44.1B (calculated Payout Ratio approx. 38.3%), a financially sustainable level. Free Cash Flow is negative at -¥50.7B, but Cash and Deposits ¥354.2B remain ample, so there is no issue in the ability to pay dividends. Next fiscal year’s dividend forecast is ¥75 (implying a payout ratio of about 39% on the EPS forecast ¥190.16), continuing a stable shareholder return policy. Share buybacks were negligible at ¥0.1B this period; dividends remain the primary form of shareholder return. Mid-term sustainability of dividends depends on returning Operating Cash Flow to positive territory and stabilizing project profitability. A payout ratio in the high 30% range is reasonable compared with industry norms and is consistent with maintaining financial soundness while continuing stable dividends.
Project Profitability Risk: Provision for losses on construction contracts was significantly increased to ¥10.6B (from ¥1.3B, +705.3%), indicating signs of cost overruns or schedule delays in specific projects. Under fixed-price contracts typical in the construction industry, unexpected losses may occur due to rising material and subcontract costs or changing construction conditions. Gross margin declined to 18.1% (down 0.5pt YoY), so stricter cost control is urgently required.
Segment Concentration Risk: Repair Works accounts for 68.6% of revenue and the majority of operating profit, making results sensitive to maintenance demand trends of specific customer groups and equipment categories. Although Repair Works’ operating margin is high at 16.6%, revenue fluctuations driven by major customers’ equipment utilization or maintenance budgets could cause significant earnings volatility. Diversifying the portfolio and developing the Construction Works segment are medium- to long-term challenges.
Declining Cash Conversion: Operating Cash Flow of -¥58.2B is far below Net Income ¥115.2B, with Operating CF/Net Income at -0.49x and OCF/EBITDA at -0.36x, highlighting weak cash realization. Timing differences in tax payments and working capital changes are primary causes, but the substantial increase in provisions for loss on construction contracts (¥10.6B, from ¥1.3B) also suggests the need for stricter project profitability management. If this trend continues, constraints on funding growth investments and shareholder returns could arise. Improving working capital management and restoring cash generation are focal points for the next periods.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 10.5% | 5.5% (3.5%–7.2%) | +4.9pt |
| Net Margin | 8.1% | 3.5% (2.5%–4.4%) | +4.6pt |
Our Operating Margin 10.5% and Net Margin 8.1% substantially exceed industry medians, underpinned by the high-margin structure of the Repair Works segment.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 12.7% | 9.8% (-2.1%–15.1%) | +2.8pt |
Revenue growth of 12.7% outpaces the industry median of 9.8%, driven by revenue increases in both Repair and Construction segments.
※Source: Company aggregation
High dependence on Repair Works and rapid recovery in Construction Works: Repair Works, accounting for 68.6% of revenue, maintained a high operating margin of 16.6%, while Construction Works saw Operating Income increase YoY by +94.7%. The stability of Repair Works combined with the growth of Construction Works is beginning to balance the portfolio and deepen its resilience. However, the high concentration entails risk linked to major customers and equipment groups, so monitoring order trends and project mix is necessary.
Turn to negative Operating Cash Flow and cash realization issues: Operating CF turned negative to -¥58.2B, well below Net Income ¥115.2B, with Operating CF/Net Income -0.49x and OCF/EBITDA -0.36x indicating weak cash conversion. While timing of tax payments and working capital changes are main causes, the large provisioning for loss on construction contracts (¥10.6B, from ¥1.3B) also signals the need for stricter project profitability management. Normalizing working capital and improving cash conversion are prerequisites for sustainable shareholder returns and growth investments.
Dependence on extraordinary gains and next-year earnings quality: Achievement of Net Income ¥115.2B benefited from Gain on Sales of Investment Securities ¥13.6B (Extraordinary Income ¥13.7B), and excluding this effect, final profit could fall by around ¥10B. Next year’s forecast assumes Operating Income ¥174.0B (+17.3%) but Net Income ¥116.0B (+0.7%), reflecting the expected absence of such extraordinary gains. The sustainability of operating-level profit growth, SG&A efficiency, and stable segment profitability will determine next year’s earnings quality.
This report is an AI-generated financial analysis document created by analyzing XBRL earnings release data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information aggregated by the company based on public financial statements. Investment decisions are your own responsibility; please consult a professional advisor as necessary before making any investment decisions.