Yashima Denki Co.,Ltd. FY2027 Q1 Earnings Report

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Executive Summary

The most important point this quarter was that revenue and earnings increased, with Operating Income growing faster than Revenue, primarily due to improved selling, general and administrative expense efficiency. Revenue was ¥171.4B (¥133.9B in the same period of the previous year, YoY +27.9%), Operating Income was ¥13.1B (¥7.0B, YoY +87.0%), Ordinary Income was ¥13.5B (¥7.3B, YoY +85.1%), and Net Income attributable to owners of the parent was ¥9.06B (¥4.81B, YoY +88.4%). Revenue was driven by increased sales and earnings in the Public and Facilities Business and a sharp recovery in the Transportation Business. The improvement in the SG&A ratio (13.9%, down -3.7pt year on year) more than offset the decline in the gross margin (21.6%, down -1.3pt year on year), improving the Operating Income margin to 7.6% (up +2.4pt year on year).

Factors Driving Earnings Changes

【Revenue】Revenue of ¥171.4B (YoY +27.9%) increased amid a change in the segment mix. The Public and Facilities Business was the largest contributor at ¥79.4B (46.3% of total, YoY +30.6%), while the Transportation Business recorded a sharp recovery from the low level of the same period of the previous year, reaching ¥39.8B (23.2% of total, YoY +234.5%). In contrast, the Plant Business declined to ¥57.2B (33.4% of total, YoY -13.3%) due to a gap between projects.

【Profit and Loss】Operating Income was ¥13.1B (YoY +87.0%), and the Operating Income margin was 7.6% (up +2.4pt from 5.2% in the previous year), as the improvement in the SG&A ratio to 13.9% (down -3.7pt from 17.6% in the previous year) more than offset the decline in the gross margin to 21.6% (down -1.3pt from 22.8% in the previous year). Ordinary Income of ¥13.5B (YoY +85.1%) tracked Operating Income closely because non-operating gains and losses were immaterial, while Net Income attributable to owners of the parent of ¥9.06B (YoY +88.4%) remained at a level reflecting an effective tax rate of 33.3%. The extraordinary loss of ¥0.01B was immaterial, and the impact of temporary factors was limited. In conclusion, both revenue and earnings increased.

Segment Analysis

The Public and Facilities Business recorded Revenue of ¥79.4B (YoY +30.6%) and Operating Income of ¥9.3B (YoY +97.9%), with a profit margin of 11.7%, making it the largest contributor to total Company profit (the largest based on total segment profit). The Plant Business recorded Revenue of ¥57.2B (YoY -13.3%) and Operating Income of ¥8.3B (YoY -12.3%), maintaining the highest margin among the three segments at 14.5%, although both revenue and earnings declined due to a decrease in projects. The Transportation Business recorded Revenue of ¥39.8B (YoY +234.5%) and Operating Income of ¥2.3B (YoY +294.0%), with a profit margin of 5.7%, demonstrating a sharp recovery from the level of the same period of the previous year while remaining the lowest-margin segment among the three. The increase in the Transportation Business’s revenue mix (from 8.8% in the previous year to 23.2% in the current period) is observed as one factor depressing the Company-wide gross margin.

Key Financial Indicators

【Profitability】The Operating Income margin improved to 7.6%, up +2.4pt from 5.2% in the previous year. The Ordinary Income margin expanded to 7.9% (5.5% in the previous year), while the Net Income margin, based on income attributable to owners of the parent, expanded to 5.3% (3.6% in the previous year). ROE was 2.5%, supported by the expansion in the Net Income margin and improved asset turnover resulting from the reduction in total assets (from ¥728.7B to ¥625.8B). 【Cash Flow Quality】Days sales outstanding shortened substantially to approximately 79.6 days (approximately 170.6 days in the previous year), while inventory turnover days shortened to approximately 27.3 days (approximately 47.7 days in the previous year), indicating progress in working capital efficiency. Non-operating income and extraordinary gains and losses were immaterial, and the fact that most profit was generated at the operating level can be interpreted positively from an earnings-quality perspective. 【Investment Efficiency】Total assets contracted to ¥625.8B (down -14.1% year on year), while Revenue increased, confirming an improvement in asset efficiency. Property, plant and equipment of ¥65.4B and intangible assets of ¥25.6B were almost unchanged from the previous year, indicating that the Company is not in a phase of major investment. 【Financial Soundness】The Equity Ratio rose to 56.7% (up +7.2pt from 49.5% in the previous year), and the current ratio was approximately 178.9% (current assets of ¥468.1B / current liabilities of ¥261.6B), providing a substantial liquidity cushion. Short-term borrowings of ¥7.0B were extremely small relative to cash and deposits of ¥223.5B, indicating conservative financial leverage.

Cash Flow Analysis

Although the statement of cash flows was outside the scope of disclosure, the trend in the balance sheet suggests that cash and deposits increased to ¥223.5B (up +28.1% from ¥177.4B in the previous year). This increase appears to have been supported by a substantial reduction in trade receivables (accounts receivable and notes receivable) to ¥149.8B (down -40.3% from ¥251.1B in the previous year) and a contraction in inventories to ¥40.4B (down -25.5% from ¥54.2B in the previous year), suggesting that progress in collection and acceptance inspections contributed to cash generation. Contract liabilities (advances received) increased to ¥46.0B (up +13.9% from ¥40.4B in the previous year), and the accumulation of advance funds for future revenue recognition was also a factor contributing to the increase in cash. Short-term borrowings were ¥7.0B, remaining at the same level as in the previous year, indicating a low degree of dependence on financing through financial activities.

Earnings Quality

Non-operating income was ¥0.5B (0.28% of Revenue), non-operating expenses were ¥0.0B, and extraordinary losses were ¥0.01B, all of which were immaterial. Most profit was generated from recurring operating earnings. Ordinary Income of ¥13.53B and Profit Before Tax of ¥13.52B were nearly identical, indicating that the impact of temporary gains and losses was limited. The difference between Ordinary Income and Net Income attributable to owners of the parent of ¥9.06B was primarily attributable to income taxes (an effective tax rate of approximately 33.3%), with no structural factors identified. Comprehensive Income was ¥10.34B (¥10.44B attributable to owners of the parent), slightly exceeding Net Income of ¥9.06B. Other securities valuation difference gains of +¥1.9B provided an uplift, while adjustments related to retirement benefits of -¥0.5B exerted downward pressure; the difference between the two was limited to valuation-related items.

Earnings Forecast and Guidance

Q1 progress against the full-year Company forecasts (Revenue of ¥780.0B, Operating Income of ¥79.0B, Ordinary Income of ¥80.0B, and EPS of ¥254.57) was 22.0% for Revenue, 16.5% for Operating Income, 16.9% for Ordinary Income, and 16.6% for Net Income, all below the simple one-quarter benchmark of 25%. Nevertheless, there were no revisions to either the earnings forecast or the dividend forecast, and the accumulation of ¥46.0B in contract liabilities provides support for future revenue recognition. Given the characteristics of the project-based business, in which acceptance inspections tend to be concentrated in the second half of the fiscal year, these progress rates must be evaluated in consideration of seasonality.

Shareholder Returns

The year-end dividend forecast for the fiscal year ending March 2027 is ¥56 (ordinary dividend of ¥50 plus an ¥6 commemorative dividend for the 80th anniversary of the Company’s founding), an increase of +24.4% from the previous year’s actual year-end dividend of ¥45 (ordinary dividend of ¥43 plus a ¥2 commemorative dividend). The Payout Ratio against the full-year EPS forecast of ¥254.57 is approximately 22.0% (¥56/¥254.57). Considering cash and deposits of ¥223.5B and extremely limited interest-bearing debt (short-term borrowings of ¥7.0B), the Company’s dividend-paying capacity is considered sufficient. Treasury shares have increased year on year, but this report does not confirm disclosure of the amount of share repurchases. Accordingly, the Payout Ratio is stated based solely on dividends.

Risk Factors

1. Decline in gross margin: The gross margin declined to 21.6%, down -1.3pt from 22.8% in the previous year. Possible factors include cost increases and changes in the project mix resulting from the increased contribution of the Transportation Business, which has the lowest margin among the three segments at 5.7%. Whether the decline can continue to be offset through SG&A efficiency is a key focus.

2. Risk of dependence on project-based business progress: Q1 progress against the full-year forecast was 16.5% for Operating Income and 16.6% for Net Income, below the simple one-quarter benchmark. Given the business characteristics under which acceptance inspections and percentage-of-completion recognition are concentrated in the second half of the fiscal year, quarterly earnings are susceptible to significant fluctuations.

3. Contingent liabilities associated with project guarantees: Contracts for plant and public facilities-related projects may involve contingent liabilities, including performance guarantees and warranties for defects. Although this report contains no indication of significant additional provisions or litigation, such matters remain subject to ongoing monitoring given the order structure for large-scale projects.

Industry Benchmarks (For Reference; Compiled by the Company)

Both the Operating Income margin and Net Income margin exceeded the industry median, placing the Company’s profitability in the upper range within the industry.

The Revenue growth rate substantially exceeded the industry median, representing an outstanding pace of growth within the industry.

※Source: Compiled by the Company

Key Points in the Financial Results

1. The improvement in the SG&A ratio (-3.7pt) exceeded the decline in the gross margin (-1.3pt) and offset it, driving the Operating Income margin up to 7.6%. This financial result indicates progress in cost structure efficiency. Whether this improvement can be maintained through recovery in the Transportation Business’s operating rate and continued high profitability in the Public and Facilities Business will be key to understanding future margin trends.

2. Both days sales outstanding (approximately 79.6 days, approximately 170.6 days in the previous year) and inventory turnover days (approximately 27.3 days, approximately 47.7 days in the previous year) shortened substantially. Improvements in working capital efficiency and the accumulation of cash and deposits (¥223.5B, +28.1%) are observed consistently.

3. Q1 progress against the full-year forecast was 22.0% for Revenue and 16.5% for Operating Income, below the simple one-quarter benchmark. However, the accumulation of ¥46.0B in contract liabilities and the unchanged earnings and dividend forecasts indicate consistency with a plan that reflects the structure of revenue recognition weighted toward the second half of the fiscal year.

Theoretical Share Price (Reference Value)

This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson-type model with an explicit five-year fade period). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥1,933–¥2,050 at Cost of Equity ±1%; ¥1,982–¥2,002 at ω±0.1.

Notes:

• Net assets as of the quarter-end are used (there is a timing gap relative to the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-06 / This value does not forecast or guarantee the future share price)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting with a professional as necessary.

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