| Metric | Current Period | Same Period Last Year | YoY |
|---|---|---|---|
| Revenue | ¥110.2B | ¥108.4B | +1.6% |
| Operating Income | ¥3.6B | ¥6.2B | -41.5% |
| Ordinary Income | ¥3.2B | ¥5.8B | -45.2% |
| Net Income | ¥2.4B | ¥4.7B | -49.4% |
| ROE | 1.8% | 3.6% | - |
In FY2026 Q3, Revenue was ¥110.2B (YoY +¥1.8B +1.6%), a modest increase, while Operating Income was ¥3.6B (YoY -¥2.6B -41.5%), Ordinary Income ¥3.2B (YoY -¥2.6B -45.2%), and Net Income ¥2.4B (YoY -¥2.3B -49.4%), resulting in a substantial decline in profits. With Revenue nearly flat, higher cost of goods sold ratio and increased interest burden (interest expenses doubled from ¥0.5B to ¥1.06B) significantly compressed profitability. The Operating Margin fell to 3.3% (down -2.4pt from 5.7% last year), well below industry levels, making structural profitability improvement an urgent priority.
[Profitability] ROE 1.8% (down from 3.6% last year), Operating Margin 3.3% (down -2.4pt from 5.7% last year), Net Margin 2.2% (down -2.1pt from 4.3% last year), and Gross Margin 18.7%, indicating that a high cost of goods sold ratio is squeezing earnings. [Cash Quality] Cash and deposits of ¥10.1B versus short-term debt of ¥35.2B imply a cash coverage of 0.29x, indicating thin liquidity. [Investment Efficiency] Total Asset Turnover 0.40x; interest burden coefficient 0.786, with interest accounting for about 21% of profit, a high level. [Financial Soundness] Equity Ratio 48.6%, Current Ratio 162.1%, interest-bearing debt ¥77.2B (short-term borrowings ¥35.2B, long-term borrowings ¥42.0B) with a short-term debt ratio of 45.6%, warranting attention to refinancing risk. Debt-to-Equity Ratio 1.06x; Financial Leverage 2.06x.
Cash and deposits increased by ¥0.4B YoY to ¥10.1B, a limited increase. Cash coverage relative to short-term borrowings of ¥35.2B is only 0.29x, indicating a thin liquidity buffer for short-term debt repayment/refinancing. Inventories comprise finished goods ¥62.5B, raw materials ¥18.0B, and work-in-process ¥2.3B, totaling ¥82.8B, with finished goods notably tying up capital. Accounts receivable stands at ¥30.3B, down YoY, indicating improving collection efficiency, but inventory tie-up continues to squeeze working capital efficiency. Of the ¥77.2B in interest-bearing debt, short-term borrowings account for ¥35.2B or 45.6%, and refinancing risk and interest burden (interest expenses ¥1.06B, up +¥0.56B YoY) are affecting cash management.
Against Ordinary Income of ¥3.2B, Operating Income was ¥3.6B, resulting in a net non-operating expense burden of about ¥0.5B. While dividend income of ¥0.56B contributes, interest expenses of ¥1.06B are large, with interest burden compressing non-operating income. Interest expenses have doubled from ¥0.50B last year, reflecting pronounced impacts from rising rates and higher borrowings. Non-operating income is limited to about 0.5% of revenue, leaving the core reliance on operating activities; however, with an Operating Margin of 3.3%, the weakness of core operating profitability is an issue. As there is no disclosure of Operating Cash Flow, we cannot directly verify the cash realization quality of earnings, but the significant inventory build and rising interest burden raise concerns about deteriorating cash conversion efficiency.
(1) Liquidity Risk: With cash and deposits of ¥10.1B versus short-term borrowings of ¥35.2B, cash coverage is 0.29x; liquidity for short-term debt repayment/refinancing is thin, and in a rising rate environment, cash flow could be pressured. (2) Profitability Deterioration Risk: The Operating Margin is a low 3.3%, with rising cost of goods sold ratio and higher interest burden squeezing profits. Of ¥16.98B in SG&A, director compensation is ¥4.07B, indicating a heavy fixed cost burden; with sluggish sales growth, profitability may deteriorate further. (3) Inventory-Related Risk: Finished goods inventory is a sizable ¥62.5B, raising not only obsolescence and impairment risks but also concerns about capital tie-up worsening working capital efficiency.
[Positioning in Industry] (Reference information; our research) In a benchmark comparison within the manufacturing sector for FY2025 Q3, the company’s financial indicators are well below the industry median. Profitability: The 3.3% Operating Margin is -4.0pt below the industry median of 7.3% (IQR: 4.6%–12.0%), and the 2.2% Net Margin is -3.2pt below the industry median of 5.4% (IQR: 3.5%–8.9%). ROE at 1.8% is far below the industry median of 4.9% (IQR: 2.8%–8.2%), highlighting low capital efficiency. Soundness: The 48.6% Equity Ratio is below the industry median of 63.9% (IQR: 51.5%–72.3%), and the Current Ratio of 1.62x is well below the industry median of 2.67x (IQR: 2.00–3.56x). Efficiency: Sales growth of +1.6% is slightly below the industry median of +2.8%, indicating a limited growth pace. The company ranks in the lower tier of the industry in terms of profitability and financial soundness, with particular need to improve Operating Margin and ROE. (*Industry: Manufacturing (n=65 companies); Comparison: FY2025 Q3; Source: Our compilation)
(1) Significant Margin Deterioration and Higher Interest Burden: The Operating Margin worsened by -2.4pt from 5.7% last year to 3.3%, and interest expenses doubled (¥0.50B → ¥1.06B). A fundamental overhaul of the earnings structure and a review of borrowing terms are in focus. (2) High Payout Ratio and Sustainability: Against a full-year dividend forecast of ¥10, the Payout Ratio based on current-period Net Income is approximately 83%, a high level; with no Operating Cash Flow disclosure, the sustainability of maintaining dividends is a focal point. (3) Inventory Levels and Working Capital Efficiency: Finished goods inventory of ¥62.5B represents significant capital tie-up. There is room to improve inventory turnover and working capital efficiency, putting upcoming inventory reduction measures and cash generation capacity in the spotlight.
This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not constitute a recommendation to invest in any particular security. The industry benchmarks are reference information compiled by our firm based on publicly available financial statements. Make investment decisions at your own responsibility and, as necessary, consult a professional advisor.