| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥626.3B | ¥616.0B | +1.7% |
| Operating Income / Operating Profit | ¥22.1B | ¥22.0B | +0.8% |
| Ordinary Income | ¥27.8B | ¥26.8B | +3.7% |
| Net Income | ¥12.9B | ¥10.2B | +27.5% |
| ROE | 3.9% | 3.2% | - |
For the fiscal year ended March 2026, Alinco Co., Ltd. reported Revenue of ¥626.3B (YoY +¥10.3B +1.7%), Operating Income of ¥22.1B (YoY +¥0.1B +0.8%), Ordinary Income of ¥27.8B (YoY +¥1.0B +3.7%), and Net Income attributable to owners of the parent of ¥12.9B (YoY +¥2.8B +27.5%). Revenue was modestly higher, operating performance was roughly flat, and gains were secured at the ordinary and net levels. Gross margin improved to 26.2% (prior year 26.0%, +20bp), but SG&A increased by ¥3.5B, leaving the operating margin at 3.5% (prior year 3.6%) effectively unchanged. Growth in Ordinary Income was driven largely by non-operating income such as foreign exchange gains of ¥4.4B (prior year ¥2.5B). Net Income rose despite an increase in the effective tax rate (38.5% vs. 35.0% prior year), supported by improvements in extraordinary items (extraordinary gains ¥1.1B vs. ¥4.1B prior year; extraordinary losses ¥0.4B vs. ¥0.9B prior year) and changes in non-controlling interests. By segment, Construction Equipment posted profit declines, Rental was slightly down, and Housing Equipment & Electronic Equipment saw narrower losses.
[Revenue] Revenue totaled ¥626.3B, up ¥10.3B (+1.7%) year-over-year. By segment, Electronic Equipment grew the most at +11.0% (¥56.3B), and Housing Equipment was solid at +5.0% (¥152.2B). Conversely, the core Construction Equipment segment declined -1.7% (¥262.8B), and Rental was essentially flat at -0.1% (¥180.7B). Contribution to consolidated revenue: Construction Equipment 42.0%, Rental 28.9%, Housing Equipment 24.3%, Electronic Equipment 9.0%; Construction Equipment and Rental comprise about 70% of total revenue. Revenue from customer contracts was ¥583.9B (93.2% of total), and other revenue (including lease income) was ¥42.3B (6.8%). The slight decline in Construction Equipment was partly due to reduced internal sales to the Rental segment (¥21.6B → ¥16.1B). Growth in Electronic and Housing Equipment was driven by recovering external demand and new customer acquisition.
[Profitability] Gross profit was ¥164.0B (gross margin 26.2%), up ¥3.7B year-over-year. Gross margin improved by +20bp, reflecting price maintenance and favorable product mix. SG&A was ¥141.9B (SG&A ratio 22.7%), up ¥3.5B, driven by higher fixed costs such as logistics and personnel. Operating Income was ¥22.1B (operating margin 3.5%), up ¥0.1B (+0.8%) and essentially flat. Non-operating income was ¥9.0B (prior year ¥7.2B), with foreign exchange gains of ¥4.4B (prior year ¥2.5B), an increase of ¥1.9B, and dividend income also rose to ¥0.9B (prior year ¥0.6B). Non-operating expenses were ¥3.4B (prior year ¥2.4B), with interest expense at ¥2.3B (prior year ¥1.6B), up ¥0.7B. As a result, Ordinary Income was ¥27.8B (ordinary income margin 4.4%), up ¥1.0B (+3.7%). Extraordinary gains fell to ¥1.1B (prior year ¥4.1B), mainly due to lower gains on sale of investment securities (¥0.4B vs. ¥0.6B prior year). Extraordinary losses decreased to ¥0.4B (prior year ¥0.9B). Income before income taxes was ¥28.5B (prior year ¥30.0B). Income taxes were ¥11.0B (effective tax rate 38.5%, prior year ¥10.5B / 35.0%), increasing the tax burden and pressuring net income. Non-controlling interests were -¥0.1B (prior year -¥0.1B), roughly unchanged. Net Income attributable to owners of the parent was ¥12.9B (net income margin 2.1%), up ¥2.8B (+27.5%). Conclusion: revenue up with marginal profit improvement (operating flat, ordinary and net improved).
Construction Equipment: Revenue ¥262.8B (prior ¥267.3B, -1.7%), Segment Profit ¥19.7B (prior ¥22.1B, -10.9%) — revenue and profit declined. Decrease in internal sales and higher fixed costs weighed. Rental: Revenue ¥180.7B (prior ¥180.8B, -0.1%), Segment Profit ¥12.7B (prior ¥14.1B, -10.0%) — slight revenue and profit decline. Other revenue (lease income) of ¥42.3B provides a stable source but margin declined somewhat. Housing Equipment: Revenue ¥152.2B (prior ¥149.3B, +2.0%), Segment Loss -¥3.6B (prior -¥5.2B) — revenue up and loss narrowed due to recovering external demand and controlled SG&A. Electronic Equipment: Revenue ¥56.3B (prior ¥50.7B, +11.0%), Segment Loss -¥4.4B (prior -¥5.3B) — revenue up and loss narrowed, supported by new orders and improved utilization, but losses remain sizable. Corporate adjustments were +¥3.4B (prior +¥1.2B), driven by foreign exchange gains and non-operating items. Construction Equipment and Rental maintain higher margins (~8–10%) and are core; Housing and Electronic Equipment remain loss-making but improving.
[Profitability] Operating margin 3.5% (prior 3.6%), Gross margin 26.2% (prior 26.0%, +20bp), SG&A ratio 22.7% (prior 22.5%, +20bp); gross margin improvement was offset by higher SG&A, leaving operating performance flat. Ordinary income margin 4.4% (prior 4.3%) rose slightly due to FX gains. Net income margin 2.1% (prior 1.6%) improved reflecting extraordinary items despite higher tax burden. ROE was 3.9% (prior 3.2%) based on Net Income ¥12.9B against average equity of ¥327.7B (ending equity ¥337.6B). ROA was 1.8% (ordinary income/total assets), slightly down from 1.9% prior year.
[Cash Quality] Operating Cash Flow (OCF) was ¥33.5B (prior ¥54.2B), a decline of -38.2%, driven by working capital deterioration (inventory +¥1.3B, trade receivables -¥1.4B, trade payables -¥3.4B) and higher corporate tax payments of ¥12.3B (prior ¥6.3B). OCF/Net Income was 2.6x (prior 5.3x). OCF before working capital changes was ¥47.0B (prior ¥59.9B), which includes depreciation of ¥24.6B. Free Cash Flow was -¥2.8B (OCF ¥33.5B - CapEx ¥37.0B), worsening from -¥0.1B (¥54.2B - ¥55.8B) prior year.
[Investment Efficiency] Total asset turnover was 0.86x (Revenue ¥626.3B / Total assets ¥732.8B), slightly down from 0.87x, affected by higher inventory. Inventory turnover days were about 76 days (Inventory ¥130.8B / Annual cost of goods sold ¥462.3B × 365) up from about 72 days. Trade receivables turnover days were about 92 days (Receivables ¥116.1B / Revenue × 365).
[Financial Soundness] Equity Ratio was 45.8% (prior 45.1%) — slight improvement. Current Ratio 193.6% (Current assets ¥429.7B / Current liabilities ¥221.9B), Quick Ratio 134.7% ((Current assets - Inventory ¥130.8B) / Current liabilities) — short-term liquidity is healthy. Interest-bearing debt totaled ¥272.9B (short-term borrowings ¥32.9B + long-term borrowings ¥157.7B + long-term borrowings classified as short-term ¥82.3B) vs. prior ¥259.4B — up ¥13.5B. Debt/Equity ratio 81.3% (interest-bearing debt / equity), Net Interest-bearing Debt ¥206.6B (interest-bearing debt - cash ¥66.3B). Interest Coverage (Operating Income / Interest expense) was 9.6x (¥22.1B / ¥2.3B), indicating sufficient capacity to meet interest obligations.
OCF was ¥33.5B (prior ¥54.2B, -38.2%); relative to Net Income of ¥12.9B this is 2.6x, indicating retained cash-generating capability but a large YoY decline. OCF before tax and working capital changes was ¥47.0B (prior ¥59.9B), including depreciation ¥24.6B (prior ¥22.8B) and goodwill amortization ¥0.7B. Working capital movements: Inventory -¥1.3B (inventory increase), Trade receivables +¥1.4B (collections), Trade payables -¥3.4B (increased payments), net cash outflow of about -¥3.3B. Corporate tax payments increased by ¥6.0B to ¥12.3B (prior ¥6.3B), pressuring OCF. Investing Cash Flow was -¥36.3B (prior -¥55.6B), primarily CapEx -¥37.0B (prior -¥55.8B); CapEx decreased by ¥18.8B YoY, reducing investing outflows. Financing Cash Flow was +¥4.8B (prior -¥1.0B), with long-term borrowings of ¥94.0B, repayments -¥86.7B, net short-term borrowings +¥6.1B (prior +¥12.5B), and dividends -¥8.8B. Free Cash Flow was -¥2.8B (OCF ¥33.5B - CapEx ¥37.0B), deteriorating from -¥1.4B prior. CapEx/Depreciation was 1.5x (¥37.0B / depreciation ¥24.6B), indicating continued growth investment. Cash and deposits were ¥66.3B (prior ¥69.4B), down ¥3.1B; interim liquidity was covered by borrowings. The OCF decline was mainly due to one-time tax payments and working capital expansion; improvements are possible via inventory reduction and extending payable terms.
Of Ordinary Income ¥27.8B, Operating Income ¥22.1B accounts for 79.5%, and net non-operating items (Non-operating Income ¥9.0B - Non-operating Expenses ¥3.4B = ¥5.7B) account for 20.5%. Breakdown of Non-operating Income: foreign exchange gains ¥4.4B, dividend income ¥0.9B, interest income ¥0.1B, other ¥1.4B. Foreign exchange gains of ¥4.4B represent approximately 20% of Operating Income and materially contributed to Ordinary Income improvement, but this is a temporary factor dependent on FX movements. Non-operating expenses comprised interest expense ¥2.3B (up ¥0.7B due to higher debt) and other ¥0.8B. Extraordinary items net to +¥0.7B (extraordinary gains ¥1.1B - extraordinary losses ¥0.4B), including ¥0.4B gains on sale of investment securities. The divergence between Ordinary Income and Net Income is primarily driven by income taxes of ¥11.0B (effective tax rate 38.5%), up 3.5 percentage points from 35.0% prior. Comprehensive Income was ¥23.6B (Net Income ¥12.9B + Other Comprehensive Income ¥6.0B + Non-controlling interests ¥0.0B). Other Comprehensive Income breakdown: actuarial gains/losses adjustment +¥4.3B, valuation difference on available-for-sale securities +¥2.7B, foreign currency translation adjustments -¥1.2B, deferred hedges +¥0.1B. OCF ¥33.5B / Net Income ¥12.9B = 2.6x, indicating sound cash backing though down from 5.3x prior. Accrual (Net Income - OCF) was -¥20.6B, representing -160% relative to Net Income, implying high cash profitability. However, working capital expansion (inventory +¥8.1B, receivables -¥7.1B, payables +¥0.6B, net cash outflow -¥5.6B) pressured OCF; improvements in inventory management and collection cycles are needed to enhance earnings quality.
For FY March 2027, management plans Revenue ¥652.0B (YoY +4.1%), Operating Income ¥30.0B (YoY +35.6%), Ordinary Income ¥32.0B (YoY +15.2%), and Net Income attributable to owners of the parent ¥21.5B (EPS ¥107.64). Revenue growth of +4.1% assumes demand recovery across segments and price retention. Operating Income is forecast to increase by ¥7.9B (+35.6%), raising operating margin to about 4.6% (prior 3.5%, +1.1pt). Key assumptions include maintaining/improving gross margin, controlling SG&A, and turning loss-making segments (Housing and Electronic Equipment) into profitability. Ordinary Income is expected to increase by ¥4.2B, less than operating income growth, incorporating potential FX reversal and higher interest expense. Net Income is planned to rise ¥8.6B (+39.8%), assuming normalization of the effective tax rate (from 38.5% to about 35%) and operating improvements. Typical progress rates by the end of H1 are around 50% of revenue and about 40% of operating income; H1 results will be used to assess achievability. Key KPIs: inventory turnover improvement, increased rental utilization, and achieving break-even at loss-making segments.
Annual dividend is ¥44 per share (interim ¥22 + year-end ¥22), unchanged from prior year. Dividend payout vs. Net Income: total dividends ¥8.8B against Net Income ¥12.9B implies about 68% (on an EPS basis, EPS ¥87.91 / dividend ¥44 = 50.0%). Free Cash Flow was -¥2.8B while total dividends were ¥8.8B, indicating dividends were funded by OCF and financing borrowings. Cash and deposits ¥66.3B (≈9.1% of total assets) provide ample liquidity and short-term payment capability, but sustainability depends on Free Cash Flow improvement (inventory reduction and CapEx efficiency). Dividend policy remains stable dividends, maintaining the prior year level. The forecast dividend for FY2027 is also planned at ¥22 (annual ¥44). Total Return Ratio is approximately 50% based on dividends only; no share buyback is disclosed and returns are dividend-focused. Retained earnings will be allocated to growth investments (CapEx / M&A) and maintaining financial stability.
Inventory stagnation and working capital expansion: Inventory was ¥130.8B (prior ¥122.7B), up ¥8.1B; inventory days ~76 days (prior 72 days), indicating increased stagnation. Although receivables were ¥116.1B (prior ¥123.2B), the inventory growth rate (+6.6%) outpaced revenue growth (+1.7%), pressuring working capital. Payables were ¥74.9B (prior ¥74.3B), roughly stable. CCC (inventory days + receivable days - payable days) is about 166 days (76 + 92 - 58), lengthening. Working capital expansion lowers OCF/EBITDA (0.72x; EBITDA = Operating Income ¥22.1B + Depreciation ¥24.6B = ¥46.7B), weakening cash generation. Risks include inventory obsolescence and discounting.
Delay in profitability improvements of loss-making segments: Housing Equipment loss -¥3.6B (as a percent of segment sales -2.4%), Electronic Equipment loss -¥4.4B (segment margin -7.8%), totaling -¥8.0B. Although losses narrowed with revenue increases, these segments remain unprofitable. Achieving the FY2027 operating income target of ¥30.0B requires either turning these segments profitable or halving losses, but fixed-cost burdens and competitive pressure could delay progress. Continued losses would drag on consolidated profitability, investment capacity, and shareholder returns.
Higher interest-bearing debt and interest burden: Interest-bearing debt is ¥272.9B (prior ¥259.4B), up ¥13.5B, with Debt/Equity 81.3%. Interest expense was ¥2.3B (prior ¥1.6B), up ¥0.7B; further rate increases could increase interest costs. Debt/EBITDA is about 5.8x (¥272.9B / EBITDA ¥46.7B), a high level that raises concerns over earnings pressure and repayment burden during downturns. Although Interest Coverage is 9.6x, prolonged stagnation in operating income and continued borrowing would erode resilience. Mitigating financial risk requires OCF improvement and de-leveraging.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 3.5% | 7.8% (4.6%–12.3%) | -4.2pt |
| Net Margin | 2.1% | 5.2% (2.3%–8.2%) | -3.1pt |
Profitability lags industry medians; there is substantial room for gross margin improvement and cost efficiency.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 1.7% | 3.7% (-0.4%–9.3%) | -2.0pt |
Revenue growth also trails the median by -2.0pt; monetizing loss-making segments and recovery in Construction Equipment are key to accelerating growth.
※ Source: Company compilation
Inventory reduction and working capital improvement are top priorities: Inventory up ¥8.1B and CCC ~166 days have worsened working capital efficiency, depressing OCF (¥54.2B → ¥33.5B). Normalizing inventory turnover (target DIO below 70 days) and strengthening receivables collection could improve OCF/EBITDA from 0.72x to above 0.9x. A 1% reduction in working capital could free approximately ¥6B of cash, supporting Free Cash Flow positivity and dividend sustainability.
Execution to improve operating margin and turn loss-making segments profitable: The FY2027 plan embeds a +1.1pt improvement in operating margin (3.5% → 4.6%), which requires Housing and Electronic Equipment to reach breakeven or halve combined losses (-¥8.0B → -¥4.0B), while maintaining margins in core segments. Maintaining/improving gross margin at 26.2% and suppressing SG&A growth (SG&A growth < revenue growth) are crucial. H1 gross margin and segment profit trends will be key indicators of plan feasibility.
Progress on de-leveraging and controlling interest burden: Interest-bearing debt ¥272.9B and Debt/EBITDA ~5.8x are high. Improving OCF (target > ¥50B) and achieving Free Cash Flow positivity will enable debt repayment and higher equity ratio (target >50%), strengthening medium-term financial stability. To control interest expense (¥2.3B), strategies include refinancing in a rising-rate environment and phased reduction of interest-bearing debt (target below ¥250B). Monitoring the Interest Coverage ratio (9.6x) for maintenance and improvement will be important.
This report is an AI-generated earnings analysis document derived from XBRL earnings release data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on public financial statements. Investment decisions are your responsibility; consult a professional advisor as appropriate before making investment decisions.