ALINCO (5933) FY2026 FY Earnings Report

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Executive Summary

For the fiscal year ended March 2026, although revenue growth was maintained, net income declined due to lower profits in the two core businesses and a reduction in extraordinary gains. Revenue was ¥626.3B (+1.7% YoY), operating income was ¥22.1B (+0.8%), ordinary income was ¥27.8B (+3.7%, including a ¥4.4B contribution from foreign exchange gains), and net income was ¥17.5B (-10.3%). Although the gross margin improved to 26.2%, the increase in SG&A expenses (+3.2%) outpaced this improvement, leaving the operating margin at 3.5%. The primary reason for the decline in net income was the reduction in extraordinary gains from ¥4.1B in the prior year to ¥1.1B in the current year.

Factors Affecting Performance

【Revenue】Revenue of ¥626.3B increased +1.7% YoY. By segment, the Electronics-Related Business posted the largest growth at +11.0%, although it accounts for only 9.0% of the revenue mix. The core Construction Equipment-Related Business, which represents 39.4% of the revenue mix, was virtually flat at +0.4%; the Rental-Related Business, representing 28.6%, declined 0.7%; and the Housing Equipment-Related Business, representing 23.1%, increased 3.5%. No significant volume growth was observed company-wide.

【Profit and Loss】Operating income of ¥22.1B (+0.8%) and ordinary income of ¥27.8B (+3.7%) contrasted with net income of ¥17.5B (-10.3%), resulting in a widening divergence. The primary cause of this divergence was the decrease in extraordinary gains (¥4.1B in the prior year → ¥1.1B in the current year). On a segment profit basis, using ordinary income as the basis, both core businesses recorded lower profits: Construction Equipment (-10.9%) and Rental (-9.8%). The Housing Equipment and Electronics businesses increased revenue but continued to operate at a loss, with losses widening. Overall, the results can be characterized as higher revenue but lower profit.

Segment Analysis

The Construction Equipment-Related Business posted revenue of ¥246.7B (+0.4%) and segment profit of ¥19.7B (-10.9%). Although it remains the largest source of profit, profit declined. The Rental-Related Business recorded revenue of ¥178.8B (-0.7%) and profit of ¥12.7B (-9.8%), also posting a decline. As these two businesses together account for the majority of company-wide segment profit, their lower profits directly resulted in the stagnation of overall profit growth. The Housing Equipment-Related Business recorded revenue of ¥144.6B (+3.5%) but a loss of ¥3.6B (a narrower loss YoY, with profit YoY of +30.6%), while the Electronics-Related Business posted strong revenue growth of ¥56.2B (+11.0%) but its loss widened to ¥4.4B (profit YoY shown as +17.4% in the direction of a narrower loss). The combined loss of the two loss-making businesses was ¥8.0B. Together with the lower profits in the two core businesses, this represents a structural challenge in the company’s weak ability to convert revenue growth into profit.

Key Financial Indicators

【Profitability】The operating margin was 3.5%, virtually unchanged from 3.6% in the prior year, while the net profit margin declined to 2.8% from 3.2%. ROE was 5.2%, below 6.3% in the prior year. 【Cash Flow Quality】Operating cash flow (OCF) totaled ¥33.5B, equivalent to 1.91 times net income. Although the cash conversion of profit itself was sound, OCF declined from ¥54.2B in the prior year. 【Investment Efficiency】Capital expenditures of ¥37.0B were 1.5 times depreciation and amortization expense of ¥24.6B, indicating that the company continues to make investments exceeding replacement levels; ROIC remains low. 【Financial Soundness】The equity ratio improved to 45.8% from 45.1% in the prior year. Liquidity is secured, with current assets of ¥429.7B compared with current liabilities of ¥221.9B; however, interest-bearing debt of ¥190.6B indicates a meaningful degree of reliance on borrowings.

Cash Flow Analysis

Operating cash flow was ¥33.5B, a significant decrease of -38.2% YoY. The ratio to net income of ¥17.5B was 1.91 times, indicating sound cash conversion of profit itself. However, income taxes paid increased to ¥12.3B from ¥6.3B in the prior year, while an increase in inventories of ¥1.3B and a decrease in trade payables of ¥3.4B were sources of cash outflow, contributing to the decline from the prior year. Investing cash flow was -¥36.3B, most of which was attributable to capital expenditures of ¥37.0B, with investment continuing to exceed depreciation and amortization expense of ¥24.6B. As a result, free cash flow was -¥2.8B, and funds were supplemented through financing cash flow of +¥4.8B, representing the net effect of long-term borrowings of ¥9.4B and repayments of ¥8.7B, among other items. The company is in a phase in which capital expenditures are front-loaded, and it has not yet reached a position where internal funds alone can cover both investment and dividends.

Quality of Earnings

Ordinary income of ¥27.8B exceeded operating income of ¥22.1B, with the difference attributable to non-operating income and expenses of ¥5.6B (income of ¥9.0B and expenses of ¥3.4B). Foreign exchange gains of ¥4.4B were the primary contributor. These foreign exchange gains were equivalent to approximately 19.9% of operating income and have a temporary character that must be evaluated separately from the company’s core earnings power. Extraordinary items resulted in a net gain of only ¥0.7B (including a ¥0.4B gain on the sale of investment securities, among other items), a significant reduction from extraordinary gains of ¥4.1B in the prior year. Consequently, net income declined despite growth in ordinary income. Since operating cash flow exceeded net income and accruals were limited, the reported profit itself was supported by cash generation. However, profit below the ordinary income level is susceptible to the effects of foreign exchange and extraordinary items, making evaluation based on operating income particularly important.

Earnings Forecasts and Guidance

The full-year company forecast calls for revenue of ¥652.0B (+4.1% YoY), operating income of ¥30.0B (+35.6%), ordinary income of ¥32.0B (+15.2%), and EPS of ¥107.64. To achieve the forecast, the operating margin must improve from the current-period actual level of 3.5% to approximately 4.6%. The key areas of focus will be the recovery of profitability in the core Construction Equipment and Rental businesses and the reduction of losses in the Housing Equipment and Electronics businesses. Forecast EPS of ¥107.64 exceeds the current-period actual EPS of ¥87.91, making the realization of the earnings growth plan an area of future focus.

Shareholder Returns

The annual dividend is ¥44.0, and the payout ratio is 50.1% against net income attributable to owners of the parent of ¥17.5B. This is up from the prior-year payout ratio of 43.5%, reflecting the maintenance of the dividend level despite the decline in net income. Operating cash flow was 3.8 times the dividend payment of ¥8.8B; however, free cash flow was -¥2.8B, meaning that dividends are not currently being funded solely by free cash flow while capital expenditures continue. The company plans to increase the dividend by ¥1 to ¥45.0 in the next fiscal year. Based on forecast EPS of ¥107.64, the payout ratio is expected to decline to approximately 41.8%, and the sustainability of the dividend increase will depend on the realization of the earnings growth plan.

Risk Factors

1. Declining profits in the core businesses: The two earnings pillars—the Construction Equipment-Related Business (profit YoY -10.9%) and the Rental-Related Business (-9.8%)—both recorded lower profits, serving as the primary cause of stagnant company-wide profit growth. Recovery in the profitability of these two businesses is essential to achieving the next fiscal year’s operating income plan of +35.6%.

2. Continued losses in loss-making segments: The combined losses of the Housing Equipment-Related Business (loss of ¥3.6B) and the Electronics-Related Business (loss of ¥4.4B) were ¥8.0B. The Electronics business experienced widening losses despite revenue growth of +11.0%, indicating weak conversion of revenue growth into profit.

3. Financial leverage and investment efficiency: With interest-bearing debt of ¥190.6B, capital expenditures of ¥37.0B were 1.5 times depreciation and amortization expense, resulting in negative free cash flow of -¥2.8B. If earnings improvement is delayed, flexibility in capital allocation may be constrained.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Profitability is significantly below the industry median, with both the operating margin and net profit margin ranking low within the industry.

Growth and Capital Efficiency

Revenue growth also fell slightly below the industry median, positioning the company below average in both growth and profitability within the industry.

※Source: Compiled by the Company

Key Points from the Financial Results

1. Revenue remained firm, increasing +1.7% YoY, but the operating margin of 3.5% remained below the industry median, indicating limited ability to convert revenue growth into profit growth.

2. While ordinary income increased (+3.7%), net income declined (-10.3%). This divergence was attributable to the reduction in extraordinary gains from the prior year and the temporary factor of foreign exchange gains of ¥4.4B. Monitoring trends at the operating income level is useful for evaluating the company’s underlying earnings power.

3. The polarization of the earnings structure—lower profits in the two core businesses, Construction Equipment and Rental, and continued losses in Housing Equipment and Electronics—will be the largest variable in achieving the next fiscal year’s operating income plan of +35.6%.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,525–¥1,613 at ±1% cost of equity, and ¥1,564–¥1,570 at ω±0.1.

Notes:

• Goodwill amortization of ¥3.3 per share is added back to profit (as a non-cash expense and for comparability with IFRS companies).
• Since forecast ROE is below the cost of equity, the theoretical value is below book value per share.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly available data; it is not a forecast of the market share price or a recommendation of any specific investment action, and 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 release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting with a professional as necessary.

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