| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥15107.0B | ¥15047.0B | +0.4% |
| Operating Income / Operating Profit | ¥284.0B | ¥296.9B | -4.3% |
| Profit Before Tax | ¥157.1B | ¥201.5B | -22.0% |
| Net Income | ¥87.7B | ¥22.2B | +295.5% |
| ROE | 1.3% | 0.4% | - |
For the fiscal year ended March 2026, Revenue was ¥15107B (YoY +¥60B +0.4%), Operating Income was ¥284B (YoY -¥13B -4.3%), Ordinary Income was ¥196B (YoY +¥66B +50.8%), and Net income attributable to owners of parent was ¥81B (YoY +¥61B +307%). While core Operating Income declined slightly on flat revenue, Ordinary Income and Net Income recorded substantial increases. Operating margin was 1.88% (down 0.09pt from 1.97% prior year), indicating continued thin margins. However, improvements in non-operating items (higher financial income, improved equity-method results, and reduced tax burden) drove Net margin to 0.54% (improvement of 0.41pt from 0.13% prior year). Comprehensive income was ¥733B (prior year ¥15B), where weaker yen and valuation gains on securities materially increased equity. ROE improved to 1.3% (prior year 0.3%), but DuPont decomposition shows ROE composed of Net margin 0.54% × Total asset turnover 0.802 × Financial leverage 2.82x, so capital efficiency remains in the lower industry tier. Interest burden coefficient is 0.55 (financial costs ¥169B vs. EBIT ¥68B) and tax burden coefficient is 0.52 (effective tax rate approx. 48%), both compressing profitability; ROIC 3.0% remains below WACC. Operating Cash Flow (OCF) was ¥827B (10.2× Net income), Free Cash Flow was ¥591B, covering dividends (total ¥259B — computed payout 318% though company-reported payout ratio is 12.9%) and investments, leaving cash and cash equivalents of ¥1,156B. Equity Ratio improved to 35.3% (prior year 33.7%), indicating gradual improvement in financial soundness. The FY2027 plan targets Revenue ¥16000B (+5.9%), Operating Income ¥375B (+32%), Net Income ¥120B (+36.8%), implying Operating margin improvement to 2.34% (+0.46pt); however, structural low-profitability correction and capital-efficiency improvement are the main evaluation points.
[Revenue] Revenue totaled ¥15107B (YoY +0.4%), effectively flat. By segment, Water Technology Business was ¥8088B (external customers, YoY +0.8%), Housing Technology Business ¥5184B (YoY -0.5%), and Living Business ¥1834B (YoY +1.3%), with modest increases in Water and Living and slight decrease in Housing. Domestic new housing and renovation demand remained flat; price revisions have taken hold in part, but volume expansion was limited. Yen depreciation boosted yen-converted overseas revenue but did not materially accelerate volume growth, resulting in modest overall revenue growth. Gross profit was ¥5152B (gross profit margin 34.1%, a 1.0pt improvement from 33.1% prior year), confirming lower cost ratios and suggesting progress on price pass-through and mix improvement.
[Profitability] Operating Income was ¥284B (YoY -4.3%). Gross profit rose by ¥515B (from ¥4,981B to ¥5,152B) but Selling, General and Administrative Expenses (SG&A) increased by ¥99B to ¥4,767B (prior year ¥4,668B), pressuring Operating Income. SG&A growth outpaced revenue growth, so operating leverage did not materialize. Segment profits (business profits) were: Water ¥454B (prior ¥369B, +23%), Housing ¥267B (prior ¥260B, +2.7%), Living ¥78B (prior ¥72B, +8.3%) — all segments increased profits, but an increase in corporate costs (mainly corporate functions) led consolidated Operating Income to decline. Ordinary Income was ¥196B (YoY +50.8%). Financial income was ¥44B (prior ¥40B) and financial costs ¥169B (prior ¥139B) — interest burden rose — but equity-method results moved only slightly from +¥3B to -¥2B, and a remeasurement gain of ¥17B related to equity-method application was recorded, improving the ordinary-income stage. Profit Before Tax was ¥157B (prior ¥202B, -22%), but income tax expense fell substantially to ¥69B (prior ¥179B), bringing the effective tax rate down to ~44% (prior ~89%). Tax reduction led to Net income attributable to owners of parent of ¥81B (prior ¥20B, +307%). Comprehensive income of ¥733B included foreign currency translation +¥561B, defined benefit remeasurement +¥37B, and securities valuation +¥33B — total other comprehensive income ¥645B — producing a large divergence from Net Income driven by valuation gains and FX in OCI. No major exceptional items were disclosed; changes in tax and financial results on an ordinary basis were the main drivers of Net Income growth. In conclusion, slight revenue increase with operating decline was offset by non-operating and tax improvements, producing large Net Income growth.
Water Technology Business recorded Revenue ¥8088B (external customers, prior ¥8026B, +0.8%) and Segment Profit ¥454B (prior ¥369B, +23.0%), achieving both revenue and profit growth. Margin improved to 5.6% (up 1.0pt from 4.6%). Core products (sanitary equipment, faucets, bathrooms) saw improved profitability through price revisions and cost reduction measures. Depreciation ¥481B, impairment ¥40B, and capital expenditure ¥389B indicate continued asset renewal and impairment recognition. Housing Technology Business posted Revenue ¥5184B (external customers, prior ¥5210B, -0.5%) and Segment Profit ¥267B (prior ¥260B, +2.7%), modestly down in revenue and up in profit. Margin was 5.1% (up 0.2pt from 4.9%). Building materials and housing solutions (sashes, doors, shutters) saw stable demand; cost control preserved margins. Depreciation ¥283B, impairment ¥4B, capital expenditure ¥166B. Living Business achieved Revenue ¥1834B (external customers, prior ¥1811B, +1.3%) and Segment Profit ¥78B (prior ¥72B, +8.3%). Margin improved to 4.3% (up 0.3pt from 4.0%). Integration of system kitchens, washstands, and interior materials has generated synergies through manufacturing and business-model similarity. Depreciation ¥63B, impairment ¥21B, capital expenditure ¥54B. Corporate costs increased to ¥415B (prior ¥388B), partially offsetting segment profit improvements.
[Profitability] Operating margin was 1.88% (down 0.09pt from 1.97%), reflecting continued thin margins. Gross profit margin was 34.1% (up 1.0pt from 33.1%), confirming lower cost ratios, but SG&A ratio rose to 31.6% (prior 31.0%), compressing Operating margin. ROE improved to 1.3% (prior 0.3%) but remains well below industry median of 6.3%, indicating low capital efficiency. DuPont decomposition: Net margin 0.54% (prior 0.13%), Total asset turnover 0.802 (prior 0.822), Financial leverage 2.82x (prior 2.95x). Net margin improvement drove ROE, while turnover and leverage declined. ROA (on Ordinary Income basis) was 0.8% (prior 1.1%), deteriorating. Tax burden coefficient 0.52 (effective tax rate ~44%, improved from ~89% prior year) and interest burden coefficient 0.55 (financial costs ¥169B vs. EBIT ¥68B) remain significant burdens, compressing returns. ROIC 3.0% is below estimated WACC, indicating failure to cover capital cost.
[Cash Quality] Operating Cash Flow (OCF) ¥827B is 10.2× Net income attributable to owners of parent (¥81B), showing very strong cash-generating capability. High OCF/Net income is driven by working capital improvements (trade receivables collection +¥52B, inventories increase -¥37B, trade payables decrease -¥140B) and non-cash items (depreciation ¥831B, impairment ¥65B). Accrual ratio is -4.0%, a negative value indicating strong cash-backed earnings. Free Cash Flow was ¥591B (OCF ¥827B - Investing CF outflow ¥236B), and FCF coverage is 2.28× (OCF ¥827B ÷ Dividend total ¥259B), indicating dividends are well funded by cash generation. Cash and cash equivalents were ¥1,156B (prior ¥1,235B, down ¥79B), supporting solid financial soundness.
[Investment Efficiency] Total asset turnover was 0.802x (prior 0.822x), slightly lower. Inventory turnover was 3.85x (COGS ¥9,956B ÷ average inventories ¥2,527B), DIO 95 days — standard for manufacturing but room for improvement. Trade receivables turnover was 5.25x (Revenue ¥15,107B ÷ average trade receivables ¥2,866B), DSO 69 days — favorable. Trade payables turnover was 4.11x (COGS ¥9,956B ÷ average trade payables ¥2,458B), DPO 89 days. Working capital cycle is 75 days (DIO 95 + DSO 69 - DPO 89), indicating appropriate cash efficiency.
[Financial Soundness] Equity Ratio (Equity to Total Assets) was 35.3% (up 1.6pt from 33.7%), in a stable range with gradual improvement of financial structure. Interest-bearing debt (bonds and borrowings) totaled ¥5,799B (short-term ¥1,632B, long-term ¥4,167B). Net interest-bearing debt was ¥4,643B (interest-bearing debt ¥5,799B - cash ¥1,156B). Net D/E ratio was 0.70x (Net interest-bearing debt ¥4,643B ÷ Equity ¥6,684B), not overly leveraged, but interest burden (financial costs ¥169B, 2.5× EBIT) weighs on profitability. Interest coverage using OCF is 4.90x (OCF ¥827B ÷ interest paid ¥169B; interest paid proxied by financial costs), indicating short-term serviceability; however EBIT/interest is 0.40x, which is low. Current ratio was 128% (current assets ¥7,189B ÷ current liabilities ¥5,605B), and quick ratio was 81% (quick assets ¥4,554B ÷ current liabilities ¥5,605B), showing healthy short-term liquidity.
Net cash provided by operating activities was ¥827B (prior ¥1,000B, -17.3%), down YoY but still 10.2× Net income attributable to owners of parent (¥81B), indicating very high cash generation quality. Add-backs included depreciation ¥831B and impairment ¥65B; working capital changes were trade receivables collection +¥52B, decrease in trade payables -¥140B, inventory increase -¥37B, overall increasing working capital outflow, but tax refunds and other effects supported robust OCF. Net cash used in investing activities was -¥236B (prior -¥281B), including tangible fixed asset acquisitions -¥321B and intangible asset acquisitions -¥107B as continued capex/IT investments, while securities sales/redemptions +¥2,508B and acquisitions -¥2,361B indicate active securities portfolio turnover. The ¥17B remeasurement gain related to equity-method application is presumed to be a valuation gain on acquisition of subsidiary interests, reflecting M&A activity. Free Cash Flow was ¥591B (OCF ¥827B - Investing CF -¥236B), and cash flows from financing activities were -¥724B (dividends paid ¥259B, short-term borrowings repayment ¥361B, long-term borrowings proceeds ¥977B, long-term borrowings repayments ¥606B, bond redemptions ¥250B, lease repayments ¥231B), reflecting lengthening of debt maturity profile and payment of dividends. Cash and cash equivalents decreased to ¥1,156B (from ¥1,235B at beginning of period, -¥79B), including FX translation +¥55B, keeping the actual cash position stable. FCF coverage 2.28× (OCF ¥827B ÷ Dividend total ¥259B) underpins dividend sustainability and leaves ample investment capacity.
Separating recurring and one-off items: Operating-level deterioration (-4.3%) indicates weaker core profitability, but Ordinary Income improved +50.8% driven by non-operating improvements. Non-operating improvements include a small increase in financial income to ¥44B (prior ¥40B); despite higher financial costs ¥169B (prior ¥139B), a ¥17B remeasurement gain from equity-method application was recorded and equity-method P&L only slightly worsened from +¥3B to -¥2B. Profit Before Tax was ¥157B (prior ¥202B, -22%), but income tax expense fell to ¥69B (prior ¥179B), lowering effective tax rate to ~44% (prior ~89%) — this tax burden reduction produced Net income attributable to owners of parent ¥81B (prior ¥20B, +307%). Comprehensive income ¥733B includes foreign currency translation +¥561B, defined benefit remeasurement +¥37B, securities valuation +¥33B — other comprehensive income totaling ¥645B — explaining large divergence from Net income of ¥88B due to valuation and FX OCI contributions. OCF being 10.2× Net income and accrual ratio -4.0% (negative) indicates high cash backing of profits driven by depreciation and working capital improvements. The divergence between Ordinary Income and Net Income is mainly attributable to the tax burden coefficient 0.52 (effective tax rate ~44%); no outsized non-operating gains are evident, and earnings quality is supported by strong cash backing rather than dependence on transitory items.
The FY2027 plan targets Revenue ¥16000B (YoY +5.9%), Operating Income ¥375B (+32.0%), Net income attributable to owners of parent ¥120B (+47.4%), EPS ¥41.75, and dividend ¥45. Planed Operating margin is 2.34% (vs. current 1.88%, +0.46pt), an ambitious target assuming margin improvement. With projected Revenue growth +5.9% vs. Operating Income +32%, the plan assumes operating leverage realization through controlling cost of goods sold and SG&A, and price/mix improvement. Current period results represent Revenue ¥15107B (94.4% of plan) and Operating Income ¥284B (75.7% of plan) on a full-year basis — Revenue is on a favorable progress rate, but profit margins lag. To meet targets, stabilization of raw material and logistics costs, continued price pass-through, and accelerated fixed-cost absorption are required. The dividend plan of ¥45 is conservative relative to current period dividend of ¥90 (interim ¥45 + year-end ¥45); given FCF coverage of 2.28× and strong cash generation, there is room for maintaining or raising the dividend. Progress toward forecasts should be monitored through subsequent quarterly trends in Operating margin.
Annual dividend is ¥90 (interim ¥45, year-end ¥45). Given Net income attributable to owners of parent ¥81B and total dividends ¥259B, the computed payout ratio is 318% — superficially high — but company-reported payout ratio is 12.9%, suggesting differences due to issued shares vs. average shares or consolidated vs. parent-company basis. FCF coverage is 2.28× (OCF ¥827B ÷ Dividend total ¥259B), indicating dividends are fully covered by OCF and sustainable. Company-reported payout ratio (12.9%) is conservative and dividend capacity is ample. No share buyback disclosure is confirmed; shareholder returns are dividend-centric. The FY2027 dividend plan ¥45 is conservative relative to current ¥90, but assuming plan Net income ¥120B (vs. current ¥81B, +48%), payout on plan basis would be around 30% and there remains scope for dividend increase given cash generation. Total return ratio equals payout ratio as no buybacks are disclosed.
Structural low-profitability risk: Operating margin 1.88% (industry median 7.8%, -5.9pt), ROIC 3.0% below capital cost. Interest burden coefficient 0.55 (financial costs ¥169B vs. EBIT ¥68B) implies over half of EBIT is offset by interest. SG&A ratio rising to 31.6% (from 31.0%) and only a 1.0pt improvement in gross profit margin means SG&A increases offset gross margin gains, preventing operating leverage. Delays in price pass-through, mix improvement, or continued fixed-cost growth could make achieving planned 2.34% Operating margin difficult and delay ROE/ROIC improvement.
Working capital / inventory management risk: Inventories ¥2614B (prior ¥2439B, +7.2%) increased materially outpacing revenue growth +0.4%. DIO 95 days is standard for manufacturing but inventory buildup during demand stagnation could pressure OCF. Trade payables ¥2448B (prior ¥2468B, -0.8%) slightly decreased, and DPO 89 days shows shortening trend. Working capital cycle 75 days is appropriate, but slower inventory turns or receivables delays would reduce FCF generation and impair financial flexibility.
Interest rate & FX risk: Interest-bearing debt ¥5,799B (Net D/E 0.70x) and financial costs ¥169B (prior ¥139B, +21.6%) show rising interest burden. Interest coverage by OCF is 4.90x, but EBIT/interest is only 0.40x; an environment of rising interest rates would materially compress profits. FX contributed +¥561B in foreign currency translation to comprehensive income and benefited from yen depreciation; however, currency reversals could produce valuation losses, weaken competitiveness, and cause OCI volatility that affects Equity.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| ROE | 1.3% | 6.3% (3.3%–9.9%) | -5.0pt |
| Operating Margin | 1.9% | 7.8% (4.6%–12.3%) | -5.9pt |
| Net Margin | 0.6% | 5.2% (2.3%–8.2%) | -4.6pt |
Profitability is well below industry median and positioned in the lower range within manufacturing. Structural low-margin profile suppresses capital efficiency.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 0.4% | 3.7% (-0.4%–9.3%) | -3.3pt |
Revenue growth lags industry median, indicating limited top-line expansion capacity. Flat demand and delayed price pass-through are contributing factors.
※Source: Company compilation
Execution capability to improve Operating margin is the primary focus. FY2027 plan assumes Operating margin 2.34% (current 1.88%, +0.46pt), but SG&A ratio rose to 31.6% this period offsetting a 1.0pt gross profit improvement. Effectiveness of price pass-through, product mix improvement, and fixed-cost control will be tested. Achieving the plan requires stabilization of raw material and logistics costs and suppression of SG&A growth to realize operating leverage — monitoring subsequent quarterly margin trends will be key.
Strong cash generation is a positive factor. OCF ¥827B (10.2× Net income) and FCF ¥591B are ample, covering dividend total ¥259B (FCF coverage 2.28×). Working capital improvements (trade receivables collection +¥52B) and accrual ratio -4.0% provide strong cash backing supporting financial safety. Improved Equity Ratio 35.3% and cash ¥1,156B enable both investment capacity and shareholder returns; scope exists to maintain or increase dividends.
Path to ROE/ROIC improvement must be demonstrated. ROE 1.3% (industry median 6.3%, -5.0pt) and ROIC 3.0% (below WACC) put capital efficiency in the lower industry range. DuPont shows Net margin 0.54%, asset turnover 0.802, leverage 2.82x — Net margin improvement drove ROE but turnover and leverage declined. Unless the interest burden coefficient 0.55 (financial costs ¥169B vs. EBIT ¥68B) and the over-half-of-EBIT interest offset structure are addressed, fundamental capital-efficiency improvement will be difficult. Deleveraging, asset efficiency measures, and sustained Operating margin improvement are prerequisites for ROE/ROIC recovery.
This report was automatically generated by AI analyzing XBRL financial statement data and is a financial analysis document. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are compiled by the firm based on public financial statement data and are for reference. Investment decisions are your responsibility; consult a professional advisor as needed.