| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥15107.0B | ¥15047.0B | +0.4% |
| Operating Income | ¥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 ¥15,107.0B (YoY +¥60.1B +0.4%), Operating Income was ¥284.0B (YoY -¥12.9B -4.3%), Ordinary Income was ¥201.6B (YoY +¥71.9B +55.4%), and Net Income was ¥87.7B (YoY +¥65.5B +295.5%). While revenue edged up slightly and operating profit declined, Net Income recovered substantially due to normalization of tax burden and improvement in financial results. Gross margin improved to 34.1% (prior year 32.6%, +1.5pt), SG&A ratio rose to 31.6% (prior year 30.0%, +1.6pt), so improvement in gross profit was offset by higher SG&A, resulting in an Operating Margin of 1.9% (prior year 2.0%, -0.1pt). Ordinary Income rose materially driven by improved financial income/expense, and Net Income recovered strongly as Profit Before Tax was ¥157.1B (prior year ¥201.5B, -22.0%) while the effective tax rate normalized to 44.1% (prior year 88.8%).
【Revenue】 Revenue of ¥15,107.0B (YoY +0.4%) was a marginal increase. By segment, Water Technology Business was ¥8,088.4B (+0.8%) representing 53.5% of sales and the largest, Housing Technology Business was ¥5,184.3B (-0.5%) at 34.3%, and Living Business was ¥1,834.3B (+1.3%) at 12.1%. Core Water Technology and Living led growth, while a slight decline in Housing Technology constrained overall performance. Gross margin improved to 34.1% from 32.6% year-on-year (+1.5pt), contributed by a decline in cost of goods sold (COGS ¥9,955.5B, YoY -¥110.3B -1.1%). Price revisions, improved product mix, and FX effects lifted gross margin.
【Profitability】 Operating Income of ¥284.0B (-4.3%) declined. Gross profit was ¥5,151.5B (YoY +¥171.4B +3.4%), while SG&A was ¥4,766.5B (YoY +¥99.0B +2.1%), increasing at a faster pace than sales and reducing Operating Margin to 1.9% (prior year 2.0%). Other expenses were ¥194.6B (prior year ¥126.6B), which included impairment losses of ¥65.1B, and netting with Other income of ¥93.6B (prior year ¥110.1B) pressured non-operating levels. Ordinary Income of ¥201.6B (+55.4%) reflected relative improvement in non-operating items despite net financial burden of -¥124.9B (Financial income ¥43.8B, prior year ¥40.0B; Financial expenses ¥168.7B, prior year ¥138.6B) and an equity-method loss of -¥2.1B (prior year +¥3.3B). Profit Before Tax was ¥157.1B (prior year ¥201.5B, -22.0%), and normalization of tax expense to ¥69.4B (effective tax rate 44.1%, prior year ¥178.8B, 88.8%) led to Net Income of ¥87.7B (+295.5%). Conclusion: revenue up / operating down (operating stage) and revenue up / net income up (net stage).
Water Technology Business posted Revenue ¥8,088.4B (+0.8%) and Operating Income ¥454.4B (+23.3%), yielding a margin of 5.6% (prior year 4.6%, +1.0pt). Price revisions and improved mix lifted gross margin and drove corporate profit improvement. Housing Technology Business recorded Revenue ¥5,184.3B (-0.5%) and Operating Income ¥267.1B (+2.6%), margin 5.2% (prior year 5.0%, +0.2pt). Despite slight revenue decline, cost efficiencies secured profit growth. Living Business had Revenue ¥1,834.3B (+1.3%) and Operating Income ¥78.4B (+8.5%), margin 4.3% (prior year 4.0%, +0.3pt). The new segment formation combining "Kitchen & Washbasin Business" and "Interior Business" produced synergies that improved margins. Total segment profit of ¥799.9B less corporate expenses of ¥414.9B resulted in Operating Income of ¥284.0B.
【Profitability】Operating Margin 1.9% (prior year 2.0%, -0.1pt), ROE 1.3% (prior year 0.3%, +1.0pt). ROE improvement was supported by Net Profit Margin 0.6% (prior year 0.1%, +0.5pt), but the gap to industry median ROE 6.3% of -5.0pt remains large. 【Cash Quality】Operating Cash Flow / Net Income is 9.43x, indicating strong cash backing of earnings. With Operating Cash Flow ¥826.9B and Depreciation ¥830.8B, estimated EBITDA is ¥1,114.8B (Operating Income ¥284.0B + Depreciation ¥830.8B), giving OCF/EBITDA 0.74x and room to improve cash conversion. 【Investment Efficiency】CapEx ¥321.4B is 0.39x of Depreciation ¥830.8B, restrained and posing risk of delayed asset renewal/growth investment. Capital expenditures including intangible asset acquisitions ¥106.8B total ¥608.5B, 0.73x of Depreciation, an appropriate level. 【Financial Health】Equity Ratio 35.3% (prior year 33.7%, +1.6pt), Interest-bearing Debt ¥5,798.8B (current ¥1,632.0B + non-current ¥4,166.8B) with D/E 1.82x. Estimated Debt/EBITDA 5.2x (threshold >4.0 is a warning), and Interest Coverage (estimated EBIT ¥67.6B / interest expense ¥116.5B) about 0.58x, indicating heavy interest burden and vulnerability to rising rates.
Operating Cash Flow ¥826.9B (prior year ¥1,000.0B, -17.3%) is 9.43x Net Income ¥87.7B, showing very solid cash backing of profits. Working capital subtotal ¥1,066.2B included inventory increase ¥37.1B and accounts payable decrease ¥140.4B as cash outflows; corporate tax payments ¥157.2B, interest payments ¥116.5B, and lease payments ¥231.4B were deducted to arrive at OCF. Investing Cash Flow was -¥235.9B: CapEx -¥321.4B and intangible asset investments -¥106.8B offset by proceeds from disposals/investment sales ¥2,507.7B and acquisitions -¥2,361.1B (net +¥146.6B), tangible asset disposal proceeds ¥32.7B, etc. Financing Cash Flow was -¥724.7B, including dividend payments ¥258.6B, short-term borrowings repayment ¥360.7B, net long-term borrowings +¥370.9B (issuance ¥977.3B, repayment ¥606.4B), bond redemptions ¥250.0B, and lease payments ¥231.4B. Free Cash Flow ¥591.0B (OCF ¥826.9B + ICF -¥235.9B) covers dividends ¥258.6B by 2.28x, indicating sustainability of capital allocation. Cash and cash equivalents were ¥1,156.2B (prior year ¥1,235.3B, -6.4%); FX translation gains ¥54.7B contributed positively, but net outflow from operating/investing/financing CF of -¥133.7B reduced year-end balance.
Recurring earnings are anchored by Operating Income ¥284.0B, with Financial Income ¥43.8B (mainly interest and dividend income) adding at the non-operating level. One-off factors include impairment losses ¥65.1B recorded in Other expenses and remeasurement gains related to equity-method associates ¥17.1B included in Other income. Other expenses ¥194.6B (prior year ¥126.6B) likely include impairment and restructuring costs, and netting with Other income ¥93.6B (prior year ¥110.1B) strained non-operating results. Non-operating Financial Income ¥43.8B is limited at 0.3% of sales, while Financial Expenses ¥168.7B (interest expense ¥116.5B and lease interest, etc.) are heavy, producing net financial expense -¥124.9B that weighed on Ordinary Income. With OCF ¥826.9B and EBITDA estimate ¥1,114.8B (Operating Income ¥284.0B + Depreciation ¥830.8B), OCF/EBITDA is 0.74x indicating scope to improve cash conversion. The gap between Ordinary Income ¥201.6B and Net Income ¥87.7B (~-56.5%) is driven by tax expense ¥69.4B (effective tax rate 44.1%) and lower Profit Before Tax. Comprehensive Income ¥732.9B (attributable to owners ¥725.0B) exceeds Net Income by ¥645.2B, explained by Other Comprehensive Income ¥645.1B (mainly foreign operations translation differences ¥560.8B, cash flow hedges ¥11.5B, remeasurements of defined benefit plans ¥36.7B, valuation differences on securities ¥33.3B, etc.), indicating large FX-driven swings that boosted equity.
For FY ending March 2027, company guidance is Revenue ¥1,6000.0B (vs current period +5.9%), Operating Income ¥375.0B (+32.0%), Net Income ¥120.0B (+36.8%), estimated EPS ¥41.75, and forecast dividend ¥45.00. Assumes Operating Margin 2.3% (current 1.9%, +0.4pt), with further gross margin improvement and SG&A efficiency as key drivers. Revenue growth of +5.9% vs Operating Income growth of +32.0% assumes significant operating leverage, but controlling SG&A growth (current +2.1% -> next period capped below revenue growth) is essential. Forecast dividend ¥45.00 equals annualized level of current period (annual ¥90.00: interim ¥45 + year-end ¥45), implying a forecast payout ratio 107.8% (¥45 ÷ EPS ¥41.75) which is high but sustainable given projected FCF generation of ¥590.9B. Guidance achievement assumptions include: (1) continued margin improvement in the core Water Technology Business, (2) Housing Technology Business reversing to revenue growth, (3) improvement in inventory/accounts receivable turnover to raise OCF/EBITDA, and (4) reduction of interest burden via lower interest-bearing debt.
Current period dividend is annual ¥90.00 (interim ¥45.00 + year-end ¥45.00), total dividends ¥258.6B. Reported payout ratio is 12.9%, which appears to be based on annual dividend ¥90 relative to EPS in reported terms. Dividend payments of ¥258.6B vs Net Income ¥87.7B imply a ratio of 294.7%, but considering Comprehensive Income ¥732.9B (attributable ¥725.0B) and strong cash generation (OCF ¥826.9B, FCF ¥591.0B), the dividend is sustainable. Share buybacks were limited (Financing CF -¥0.1B), so shareholder returns are dividend-centric. Total shareholder returns (dividends + buybacks) ¥258.7B vs FCF ¥591.0B yields a Total Return Ratio 43.8%, indicating ample capacity on an FCF basis. Forecast dividend next year ¥45.00 (annualized) vs forecast EPS ¥41.75 implies forecast payout ratio 107.8% which is high, but assuming forecast Net Income ¥120.0B and continuation of Operating Cash Flow levels, the cash backing for dividends is expected to be maintained.
Risk of persistently low Operating Margin: Operating Margin 1.9% (industry median 7.8%, -5.9pt) is structurally low, and SG&A ratio 31.6% (YoY +1.6pt) is increasing faster than sales growth +0.4%. This makes resilience in downturns weak and fixed cost burden increases earnings volatility. The ¥65.1B impairment also temporarily depressed profits and could recur.
High leverage and interest rate sensitivity: Interest-bearing Debt ¥5,798.8B, estimated Debt/EBITDA 5.2x (threshold >4.0 is cautionary), and estimated Interest Coverage 0.58x indicate a heavy interest burden. Rising rates could increase interest payments (currently ¥116.5B) and pressure Ordinary Income ¥201.6B, reducing financial flexibility. Large intangible assets ¥5,932.4B (31.5% of total assets, and 88.8% of equity) carry tail risk for impairments.
Working capital management and inventory stagnation risk: Accounts receivable ¥2,891.7B (estimated DSO 70 days), inventory ¥2,613.6B (estimated DIO 96 days) show extended holdings; inventory increase ¥37.1B and accounts payable decrease ¥140.4B pressured OCF. Risks include inventory obsolescence valuation losses or discounting, and longer receivable collection causing credit losses. Segment concentration (Water Technology 53.5% of sales) amplifies product/cycle dependency and working capital variability.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| ROE | 1.3% | 6.3% (3.2%–9.9%) | -5.0pt |
| Operating Margin | 1.9% | 7.8% (4.6%–12.3%) | -5.9pt |
| Net Profit Margin | 0.6% | 5.2% (2.3%–8.2%) | -4.6pt |
Profitability metrics are well below industry medians; ROE, Operating Margin, and Net Profit Margin are in the lower range. While gross margin improvements continue, SG&A burden and interest costs compress profitability.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 0.4% | 3.7% (-0.4%–9.3%) | -3.3pt |
Revenue growth trails the industry median; contributions from core Water Technology +0.8% and Living +1.3% are limited.
※ Source: Company compilation
Gross margin improvement and profit gains in Water Technology drove the large recovery in Net Income, but Operating Margin 1.9% (industry median 7.8%, -5.9pt) remains structurally low. SG&A efficiency and interest burden reduction are the most important medium-term priorities. With OCF ¥826.9B and FCF ¥591.0B, cash generation is plentiful and dividend cash backing is solid, but achieving next period guidance of Operating Income +32.0% requires controlling SG&A growth and improving inventory/accounts receivable turnover.
Interest-bearing Debt ¥5,798.8B (estimated Debt/EBITDA 5.2x) and sizable intangibles ¥5,932.4B (31.5% of total assets) are the main financial risks; monitor resilience to rising rates and impairment risk. Conversely, FX translation gains +¥560.8B explained Comprehensive Income ¥732.9B and increased Net Assets to ¥6,683.6B (YoY +¥482.9B +7.8%), improving Equity Ratio to 35.3% and supporting financial flexibility. With restrained investment levels (CapEx/Depreciation 0.39x), accelerating growth investment and improving working capital efficiency are key to sustaining growth beyond next year.
This report is an AI-generated financial analysis document automatically produced by analyzing XBRL financial statement data. It does not constitute investment advice for specific securities. Industry benchmarks are reference information compiled by the firm based on public financial statements. Investment decisions are your responsibility; consult professional advisors as necessary before making investment decisions.