| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥516.4B | ¥528.6B | -2.3% |
| Operating Income | ¥16.8B | ¥20.1B | -16.4% |
| Ordinary Income | ¥15.2B | ¥21.6B | -29.9% |
| Net Income | ¥44.8B | ¥15.4B | +191.4% |
| ROE | 3.0% | 1.1% | - |
FY2026 Q1 results: Revenue ¥516.4B (YoY -¥12.2B, -2.3%), Operating Income ¥16.8B (YoY -¥3.3B, -16.4%), Ordinary Income ¥15.2B (YoY -¥6.5B, -29.9%), Net Income ¥44.8B (YoY +¥29.4B, +191.4%). Revenue slightly declined due to double-digit decreases in Overseas Business; at the operating level, a decline in gross margin (31.2%, -1.5pt YoY) squeezed profits resulting in lower Operating Income. Ordinary Income worsened further due to increased non-operating expenses, but Net Income surged materially owing to a special gain on sale of investment securities of ¥44.3B. Domestic Business remained resilient with Revenue +1.6%, while Overseas Business saw Revenue -11.6% and Operating Income -41.8%, materially depressing company-wide margins. EBIT margin was 3.2% and ROE 3.0%, indicating low capital efficiency and a need to improve core earnings power.
[Revenue] Revenue ¥516.4B, down ¥12.2B (−2.3% YoY). By segment, Domestic Business ¥388.7B (+1.6%) was steady, while Overseas Business ¥158.5B (−11.6%) posted double-digit declines and pulled overall results down. By field, the core Hot Water & Air Conditioning field accounted for ¥431.2B or 83.5% of total, Kitchen field ¥63.4B (12.3%), and Others ¥21.8B (4.2%). Overseas decline is estimated to be due to a combination of lower shipment volumes and FX impacts. A change in depreciation method (molds from declining-balance to straight-line) increased Domestic segment profit by ¥1.5B, but had limited impact on the top-line.
[Profit & Loss] Cost of sales ¥355.4B produced Gross Profit ¥160.9B, and Gross Margin 31.2%, down 1.5pt from 32.7% YoY. Raw material costs, adverse FX, and product mix changes likely pressured gross margin. SG&A ¥144.1B decreased ¥11.7B in absolute terms YoY, improving SG&A ratio to 27.9% (from 28.9%, -1.0pt), but could not offset gross margin deterioration, resulting in Operating Income ¥16.8B (−16.4%). Operating margin fell to 3.2% (from 3.8%). Non-operating income was ¥4.5B (dividends received ¥2.0B, etc.) while non-operating expenses were ¥6.2B (FX losses ¥0.3B, interest expense ¥0.5B, etc.), leading to Ordinary Income ¥15.2B (−29.9%). The booking of Special Gain ¥44.3B (gain on sale of investment securities) pushed Pre-tax Income to ¥56.9B; after deducting income taxes of ¥12.2B, Net Income attributable to owners of the parent was ¥44.6B (+191.4%), shifting from an operating-driven decline to a large profit increase led by one-off gains.
Domestic Business: Revenue ¥388.7B (+1.6% YoY), Operating Income ¥14.2B (−9.3%), Operating Margin 3.7%. Overseas Business: Revenue ¥158.5B (−11.6%), Operating Income ¥2.5B (−41.8%), Operating Margin 1.6% — remaining at a low level. Domestic saw revenue growth but slight margin decline; Overseas suffered large profit declines from lower shipments and adverse FX. Change in depreciation method increased Domestic segment profit by ¥1.5B, but substantial Overseas deterioration pressured consolidated Operating Income. Segment composition: Domestic 75.3%, Overseas 24.7%, indicating high domestic dependency and that Overseas recovery is key to improving consolidated margins.
[Profitability] Operating Margin 3.2% down 0.6pt from 3.8% a year ago; Net Margin 8.7% rose 5.8pt from 2.9% due to special gains, but core earnings (EBIT) margin deterioration persists. ROE 3.0% remains low even with one-off net income contributions, indicating capital efficiency issues. Gross Margin 31.2% worsened by 1.5pt YoY, reflecting adverse cost environment and mix effects. [Cash Quality] Operating Cash Flow (OCF) data not disclosed; however, DSO 291 days (Receivables + E-recorded claims / daily sales), DIO 315 days (Inventories / daily COGS), and CCC 294 days signal deterioration in working capital efficiency, with inventory and receivables stagnation depressing Total Asset Turnover to 0.221. Product warranty reserves are ¥2.9B (current ¥1.0B + non-current ¥1.9B), equivalent to 5.7% of sales — a high level that suppresses margins. [Investment Efficiency] With Total Assets ¥2,332.3B and EBIT ¥16.8B, estimated ROIC is 1.0%, extremely low; Investment securities ¥402.4B (17.2% of total assets) and scope to improve working capital efficiency are significant. [Financial Soundness] Equity Ratio 63.5%, Debt-to-Equity 0.58x, Debt/Capital 4.5% — leverage is very conservative, and Interest Coverage 31.1x indicates strong financial safety. Current Ratio 187.6%, Quick Ratio 140.0%, Cash/Short-term Debt 4.17x indicate ample short-term liquidity.
Because the cash flow statement data is undisclosed, analyzing funding trends from BS movements shows Cash and Deposits increased to ¥284.0B, +¥28.4B (+11.1%), with realization of gains from sale of investment securities and working capital funding boosting liquidity. Accounts Receivable decreased to ¥411.5B, −¥46.8B (−10.2%), suggesting some collection progress, but DSO remains high at 291 days. Inventories ¥307.0B decreased ¥10.5B (−3.3%) modestly, but DIO 315 days indicates continued inventory stagnation. Accounts Payable ¥303.5B declined ¥81.8B (−21.2%) YoY, pointing to payment timing shortening or cash outflows from inventory adjustments. Short-term borrowings increased to ¥68.1B, +¥8.2B (+13.8%), indicating short-term funding steps. Net Income ¥44.6B is heavily dependent on special gains, creating a large gap with recurring cash generation (EBIT margin 3.2%); improving working capital efficiency is key to enhancing cash generation.
There is a large divergence between Ordinary Income ¥15.2B and Net Income ¥44.6B, driven by a one-off Special Gain ¥44.3B (gain on sale of investment securities). Non-operating income ¥4.5B is small (0.9% of sales), mainly dividends received ¥2.0B, so dependence on non-operating items is low. Among non-operating expenses ¥6.2B, FX loss ¥0.3B was recorded, indicating FX sensitivity in global operations. Special Losses were limited at ¥2.6B (impairment on investment securities ¥2.5B, etc.), but valuation differences in other comprehensive income were −¥9.6B, showing exposure to market value fluctuations of held securities. Comprehensive Income ¥48.4B exceeded Net Income, with Foreign Currency Translation Adjustment +¥16.2B contributing positively, while Remeasurements of Defined Benefit Plans −¥1.6B and Hedge Gains/Losses −¥1.9B detracted. Warranty reserves at 5.7% of sales are high and may reflect front-loaded recognition of future costs, potentially impacting margins; reducing warranty reserve ratio through quality improvements would enhance earnings quality. Most of the Net Margin 8.7% is transient; the EBIT margin 3.2% better represents core earnings power.
Full Year guidance is unchanged: Revenue ¥2,100.0B (+3.9% YoY), Operating Income ¥45.0B (+4.6%), Ordinary Income ¥55.0B (−0.8%), Net Income ¥86.0B, EPS ¥188.07. Q1 progress rates vs full year guidance were: Revenue 24.6%, Operating Income 37.3%, Ordinary Income 27.6%, Net Income 51.9%. Revenue progress is roughly in the normal range (25%), but Operating Income progress of 37.3% is +12.3pt above normal, suggesting contributions from SG&A efficiency and the depreciation method change. Net Income progress 51.9% is front-loaded due to the special gain ¥44.3B; absent a similar one-off in H2, full-year results risk missing the plan. Recovery pace in Overseas Business and improvement in working capital efficiency are prerequisites for achieving guidance.
No dividend was paid at Q1-end; full-year dividend forecast ¥47.00 per share (vs prior ¥35.00, +¥12.00 increase). Dividend payout ratio against forecast EPS ¥188.07 is about 25%, conservative; total dividends against Net Income ¥86.0B amount to approximately ¥21.5B. With Cash and Deposits ¥284.0B and a net cash position with Debt/Capital 4.5% low leverage, dividend sustainability is high. However, Q1 Net Income ¥44.6B is heavily dependent on special gains, so assessment of dividend funding should emphasize full-year operating cash generation and normalization of working capital. No share buyback was disclosed; evaluation is based on payout ratio rather than Total Return Ratio.
Deterioration of Overseas Business profitability: Overseas Revenue −11.6% and Operating Income −41.8% with Operating Margin 1.6% remain materially weak. Prolonged FX headwinds or shipment declines would hinder recovery of consolidated margins and raise the risk of missing full-year targets. Overseas segment accounts for 24.7% of Revenue and contributes 15.2% of profits, meaning significant impact on the group.
Worsening working capital efficiency and declining cash generation: DSO 291 days, DIO 315 days, CCC 294 days indicate progressing receivable and inventory stagnation; Total Asset Turnover 0.221 and ROIC 1.0% show very low capital efficiency. Accounts Payable decline of −21.2% adds cash outflow pressure; prolonged weak Operating Cash Flow would affect investment capacity and dividend sustainability. High warranty reserves (5.7% of sales) also pose future cash outflow risk.
Gross margin decline and fragility of core earnings: Gross Margin 31.2% worsened by 1.5pt YoY, Operating Margin 3.2% is 3.6pt below industry median of 6.8%. If raw material and logistics cost increases or FX cannot be passed through in pricing, recurring profit growth without reliance on special gains will be difficult, prolonging ROE 3.0% weakness. Without controlling quality costs and improving product mix, sustainable margin expansion is unlikely.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 3.2% | 6.8% (2.9%–9.0%) | -3.6pt |
| Net Margin | 8.7% | 5.9% (3.3%–7.7%) | +2.7pt |
Operating Margin is 3.6pt below the industry median, indicating weaker profitability, while Net Margin is +2.7pt above the median due to special gain contribution.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -2.3% | 13.2% (2.5%–28.5%) | -15.4pt |
Revenue growth lags the industry median by 15.4pt, with Overseas slowdown a major factor behind weaker growth.
※Source: Company compilation
Improving core earnings power is urgent. To escape an Operating Margin of 3.2% (3.6pt below industry median 6.8%), recovery in Gross Margin and rebuilding Overseas margins are key. The depreciation method change is a short-term profit boost, but sustainable profitability requires price pass-through, reduction of quality costs (cutting warranty ratio of 5.7%), and product mix improvements. Without reversal of Overseas Revenue −11.6%, achieving full-year targets will be difficult; H2 recovery in Overseas demand is a key watchpoint.
There is significant room to improve working capital efficiency. Compressing DSO 291 days and DIO 315 days would directly improve Total Asset Turnover 0.221 and ROIC 1.0%. Inventory reduction and stronger collections would enhance Operating Cash Flow, and combined with further reduction of Investment Securities ¥402.4B, capital efficiency could converge toward peer levels. Easing the cash outflow pressure from the −21.2% decline in Accounts Payable would also stabilize cash generation.
The large increase in Net Income is dependent on a ¥44.3B gain on sale of investment securities; Q1 progress of 51.9% against full-year Net Income forecast ¥86.0B lacks sustainability. The dividend forecast ¥47 (payout ratio 25%) is conservative and sustainable, but evaluation of dividend funding should focus on Operating Cash Flow and normalization of working capital. Financial safety is high (Equity Ratio 63.5%, Debt/Capital 4.5%), providing capacity to maintain dividends in a downturn, but improving core earnings would raise the quality of shareholder returns.
This report is an earnings analysis document automatically generated by AI analyzing XBRL financial statement data. It does not recommend investment in any specific securities. Industry benchmarks are reference information compiled by our firm based on public financial statements. Investment decisions are your own responsibility; consult professionals as needed before acting.