| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥582.8B | ¥575.6B | +1.2% |
| Operating Income / Operating Profit | ¥18.9B | ¥16.2B | +17.0% |
| Ordinary Income | ¥26.6B | ¥23.2B | +14.8% |
| Net Income / Net Profit | ¥17.7B | ¥22.2B | -20.1% |
| ROE | 2.7% | 3.3% | - |
For the fiscal year ending March 2026, Revenue was ¥582.8B (YoY +¥7.1B +1.2%), Operating Income was ¥18.9B (YoY +¥2.8B +17.0%), Ordinary Income was ¥26.6B (YoY +¥3.4B +14.8%), and Net Income attributable to owners of the parent was ¥13.3B (YoY -¥4.9B -26.8%). Core profitability secured operating-level profit improvement driven by gross margin improvement, but Net Income declined due to the absence of prior-year investment securities sale gains of ¥12.2B and the booking of impairment losses of ¥2.6B. Stable operations in the IH Business-related operations and margin recovery in the Products Business were the main drivers of operating profit growth, with the operating margin improving by +0.4pt to 3.2%.
[Revenue] Revenue of ¥582.8B (+1.2%) was only slightly up. By segment, IH Business-related operations declined to ¥196.0B (-6.2%), Products Business-related operations were essentially flat at ¥363.4B (-0.6%), and Others increased sharply to ¥24.3B (+1,596.5%). The sharp rise in Others was driven by contributions from two newly consolidated companies, while existing businesses were generally stagnant. Revenue composition was Products Business 62.4%, IH Business 33.6%, Others 4.2%, with the Products Business remaining the mainstay but the IH Business continuing to exhibit higher profitability.
[Profitability] Operating Income of ¥18.9B (+17.0%) increased materially relative to the +1.2% change in Revenue, with operating margin improving to 3.2% from 2.8% (+0.4pt). Gross profit was ¥112.1B (+8.3%), and gross margin was 19.2% (prior year 18.0%, +1.2pt), reflecting cost corrections and the effect of price pass-through. Selling, general and administrative expenses were ¥93.2B (+6.7%) but were more than offset by gross profit expansion, producing operating leverage. Goodwill amortization of ¥0.9B was newly incurred but had a minor impact. Ordinary Income of ¥26.6B (+14.8%) was supported by non-operating income of ¥9.9B (dividend income ¥2.0B, interest income ¥1.3B, equity-method investment income ¥2.1B, etc.). Meanwhile, special items: the prior-year gain on sale of investment securities of ¥12.2B lapsed, and the current period included impairment losses of ¥2.6B and loss on retirement of fixed assets of ¥0.8B, resulting in net special losses of ¥3.5B. Effective tax rate of 24.4% was standard, but after deducting Net Income attributable to non-controlling interests of ¥4.4B, Net Income attributable to owners of the parent declined to ¥13.3B (-26.8%). Excluding temporary items, core operating profitability steadily improved; although reported as revenue up and net profit down, the underlying structure is effectively revenue and profit growth.
Products Business-related operations: Revenue ¥363.4B (-0.6%), Operating Income ¥4.6B (+157.8%), margin 1.3%. Significant improvement from prior-year low profitability, but margin remains in the 1% range and the earnings base is fragile. IH Business-related operations: Revenue ¥196.0B (-6.2%), Operating Income ¥13.0B (-5.5%), margin 6.6%, maintaining high profitability. Operating Income declined due to lower revenue, but margin stayed in the 6% range, preserving its position as the group's profit pillar. Others: Revenue ¥24.3B (+1,596.5%), Operating Income ¥1.2B (+117.9%), margin 5.0%, with large contribution from newly consolidated companies. Segment assets: Products Business ¥338.6B, IH Business ¥275.0B, Others ¥65.5B; the increase in Others’ assets includes goodwill of ¥16.3B related to M&A.
[Profitability] Operating margin improved to 3.2% (prior year 2.8%, +0.4pt). Gross margin improved to 19.2% (prior year 18.0%, +1.2pt). SG&A ratio rose slightly to 16.0% (prior year 15.2%, +0.8pt), but gross margin improvement more than offset this. Net margin was 3.0%; excluding one-off items, operational profitability shows similar improvement trends. ROE was 2.7% (prior year 3.0%) and ROA was 2.0% (prior year 2.6%), both low. [Cash Quality] Operating Cash Flow (OCF) was ¥17.7B, exceeding Net Income of ¥13.3B (OCF/NI = 1.33x), with an accrual ratio of -0.5% which is favorable. However, OCF/EBITDA was low at 0.43x (OCF ¥17.7B / EBITDA ¥41.7B), primarily due to working capital deterioration. Days Sales Outstanding is long at 80 days (Accounts receivable ¥127.6B ÷ annualized daily sales ¥1.60B), with increases in receivables of -¥11.1B, decreases in payables of -¥4.6B, and decreases in advance receipts of -¥8.5B pressuring cash flow. [Investment Efficiency] Total asset turnover was 0.66x, inventory turnover 6.2x (Cost of Goods Sold ¥470.7B ÷ Inventory ¥76.0B), and fixed asset turnover 1.31x (Revenue ¥582.8B ÷ Fixed assets ¥443.9B). Capital expenditures were ¥39.9B, depreciation ¥22.8B, giving a CapEx/Depreciation ratio of 1.75x, indicating an expansionary investment cycle. [Financial Soundness] Equity Ratio was 74.2% (prior year 79.2%)—still high but down due to increased interest-bearing debt. Current ratio 335% and quick ratio 322% are extremely healthy. Interest-bearing debt total ¥116.2B (short-term borrowings ¥37.99B, long-term borrowings ¥78.19B) versus cash and deposits ¥171.5B, producing a net cash position. Debt/EBITDA rose to 2.79x (interest-bearing debt ¥116.2B / EBITDA ¥41.7B) but interest coverage remains comfortable at 16.45x (EBIT ¥18.9B / interest expense ¥1.15B).
Operating Cash Flow was ¥17.7B (prior year ¥41.1B, -56.8%)—a sharp decline but still above Net Income ¥13.3B, maintaining an OCF/NI ratio of 1.33x. Depreciation ¥22.8B, goodwill amortization ¥0.9B, and impairment losses ¥2.6B brought the operating cash subtotal to ¥22.0B, but working capital deterioration pressured OCF. Key drivers were increase in accounts receivable -¥11.1B, decrease in inventory +¥3.4B, decrease in accounts payable -¥4.6B, and decrease in advance receipts -¥8.5B, highlighting the need for receivables management and securing advance receipts. Investing Cash Flow was -¥52.4B (prior year -¥34.0B) with large outflows from CapEx -¥39.9B and acquisition of subsidiary shares -¥21.3B (for two newly consolidated companies). Proceeds from sale of investment securities ¥16.9B partially offset outflows, but Free Cash Flow turned negative to -¥34.6B (prior year +¥7.0B). Financing Cash Flow was -¥1.2B (prior year +¥17.1B): while funds were raised via long-term borrowings ¥50.0B and increased short-term borrowings ¥46.0B, repayments of long-term borrowings -¥12.7B, short-term borrowings repayments -¥39.7B, dividend payments -¥20.1B, and share buybacks -¥20.0B were executed. As a result, cash and cash equivalents decreased to ¥142.0B (prior year ¥175.8B), but including foreign exchange effects +¥2.1B, ending cash was ¥171.5B, remaining at a high level.
Recurring earnings are supported by gross profit of ¥112.1B plus stable non-operating income of ¥9.9B (equity-method investment income ¥2.1B, dividend income ¥2.0B, interest income ¥1.3B, etc.), with non-operating income to Revenue ratio at 1.7%, not overly dependent. One-off items included impairment losses ¥2.6B (impairment of fixed assets in Products Business) and loss on retirement of fixed assets ¥0.8B, offset by special gains ¥0.3B (gain on sale of fixed assets), resulting in a net negative impact of -¥3.2B. The prior-year special gain from sale of investment securities ¥12.2B is the main reason for the large decline in Net Income. Accrual quality is good with OCF/NI = 1.33x, but OCF/EBITDA = 0.43x (OCF ¥17.7B / EBITDA ¥41.7B) reflects working capital deterioration and indicates issues in cash conversion efficiency. Comprehensive income was ¥32.2B (attributable to owners of the parent ¥26.5B), far exceeding Net Income of ¥13.3B, with Other Comprehensive Income ¥14.5B (foreign currency translation adjustments ¥7.0B, valuation differences on available-for-sale securities ¥4.3B, retirement benefit adjustments ¥2.3B, etc.) contributing. Currency and equity price appreciation boosted equity, creating a structure where Other Comprehensive Income complements weak Net Income.
Full Year (FY) guidance: Revenue ¥640.0B (YoY +9.8%), Operating Income ¥21.0B (YoY +11.0%), Ordinary Income ¥25.0B (YoY -6.2%), Net Income attributable to owners of the parent ¥15.0B (YoY +12.9%), EPS ¥46.01, dividend ¥35 planned. Revenue growth is expected from full-year contribution of newly consolidated companies and price pass-through and utilization improvements in existing businesses. Operating Income aims to rise +11.0% supported by continued margin correction in the Products Business and maintained high margins in the IH Business. Ordinary Income is projected to decline -6.2% due to conservative estimates on financial results (including increased interest payments), but Net Income is expected to recover +12.9% as one-off losses like the current period impairment lapse. Progress rates are Revenue 91.1%, Operating Income 90.0%, Ordinary Income 106.4%, Net Income 88.6%; Ordinary Income has already exceeded plan, suggesting the guidance incorporates conservative assumptions for higher financial costs in H2. Planned dividend ¥35 (assumed interim and year-end ¥17.5 each) is half of the current period ¥71, but the current period’s high payout was an extraordinary level: with Net Income attributable to owners of the parent ¥13.3B, the payout ratio was 175%, an unusually high level. Next fiscal year normalization is expected to a payout ratio around 76% as profits recover. With cash and deposits ¥171.5B and Equity Ratio 74.2%, dividend continuity capability is sufficient, but note that Free Cash Flow -¥34.6B versus total shareholder returns ¥37.7B cannot be covered by internal cash generation; sustainable returns depend on investment cycle progression and improvement in working capital to restore Operating Cash Flow.
This fiscal period’s total dividend was interim ¥33 and year-end ¥38, totaling ¥71, and with shares outstanding of 32,805 thousand shares (effective 32,604 thousand shares excluding treasury stock), total dividends amounted to ¥2.32B (back-calculated from dividend payments in the cash flow statement ¥2.01B + dividends to non-controlling interests ¥0.40B). Assuming parent shareholders’ dividends of ¥1.77B (average shares outstanding during the period 33,427 thousand shares × ¥71), the payout ratio against Net Income attributable to owners of the parent ¥13.3B would be approximately 133%, substantially exceeding Net Income. Additionally, ¥2.00B of share buybacks were conducted, making total shareholder returns ¥3.77B and total return ratio 283%, extremely high. Dividend yield cannot be calculated due to lack of share price information, but DOE (dividends on equity) is approximately 3.0% (dividends ¥1.77B ÷ shareholders’ equity ¥58.22B) and remains low. Next fiscal year dividend forecast ¥35 is half of current ¥71, suggesting the high payout this year was temporary; normalization to a payout ratio around 76% (total dividends ~¥1.14B against Net Income ¥15.0B) is expected. Given cash and deposits ¥171.5B and Equity Ratio 74.2%, the financial base can sustain dividends, but that Free Cash Flow -¥34.6B cannot cover total returns ¥3.77B from internal generation is a point to note; sustained returns depend on recovery of Operating Cash Flow through investment cycle progression and working capital improvement.
Decline in cash generation due to working capital deterioration: Days Sales Outstanding at 80 days is long, and decrease in advance receipts -¥8.5B compounded the situation, with OCF/EBITDA at 0.43x. Operating Cash Flow has been pressured in an expansionary investment cycle, making strengthening receivables management and securing advance receipts urgent. Free Cash Flow -¥34.6B versus total shareholder returns ¥3.77B not covered by internal cash generation, and reliance on cash drawdown and increased borrowings to bridge the gap requires adjusting the pace of investment and returns.
Potential entrenchment of low profitability in the Products Business: Operating margin in Products Business remains 1.3%, improved from 0.5% prior year but still low. As the main business accounting for 62.4% of revenue, low profitability restrains group-level margin improvement. Inadequate pricing power against raw material price increases and demand volatility could delay margin correction, further depressing ROE and ROIC.
Rising leverage and interest burden: Debt/EBITDA rose to 2.79x (prior year 1.64x), with short-term borrowings +95.1% and long-term borrowings +61.3% indicating a rapid increase in interest-bearing debt. Interest expense rose to ¥1.15B (prior year ¥0.69B, +66.7%). Although interest coverage is comfortable at 16.45x, sensitivity to leverage has increased if EBITDA declines. In a rising interest rate environment, higher financial costs could compress Ordinary Income.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 3.2% | 7.8% (4.6%–12.3%) | -4.5pt |
| Net Margin | 3.0% | 5.2% (2.3%–8.2%) | -2.2pt |
Both operating and net margins are below industry medians, indicating relatively low profitability for a manufacturer. Improving low-margin structure in the Products Business is key to improving industry positioning.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 1.2% | 3.7% (-0.4%–9.3%) | -2.5pt |
Revenue growth lags the industry median, with stagnation in existing businesses notable. Accelerating organic growth excluding newly consolidated companies is a challenge.
※Source: Company compilation
Improvement trend in core earnings power continues: Gross margin +1.2pt and operating margin +0.4pt indicate steady improvement in core profitability, supported by margin correction in the Products Business and stable operations in the IH Business. The decrease in Net Income this period is mainly due to the prior-year gain on sale of investment securities ¥12.2B and the one-off impairment loss ¥2.6B; normalization of one-off items should lead to Net Income recovery next fiscal year. OCF/NI = 1.33x indicates good accrual quality and conversion of recurring profits to cash is secured.
Focus on working capital management and restoration of cash generation: OCF/EBITDA = 0.43x is low, with increases in accounts receivable -¥11.1B, decreases in advance receipts -¥8.5B, and decreases in accounts payable -¥4.6B as major drivers of OCF pressure. Days Sales Outstanding 80 days is long, and reinforcing collections and securing advance receipts are urgent. Investing Cash Flow -¥52.4B (CapEx ¥39.9B, M&A ¥21.3B) indicates an expansionary investment cycle, and Free Cash Flow -¥34.6B versus total returns ¥3.77B (dividends + share buybacks) cannot be covered by internal generation. Next fiscal year, normalization of working capital should help restore OCF, and stabilizing investment pace along with balanced shareholder returns will be key to sustainability.
Financial soundness is high but structural improvement in low ROE/ROIC is required: Equity Ratio 74.2%, cash ¥171.5B, Debt/EBITDA 2.79x indicate a still-strong financial base. However, ROE 2.7% and ROA 2.0% reflect low capital efficiency, and an operating margin of 3.2% makes it difficult to generate returns above cost of capital. Structural improvement requires raising Products Business margin (1.3% → >3%) and scaling the IH Business. M&A (two new companies) appears healthy in scale and valuation (goodwill ¥16.3B / net assets 2.5%), but realizing integration benefits and monitoring impairment risk are important.
This report is an AI-generated earnings analysis derived from XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on public financial statements. Investment decisions should be made at your own responsibility and, if necessary, after consulting a professional advisor.