| Indicator | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥2096.6B | ¥2281.4B | -8.1% |
| Operating Income | ¥146.5B | ¥118.6B | +23.5% |
| Profit Before Tax | ¥152.7B | ¥108.3B | +41.0% |
| Net Income | ¥124.2B | ¥115.6B | +7.4% |
| ROE | 15.0% | 17.6% | - |
For the fiscal year ended March 2026, Revenue was ¥2,096.6B (YoY -¥184.9B -8.1%), Operating Income was ¥146.5B (YoY +¥27.9B +23.5%), Ordinary Income was ¥78.9B (YoY +¥21.2B +36.8%), and Net Income attributable to owners of the parent was ¥109.7B (YoY +¥2.5B +2.3%). Despite the revenue decline, the operating margin improved by 1.8pt to 7.0% (prior year 5.2%). Gross margin improved to 15.6% (prior year 13.9%) and SG&A ratio was 7.8% (prior year 7.6%), indicating progress in earnings-structure optimization. Operating Cash Flow (OCF) was ¥286.0B (YoY +35.7%)—2.3x net income—Free Cash Flow (FCF) was ¥47.5B, comfortably covering dividend payments of ¥19.4B. By region, North America accounted for 53.7% of revenue, while high margins in Japan (Operating Income margin 11.0%) and Asia (11.7%) drove consolidated profit growth. On the balance sheet, tangible fixed assets expanded to ¥886.6B (+29.2%), and long-term borrowings increased to ¥437.5B (+80.7%), indicating simultaneous debt duration extension and accelerated growth investment. Equity Ratio was 38.7% and ROE 15.3%, showing solid capital efficiency, but elevated Debt/EBITDA and inventory days of 64 remain structural monitoring points.
[Revenue] Revenue declined to ¥2,096.6B (YoY -8.1%). By region, North America ¥1,125.8B (-2.5%) accounted for 53.7% of revenue as the largest market, while China ¥324.3B (-15.9%), Asia ¥183.3B (-28.7%), and Japan ¥463.2B (-4.4%) also experienced declines. The sharp drops in China and Asia are likely due to an adjustment phase in auto demand and variability in customer production schedules. Inter-segment internal sales increased to ¥182.4B (prior year ¥99.4B), suggesting expanded parts supply from Japan to other regions. External revenue composition by region was North America 53.7%, Japan 22.1%, China 15.5%, Asia 8.7%, indicating continued high reliance on North America.
[Profit & Loss] Operating Income rose significantly to ¥146.5B (+23.5%), improving the operating margin to 7.0% (prior year 5.2%) by 1.8pt. Cost of sales decreased by ¥227.6B to ¥1,768.7B (-11.4%), outpacing revenue decline, raising gross margin to 15.6% (prior year 13.9%) (+1.7pt). SG&A was ¥163.5B (-¥9.9B -5.7%), reflecting efficiency improvements; SG&A ratio edged up slightly to 7.8% (prior year 7.6%). Other income was ¥13.8B (prior year ¥11.0B) and other expenses were ¥31.6B (prior year ¥36.0B), a net other loss of -¥17.8B, slightly improved. Non-operating items included financial income ¥12.4B (prior year ¥6.1B) and financial expenses ¥17.0B (prior year ¥22.0B), net financial result -¥4.6B, a substantial improvement from -¥15.9B prior year. Equity-method investment income was ¥10.7B (prior year ¥5.5B), roughly double, contributing to Ordinary Income of ¥78.9B (+36.8%). Profit Before Tax was ¥152.7B (+41.0%); after deducting income taxes of ¥28.5B (prior year tax refund -¥7.3B), Net Income was ¥124.2B (+7.4%), and Net Income attributable to owners of the parent was ¥109.7B (+2.3%). Non-controlling interests were ¥14.4B (prior year ¥8.3B), reflecting improved subsidiary performance. In summary, despite revenue decline, substantial improvements in gross margin and operating margin, coupled with reduced financial expenses and expanded equity-method gains, resulted in a decline-in-revenue/increase-in-profit outcome.
North America reported Revenue ¥1,125.8B (-2.5%), Operating Income ¥58.6B (+33.4%), and Operating Income margin 5.2% (prior year 3.8%), showing revenue decline but profit increase, with cost improvements boosting margin by 1.4pt. Asia reported Revenue ¥183.3B (-28.7%), Operating Income ¥21.4B (+2127.1%), and Operating Income margin 11.7% (prior year 0.4%), a substantial profitability improvement. The shift from a prior-year low margin (0.4%) to 11.7% likely reflects the deconsolidation from the sale of H-ONE India PVT. Ltd. shares and profitability improvements in remaining operations. Japan reported Revenue ¥463.2B (-4.4%), Operating Income ¥50.7B (+78.7%), and Operating Income margin 11.0% (prior year 4.9%), with expanded internal supply and manufacturing efficiency contributing. China reported Revenue ¥324.3B (-15.9%), Operating Income ¥31.4B (+33.6%), and Operating Income margin 9.7% (prior year 6.0%), covering revenue declines with margin improvements. Aggregate segment profit was ¥162.2B (prior year ¥96.8B) versus consolidated Operating Income ¥146.5B; adjustment amount -¥15.7B (prior year +¥21.8B) reflects elimination of internal transactions and allocation changes in corporate overhead. All regions improved operating margins, confirming cost optimization across the production network and strengthened margin management.
[Profitability] Operating margin of 7.0% (prior year 5.2%) improved by 1.8pt; gross margin 15.6% (prior year 13.9%) improved by 1.7pt. ROE 15.3% (prior year 18.0%) declined YoY due to reduced leverage and net margin variability but remains above industry levels over multiple prior periods. Net margin 5.9% (prior year 5.1%) improved by 0.8pt, aided by improvements in non-operating items. [Cash Quality] OCF ¥286.0B is 2.3x Net Income ¥124.2B, indicating excellent cash conversion. OCF subtotal ¥304.5B (Tax-before profit ¥152.7B ≈ 2x) reflects depreciation ¥97.8B, impairment losses ¥13.1B, and working capital improvements. In working capital, trade receivables decreased by ¥82.3B, inventories increased by ¥23.1B, and trade payables increased by ¥0.1B, with improved receivables collection boosting cash flow. Inventory days are about 64 days (Inventories ¥312.3B ÷ COGS ¥1,768.7B × 365), up from about 49 days, showing some inventory efficiency loosening. [Investment Efficiency] Total asset turnover was 1.02x (Revenue ¥2,096.6B ÷ Total Assets ¥2,054.1B), down from 1.28x, with increased tangible fixed assets and lower revenue pressuring efficiency. Capital expenditures were ¥259.2B, 2.65x depreciation ¥97.8B, indicating a growth-investment phase. FCF was ¥47.5B (OCF ¥286.0B − Investing CF ¥238.5B) positive, covering dividend payments ¥19.4B by 2.5x. [Financial Soundness] Equity Ratio 38.7% (prior year 35.8%) improved ~3pt; Net Assets ¥829.2B (prior year ¥655.4B) rose 26.5% due to retained earnings and expanded comprehensive income. Interest-bearing debt totaled ¥673.8B (Short-term borrowings ¥236.3B + Long-term borrowings ¥437.5B), up from ¥653.4B, while Debt/Equity ratio improved to 0.81x (prior year 1.00x) but the capital structure remains leverage-oriented. Current ratio 130% (Current assets ¥888.4B ÷ Current liabilities ¥681.3B) is at a healthy level, but quick ratio excluding inventories is about 85%, showing relatively high inventory dependence. Cash and cash equivalents ¥223.4B equal roughly 1.3 months of monthly sales, indicating sufficient short-term liquidity.
OCF was ¥286.0B (YoY +¥64.9B +29.4%), substantially increased to 2.3x Net Income ¥124.2B. OCF subtotal ¥304.5B (prior year ¥235.4B) is derived from Profit Before Tax ¥152.7B plus non-cash expenses including depreciation ¥97.8B and impairment losses ¥13.1B, less equity-method investment income ¥10.7B. Working capital improvements were notable, with trade receivables decreasing ¥82.3B (prior year decrease ¥18.5B) as the largest positive contributor. Inventories increased ¥23.1B (prior year decrease ¥3.4B) and trade payables increased ¥0.1B (prior year decrease ¥20.2B), so increased inventory partially pressured CF efficiency but receivables collection more than offset it. Interest received ¥2.1B, dividends received ¥7.3B, interest paid -¥16.0B, and income taxes paid -¥11.9B resulted in OCF ¥286.0B. Investing CF was -¥238.5B (prior year -¥131.5B), driven by capital expenditures -¥259.2B (prior year -¥161.8B), partially offset by proceeds from sales of tangible fixed assets ¥20.4B (prior year ¥3.2B) and proceeds from changes in consolidation scope (prior year ¥29.3B, none this period). FCF remained positive at ¥47.5B (OCF ¥286.0B − Investing CF ¥238.5B), adequately covering dividend payments ¥19.4B. Financing CF was -¥48.5B (prior year -¥73.4B), mainly reflecting net decrease in short-term borrowings -¥196.2B, proceeds from long-term borrowings ¥342.4B, repayments of long-term borrowings -¥168.1B, and dividend payments -¥19.4B. Including foreign exchange translation effects +¥31.3B, cash and cash equivalents increased by ¥30.3B to an ending balance of ¥223.4B. Overall, expanded OCF alongside large-scale capital expenditure and lengthening of debt maturity stabilized the financial base; cash generation is solid, but inventory efficiency improvement and earlier recovery of invested capital are the next focuses.
Of Net Income ¥124.2B, Operating Income ¥146.5B is the source of recurring business profit; the ¥67.6B gap to Ordinary Income ¥78.9B reflects non-operating items. Financial income ¥12.4B and equity-method income ¥10.7B have some recurring nature, while financial expenses ¥17.0B depend on interest-bearing debt levels and vary with leverage changes. Other income ¥13.8B and other expenses ¥31.6B include FX gains/losses and gains/losses on fixed asset disposals, some of which are one-off. Impairment losses ¥13.1B (Japan ¥8.7B, North America ¥4.4B) are special items and are deducted from operating income. Profit Before Tax ¥152.7B and income taxes ¥28.5B (effective tax rate 18.7%) normalized from the prior year's tax refund -¥7.3B. Comprehensive income ¥192.8B (owners of the parent ¥172.6B) significantly exceeded Net Income ¥124.2B due to other comprehensive income of ¥68.6B. Breakdown: translation differences on foreign operations ¥48.3B, remeasurements of defined benefit plans ¥13.7B, fair value measurement of capital financial instruments -¥1.1B, and equity-method other comprehensive income ¥7.7B—FX effects were the largest upside contributor. OCF ¥286.0B is 2.3x Net Income ¥124.2B, indicating very strong cash backing of profits. Accrual (Net Income − OCF) was -¥161.8B, largely reflecting non-cash items depreciation ¥97.8B and working capital improvement ¥82.3B, which supported cash generation beyond accounting profit. Overall, recurring operating income and strong OCF underpin earnings quality; the expansion in comprehensive income was mainly driven by FX valuation gains, while core sustainable earnings strength is evident at operating and ordinary levels.
Full year guidance forecasts Revenue ¥2,300.0B (vs. current period +9.7%), Operating Income ¥160.0B (+9.2%), and Net Income attributable to owners of the parent ¥110.0B (+0.3%), EPS ¥390.80, and dividend ¥35. Compared with current-period results, revenue recovery and continued cost improvements are assumed to drive operating income growth. The forecasted smaller increase in Net Income relative to Operating Income likely incorporates higher financial expenses or normalized tax rates. The Revenue target ¥2,300.0B assumes a reversal from this period's -8.1% decline, expecting regional demand recovery and contributions from new orders. Operating Income target ¥160.0B (operating margin about 7.0%) assumes maintaining the current profit margin level, with cost improvements taking hold and volume effects materializing. The current period progress toward operating income is 91.6% (¥146.5B ÷ ¥160.0B), indicating high probability of achieving the full-year target. Progress toward the Net Income target is 99.7% (¥109.7B ÷ ¥110.0B), nearly achieved, limiting residual period risk. The dividend forecast ¥35 per share is reduced from the current period ¥64, which consisted of Q2 ¥32 + Year-end ¥32 = ¥64, implying a reorganization of the full-year dividend policy. Forecast payout ratio is about 9.0% (¥35 ÷ ¥390.80) on a forecast basis—conservative—reflecting continued large-scale capital expenditure and prioritization of leverage management in capital allocation.
The current period dividend was ¥64 per share (Q2 ¥32 + Year-end ¥32), a substantial increase from ¥13 in the prior year. Total dividend payments were ¥19.4B (cash flow statement basis), and the payout ratio relative to Net Income attributable to owners of the parent ¥109.7B is about 17.7% (cash dividend ¥19.4B ÷ Net Income ¥109.7B), a conservative level. Dividend payments of ¥19.4B are covered 2.5x by FCF ¥47.5B, meaning dividends are sufficiently funded internally. There were no share buybacks; dividends are the primary form of shareholder return. Next-period dividend guidance is ¥35, reduced from current-period ¥64, likely reflecting a reorganization or normalization of the dividend policy on a full-year basis. The reduction in payout ratio reflects continued capital expenditures ¥259.2B (2.65x depreciation) and prioritization of leverage management (Debt/Equity 0.81x) in capital allocation. With cash balance ¥223.4B and stable OCF ¥286.0B generation, dividend sustainability is supported, but future dividend increases will depend on progress in recovering invested capital and improving leverage ratios. There is no explicit Total Return Ratio disclosed; as no buybacks were executed, the payout ratio effectively equals the Total Return Ratio at present.
Regional concentration and demand variability risk: North America accounts for 53.7% of revenue, and performance is linked to variability in automotive OEM production plans. This period saw revenue declines across all regions (North America -2.5%, China -15.9%, Asia -28.7%, Japan -4.4%). While regional diversification has progressed, North America reliance remains high. Cyclical adjustments in auto demand and model-change waves related to electrification pose risks to revenue volatility.
Leverage and pressure on financial expenses: Interest-bearing debt is ¥673.8B with Debt/Equity 0.81x, indicating a leveraged capital structure; financial expenses ¥17.0B represent 11.6% of Operating Income ¥146.5B. Long-term borrowings increased to ¥437.5B (+80.7%), extending debt maturities, but in a rising-rate environment interest burdens could increase and compress margins. A persistently high Debt/EBITDA ratio could affect ratings and covenant headroom.
Inventory buildup and deterioration in capital efficiency: Inventories ¥312.3B and inventory days about 64 days, up from about 49 days, indicate loosened inventory efficiency. In demand volatility, this could lead to production reductions or discount pressure, and higher working capital suppresses CF generation. Total asset turnover 1.02x (prior year 1.28x) declined due to increased tangible fixed assets and lower revenue; early recovery of invested capital and inventory optimization are keys to improving capital efficiency.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| ROE | 15.3% | 6.3% (3.2%–9.9%) | +9.0pt |
| Operating Margin | 7.0% | 7.8% (4.6%–12.3%) | -0.8pt |
| Net Margin | 5.9% | 5.2% (2.3%–8.2%) | +0.7pt |
ROE exceeds the industry median by 9.0pt, indicating top-tier capital efficiency. Operating margin is 0.8pt below the median, but net margin exceeds the median due to improvements in non-operating items lifting bottom-line profitability.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -8.1% | 3.7% (-0.4%–9.3%) | -11.8pt |
Revenue growth underperforms the industry median by 11.8pt, reflecting a demand-adjustment phase. If next-period forecast +9.7% is realized, a return toward industry-average levels is expected.
※ Source: Company compilation
Operating income increase and margin improvement amid revenue decline: Despite headwinds of -8.1% in revenue, Operating Income rose +23.5% and operating margin improved to 7.0% (+1.8pt). Gross margin improvement to 15.6% (+1.7pt) and segment-level margin strengthening (Japan 11.0%, Asia 11.7%) drove profitability, indicating the effects of cost optimization and production-network restructuring are taking hold. The next fiscal year guidance assumes revenue recovery +9.7% and Operating Income ¥160.0B (+9.2%), indicating margin maintenance.
Strong OCF and FCF generation: OCF ¥286.0B is 2.3x net income and FCF ¥47.5B covers dividends ¥19.4B by 2.5x, demonstrating excellent cash conversion. Despite active capex ¥259.2B (2.65x depreciation), FCF remained positive, confirming capacity to balance growth investment and shareholder returns. Inventory days of 64 (up from 49) indicate that improving inventory efficiency is key for the next stage of CF efficiency improvement.
Extended leverage and monitoring capital efficiency: Long-term borrowings increased to ¥437.5B (+80.7%), extending debt maturities, and interest-bearing debt totaled ¥673.8B with Debt/Equity 0.81x, reflecting a leveraged capital structure. Financial expenses ¥17.0B represent 11.6% of Operating Income, posing a risk to margins in a rising-rate environment. Total asset turnover 1.02x (prior year 1.28x) declined, underscoring the importance of early recovery of invested capital and inventory optimization to improve capital efficiency and reduce leverage.
This report is an AI-generated financial analysis document produced by analyzing XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company from public financial statements. Investment decisions are your responsibility; consult a professional advisor as needed.