TAKUMA CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

For Q1 of the fiscal year ending March 2027, Takuma posted substantial increases in both revenue and profit, driven by the simultaneous expansion and improved profitability of its core Domestic Environment & Energy Business. Revenue was ¥404.5B (+32.9% YoY), Operating Income was ¥32.8B (+223.4%), Ordinary Income was ¥37.0B (+175.8%), and Net Income attributable to owners of the parent was ¥26.3B (¥10.7B in the previous year, +146.0% YoY). Gross profit margin improved to 22.2% (21.5% in the previous year), while Operating Income margin improved to 8.1% (3.3% in the previous year). Strong operating leverage emerged as SG&A expense growth was contained at approximately +3.3% relative to revenue growth. The primary driver of revenue growth was progress in fulfilling orders in the Domestic Environment & Energy Business. Progress against the full-year plan was 21.2% for revenue and 18.4% for Operating Income, slightly below the standard Q1 level of 25%.

Factors Affecting Financial Performance

【Revenue】Revenue was ¥404.5B, representing a +32.9% increase YoY. By segment, the Domestic Environment & Energy Business led overall performance with revenue of ¥336.0B (83.1% of total revenue, +44.5% YoY), while Package Boilers remained solid at ¥50.7B (+5.5%). Facilities & Systems contracted to ¥13.2B (-13.9%), and the Overseas Environment & Energy Business declined to ¥5.5B (-40.9%), resulting in a further increase in dependence on the domestic business.

【Profit and Loss】Operating Income was ¥32.8B (+223.4% YoY), and Ordinary Income was ¥37.0B (+175.8%). Segment profit in the Domestic Environment & Energy Business expanded sharply to ¥39.5B (+115.3%, 11.7% margin), becoming the effective source of company-wide profit growth. In contrast, the Overseas Environment & Energy Business continued to report an operating loss of ¥0.7B (-12.5% margin), weighing on the business mix. The gap between Ordinary Income and Net Income (¥26.3B attributable to owners of the parent) was attributable to the ¥13.3B income tax burden, while a ¥2.7B gain on the sale of investment securities was recorded as extraordinary income as a temporary factor. The distinguishing feature was that revenue and profit both increased, with the domestic business expanding in scale while simultaneously improving profitability.

Segment Analysis

The Domestic Environment & Energy Business generated revenue of ¥336.0B (83.1% of total revenue, +44.5% YoY) and segment profit of ¥39.5B (+115.3%), with a margin of 11.7%. Both profitability and scale improved markedly from the previous year, making this segment the center of company-wide profit growth. Package Boilers recorded revenue of ¥50.7B (+5.5%) and profit of ¥1.4B (+230.2%), with its profit margin improving to 2.7% and its profit surplus expanding despite its small scale. Facilities & Systems contracted to revenue of ¥13.2B (-13.9%) but maintained a profit margin of 6.5%, preserving a certain level of profitability. The Overseas Environment & Energy Business continued to report a loss, with revenue of ¥5.5B (-40.9%) and a segment loss of ¥0.7B (-12.5% margin), creating a clear contrast with the highly profitable domestic business. Against company-wide Operating Income of ¥32.8B, the adjustment for company-wide expenses and other items was negative ¥8.2B.

Key Financial Indicators

【Profitability】Operating Income margin was 8.1%, an improvement of +478bp from 3.3% in the previous year. Ordinary Income margin was 9.1% (4.4% in the previous year), and Net Income margin (on an attributable-to-owners-of-the-parent basis) was 6.5% (3.5% in the previous year), with both improving substantially. ROE was 2.4%, primarily due to the improvement in Net Income margin, while total asset turnover of 0.225 and financial leverage of approximately 1.6x remained at relatively low but stable levels. 【Cash Flow Quality】Extraordinary income of ¥2.7B (gain on the sale of investment securities) and dividend income of ¥4.5B contributed to profit, but the proportion of temporary items in Net Income was limited, with the primary source of profit being the improvement in Operating Income. 【Investment Efficiency】Investment and other assets, including investment securities of ¥258.9B, are substantial and generate a stable source of financial income through dividend receipts. Meanwhile, intangible assets represented just 1.2% of total assets, limiting impairment risk. 【Financial Soundness】The Equity Ratio improved to 61.9% (59.1% in the previous year), while cash and deposits increased 37.9% YoY to ¥555.9B. Interest-bearing debt was extremely small, and the current ratio was approximately 216%, indicating ample liquidity. However, a substantial decrease in accounts receivable occurred simultaneously with an increase in inventories, requiring attention to changes in the composition of working capital.

Cash Flow Analysis

Although a separate cash flow statement has not been disclosed, the accumulation of funds can be confirmed from changes in the balance sheet. Cash and deposits increased by ¥152.7B (+37.9%) from the end of the previous fiscal year to ¥555.9B, while accounts receivable and notes receivable decreased by ¥338.2B from the end of the previous fiscal year to ¥490.3B. Progress in the inspection and collection of projects appears to have contributed to cash generation. On the other hand, inventories increased by ¥28.0B to ¥98.7B, partially offsetting this factor through the accumulation of work-in-progress and materials associated with project execution. Contract liabilities (advance payments) remained at a substantial level of ¥156.2B, with the advance-payment structure characteristic of long-term projects contributing to working capital stability. Short-term borrowings decreased substantially by ¥6.2B from the end of the previous fiscal year, indicating lower reliance on borrowings alongside improved cash liquidity.

Quality of Earnings

The main source of profit was the improvement in Operating Income, and the impact of temporary items was limited. Although a ¥2.7B gain on the sale of investment securities was recorded as extraordinary income, its contribution to Net Income (¥26.3B attributable to owners of the parent) was limited to approximately 10%. The primary component of non-operating income of ¥5.2B was dividend income of ¥4.5B, which reinforces earnings stability as a recurring income source from investment securities of ¥258.9B. The difference between Ordinary Income of ¥37.0B and Net Income of ¥26.3B was primarily attributable to the ¥13.3B income tax burden and does not indicate a structural profitability issue. From an accrual perspective, accounts receivable declined substantially while inventories increased simultaneously. Attention is warranted because fluctuations in working capital according to the progress stage of long-term projects may create timing differences between profit recognition and cash generation.

Earnings Forecast and Guidance

Against the full-year earnings forecast (Revenue of ¥1910.0B, Operating Income of ¥178.0B, Ordinary Income of ¥185.0B, and EPS of ¥215.00), progress in Q1 was 21.2% for revenue, 18.4% for Operating Income, and 20.0% for Ordinary Income. All were below the standard Q1 progress benchmark of 25%, with Operating Income progress particularly low in relative terms. Given the business characteristics, which include many long-term EPC projects, this appears to reflect seasonality whereby inspections and revenue recognition tend to be concentrated in the second half of the fiscal year. Contract liabilities of ¥156.2B, equivalent to approximately 8.2% of forecast revenue, remained at a level capable of supporting revenue recognition from the second half onward. As of Q1, no revisions had been made to the earnings or dividend forecasts.

Shareholder Returns

The full-year dividend forecast is ¥108.00 per share, implying a Payout Ratio of approximately 50.2% against forecast EPS of ¥215.00. As of Q1, no revision had been made to the dividend forecast. Based on approximately 72,393 thousand shares, calculated by deducting treasury shares of 3,296 thousand shares from issued shares of 75,689 thousand shares, total annual dividends are estimated at approximately ¥7.8B, a level that can be comfortably funded by cash and deposits of ¥555.9B. Given the financial structure of extremely low interest-bearing debt and minimal interest expense, stability is evident in terms of securing the source of dividend payments.

Risk Factors

1. Segment concentration risk: The Domestic Environment & Energy Business accounts for 83.1% of total revenue, creating a structure in which the progress and profitability fluctuations of individual projects in this business have a significant impact on company-wide performance.

2. Overseas business profitability: The Overseas Environment & Energy Business continues to operate at a loss, with revenue of ¥5.5B (-40.9% YoY) and a segment loss of ¥0.7B (-12.5% margin), constituting a factor that depresses the company-wide profit mix.

3. Working capital fluctuations: While accounts receivable decreased by ¥338.2B from the end of the previous fiscal year, inventories increased by ¥28.0B. Changes in the asset composition associated with the progress stages characteristic of long-term projects may cause volatility in the timing of cash generation.

Industry Benchmark (Reference; Compiled by the Company)

Profitability and Returns

Both the Operating Income margin and Net Income margin were slightly below the industry median, but both remained within the IQR.

Growth and Capital Efficiency

Revenue growth was substantially above both the industry median and the upper bound of the IQR, representing outstanding growth within the industry.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. The Domestic Environment & Energy Business expanded in terms of both revenue and profit margin. The improvement to a gross profit margin of 22.2% and an Operating Income margin of 8.1%, together with a decline in the SG&A ratio (-402bp YoY equivalent), indicates the emergence of operating leverage.

2. Full-year progress was below the standard benchmark of 25%, at 21.2% for revenue and 18.4% for Operating Income. The level of contract liabilities of ¥156.2B suggests a revenue recognition structure weighted toward the second half. Trends in quarterly progress will be a key point to monitor going forward.

3. The continued loss in the Overseas Environment & Energy Business (segment loss of ¥0.7B), together with working capital fluctuations reflected in changes in accounts receivable and inventories, should be monitored as factors inherent in the business structure.

Theoretical Share Price (Reference Value)

This is a reference range mechanically calculated solely from publicly available data using a residual income model (Ohlson-type model with an explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥1,719–¥1,818 at Cost of Equity ±1%, and ¥1,762–¥1,775 at ω±0.1.

Notes:

• Net assets as of the end of the quarter are used (there is a time lag relative to the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model / Interest rate reference month: 2026-07 / This value does not predict or guarantee the future share price)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own responsibility, after consulting with professionals as necessary.

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