TSUGAMI (6101) FY2026 FY Earnings Report

Quick View

Executive Summary

For the fiscal year ended March 2026, Tsugami reported higher revenue and earnings, accompanied by a significant improvement in profit margins, driven by expanding machine-tool demand centered on China. Revenue was ¥1291.4B (+20.2% year on year), Operating Income was ¥361.0B (+54.9%), Profit Before Tax was ¥356.2B (+50.2%), and profit attributable to owners of the parent was ¥167.5B (+53.6%). The most notable feature was strong operating leverage, resulting from improved gross margins and the containment of SG&A expenses, with the Operating Income growth rate of 54.9% substantially exceeding the 20.2% revenue growth rate.

Factors Affecting Performance

【Revenue】Revenue was ¥1291.4B, up +20.2% year on year. By region, China generated ¥1034.8B (+27.9%), accounting for 80.8% of consolidated revenue and serving as the core driver of growth. India achieved high growth of ¥68.2B (+46.0%), although its composition ratio remained limited at 5.3%. Meanwhile, Japan recorded ¥164.4B (-17.6%) and South Korea ¥12.9B (-18.0%), both representing declines in revenue.

【Profit and Loss】Operating Income was ¥361.0B (+54.9%), and the Operating Income margin improved to 28.0% from 21.7% in the previous year, a 6.3pt improvement. The gross margin rose to 37.1% from 33.8%, while SG&A expenses decreased to ¥139.8B (-2.3%), resulting in a decline in the SG&A ratio to 10.8% from 13.3%. By segment, China was the largest contributor to earnings growth, with segment profit of ¥311.6B (+39.2%, 30.1% margin), while Japan also achieved a significant improvement in profitability despite lower revenue, recording ¥23.3B (+934.7%). Profit Before Tax growth (+50.2%) was slightly below Operating Income growth due to the increase in financial expenses to ¥10.6B from ¥3.4B in the previous year; however, the trend of higher revenue and earnings is clear.

Segment Analysis

The China segment is the core business driving consolidated performance, with external revenue of ¥1034.8B (+27.9% year on year), segment profit of ¥311.6B (+39.2%), and a 30.1% profit margin. Japan recorded lower revenue of ¥164.4B (-17.6%), but segment profit improved substantially to ¥23.3B (+934.7%, 14.2% margin). India achieved high growth, with revenue of ¥68.2B (+46.0%) and segment profit of ¥3.5B (+211.9%, 5.1% margin), although its profit margin was below those of China and Japan. South Korea recorded revenue of ¥12.9B (-18.0%), with segment profit approximately breakeven. The gap in profit margins between China and India (30.1% versus 5.1%) reflects regional differences in product mix, capacity utilization, and cost structures.

Key Financial Metrics

【Profitability】The Operating Income margin improved by 6.3pt to 28.0% from 21.7% in the previous year, supported by both the increase in gross margin to 37.1% from 33.8% and the decline in the SG&A ratio to 10.8% from 13.3%. The Net Income margin was 18.8% based on consolidated profit for the period.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥286.0B, equivalent to 1.18 times consolidated profit for the period of ¥243.2B and 1.71 times profit attributable to owners of the parent of ¥167.5B, indicating strong cash conversion of accounting earnings. However, the increase in OCF was supported by a ¥21.7B decrease in inventories, a ¥20.8B increase in contract liabilities, and ¥19.5B in subsidies received; attention is therefore required regarding the sustainability of these temporary factors.【Investment Efficiency】ROE rose by 5.2pt to 23.4% from 18.2% in the previous year, while EPS increased significantly to ¥361.20 (+56.0%).【Financial Soundness】The Equity Ratio was 52.0%. Against cash and cash equivalents of ¥421.8B, short-term borrowings were only ¥90.1B, resulting in net cash of ¥331.7B.

Cash Flow Analysis

Operating Cash Flow (OCF) was ¥286.0B, a substantial increase from ¥88.6B in the previous year. In addition to the increase in Profit Before Tax, the decrease in inventories of ¥21.7B, increase in contract liabilities of ¥20.8B, and ¥19.5B in subsidies received contributed to the improvement. Meanwhile, trade receivables represented a ¥42.2B cash outflow factor as revenue expanded, confirming an increase in funds tied up in collections during the growth phase. Investing CF was -¥20.8B, primarily reflecting capital expenditures of ¥24.4B, and Free CF improved significantly to ¥265.2B from the previous year. Financing CF was -¥159.3B, with major outflows including ¥20.1B in share repurchases, ¥54.5B for the acquisition of subsidiary interests from non-controlling interests, and ¥32.1B in dividend payments (¥57.8B in total, including the portion attributable to non-controlling shareholders). As a result, cash and cash equivalents increased by ¥144.5B from ¥277.3B at the end of the previous fiscal year to ¥421.8B, substantially strengthening liquidity on hand.

Earnings Quality

Current-period Operating Income included a net amount of other income and expenses of ¥21.1B, compared with ¥12.6B in the previous year, with other income consisting primarily of subsidies received and related items. Financial expenses increased to ¥10.6B from ¥3.4B in the previous year, resulting in net financial expenses of ¥4.9B; however, the impact on Profit Before Tax was limited. Although OCF was 1.18 times consolidated profit for the period, indicating strong cash conversion, part of the increase was attributable to temporary working-capital movements, such as the decline in inventories and increase in contract liabilities. Sustainability from the following fiscal year onward therefore requires close monitoring. Comprehensive income was ¥350.0B, substantially exceeding consolidated profit for the period of ¥243.2B, with most of the difference attributable to foreign currency translation adjustments for foreign operations of ¥97.5B. Given the high proportion of overseas operations, this gap reflects the impact of foreign exchange movements on equity and should be evaluated separately from the earning power of the core business.

Earnings Forecasts and Guidance

The company’s forecast for the next fiscal year is revenue of ¥1450.0B (+12.3% versus the current period), Operating Income of ¥365.0B (+1.1%), and EPS of ¥370.28 (forecast profit attributable to owners of the parent of ¥170.0B, +1.5%). The forecast Operating Income margin is 25.2%, representing a planned decline of 2.8pt from 28.0% in the current period. This plan appears to incorporate normalization from the current period’s high level of profitability. The company plans to maintain revenue growth while limiting earnings growth, making the extent to which the rapid improvement in the current-period profit margin is structural or attributable to temporary demand factors the key focus in evaluating progress during the next fiscal year.

Shareholder Returns

The annual dividend was ¥85 per share, compared with ¥27 in the previous year, resulting in a Payout Ratio of 23.5% against EPS attributable to owners of the parent of ¥361.20. Including share repurchases of ¥20.1B, the Total Return Ratio was approximately 31.1%, calculated as total dividend payments of ¥32.1B plus share repurchases of ¥20.1B, divided by profit attributable to owners of the parent of ¥167.5B. Dividend payments were sufficiently covered by OCF of ¥286.0B and Free CF of ¥265.2B, indicating substantial capacity for shareholder returns. The dividend forecast for the next fiscal year is ¥98 per share, representing a planned increase of ¥13 from the current period.

Risk Factors

1. Concentration risk in the China business: The China segment accounts for 80.8% of revenue and segment profit of ¥311.6B. Changes in China’s capital investment trends, machine-tool demand, policies, and geopolitical factors are structured to directly affect consolidated performance.

2. Lengthening working-capital cycle: Trade receivables of ¥503.2B increased by +23.7% year on year, outpacing the 20.2% revenue growth rate and becoming a source of OCF outflows. Inventories were ¥327.2B, accounting for 21.2% of total assets, increasing the risk of valuation losses and discount sales if demand slows.

3. Impact of foreign exchange movements: Of other comprehensive income of ¥106.9B, foreign currency translation adjustments for foreign operations accounted for ¥97.5B. Given the high proportion of overseas assets, the yen-converted values of equity and cash balances are structurally susceptible to foreign exchange movements.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Return on Equity, Operating Income margin, and Net Income margin all substantially exceeded the industry median, placing profitability at a high level within the industry.

Growth and Capital Efficiency

The revenue growth rate also substantially exceeded the industry median, placing the company among the industry leaders in terms of growth.

Source: Compiled by the company

Key Points from the Earnings Results

1. The combination of a 28.0% Operating Income margin, ROE of 23.4%, and Debt/EBITDA of 0.24x represents a key feature of the current-period results: high profitability combined with low leverage, at levels substantially exceeding the industry median.

2. While high-margin growth in China is driving performance, the regional concentration in China, which accounts for 80.8% of consolidated revenue, is a structural feature that amplifies both returns and risks.

3. The forecast for the next fiscal year assumes continued revenue growth while lowering the Operating Income margin to 25.2%. The extent to which the current period’s high profitability can be sustained will be a key point to monitor in future earnings results. The pace of increases in trade receivables and inventories will also require close attention from a working-capital perspective.

Theoretical Share Price (Reference Value)

Sensitivity: ¥2,381–¥2,526 at ±1% in the Cost of Equity, and ¥2,433–¥2,482 at ±0.1 in ω.

Notes:

• Net Income is substantially compressed relative to Operating Income due to tax expenses, acquisition-related expenses, non-controlling interests, and other factors (Net Income ÷ Operating Income 47%). This value reflects that compression at face value; if these factors are temporary, the underlying earning power may be higher than this figure.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / This is a mechanically calculated value based solely on publicly disclosed data; it is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

---

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 discretion and responsibility, after consulting professionals as necessary.

---End of Report---