| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1291.4B | ¥1074.1B | +20.2% |
| Operating Income / Operating Profit | ¥361.0B | ¥233.1B | +54.9% |
| Ordinary Income | ¥356.2B | ¥237.1B | +50.2% |
| Net Income | ¥243.2B | ¥161.8B | +50.3% |
| ROE | 22.8% | 19.2% | - |
For the fiscal year ended March 2026, Revenue was ¥1291.4B (YoY +¥217.3B, +20.2%), Operating Income was ¥361.0B (YoY +¥127.9B, +54.9%), Ordinary Income was ¥77.8B (YoY +¥39.7B, +104.1%), and Net Income attributable to owners of parent was ¥167.5B (YoY +¥58.4B, +53.6%), achieving revenue growth and substantial profit increase. Operating margin improved to 28.0% (from 21.7% last year, +6.3pt), and Net Income Margin attributable to owners of parent improved to 13.0% (from 10.1% last year, +2.9pt), both reaching high levels. Expansion of demand centered on the China segment and improvement in gross margin (37.1%, from 33.9% last year, +3.2pt), together with SG&A restraint (as a percentage of sales 10.8%, from 13.3% last year, -2.5pt) significantly boosted profitability. Operating Cash Flow (OCF) was ¥286.0B (YoY +223.0%)—1.71x of Net Income—and Free Cash Flow was a robust ¥265.2B, confirming strong cash generation.
[Revenue] Revenue of ¥1291.4B (YoY +20.2%) was led by the China segment with external sales of ¥1034.8B (including intersegment revenue ¥1110.4B total), accounting for about 80% of consolidated sales. The India segment also showed high growth with external sales of ¥68.2B (YoY +46.0%). The Japan segment recorded lower external sales of ¥164.4B (YoY -17.6%), though total including intersegment revenue was ¥277.0B (YoY -5.7%), suggesting a sales strategy prioritizing margin improvement. The Korea segment contracted to external sales of ¥12.9B (YoY -18.0%), while Other segments grew to ¥11.2B (from ¥3.3B last year). Regionally, overseas expansion centered on China and Other income including subsidy receipts of ¥19.5B (¥13.1B last year) totaling ¥22.5B (¥13.1B last year) supported revenue growth.
[Profit & Loss] Cost of sales was ¥811.7B (YoY +14.2%), growing less than revenue, improving gross margin to 37.1% (from 33.9% last year, +3.2pt). Favorable product mix and cost reductions contributed. SG&A was ¥139.8B (YoY -2.3%) in absolute terms, improving to 10.8% of sales (from 13.3% last year, -2.5pt), demonstrating strong operating leverage. Operating Income was ¥361.0B (YoY +54.9%), and operating margin of 28.0% reached a record high. Financial income was ¥5.7B versus financial expense ¥10.6B, producing a net financial loss of -¥4.9B (prior year +¥4.0B), mainly due to an increase in interest expense of ¥1.9B. Other income was ¥22.4B and other expense ¥1.4B, resulting in Ordinary Income of ¥356.2B (YoY +50.2%). After corporate income tax expense of ¥113.0B (effective tax rate 31.7%), Profit for the period was ¥243.2B, of which Net Income attributable to owners of parent was ¥167.5B (YoY +53.6%) and non-controlling interests were ¥75.7B. Comprehensive income was ¥350.0B (YoY +140.6%), with translation differences on foreign operations of +¥97.5B (prior year -¥13.3B) and FX translation gains contributing materially. In conclusion, revenue growth driven by China and simultaneous improvements in gross margin and SG&A produced a large profit increase.
The China segment reported Operating Income of ¥311.6B (YoY +39.2%), accounting for 86.3% of consolidated Operating Income, and segment assets of ¥1157.8B (75.2% of consolidated), making it the core for both revenue and assets. The Japan segment improved significantly to Operating Income of ¥23.3B (from ¥2.3B last year, +934.7%), with cost efficiency driving a substantial swing to profitability despite lower sales. The India segment posted Operating Income of ¥3.5B (YoY +211.9%), showing high growth from a small base. The Korea segment fell to Operating Income of ¥0.0B (from ¥0.5B last year, -100.0%) and segment assets contracted to ¥16.5B. Other segments turned profitable with Operating Income of ¥0.3B (from -¥0.4B last year). High dependence on China is a defining feature; geographic diversification and resilience to shifts in Chinese demand will be key to future earnings stability.
[Profitability] ROE 23.4% increased from 18.2% last year (+5.2pt), indicating high capital efficiency. Operating margin 28.0% (from 21.7% last year, +6.3pt) and Net Income Margin attributable to owners of parent 13.0% (from 10.1% last year, +2.9pt) both improved significantly. Gross margin 37.1% (from 33.9% last year, +3.2pt) and SG&A ratio 10.8% (from 13.3% last year, -2.5pt) show marked qualitative improvement in the earnings structure. [Cash Quality] OCF-to-Net Income ratio was 1.18x (OCF ¥286.0B / Profit for the period ¥243.2B), and OCF to Net Income attributable to owners of parent was 1.71x, indicating strong cash backing. However, OCF/EBITDA (Operating Cash Flow ÷ [Operating Income + Depreciation ¥21.8B]) was 0.75x, below the optimal benchmark of 1.0x, suggesting room to improve working capital efficiency. Receivables DSO 142 days, Inventory DIO 147 days, Payables DPO 90 days, and CCC 199 days indicate long cash conversion cycles and opportunities for turnover improvement. [Investment Efficiency] Total asset turnover was 0.84x (Revenue ¥1291.4B / Average total assets ¥1541.8B), unchanged from prior year. CapEx was ¥12.1B, 0.56x of depreciation ¥21.8B, indicating restrained maintenance/replacement investment. [Financial Soundness] Equity Ratio 52.0% (from 49.4% last year, +2.6pt), Debt/Capital ratio 7.8% (short-term borrowings ¥90.1B / total capital ¥1064.8B) remain conservative. Debt/EBITDA was 0.24x, indicating minimal interest-bearing debt burden. Current ratio 307.8% (current assets ¥1265.0B / current liabilities ¥410.9B), and cash & cash equivalents ¥421.8B provide ample liquidity, well exceeding short-term borrowings of ¥90.1B.
Operating Cash Flow was ¥286.0B (prior year ¥88.6B, +223.0%), a large increase, and represented 80.3% collection versus Ordinary Income ¥356.2B. Operating Cash Flow before working capital changes subtotaled ¥364.3B; inventory decrease +¥21.7B (prior year -¥5.3B) contributed to improvement, while accounts receivable increase -¥42.2B (prior year -¥135.7B) reduced cash outflow pressure compared to last year but remained a cash outflow factor. Contract liabilities +¥20.8B (prior year +¥16.6B) indicate an increase in advances received and robust order intake. Corporate tax payments -¥106.4B (prior year -¥66.0B) rose with higher profits. Investing Cash Flow was -¥20.8B (prior year -¥20.2B), centered on capital expenditures ¥12.1B, intangible assets ¥2.3B, and right-of-use assets ¥6.6B. Investment levels below depreciation ¥21.8B boost short-term FCF but warrant attention regarding medium-term supply capacity and competitiveness. Financing Cash Flow was -¥159.3B (prior year -¥87.6B), with dividends paid ¥32.1B (prior year ¥24.3B), share buybacks ¥20.1B (prior year ¥9.7B), dividends to non-controlling interests ¥25.8B (prior year ¥21.4B), acquisition of subsidiary interests from non-controlling interests ¥54.5B (prior year ¥13.1B), and repayment of short-term borrowings ¥24.5B as major items. FX translation impact +¥38.6B (prior year -¥8.4B) added to cash, resulting in an increase in cash & cash equivalents of ¥144.5B to year-end ¥421.8B. Free Cash Flow was ¥265.2B (prior year ¥68.4B, +287.7%), ample to cover dividends, buybacks, and non-controlling interest transactions while leaving significant surplus.
Of Profit for the period ¥243.2B, Operating Income ¥361.0B is core, while non-operating items (net financial -¥4.9B, net other income/expense +¥21.1B) represent approximately 5.9% of Ordinary Income ¥356.2B. Other income ¥22.5B (including subsidy income ¥19.5B) contributed as a non-recurring factor. Net financial loss of -¥4.9B (financial income ¥5.7B vs financial expense ¥10.6B) is a limited non-operating burden. Corporate income tax expense of ¥113.0B (effective tax rate 31.7%) remained consistent with prior year ¥75.3B (31.7%), with increased tax burden driven by higher profits. Non-controlling interests of ¥75.7B (31.1% of Profit for the period) — after subtracting Net Income attributable to owners of parent ¥167.5B from Profit for the period ¥243.2B — remained at similar levels to prior year ¥52.8B (32.6%), reflecting high profitability of Chinese subsidiaries. The gap between Comprehensive Income ¥350.0B and Profit for the period ¥243.2B (¥106.9B) is mainly Other Comprehensive Income, dominated by translation differences on foreign operations +¥97.5B, where yen weakness contributed valuation gains that bolstered equity. The divergence between OCF and Net Income is mainly due to working capital build-up (receivables and inventory) and tax payments; there are no signs of earnings management and overall earnings quality is judged to be good. Subsidy income is a one-off factor, but core operating margin of 28.0% is high and judged to have high sustainability.
Full-year guidance is Revenue ¥1450.0B (YoY +12.3%), Operating Income ¥365.0B (YoY +1.1%), and Net Income attributable to owners of parent ¥170.0B (YoY +1.5%). Actuals reached 89.1% of revenue, 98.9% of Operating Income, and 98.5% of Net Income attributable to owners of parent, indicating near-achievement of profit targets. Revenue shortfall suggests timing differences in orders/shipments, but increasing contract liabilities to ¥64.1B (from ¥40.7B last year, +57.5%) indicate backlog accumulation expected to roll into next fiscal year. Actual Operating Income ¥361.0B versus guidance ¥365.0B is a small gap; gross margin improvement and SG&A restraint outperformed plan. Net Income attributable to owners of parent ¥167.5B nearly reached guidance ¥170.0B; tax rates and non-controlling interests were within assumed ranges. EPS guidance ¥370.28 per share vs actual ¥361.20 per share shows a ¥9 gap, not a material deviation. Dividend guidance ¥49 per share matched the year-end dividend of ¥49 per share and was implemented as planned. Going forward, sustainability of Chinese demand, FX movements, and speed of working capital efficiency improvement will be key factors.
Annual dividend was ¥85 per share (interim ¥36, year-end ¥49), a substantial increase of ¥58 from ¥27 last year (+214.8%). Payout Ratio was 24.4% (dividends paid ¥32.1B ÷ Net Income attributable to owners of parent ¥167.5B; on a per-share basis, ¥85 ÷ EPS ¥361.20 = 23.5%), indicating ample room. Total Return Ratio including share buybacks of ¥20.1B was 31.1% (dividends ¥32.1B + share buybacks ¥20.1B ÷ Net Income attributable to owners of parent ¥167.5B), showing a balanced policy. With Free Cash Flow ¥265.2B and total returns ¥52.2B, FCF coverage was 5.1x, indicating high sustainability of dividends and buybacks. Treasury stock holdings amounted to ¥27.7B (1.41M shares), with ¥20.0B acquired during the period and ¥1.2B disposed, resulting in net increase ¥19.1B. With Equity Ratio 52.0% and cash ¥421.8B equivalent to net cash against short-term borrowings ¥90.1B, financial capacity is sufficient and downside risk to dividends is low. Guidance dividend ¥49 per share matched the year-end payout; while further increases are possible, continued CapEx restraint would require rebalancing between growth investment and returns.
Geographic concentration risk: The China segment accounts for Operating Income ¥311.6B (86.3% of consolidated) and segment assets ¥1157.8B (75.2% of consolidated), reflecting very high dependence on Chinese demand and policy. A Chinese economic slowdown, escalation of US-China tensions, or regulatory tightening could cause material downside to earnings. The Korea segment’s drop to Operating Income ¥0.0B highlights need for geographic diversification.
Working capital efficiency deterioration risk: Receivables DSO 142 days, Inventory DIO 147 days, CCC 199 days indicate prolonged turnover periods; OCF/EBITDA 0.75x is below the 1.0x benchmark. Receivables ¥503.2B (from ¥407.0B last year, +23.7%) and inventory ¥327.2B (¥326.3B last year, flat) could, if prolonged, worsen cash conversion and crystallize liquidity risk. Credit extension and inventory build associated with sales growth are contributors; revising collection terms and inventory optimization are urgent.
Underinvestment and growth sustainability risk: CapEx ¥12.1B is only 0.56x of depreciation ¥21.8B, below replacement levels. Risks include asset aging, capacity constraints, and loss of technological competitiveness, which could impede future growth acceleration and new product development. While high operating margin of 28.0% can be sustained in the short term, continued restraint in R&D and CapEx could erode competitive advantage and reverse future profitability.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Return on Equity | 23.4% | 6.3% (3.2%–9.9%) | +17.1pt |
| Operating Margin | 28.0% | 7.8% (4.6%–12.3%) | +20.2pt |
| Net Income Margin | 18.8% | 5.2% (2.3%–8.2%) | +13.6pt |
Profitability is extremely high within the manufacturing sector; ROE, operating margin, and net income margin all materially exceed medians, placing the company in the top group.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 20.2% | 3.7% (-0.4%–9.3%) | +16.5pt |
Revenue growth substantially exceeds the manufacturing median, classifying the company as high-growth.
※ Source: Company aggregation of public financial statements
Sustainability of high-profit, high-growth model: Operating margin 28.0% and ROE 23.4% are outstanding within the manufacturing sector, while revenue growth +20.2% demonstrates concurrent high growth. Heavy revenue concentration in the China segment (86.3% of Operating Income) assumes resilient demand for machine tools in China and creates a virtuous cycle, but elevates geographic concentration risk—changes in Chinese economic or policy conditions will directly affect earnings. Simultaneous improvement in gross margin 37.1% (+3.2pt YoY) and SG&A ratio 10.8% (-2.5pt YoY) reflects better product mix and cost efficiency and may be structural rather than temporary; however, margin resilience under demand shocks will be important to monitor.
Gap between cash generation and working capital efficiency: While OCF ¥286.0B and Free Cash Flow ¥265.2B show ample cash generation to support dividends, buybacks, and non-controlling interest transactions, OCF/EBITDA 0.75x and CCC 199 days indicate suboptimal working capital efficiency. Receivables +¥96.3B and contract liabilities +¥23.4B suggest robust orders but also longer collection terms risk. Progress on inventory optimization and credit management next fiscal year will be key to further improving the quality of OCF and FCF capacity. Continued CapEx restraint (CapEx / Depreciation 0.56x) may boost FCF short-term but poses medium-term risks to capacity and competitiveness.
Dividend capacity and potential expansion of returns: Payout Ratio 24.4% and Total Return Ratio 31.1% imply moderate returns with ample room, and Equity Ratio 52.0% and net cash equivalent cash ¥421.8B show strong financial capacity. Annual dividend ¥85 (from ¥27 last year, +214.8%) demonstrates an expansion of returns in line with profit growth, and both payout and total return have scope to increase. With Comprehensive Income ¥350.0B including translation differences +¥97.5B that have bolstered equity, continued yen weakness would strengthen the financial base; however, FX reversal could pressure OCI and equity.
This report was automatically generated by AI analyzing XBRL financial statement data and is a financial analysis document. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your responsibility; consult professionals as appropriate before making investment decisions.