Makino Milling Machine (6135) FY2026 Q3 Earnings Report

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Executive Summary

The company posted higher revenue and higher profit, driven by the capture of demand for machine tools, with operating income growth exceeding revenue growth. Revenue was ¥190.13B (+12.6% YoY), operating income was ¥17.68B (+33.6%), ordinary income was ¥19.78B (+36.5%), and net income attributable to owners of the parent was ¥14.03B (+33.2%). As operating income growth outpaced revenue growth, the operating margin improved to 9.3% (7.8% in the previous year).

Factors Affecting Performance

【Revenue】Revenue increased 12.6% YoY to ¥190.13B. By segment, One generated ¥99.21B (operating margin: 8.5%) and Two generated ¥101.15B (6.9%), forming the two core pillars, while Three generated ¥52.80B (4.0%) and Four generated ¥12.07B, recording an operating loss of ¥0.61B. The relatively high profit margins of the two core segments are driving overall profitability.

【Profit and Loss】While securing a gross margin of 31.2%, the company controlled the SG&A ratio at 21.9%, resulting in operating income of ¥17.68B (+33.6%), which exceeded the rate of revenue growth. Non-operating income and expenses resulted in a surplus of ¥2.10B (including ¥1.11B in interest and dividend income and ¥0.55B in subsidy income, among others), lifting ordinary income to ¥19.78B. Extraordinary income and expenses resulted in a net loss of ¥0.05B, while the ¥1.03B gain on the sale of investment securities was a temporary non-core factor. Net income of ¥14.03B increased 33.2% YoY, classifying the results as higher revenue and higher profit.

Segment Analysis

By segment, One generated revenue of ¥99.21B and operating income of ¥8.45B (margin: 8.5%), while Two generated revenue of ¥101.15B and operating income of ¥6.94B (6.9%). Although Two exceeded One in revenue scale, One had the higher profit margin. Three generated revenue of ¥52.80B and operating income of ¥2.12B (4.0%), while Four generated revenue of ¥12.07B and operating income of negative ¥0.61B (−5.1%), making it a loss-making segment. Of total company operating income of ¥17.68B, the combined contribution from One and Two was ¥15.39B, making them the center of profitability.

Key Financial Indicators

【Profitability】Both the operating margin of 9.3% (7.8% in the previous year) and net profit margin of 7.4% (6.2% in the previous year) improved from the prior year. The structure in which a gross margin of 31.2% absorbs an SG&A ratio of 21.9% is supporting the rise in profit margins. 【Cash Flow Quality】Comprehensive income of ¥27.47B exceeded net income of ¥14.04B by ¥13.43B, with foreign currency translation adjustments of ¥8.42B and valuation differences on securities of ¥5.37B boosting net assets. 【Investment Efficiency】ROE was 5.6%. Despite the improvement in net profit margin, total asset turnover remained at 0.470x and financial leverage at 1.61x, indicating room for improvement in capital efficiency. 【Financial Soundness】The equity ratio was 62.2%, and cash and deposits of ¥73.54B exceeded interest-bearing debt of ¥33.15B, indicating a strong financial foundation.

Cash Flow Analysis

As individual items from the statement of cash flows are not included in the disclosed data, cash flow trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥73.54B, increasing by more than ¥10B from ¥63.51B in the previous year, while net assets increased from ¥226.65B to ¥251.81B. Meanwhile, inventory accumulation was observed, comprising finished goods of ¥37.83B, raw materials of ¥51.06B, and work in process of ¥20.26B, indicating an increase in working capital to accommodate expanded production and orders. Since cash and deposits increased alongside revenue and profit growth, cash generation through business activities is generally considered favorable; however, inventory and accounts receivable levels require monitoring from the perspective of capital efficiency.

Quality of Earnings

Of ordinary income of ¥19.78B, non-operating income and expenses represented a surplus of ¥2.10B, consisting mainly of ¥1.11B in interest and dividend income, ¥0.55B in subsidy income, and ¥0.17B in foreign exchange gains, all of which were limited in scale. Extraordinary income amounted to ¥1.16B, including a ¥1.03B gain on the sale of investment securities, while extraordinary losses were ¥1.21B, resulting in a net loss of ¥0.05B and having little impact on profit before tax of ¥19.73B. Comprehensive income of ¥27.47B significantly exceeded net income of ¥14.04B, primarily due to valuation-related factors, namely foreign currency translation adjustments of ¥8.42B and valuation differences on securities of ¥5.37B. Growth in operating income generated by the core business was the central driver of earnings improvement, while the contribution from temporary gains and losses was limited; overall, earnings quality can be assessed as generally favorable.

Earnings Forecast and Guidance

Against the full-year company plan, revenue progress was 75.4% (plan: ¥252.00B), operating income progress was 74.3% (plan: ¥23.80B), and ordinary income progress was 77.3% (plan: ¥25.60B). Compared with the standard progress rate of 75% through Q3, operating income progress was broadly in line, while net income progress of 72.3% was slightly below this level. Achieving the plan will require an operating margin of approximately 9.9% in Q4, requiring an increase from the cumulative actual margin of 9.3%.

Shareholder Returns

The Q2 dividend was ¥0 per share, and the full-year dividend forecast is also ¥0, indicating that the no-dividend policy continues for the current period. As there is no dividend to use as the basis for calculation, the payout ratio is 0%. Given the financial foundation of cash and deposits of ¥73.54B and an equity ratio of 62.2%, the absence of a dividend is not considered to be due to funding constraints.

Risk Factors

1. Lengthening inventory and collection cycles: Annualized DIO of approximately 228 days, DSO of approximately 78 days, and CCC of approximately 261 days all exceed generally cautious levels. Inventory consisting of raw materials of ¥51.06B, work in process of ¥20.26B, and finished goods of ¥37.83B could create adjustment pressure when demand fluctuates.

2. Increasing proportion of construction in progress: Construction in progress of ¥21.80B represents 20.6% of property, plant and equipment of ¥105.58B. If delays occur in commencing operations at facilities or in recovering investments, future depreciation expenses and capital efficiency could be affected.

3. Short-term debt composition and funding structure: Although the proportion of short-term liabilities is relatively high, including ¥17.15B in short-term borrowings and ¥5.00B in the current portion of bonds, cash and deposits of ¥73.54B exceed current liabilities of ¥109.14B, indicating high near-term financial resilience.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Both the operating margin and net profit margin exceed the industry median, placing profitability at a relatively favorable level within the industry.

Growth and Capital Efficiency

The revenue growth rate significantly exceeds the industry median, representing a top-tier growth pace within the industry.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. Operating income increased 33.6% compared with a 12.6% increase in revenue, and the operating margin improved from the previous year. A notable feature is that revenue growth was efficiently converted into profit growth.

2. Despite a financial foundation consisting of an equity ratio of 62.2% and cash and deposits of ¥73.54B, ROE of 5.6% is below the 8% level generally regarded as a cautionary threshold for the industry, with low total asset turnover acting as a constraint on capital efficiency.

3. Full-year plan progress was broadly standard, with revenue progress of 75.4% and operating income progress of 74.3%; however, achieving the plan will require an increase in the Q4 operating margin from the cumulative actual level.

Theoretical Share Price (Reference Value)

Sensitivity: ¥9,991–¥10,599 at ±1% for the cost of equity, and ¥10,271–¥10,299 at ±0.1 for ω.

Notes:

• As forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end are used (there is a timing gap relative to the full-year forecast).
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual income model (Ohlson type; explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated solely from publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and 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 summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting with a professional as necessary.

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