| Indicator | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥419.8B | ¥410.1B | +2.4% |
| Operating Income / Operating Profit | ¥24.0B | ¥23.1B | +4.0% |
| Ordinary Income | ¥33.5B | ¥30.7B | +9.0% |
| Net Income / Net Profit | ¥13.9B | ¥22.9B | -39.0% |
| ROE | 2.2% | 3.6% | - |
For the fiscal year ended March 2026, Revenue was ¥419.8B (YoY +¥9.8B +2.4%), Operating Income was ¥24.0B (YoY +¥0.9B +4.0%), Ordinary Income was ¥33.5B (YoY +¥2.8B +9.0%), and Net Income attributable to owners of the parent was ¥13.9B (YoY -¥9.0B -39.0%). Although revenue and operating profit increased, final profit declined sharply due to the recording of impairment losses of ¥19.2B. The operating margin improved to 5.7% (up +0.1pt from 5.6% a year earlier), and Ordinary Income exceeded the operating-level result by ¥9.5B thanks to foreign exchange gains of ¥4.6B and equity-method investment gains of ¥2.0B. Meanwhile, special gains totaled ¥19.9B (gain on sale of investment securities ¥13.0B and gain on sale of fixed assets ¥6.2B), but these were largely offset by impairment losses of ¥19.2B, leaving a net impact of only +¥0.3B. The effective tax rate remained high at 38.8%, and income taxes of ¥13.1B were recorded against pre-tax profit of ¥33.8B, pressuring the bottom line.
[Revenue] Revenue was ¥419.8B (+2.4%), achieving a third consecutive year of top-line growth. By region, Japan ¥195.1B (+7.1%) was the largest growth driver, with China ¥49.3B (+15.3%) and Other Asia & Oceania ¥68.2B (+4.3%) also performing solidly. Conversely, Taiwan ¥28.9B (-7.1%) and Europe ¥43.3B (-4.1%) saw declines, reflecting regional mix differences. North America fell sharply to ¥21.7B (-24.3%), with weakening local demand despite a stronger dollar. Gross margin was 28.2% (up +0.6pt from 27.6% a year earlier), as price pass-through and product mix improvements were effective despite higher raw material costs. Cost of sales ratio improved to 71.8% (down -0.6pt YoY), aided by manufacturing efficiency gains.
[Profitability] Operating Income rose to ¥24.0B (+4.0%), but SG&A expenses of ¥94.2B (+4.7%) grew faster than revenue (+2.4%), limiting operating leverage. SG&A ratio worsened to 22.4% (up +0.5pt from 21.9%), with personnel expenses ¥27.7B (salaries and allowances) remaining high at 6.6% of sales and serving as the main SG&A pressure. R&D expenses were ¥4.8B (1.1% of sales), roughly unchanged. Non-operating income totaled ¥10.4B, mainly comprising foreign exchange gains ¥4.6B, dividend income ¥1.3B, interest income ¥1.3B, and equity-method investment gains ¥2.0B. Foreign exchange gains benefited from yen weakness, increasing by ¥4.0B from ¥0.6B in the prior year. Non-operating expenses were ¥1.0B, primarily interest expense ¥0.7B, resulting in Ordinary Income up +9.0% at that stage. In special items, gains on sale of investment securities ¥13.0B and gains on sale of fixed assets ¥6.2B were recorded, while impairment losses ¥19.2B were also booked, leaving a net special-item impact of only +¥0.3B. Although impairment is a one-off factor, its scale—about 80% of operating income—impacted profit quality. Pre-tax profit was ¥33.8B (-11.1%), and a high effective tax rate of 38.8% (income taxes ¥13.1B) squeezed net income, resulting in Net Income attributable to owners of the parent of ¥13.9B (-39.0%). In conclusion, while revenue and operating profit increased, one-off impairment losses and high tax burden led to a substantial decline in final profit.
[Profitability] Operating margin was 5.7% (up +0.1pt from 5.6% a year earlier), but Net Profit Margin fell sharply to 3.3% (down -2.3pt from 5.6%) due to impairment and high tax burden. Gross margin improved to 28.2% (up +0.6pt from 27.6%), indicating some success in price pass-through despite rising raw material costs. SG&A ratio worsened to 22.4% (up +0.5pt from 21.9%), with higher personnel costs compressing operating leverage.
[Cash Quality] Operating Cash Flow (OCF) was ¥54.1B, 3.9x Net Income ¥13.9B, but boosted by non-cash add-backs including impairment losses ¥19.2B. In working capital, increases in trade receivables ¥5.8B and inventories ¥5.1B and a decrease in accounts payable ¥0.4B resulted in a total cash outflow of ¥11.3B. OCF/EBITDA ratio was 0.92x, broadly in a healthy range.
[Investment Efficiency] ROE was 2.2% (down from 3.6% a year earlier), mainly due to deterioration in Net Profit Margin. ROA (on Ordinary Income basis) was 4.3%, up +0.2pt from 4.1% last year, while asset turnover remained flat at 0.53x (prior year 0.54x). R&D expense ratio of 1.1% is at a maintenance-investment level, leaving scope for additional investment to strengthen product competitiveness.
[Financial Soundness] Equity Ratio was 81.0% (down -2.2pt from 83.2% last year), an exceptionally high level. Interest-bearing debt increased to ¥45.4B (up ¥23.1B from ¥22.3B), but Debt/Equity ratio remains low at 7.1% (prior year 3.5%). Current ratio was 549% (prior year 519%), and cash and deposits ¥160.8B are roughly 363x short-term borrowings of ¥0.4B, indicating abundant liquidity.
OCF was ¥54.1B (YoY -6.1%). Starting from pre-tax income ¥33.8B, depreciation ¥34.8B and impairment losses ¥19.2B were added back, and after subtracting equity-method investment gains ¥2.0B, working capital movements—trade receivables increase ¥5.8B, inventories increase ¥5.1B, and accounts payable decrease ¥0.4B—resulted in a total cash outflow of ¥11.3B. After income taxes paid ¥4.4B, the OCF result was achieved. Without the non-cash impairment add-back, OCF would have been around ¥35B, indicating that deterioration in working capital efficiency is constraining cash generation. Investing Cash Flow was -¥21.2B, driven mainly by capital expenditures of ¥29.6B, partly offset by proceeds from sale of securities ¥15.5B and proceeds from sale of fixed assets ¥6.4B. CapEx was 0.85x depreciation (¥34.8B), focused on maintenance and efficiency investments. Financing Cash Flow was -¥18.8B; long-term borrowings raised ¥25.0B were used to cover shareholder returns totaling ¥40.0B (dividends ¥15.1B and share repurchases ¥24.9B). Free Cash Flow was ¥32.9B (OCF ¥54.1B - Investing CF ¥21.2B), covering dividends ¥15.1B by 2.2x, but total shareholder returns of ¥40.0B exceeded FCF, financed by increased long-term borrowings and available liquidity. Cash and deposits were ¥160.8B (up ¥13.3B from ¥147.5B), indicating no short-term liquidity concerns.
Operating Income of ¥24.0B contrasted with Ordinary Income of ¥33.5B, a ¥9.5B divergence largely due to non-operating income of ¥10.4B. Key components were foreign exchange gains ¥4.6B (prior year ¥0.6B), dividend income ¥1.3B, and equity-method investment gains ¥2.0B; FX gains are non-recurring, while equity-method gains can be considered a stable revenue source. Moving from Ordinary Income to pre-tax profit, special gains ¥19.9B (gain on sale of investment securities ¥13.0B, gain on sale of fixed assets ¥6.2B) and special losses ¥19.6B (impairment losses ¥19.2B, disaster losses ¥0.4B) largely offset, leaving a net impact of +¥0.3B. The impairment loss ¥19.2B—about 80% of Operating Income—significantly affected profit quality despite being a one-off. Against pre-tax profit of ¥33.8B, income taxes of ¥13.1B (effective tax rate 38.8%) were high, so Net Income of ¥13.9B represented only 41.2% of pre-tax profit. Comprehensive income was ¥46.5B, exceeding Net Income by ¥32.6B, driven by valuation differences on available-for-sale securities ¥12.5B, adjustments related to retirement benefit plans ¥9.7B, foreign currency translation adjustments ¥1.6B, and OCI attributable to equity-method investees ¥2.0B. Balance-sheet-based valuation gains boosted comprehensive income and should be distinguished from earnings power on a net-income basis. Allocation of OCF to working capital showed deterioration: delayed receivable collections and inventory increases caused a combined cash outflow of ¥11.3B, indicating room for improvement in accrual quality.
Full-year guidance is maintained at Revenue ¥440.0B (+4.8%), Operating Income ¥37.0B (+54.0%), and Ordinary Income ¥38.0B (+13.5%). At the fiscal year-end, progress rates were Revenue 95.5%, Operating Income 64.9%, and Ordinary Income 88.2%; Operating Income progress lags, meaning the plan assumes significant profit improvement in Q4. The gap between initial operating margin guidance of 8.4% and actual 5.7% (-2.7pt) requires substantial SG&A ratio compression, penetration of price revisions, and product mix improvements to achieve. Ordinary Income projection assumes continuation of foreign exchange gains, so changes in FX assumptions present downside risk. Forecast EPS of ¥54.01 compared with current EPS of ¥40.92 implies 75.8% progress. The dividend guidance of ¥17.00 includes interim ¥15 and year-end ¥15 realized for a total of ¥30, so downward dividend risk is low, but upside for dividend increases is limited.
Annual dividend is ¥30 per share (interim ¥15; year-end ¥15), unchanged from the prior year. Against Net Income attributable to owners of the parent of ¥13.9B, total dividends were about ¥15.1B (issued shares 48,430 thousand - treasury stock 294 thousand), resulting in a Payout Ratio of approximately 109%, exceeding net income. Additionally, share repurchases of ¥24.9B were implemented during the period; combined with dividends ¥15.1B, total shareholder returns were approximately ¥40.0B, 2.9x Net Income ¥13.9B and 1.2x Free Cash Flow ¥32.9B. The funds for maintaining dividends were secured by ample cash and deposits ¥160.8B and OCF ¥54.1B, so short-term dividend sustainability is not a concern. However, total returns including share repurchases exceeded FCF and were covered by ¥25.0B in long-term borrowings and liquid assets. Sustaining total returns in future periods will require improvement in operating margins and working capital efficiency to expand FCF. The forecast payout ratio is 31.5% (¥17.00 on FY EPS ¥54.01), set materially below the current period level, implying potential room for dividend increases in a recovery scenario.
Deterioration in working capital efficiency: Days sales outstanding are about 94 days (prior year ~89 days), and inventory days are about 113 days (prior year ~108 days), lengthening the cash conversion cycle to about 186 days. Inventory increase ¥5.1B and receivables increase ¥5.8B pressured OCF by about -¥11.3B, making improvement in working capital management urgent. If order/sales planning and production/inventory optimization and shortening of receivables collection cycles are not achieved, cash generation capacity may be persistently impaired.
Execution risk for margin improvement: Full-year guidance assumes operating margin of 8.4% (an improvement of +2.7pt from current 5.7%), requiring large SG&A ratio compression and simultaneous achievement of price revisions and product mix improvements. With SG&A ratio having worsened by +0.5pt this period and continued personnel cost pressure, failure to control SG&A as planned increases the risk of missing operating profit targets. Also, deterioration in regional mix (e.g., China, Taiwan) or renewed raw material cost inflation outpacing price pass-through would limit gross margin improvement.
Impact of one-off items and tax burden: This period included impairment losses of ¥19.2B (about 80% of Operating Income) and a high effective tax rate of 38.8%, which depressed net income. There are risks of recurring impairments or valuation losses on investment securities, and persistence of high tax rates would increase volatility in net income. Comprehensive income exceeded net income due to valuation gains on available-for-sale securities ¥12.5B, etc.; however, in market downturns, reverse valuation losses could impair equity. Foreign exchange gains ¥4.6B (13.7% of Ordinary Income) are also non-recurring and could compress ordinary-level profits if the yen strengthens.
Profitability & Returns
| Indicator | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 5.7% | 7.8% (4.6%–12.3%) | -2.0pt |
| Net Profit Margin | 3.3% | 5.2% (2.3%–8.2%) | -1.9pt |
Both operating and net profit margins are below the industry median, indicating relatively low profitability within the manufacturing sector.
Growth & Capital Efficiency
| Indicator | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 2.4% | 3.7% (-0.4%–9.3%) | -1.3pt |
Revenue growth rate is below the industry median, with top-line expansion lagging the manufacturing sector average.
※ Source: Company compilation
The main highlights this fiscal year are achievement of revenue and operating income growth in core operations and maintenance of a very healthy financial base. Revenue +2.4% and Operating Income +4.0% achieved a third consecutive year of revenue and profit growth, and gross margin improved by +0.6pt. Equity Ratio 81.0%, cash and deposits ¥160.8B, and Debt/Equity ratio 7.1% demonstrate substantial financial capacity, allowing simultaneous dividend maintenance and growth investment. By region, Japan +7.1% and China +15.3% led growth, offsetting slowdowns in Europe and North America. Conversely, Net Income declined sharply -39.0% due to impairment losses ¥19.2B and a high effective tax rate of 38.8%, indicating a significant one-off impact on profit quality. Comprehensive income ¥46.5B far exceeded Net Income ¥13.9B, driven by valuation gains on securities and retirement benefit adjustments recorded on the balance sheet; these are not realized gains and should be distinguished from future earnings power.
Keys to achieving next fiscal year’s plan are substantial operating margin improvement and normalization of working capital efficiency. To reach the full-year Operating Income forecast ¥37.0B (+54.0%), operating margin must be raised from 5.7% to 8.4% (+2.7pt), requiring reversal of the current SG&A ratio deterioration (up +0.5pt), effective price revisions, and product mix improvements. Working capital trends show DSO 94 days and inventory days 113 days, and shortening the CCC to restore cash generation is a condition for sustainable growth. OCF ¥54.1B excluding impairment add-back would be around ¥35B, with working capital outflow of ¥11.3B acting as a drag. Total shareholder returns ¥40.0B exceeded FCF ¥32.9B, so sustained shareholder returns require profit growth and cash efficiency improvements. Foreign exchange gains ¥4.6B (13.7% of Ordinary Income) also boosted ordinary-level profits; changes in FX assumptions are a risk factor for the earnings forecast.
This report is an earnings analysis document automatically generated by AI 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 based on public financial statements. Investment decisions are your responsibility; consult a professional as necessary.
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