| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥1631.1B | ¥1703.4B | -4.2% |
| Operating Income | ¥128.5B | ¥118.1B | +8.8% |
| Ordinary Income | ¥173.4B | ¥146.8B | +18.2% |
| Net Income | ¥80.7B | ¥27.0B | +198.8% |
| ROE | 4.8% | 1.7% | - |
For the fiscal year ended March 2026, Revenue was ¥1631.1B (YoY -¥72.3B, -4.2%) resulting in Operating Income of ¥128.5B (YoY +¥10.4B, +8.8%), Ordinary Income of ¥173.4B (YoY +¥26.7B, +18.2%), and Net Income attributable to owners of parent of ¥80.7B (YoY +¥53.7B, +198.8%), representing a significant increase in profits despite lower sales. Gross margin improved to 25.9% (prior 24.0%, +1.9pt) and Operating Margin improved to 7.9% (prior 6.9%, +1.0pt). Non-operating income including equity-method income of ¥23.2B and dividend & interest income of ¥12.2B boosted results at the ordinary income level. Special gains included gain on sale of investment securities of ¥11.8B, which were largely offset by impairment losses of ¥22.4B and business restructuring costs of ¥4.1B; a low effective tax rate of 19.4% also contributed to the upside in Net Income. The core Automotive & Industrial Machinery Parts segment posted Revenue of ¥1232.1B (-3.6%) but Operating Income of ¥104.0B (+15.0%), improving margin to 8.4%, and accounted for about 81% of consolidated Operating Income. Conversely, Piping & Construction Equipment recorded Revenue of ¥172.6B (-7.6%) and Operating Income of ¥6.4B (-46.2%), with margin deteriorating sharply to 3.7%, dragging on the company mix. Results materially exceeded the company full-year guidance (Operating Income ¥100B, Ordinary Income ¥135B, Net Income ¥90B), landing in a reduction-in-sales / increase-in-profits outcome versus the company’s assumed decrease-in-sales / decrease-in-profits scenario.
Revenue: Revenue was ¥1631.1B (YoY -¥72.3B, -4.2%). By segment, the core Automotive & Industrial Machinery Parts generated external sales of ¥1231.2B (-3.6%), representing 75.5% of total Revenue and the primary driver of the overall decline. Piping & Construction Equipment external sales were ¥172.4B (-7.6%), Thermal Engineering external sales were ¥92.0B (-3.7%), and Others (non-reporting segments) external sales were ¥135.5B (-3.7%) — all segments experienced declines due to weaker customer demand and market conditions.
Profitability: Operating Income rose to ¥128.5B (YoY +¥10.4B, +8.8%). Cost of sales ratio declined to 74.1% (prior 76.1%, -2.0pt), lifting gross margin to 25.9% (prior 24.0%, +1.9pt). Selling, general & administrative expenses increased to ¥293.5B (prior ¥289.9B, +¥3.6B), raising SG&A as a share of Revenue to 18.0% (prior 17.0%, +1.0pt), but the improvement in gross margin more than offset this, improving Operating Margin to 7.9% (prior 6.9%, +1.0pt). Non-operating items — equity-method income ¥23.2B (prior ¥22.7B) and dividend & interest income ¥12.2B (prior ¥12.1B) — supported Ordinary Income of ¥173.4B (YoY +¥26.7B, +18.2%), with an Ordinary Income margin of 10.6% (prior 8.6%, +2.0pt). Special items included gain on sale of investment securities ¥11.8B, while impairment losses ¥22.4B and business restructuring costs ¥4.1B produced a net special-item charge of -¥15.5B. Profit before tax was ¥186.6B (prior ¥131.5B, +41.9%), taxes ¥36.2B (effective tax rate 19.4%), and after deduction of non-controlling interests ¥10.1B, Net Income attributable to owners of parent was ¥80.7B (prior ¥27.0B, +198.8%). The company achieved higher profits despite lower sales, driven by cost improvements, price pass-through, and cost control.
Automotive & Industrial Machinery Parts: Revenue ¥1232.1B (YoY -3.6%), Operating Income ¥104.0B (+15.0%), margin improved to 8.4% (prior 7.1%, +1.3pt). Despite lower sales, cost improvements and pricing actions were effective, and this core segment — contributing ~81% of consolidated Operating Income — led the increase in profits.
Piping & Construction Equipment: Revenue ¥172.6B (-7.6%), Operating Income ¥6.4B (-46.2%), margin fell sharply to 3.7% (prior 6.4%, -2.7pt). The segment faced both revenue decline and margin deterioration, weighing on the consolidated mix.
Thermal Engineering: Revenue ¥92.0B (-3.7%), Operating Income ¥8.8B (-10.2%), margin slightly declined to 9.6% (prior 10.2%, -0.6pt) but remained at a relatively high level.
Others (non-reporting segments): Revenue ¥160.9B (-3.7%), Operating Income ¥15.0B (+39.0%), margin improved materially to 9.3% (prior 6.4%, +2.9pt), driven by profitability improvements in EMC business, Metalmold, and medical-related products.
Margin improvement in the core segment supported consolidated profits, while restoring profitability in Piping & Construction Equipment remains a priority for the next fiscal year.
Profitability: Operating Margin 7.9% (prior 6.9%, +1.0pt), Ordinary Income margin 10.6% (prior 8.6%, +2.0pt), Net Income margin 4.9% (prior 1.6%, +3.3pt) — profitability improved across all stages. Gross margin 25.9% (prior 24.0%, +1.9pt) reflects benefits from cost improvements and price pass-through. ROA was 7.7% (prior 6.7%, +1.0pt), indicating improved asset return. ROE was 4.8% (prior 6.1%, -1.3pt) — the decline is mainly due to an increase in equity (Net assets 1696.7B, prior 1546.7B) expanding the denominator rather than a deterioration in return.
Cash quality: Operating Cash Flow (OCF) was ¥163.4B, twice Net Income (¥80.7B), indicating high quality. Adding depreciation ¥87.8B yields an OCF subtotal of ¥182.2B before working capital changes; working capital changes were -¥18.8B (inventory increase ¥19.3B, accounts receivable decrease ¥14.1B, accounts payable decrease ¥16.5B) and taxes paid ¥36.6B, suggesting good conversion of profits to cash but room to compress inventory and payables. Free Cash Flow was ¥114.9B (OCF ¥163.4B - Investing CF ¥48.5B), covering dividend payments of ¥36.2B by 3.2x, supporting dividend sustainability.
Investment efficiency: Total asset turnover was 0.71x (prior 0.78x), declining, and inventory days extended to 73 days (prior 51 days). Receivables days were 82 days (prior 80 days), largely stable. The Cash Conversion Cycle (CCC) indicates scope for working capital efficiency improvement. Capital expenditure was ¥78.5B, below depreciation ¥87.8B (capex/depreciation ratio 0.89x), indicating maintenance/ selective investment posture.
Financial soundness: Equity Ratio 74.1% (prior 70.6%, +3.5pt) and net cash (cash ¥291.1B - interest-bearing debt ¥73.6B) of ¥217.5B provide a very strong liquidity position. Current ratio 293% (prior 295%) and quick ratio 228% (prior 232%) show strong short-term solvency. Debt/EBITDA was 0.34x (= (short-term borrowings ¥7.6B + long-term borrowings ¥66.0B + bonds ¥0B) ÷ (Operating Income ¥128.5B + Depreciation ¥87.8B)), an extremely low level indicating negligible leverage risk.
Operating Cash Flow was ¥163.4B (prior ¥174.8B, -6.5%) — a year-on-year decline but still covering Net Income by 2.0x, maintaining high quality. OCF subtotal (before working capital changes) was ¥182.2B, including depreciation ¥87.8B, impairment losses ¥22.4B, and equity-method income -¥23.2B among other items. Working capital changes comprised inventory increase ¥19.3B, accounts receivable decrease ¥14.1B, and accounts payable decrease ¥16.5B, yielding a net cash outflow of -¥18.8B and indicating that inventory build-up and payables compression restrained OCF. After taxes paid ¥36.6B and net interest received (interest received ¥20.0B - interest paid ¥2.2B), final OCF was ¥163.4B.
Investing CF was -¥48.5B, centered on capex -¥78.5B, intangible asset investments -¥10.5B, and proceeds from sales of securities ¥39.9B, reflecting a focus on maintaining/optimizing existing assets over aggressive growth investment. Free Cash Flow was ¥114.9B (OCF ¥163.4B + Investing CF -¥48.5B), covering dividend payments ¥36.2B by 3.2x, securing dividend sustainability.
Financing CF was -¥103.8B: while securing long-term borrowings ¥60.0B, the company repaid short-term borrowings ¥38.5B, repaid long-term borrowings ¥22.6B, paid dividends ¥36.2B, and conducted share buybacks ¥0.1B, net reducing interest-bearing debt. Cash increased from beginning-of-period ¥270.7B to end-of-period ¥291.1B (+¥13.1B); including FX effects +¥2.0B, liquidity expanded. OCF/EBITDA ratio was 0.76x ((OCF ¥163.4B) ÷ (Operating Income ¥128.5B + Depreciation ¥87.8B)), somewhat low, indicating working capital efficiency as a key area for improvement next fiscal year.
The core recurring earnings driver is Operating Income ¥128.5B, with stable non-operating contributions from equity-method income ¥23.2B and dividend & interest income ¥12.2B, forming Ordinary Income ¥173.4B. One-off items comprised Special gains ¥41.7B (gain on sale of investment securities ¥11.8B, gain on sale of fixed assets ¥0.2B, etc.) and Special losses ¥28.6B (impairment losses ¥22.4B, business restructuring costs ¥4.1B, loss on disposal of fixed assets ¥2.0B, etc.), netting a +¥13.1B contribution. These one-off items represent about 16% of Net Income ¥80.7B, a moderate level of one-off influence with reversion risk in the next fiscal year.
Non-operating income ¥50.3B equals 3.1% of Revenue, below 5%, indicating limited reliance on non-core income. Accrual (Net Income - OCF) was ¥80.7B - ¥163.4B = -¥82.7B, yielding an accrual ratio of -¥82.7B ÷ Total Assets ¥2289.5B = -3.6%, and OCF/Net Income ratio of 2.0x, together signifying high cash realization quality. The gap between Ordinary Income ¥173.4B and Net Income ¥80.7B (~-53%) is mainly due to taxes ¥36.2B (effective tax rate 19.4%), non-controlling interests ¥10.1B, and net special items +¥13.1B. The effective tax rate of 19.4% is below statutory rates, suggesting tax incentives or utilization of deferred tax assets. Comprehensive income was ¥197.8B (Net Income ¥80.7B + Other Comprehensive Income ¥47.4B), with valuation gains on securities ¥36.8B and foreign currency translation adjustments ¥8.1B contributing, reflecting valuation gains on held assets. Given the improvement in Operating Income and high OCF, overall quality of earnings is assessed as high.
The company’s full-year guidance was Revenue ¥1620.0B, Operating Income ¥100.0B, Ordinary Income ¥135.0B, Net Income attributable to owners of parent ¥90.0B (EPS 334.64円, dividend ¥80). Actual results: Revenue ¥1631.1B (achievement 100.7%), Operating Income ¥128.5B (128.5%), Ordinary Income ¥173.4B (128.5%), Net Income ¥80.7B (89.7%). Operating and Ordinary Income substantially exceeded guidance, while Net Income slightly missed. Revenue finished slightly above the company’s flat assumption, and margin improvements at gross and operating levels (gross margin +1.9pt, Operating Margin +1.0pt) outperformed expectations. Net Income fell short of the ¥90B forecast largely due to net impact of one-off items (impairment ¥22.4B vs sale gains ¥11.8B) and somewhat heavier tax burden, resulting in an outcome ~10% below forecast. The company had expected decreases in both sales and profits, but delivered decreased sales with increased profits, outperforming expectations through cost improvements, price pass-through, and cost control. The company increased dividends to year-end ¥160 (interim ¥50, annual ¥210), a significant upward revision from the guided ¥80. For the coming periods, sustaining margins in the core segment, restoring profitability in Piping & Construction Equipment, and improving working capital efficiency will be key to continued growth.
Annual dividend is ¥210 (interim ¥50, year-end ¥160), maintained from prior year ¥210 (interim ¥45, year-end ¥165) while effecting a mid-term increase. Payout Ratio is 40.2% (Dividend ¥210 ÷ EPS 521.58円), unchanged from prior year, maintaining a stable dividend policy. Total dividends amounted to ¥34.9B, covering 30.4% of Free Cash Flow ¥114.9B (FCF coverage 3.3x), indicating dividend sustainability is well secured. Share buybacks were ¥0.1B, modest; total shareholder returns (dividends + buybacks) were approximately ¥35.0B, and Total Return Ratio was 43.4% (Total return ¥35.0B ÷ Net Income ¥80.7B), reflecting a dividend-centric return policy. With an Equity Ratio of 74.1% and net cash position ¥217.5B, the financial capacity to increase dividends or share buybacks is substantial, but the company currently emphasizes a balance between stable dividends and internal reserves. If earnings growth and cash generation continue, an increase in Total Return Ratio or enlargement of buybacks could be expected.
Working capital efficiency deterioration: Inventory days extended to 73 days (prior 51 days) and receivables days 82 days (prior 80 days), reducing working capital efficiency and producing working capital outflow of -¥18.8B against an OCF subtotal ¥182.2B. Inventory increase ¥19.3B and accounts payable decrease ¥16.5B were the main drivers, suggesting lower demand forecasting accuracy or supply planning mismatches. Extension of the CCC could reduce capital efficiency and constrain future OCF generation.
Profit deterioration in Piping & Construction Equipment segment: Revenue ¥172.6B (-7.6%), Operating Income ¥6.4B (-46.2%), margin down to 3.7% (prior 6.4%, -2.7pt). The double impact of lower sales and margin compression, due to rising costs and pricing competition, materially weighs on the consolidated mix. Although the segment accounts for ~11% of sales, its impact on profits is large, requiring prompt margin restoration.
Revenue concentration in the core segment: Automotive & Industrial Machinery Parts accounts for 75.5% of sales and ~81% of Operating Income, indicating high portfolio concentration. This increases sensitivity to automotive demand fluctuations, customer production adjustments, and structural shifts in parts demand due to electrification, amplifying earnings volatility linked to key customers and products.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.9% | 7.8% (4.6%–12.3%) | +0.1pt |
| Net Income Margin | 4.9% | 5.2% (2.3%–8.2%) | -0.2pt |
Operating Margin slightly exceeds the industry median and is at a standard level, while Net Income Margin is slightly below median, reflecting compression from taxes and non-controlling interests.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -4.2% | 3.7% (-0.4%–9.3%) | -7.9pt |
Revenue growth is -7.9pt below the industry median, indicating a clear revenue decline and underperformance versus peers that are generally in a growth trend.
※ Source: Company compilation
Margin improvement and substantial outperformance vs full-year guidance amid lower sales: Despite Revenue decline of -4.2%, improvements in gross margin (+1.9pt) and Operating Margin (+1.0pt) led to Operating Income +8.8% and Ordinary Income +18.2%, materially exceeding the company full-year guidance (Operating ¥100B, Ordinary ¥135B) with an achievement ratio of 128.5%. Cost improvements, price pass-through, and cost control were effective, and the core Automotive & Industrial Machinery Parts segment improved margin to 8.4% (prior 7.1%, +1.3pt). Achieving higher profits in a sales-down environment is commendable, while the sustainability of these short-term profitability gains warrants attention.
Working capital efficiency deterioration and reduced cash generation: Inventory days extended to 73 days (prior 51 days, +22 days), and working capital changes produced -¥18.8B cash outflow, causing OCF to fall -6.5% YoY to ¥163.4B. OCF/EBITDA ratio of 0.76x is low; inventory build-up and payables compression lowered capital efficiency. While Free Cash Flow ¥114.9B covers dividends by 3.2x and secures sustainability, normalizing working capital (inventory reduction, optimizing payables terms) offers scope to improve cash generation.
Low profitability in Piping & Construction Equipment and portfolio concentration: The Piping & Construction Equipment segment posted Revenue -7.6% and Operating Income -46.2%, with margin plunging to 3.7% (prior 6.4%). This drags on consolidated mix. The core Automotive & Industrial Machinery Parts segment accounts for 75.5% of sales and ~81% of Operating Income, reflecting high portfolio concentration. Exposure to automotive demand fluctuations is significant; restoring profitability in Piping & Construction Equipment and diversifying the business portfolio are medium-to-long-term priorities.
This report is an AI-generated earnings analysis document created by 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 publicly disclosed financial statements. Investment decisions are your own responsibility; please consult a professional advisor as appropriate before making investment decisions.