| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥448.9B | ¥383.5B | +17.0% |
| Operating Income / Operating Profit | ¥33.0B | ¥29.3B | +12.7% |
| Ordinary Income | ¥36.2B | ¥33.9B | +6.8% |
| Net Income / Net Profit | ¥34.6B | ¥38.8B | -10.7% |
| ROE | 5.5% | 6.5% | - |
For the fiscal year ended March 2026, Revenue was ¥448.9B (YoY +¥65.4B +17.0%), Operating Income was ¥33.0B (YoY +¥3.7B +12.7%), Ordinary Income was ¥36.2B (YoY +¥2.3B +6.8%), and Net Income was ¥34.6B (YoY -¥4.2B -10.7%). The Process Engineering Business drove the company, growing Revenue +30.6% and Operating Income +50.1%, becoming the core business accounting for over 60% of Operating Income. The Heat Exchanger Business posted higher Revenue but its operating margin declined from 9.3% to 5.7%; the Valve Business achieved higher Revenue and Income while maintaining a margin of 7.1%. Non-operating items included stable dividend income of ¥4.1B but a foreign exchange loss of ¥1.1B. Extraordinary items included gain on sale of investment securities ¥14.9B and gain on sale of fixed assets ¥5.6B, offset by special losses including environmental measures of ¥8.9B, reducing net one-off gains from prior year (+¥17.6B) to +¥11.6B and resulting in a decrease in net profit. Operating margin was 7.4% (prior year 7.6%), Net Margin was 7.7% (prior year 10.1%); despite top-line and operating growth, volatility in extraordinary items pressured final profit.
[Revenue] Revenue was ¥448.9B (+17.0%), achieving double-digit growth. By segment, the Process Engineering Business surged to ¥224.1B (+30.6%) driven by progress on large project orders, becoming the core business representing 49.9% of corporate Revenue. The Heat Exchanger Business grew to ¥172.3B (+6.7%) showing steady growth but its share declined to 38.4%. The Valve Business reported ¥51.8B (+4.6%) maintaining an 11.5% share. Gross margin declined to 23.1% (prior year 25.5%), down 2.4 points, reflecting a shift in sales mix toward relatively lower-margin Process Engineering projects and deterioration in Heat Exchanger profitability (cost increases and product mix changes).
[Profitability] Gross profit was ¥103.8B (+¥6.0B) while SG&A was ¥70.7B (+¥2.3B), improving SG&A ratio to 15.8% (prior year 17.8%), resulting in Operating Income of ¥33.0B (+12.7%). Operating margin was 7.4% (prior year 7.6%), down 0.2 points. By segment, Heat Exchanger deteriorated to ¥9.9B (-26.4%, margin 5.7%), Process Engineering improved to ¥21.3B (+50.1%, margin 9.5%), and Valve improved to ¥3.7B (+25.3%, margin 7.1%). Non-operating income totaled ¥5.1B (mainly dividend income ¥4.1B), non-operating expense was ¥2.0B (foreign exchange loss ¥1.1B, interest expense ¥0.2B), yielding Ordinary Income of ¥36.2B (+6.8%). Extraordinary gains were ¥20.5B (gain on sale of investment securities ¥14.9B, gain on sale of fixed assets ¥5.6B) and extraordinary losses ¥8.9B (including environmental measures ¥3.3B), producing Profit Before Tax of ¥47.8B (-7.1%). After deducting corporate tax of ¥13.2B, Net Income was ¥34.6B (-10.7%). The reduction in net one-off gains from +¥17.6B to +¥11.6B and the occurrence of foreign exchange loss were the main drivers of the decline in Net Income, resulting in a final-period decrease despite top-line and operating improvements.
The Heat Exchanger Business recorded Revenue ¥172.3B (+6.7%), Operating Income ¥9.9B (-26.4%), and margin 5.7% (prior year 8.3%), with a significant decline in profitability. Despite Revenue growth, increases in cost of goods sold and adverse product mix pressured profits, reducing the segment’s share of segment Operating Income to 28.4% (prior year 43.9%). The Process Engineering Business achieved Revenue ¥224.1B (+30.6%), Operating Income ¥21.3B (+50.1%), and margin 9.5% (prior year 8.3%), realizing both growth and higher profitability and becoming the core business accounting for 61.1% of segment Operating Income. Progress on large orders and improved utilization contributed, with Operating Income growth outpacing Revenue growth. The Valve Business posted Revenue ¥51.8B (+4.6%), Operating Income ¥3.7B (+25.3%), and margin 7.1% (prior year 5.9%), improving contribution with a 10.6% share. Other businesses (including power generation) were small at Revenue ¥0.7B and Operating Income ¥0.5B but maintained a high margin of 72.2%.
[Profitability] Operating margin of 7.4% fell 0.2 points from 7.6% a year earlier; Net margin of 7.7% declined 2.4 points from 10.1%. ROE was 5.5% (prior year 6.3%), decomposable as Net Margin 7.7% × Total Asset Turnover 0.54 × Financial Leverage 1.31, indicating a relatively capital-rich structure with mid-level returns. EBITDA margin was 11.3% (Operating Income ¥33.0B + Depreciation ¥17.5B = ¥50.5B ÷ Revenue ¥448.9B), maintaining double-digit level. [Cash Quality] Operating Cash Flow / Net Income ratio was 0.49x, low, as declines in contract liabilities of ¥27.9B, decreases in accounts payable of ¥10.4B, tax payments ¥21.1B, and non-cash adjustments such as gain on sale of investment securities depressed operating cash flow. Working capital efficiency: DSO 62 days, DIO 123 days, DPO 26 days, CCC 151 days; Work-in-progress ratio at 51% indicates large cash tied to big projects. [Investment Efficiency] Total Asset Turnover 0.54x, Work-in-progress ¥59.4B (prior year ¥72.7B) decreased but remains high; Inventory turnover days 123 days reflecting cash retention tied to project progress. [Financial Health] Equity Ratio 76.2% (prior year 72.1%) is robust; Current Ratio 289.8%, Quick Ratio 260.8% indicate very high liquidity. Interest-bearing liabilities totaled ¥46.7B (long-term debt ¥6.7B + corporate bonds ¥40.0B; including corporate bonds maturing within 1 year ¥13.3B), Debt/EBITDA ratio 0.92x, Interest Coverage 183x (Operating Income ¥33.0B ÷ interest expense ¥0.2B), indicating top-tier financial resilience.
Operating Cash Flow was ¥17.1B (prior year ¥47.2B, -63.9%). Operating cash flow before working capital changes totaled ¥39.5B, but decreases in contract liabilities ¥27.9B (decline in advances received), decreases in accounts payable ¥10.4B, corporate tax payments ¥21.1B absorbed cash; additionally, non-cash adjustments including gain on sale of investment securities ¥14.9B and gain on sale of fixed assets ¥5.6B pushed operating cash flow down. Inventory reduction ¥18.3B (conversion of inventory to cash) contributed inflow. Operating CF / Net Income ratio 0.49x indicates weak cash realization, mainly due to working capital cash absorption (CCC 151 days). Investing Cash Flow was +¥3.6B (net inflow), as proceeds from sale of tangible fixed assets ¥15.5B partially offset capital expenditures ¥28.4B and sale of investment securities proceeds ¥16.8B contributed. Financing Cash Flow was -¥31.4B, driven by dividend payments ¥13.6B, share buybacks ¥13.4B, and payments to noncontrolling interests under equity method ¥3.9B. Free Cash Flow was ¥20.7B (Operating CF ¥17.1B + Investing CF ¥3.6B), covering dividend payments ¥13.6B and part of capital expenditures, with cash and deposits at ¥120.1B (prior year ¥129.1B) maintaining ample liquidity. Overall, the softening in Operating CF was largely due to a temporary decline in contract liabilities and increased tax payments; improving working capital efficiency is key to improving cash conversion going forward.
Ordinary Income of ¥36.2B vs Net Income of ¥34.6B shows a small divergence, indicating stable earnings at the ordinary level. Ordinary Income benefited from stable dividend income ¥4.1B (80% of non-operating income), while a foreign exchange loss ¥1.1B occurred as a non-operating expense, resulting in only +¥3.2B addition from Operating Income to Ordinary Income. Net extraordinary items amounted to +¥11.6B (extraordinary gains ¥20.5B - extraordinary losses ¥8.9B), with one-off gains from sale of investment securities ¥14.9B and sale of fixed assets ¥5.6B, partially offset by non-recurring costs such as environmental measures ¥3.3B. Compared to prior year net extraordinary items +¥17.6B, one-off contributions shrank. Of this period’s Net Income ¥34.6B, estimated stable earnings on an ordinary basis account for ¥34.6B (approximately ¥22.9B on a post-tax basis before extraordinary adjustments), and one-off contributions are estimated at about ¥11.6B (pre-tax). Comprehensive income was ¥62.9B (Net Income ¥34.6B + Other Comprehensive Income ¥28.3B); key components of OCI were valuation differences on securities ¥20.3B, foreign currency translation adjustments ¥6.2B, and retirement benefit adjustments ¥2.2B. The divergence of +¥28.3B between Net Income and Comprehensive Income reflects accumulated valuation gains and is not realized profit. The fact Operating CF ¥17.1B is significantly below Net Income ¥34.6B is due to temporary declines in contract liabilities and increased tax payments, in addition to working capital cash absorption (persistent work-in-progress), indicating significant room to improve cash realization quality.
Full-year guidance was conservatively set at Revenue ¥440.0B (-2.0%), Operating Income ¥33.0B (-0.1%), Ordinary Income ¥36.0B (-0.6%), Net Income ¥24.1B (EPS91.66円). Actuals were Revenue ¥448.9B (achievement 102.0%), Operating Income ¥33.0B (100.0%), Ordinary Income ¥36.2B (100.6%), Net Income ¥34.6B (143.6%), with Revenue and Ordinary Income slightly above guidance and Net Income significantly above due to one-off gains. Compared with full-year guidance, Operating Income met expectations, Revenue exceeded guidance, and final profit substantially exceeded guidance due to extraordinary gains. Going forward, continuation of large orders in the Process Engineering Business and recovery of profitability in the Heat Exchanger Business will be key.
Annual dividend is ¥55 (interim ¥27 + year-end ¥28), with payout ratio 45.8% (total dividends ¥14.6B ÷ Net Income ¥34.6B ×100, noting actual cash dividend after treasury stock deduction is ¥13.64B) at a mid-level. This is a substantial increase from prior year dividend ¥21 (interim and year-end ¥10.5 each), indicating a strengthened return policy tied to profit growth. Share buybacks of ¥13.4B were executed; combined with dividends ¥13.6B, Total Return Ratio is approximately 78.2% (total return ¥27.0B ÷ Net Income ¥34.6B), demonstrating an aggressive shareholder return stance. Free Cash Flow ¥20.7B vs dividends ¥13.6B gives FCF coverage 1.52x; relative to combined dividend + buybacks ¥27.0B, coverage is 0.77x, meaning total returns slightly exceed cash generation and Operating CF softness is a factor. However, with cash and deposits ¥120.1B, there is no short-term concern about dividend sustainability. In the medium term, improvement in Operating CF and working capital efficiency will underpin sustainable shareholder returns.
Heat Exchanger Business profitability risk: Operating margin declined from 8.3% to 5.7% (-2.6 points) and Operating Income fell by -26.4% YoY. Cost increases and adverse product mix are the main causes; if price pass-through delays or competitive pressures persist, corporate earnings could be downgraded. The segment’s share of segment Operating Income shrank from 43.9% to 28.4%, and structural recovery of profitability is a challenge.
Working capital cash absorption risk: Work-in-progress ¥59.4B (51% of inventory), CCC 151 days, Operating CF / Net Income ratio 0.49x show significant cash tied up by large projects. Contract liabilities are ¥30.6B (prior year ¥58.4B), a large decrease that reduces the buffer of advances received; project delays or cost overruns could further deteriorate cash flow and necessitate additional working capital. Prolonged DSO 62 days and DIO 123 days impede capital efficiency and constrain growth investment capacity.
Foreign exchange and environmental cost volatility risk: Foreign exchange loss ¥1.1B was recorded as non-operating expense, depressing Ordinary Income. Environmental measures of ¥3.3B were recorded as special losses; future regulatory tightening or equipment renewal needs could result in similar costs. Effectiveness of FX hedging is limited (deferred hedge profit/loss -¥0.2B), and currency mismatches in import/export transactions remain an earnings volatility factor.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.4% | 7.8% (4.6%–12.3%) | -0.4pt |
| Net Margin | 7.7% | 5.2% (2.3%–8.2%) | +2.5pt |
Operating margin is slightly below the industry median, while Net margin is 2.5 points above the median, placing the company relatively high. Excluding one-off contributions, the company maintains relatively high profitability on an ordinary basis.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 17.0% | 3.7% (-0.4%–9.3%) | +13.3pt |
Revenue growth rate of 17.0% significantly exceeds the industry median of 3.7%, placing the company among top-growth peers. Large order intake in the Process Engineering Business is driving growth.
※ Source: Company aggregation
Process Engineering Business became the core and changed the profit structure: It grew to account for 61.1% of Operating Income and achieved a high margin of 9.5%. With Revenue growth +30.6% and Operating Income growth +50.1%, it is superior both in growth and profitability, shifting the company’s performance to be dependent on backlog digestion and project quality. Although backlog disclosure is not provided, the decline in contract liabilities to ¥30.6B (prior year ¥58.4B) suggests recent progress on orders; new order trends will be a catalyst for medium-term growth.
Recovery potential in Heat Exchanger Business profitability: Although margin fell to 5.7% (prior year 8.3%), Revenue of ¥172.3B is substantial and offers large upside from improvements. If cost optimization, price pass-through, and product mix improvements restore margin by 1 point, Operating Income could increase by ¥1.7B, directly boosting corporate margins. Structural recovery of profitability will be a key focus in the next evaluation phase.
Working capital efficiency and cash conversion improvement potential: With Operating CF / Net Income 0.49x and CCC 151 days, capital efficiency is an issue; compressing work-in-progress (through advanced project management) and shortening DSO (improving collection terms) could bring Operating CF in line with Net Income, potentially doubling FCF to over ¥40B and expanding both shareholder return capacity and growth investment potential. The decline in contract liabilities is seen as temporary; recovery in orders and increases in advances received would catalyze cash flow improvement.
This report was auto-generated by AI analyzing XBRL earnings release data and is a financial results analysis document. It is not a recommendation to invest in any specific security. Sector benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your own responsibility; consult a professional advisor as needed.