| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥562.5B | ¥963.6B | -41.6% |
| Operating Income / Operating Profit | ¥66.7B | ¥153.7B | -56.6% |
| Ordinary Income | ¥56.3B | ¥134.0B | -58.0% |
| Net Income | ¥41.9B | ¥48.4B | -13.5% |
| ROE | 10.5% | 13.1% | - |
For the fiscal year ended March 2026, Revenue / Net Sales were ¥562.5B (YoY -¥401.0B -41.6%), Operating Income was ¥66.7B (YoY -¥87.0B -56.6%), Ordinary Income was ¥56.3B (YoY -¥77.7B -58.0%), and Net income attributable to parent company shareholders was ¥38.2B (YoY -¥63.8B -62.6%), marking a substantial decline in both sales and profits. The primary driver was a pullback after a very large semiconductor-related project executed in the U.S. in the prior year; U.S. segment revenue plunged by 80.8% YoY while Korea expanded by 131.5%, accelerating geographic diversification. Gross margin improved to 22.6% (+0.7pt YoY), but operating leverage deteriorated due to lower revenue, pushing Operating Margin down 4.1pt to 11.9% (prior year 16.0%). At the ordinary income stage, foreign exchange gains of ¥10.6B supported results, but interest expense of ¥23.2B was a heavy burden and worsening non-operating results amplified the decline in Ordinary Income. At the Net Income stage, special gains/losses were minor and the effective tax rate was 32.4%, a normal level, but Net Margin fell 3.2pt to 7.4% (prior year 10.6%) due to operating profit deterioration.
[Revenue] Topline decreased sharply to ¥562.5B (YoY -41.6%), hit directly by the pullback from the prior-year ultra-large semiconductor project. By region, the U.S. contracted substantially to ¥100.8B (-80.8%) from ¥523.7B in the prior year, reflecting the completion of the SAMSUNG AUSTIN SEMICONDUCTOR-related project that drove results last year. Conversely, Korea expanded to ¥95.8B (+131.5%), led by SK Hynix, while China fell to ¥77.0B (-23.0%) and Taiwan to ¥35.4B (-17.6%). Japan was ¥290.9B (+0.9%), a slight increase supported by projects for LAPIS Semiconductor. Segment revenue mix was Japan 51.7%, U.S. 17.9%, Korea 17.0%, China 13.7%, Taiwan 6.3%, indicating progress in geographic diversification but continuing high dependence on U.S. projects that amplifies earnings volatility. Contract assets remained high at ¥773.6B, and the pipeline waiting on project progress poses timing risk for revenue recognition.
[Profitability] Gross margin improved to 22.6% (prior year 21.9%) by 0.7pt, supported by changes in project mix and price maintenance. The U.S. segment maintained high margins at 23.4% and Taiwan at 21.3%, confirming margin preservation based on technological advantage. SG&A rose slightly to ¥60.4B (prior year ¥57.4B) and fixed cost reduction lagged the revenue decline, raising the SG&A ratio to 10.7% (prior year 6.0%) up 4.7pt. Consequently, Operating Income deteriorated to ¥66.7B (-56.6%), with Operating Margin down to 11.9% (prior year 16.0%), showing a reversal of operating leverage due to reduced scale. At the non-operating level, interest and dividend income totaled ¥1.1B and foreign exchange gains ¥10.6B (total ¥11.7B), while non-operating expenses of ¥23.4B—mainly interest expense of ¥23.2B—resulted in a non-operating deficit of -¥10.4B. The interest burden on short-term borrowings of ¥510.7B is heavy, leaving an interest coverage ratio of only 2.87x. Ordinary Income fell to ¥56.3B (-58.0%), a larger drop than Operating Income, reflecting the significant financial cost burden. Special gains/losses were minor (gains ¥0.2B, losses ¥0.01B). After deducting corporate taxes of ¥18.3B from Pre-tax Income of ¥56.5B (effective tax rate 32.4%), Net income attributable to parent company shareholders was ¥38.2B (-62.6%). In conclusion, substantial revenue decline from the prior-year U.S. large project, delayed fixed-cost reductions causing operating leverage deterioration, and increased interest burden from reliance on short-term debt combined to produce the revenue and profit contraction.
Japan segment: Revenue ¥290.9B (YoY +0.9%), Operating Income ¥30.8B (-23.1%), Margin 10.6% (prior year 13.9%), showing profit decline and margin compression. A new project for LAPIS Semiconductor accounted for ¥104.7B, but overall profitability was weighed down by higher SG&A. U.S. segment: Revenue ¥100.8B (-80.8%), Operating Income ¥23.6B (-72.3%), Margin 23.4% (prior year when profit was ¥85.0B) — large YoY decline but retained high profitability. The prior-year SAMSUNG AUSTIN project of ¥524.4B reversed, and this period the same customer accounted for ¥100.8B, roughly one-fifth. Korea segment: Revenue ¥95.8B (+131.5%), Operating Income ¥4.0B (+25.7%), Margin 4.2% (prior year 7.7%) — strong top-line expansion but margins remain low. Expansion of business to SK Hynix (¥68.5B) contributed, but initial investment burdens and competitive pressures restrained margins. China segment: Revenue ¥77.0B (-23.0%), Operating Income ¥0.9B (-90.5%), Margin 1.2% (prior year 10.0%) — steep profit decline due to geopolitical risk and intensified competition. Taiwan segment: Revenue ¥35.4B (-17.6%), Operating Income ¥7.5B (-51.4%), Margin 21.3% (prior year 36.2%) — revenue and profit down but high-margin structure maintained. Company-wide, Japan accounted for 46.2% of Operating Income and remains the largest earnings source, followed by the U.S. 35.3% and Taiwan 11.3%. Korea and China are in revenue expansion phases; improving their profitability remains a challenge.
[Profitability] ROE 10.5% (prior year 31.4%) is explained by the product of Net Margin 6.8% (prior year 10.6%), Total Asset Turnover 0.51x (prior year 0.83x), and Financial Leverage 2.77x (prior year 3.16x); declines in Net Margin and turnover are the main drivers of the large deterioration. Operating Margin 11.9% (prior year 16.0%) declined 4.1pt, and SG&A ratio rose to 10.7% (prior year 6.0%) by 4.7pt, triggering a reversal of operating leverage. ROA (Ordinary) was 5.0% (prior year 14.3%), a large decline reflecting deteriorating asset efficiency and profitability. [Cash Quality] Operating Cash Flow (OCF)/Net Income was 1.23x (prior year -0.06x), an improvement showing generally good cash realization, but OCF/EBITDA was low at 0.56x, indicating room to improve working capital management. Accrual ratio was -0.8%, indicating healthy earnings quality. [Investment Efficiency] Total Asset Turnover 0.51x (prior year 0.83x) fell sharply with the revenue drop, and contract assets remained elevated at ¥773.6B, pushing up total assets. Capital expenditure was ¥13.8B, below depreciation of ¥16.9B, with CapEx/Depreciation at 0.81x, indicating restrained investment. [Financial Soundness] Equity Ratio 36.1% (prior year 31.7%) improved due to higher net assets, but Debt/Equity was 1.28x and Interest-bearing Debt/EBITDA was 6.11x, both still high. Current Ratio 146.6% (prior year 138.2%) and Quick Ratio 146.0% show short-term liquidity superficially secured, but short-term borrowings of ¥510.7B comprise all interest-bearing debt and cash/short-term debt ratio is only 0.20x, so liquidity buffer is limited. Interest Coverage was 2.87x (prior year 8.09x), markedly lower, indicating reduced capacity to bear interest.
Operating Cash Flow was ¥46.8B (prior year -¥202.0B), a major improvement. Starting from Pre-tax Income ¥56.5B, subtotal before working capital changes was ¥98.6B, then working capital changes totaled -¥51.8B (decrease in trade receivables ¥66.9B, inventory increase -¥9.1B, decrease in accounts payable -¥23.3B, decrease in advance payments ¥11.1B, decrease in contract liabilities -¥76.5B, etc.), interest payments -¥30.7B, and corporate tax payments -¥22.6B, resulting in ¥46.8B generated. Large reductions in trade receivables and recovery of advance payments supported cash generation, reversing receivables expansion from prior large projects. The large decrease in contract liabilities (-¥76.5B) reflects recognition of previously received advances upon acceptance, and rebuilding advance receipts through new project wins will be key to improving cash flow. OCF/Net Income at 1.23x is healthy, but OCF/EBITDA 0.56x is low, suggesting scope to improve interest/tax burden and working capital management. Investing Cash Flow was -¥14.7B, restrained and consisting mainly of CapEx ¥13.8B and purchases of investment securities ¥3.1B, netting -¥14.7B after sales/collections. CapEx/Depreciation was 0.81x, keeping investment at maintenance levels to conserve cash. Free Cash Flow was ¥32.1B (prior year -¥222.0B), turning positive and nearly covering total dividends of ¥30.3B, securing dividend sustainability on an annual basis. Financing Cash Flow was -¥69.1B, a net of short-term borrowings decrease -¥36.1B (increase ¥21.7B, decrease -¥57.8B), dividend payments -¥30.3B, lease repayments -¥6.5B, share buybacks -¥0.0B, and proceeds from treasury share disposals ¥3.7B. Cash and equivalents fell from ¥165.4B at the beginning of the period to ¥99.3B at period end (-¥66.1B), with FX effects of -¥29.1B also weighing. Declining liquidity, together with short-term borrowing reliance, constrains cash-flow flexibility, making long-term financing and commitment line arrangements a priority for financial strategy.
Core earnings stem from the water treatment equipment business (design, construction, maintenance), with Operating Income of ¥66.7B comprising recurring earnings. Special gains/losses were minimal (gains ¥0.2B from sales of investment securities; losses ¥0.01B including disposal losses of fixed assets), affecting Pre-tax Income of ¥56.5B by only 0.3%, supporting high quality of Net Income ¥38.2B. Of non-operating income ¥12.99B, foreign exchange gains ¥10.6B accounted for 81.6%, indicating significant contribution from one-off factors. FX gains reflect valuation gains on foreign-currency sales and assets amid yen depreciation and are therefore of limited sustainability. Of non-operating expenses ¥23.4B, 99.2% was interest expense ¥23.2B, showing the interest burden on short-term borrowings of ¥510.7B is a recurring cost. Accrual ratio ((Net Income - Operating CF)/Total Assets) was -0.8%, negative and indicating cash generation exceeds accounting profit, a healthy sign. Operating CF ¥46.8B is 1.23x Net Income ¥38.2B, providing backing and indicating little divergence between accounting profit and cash generation. Comprehensive income was ¥48.6B (Net Income ¥38.2B + Other Comprehensive Income ¥10.5B). Other Comprehensive Income comprised foreign currency translation adjustments ¥9.0B, valuation differences on available-for-sale securities ¥1.5B, and deferred hedges -¥0.0B. Other Comprehensive Income ¥10.5B equals 27.5% of Net Income, mainly due to translation differences of overseas subsidiaries and not realized gains, so its impact on earnings quality is neutral. Overall, recurring operating income supplemented by temporary FX gains and pressure from interest expense characterizes the structure; sustainable earnings depend on recovery at the operating level and reduction of interest burden.
Full-year guidance assumes Revenue ¥970.0B (vs. this period +72.5%), Operating Income ¥160.0B (+140.0%), Ordinary Income ¥150.0B (+166.5%), and Net income attributable to parent company shareholders ¥111.0B (EPS ¥289.90), forecasting a substantial recovery. Given this period’s Revenue of ¥562.5B (YoY -41.6%), the full-year forecast implies a return to prior-year levels (Revenue ¥963.6B, Operating Income ¥153.7B), premised on a renewed upswing in the semiconductor equipment investment cycle and revival of large U.S. projects. Progress rates are Revenue 58.0%, Operating Income 41.7%, Ordinary Income 37.5%, Net Income 34.4%, indicating results are planned to be heavily skewed to the second half. Realization depends on progress of contract assets ¥773.6B, backlog acceptance, and new project wins in the U.S. and Korea. Dividend forecast is annual ¥30.0 (interim undecided, year-end undecided), a sharp cut from this period’s actual ¥81, normalizing payout ratio from about 86.2% this period to about 10.3% (based on forecast Net Income). Achieving guidance requires accelerated project progress in H2, maintaining gross margin (low-20s%), SG&A containment to improve Operating Margin (target 16.5%), and stabilization of interest burden. The upbeat forecast amid a volatile order environment necessitates monitoring quarterly order and revenue progress.
Annual dividend was ¥81 (Q2-end ¥20, year-end ¥61), with payout ratio 29.7% (XBRL-disclosed), while our calculation shows about 86.2% (Total dividends ¥30.3B / Net Income ¥38.2B ×100), a high level. Prior-year dividend was ¥20 (payout ratio 29.7%); this period dividends increased, but due to large Net Income decline, payout ratio surged. Free Cash Flow ¥32.1B nearly covered total dividends ¥30.3B (FCF coverage 0.98x), maintaining a level of dividend funding from internally generated funds on an annual basis. Share buybacks were essentially zero (-¥0.0B), so Total Return Ratio approximates payout ratio. Next fiscal year dividend forecast is ¥30, a large cut of -¥51 YoY, normalizing payout to about 10.3% (based on forecast Net Income ¥111.0B). The dividend cut reflects unsustainability of the high payout this period and a managerial decision to prioritize cash preservation given the short-term borrowing-dependent capital structure. Dividend sustainability depends on recovery of Operating Income, stable generation of Free Cash Flow, and reduction/lengthening of interest-bearing debt to reduce interest burden. With cash ¥104.3B, short-term borrowings ¥510.7B, and cash/short-term debt 0.20x, prioritizing financial soundness over dividend maintenance is reasonable.
Semiconductor capital expenditure cycle variability risk: The regional revenue mix has high exposure to semiconductor-related customers (U.S. 17.9%, Korea 17.0%, Taiwan 6.3%), and the U.S. declined sharply -80.8% YoY this period, directly impacting performance. Contract assets ¥773.6B (70.1% of total assets) represent balances awaiting revenue recognition under percentage-of-completion, and customer capex delays or acceptance delays can shift revenue recognition timing and affect liquidity. Work-in-progress ¥35.9B (inventory ratio 69.3%) and finished goods ¥3.9B make up the bulk of inventories, and project-level margin control and schedule delay risk drive profitability. Customer concentration is high: top customers LAPIS Semiconductor ¥104.7B, SAMSUNG AUSTIN ¥100.8B, SK Hynix ¥68.5B sum to ¥274.0B (48.7% of revenue), so their investment behavior amplifies earnings volatility.
Short-term borrowing dependence and interest burden risk: Interest-bearing debt ¥510.7B is composed 100% of short-term borrowings, with fixed liabilities only lease obligations ¥16.2B, representing an extreme short-term debt-dependent structure. Cash/short-term debt ratio 0.20x, Debt/EBITDA 6.11x, and Interest Coverage 2.87x indicate limited liquidity buffer and vulnerability to interest rate rises and refinancing risk. Interest payments ¥23.2B represent 34.8% of Operating Income ¥66.7B, and estimated effective interest rate is about 4.5% (interest payments / average borrowings). In a rising-rate environment, Ordinary Income would be heavily pressured, and delayed refinancing into long-term funds would heighten liquidity risk. On working capital, trade receivables decreased ¥66.9B supporting OCF, but advance payments decreased ¥11.1B and contract liabilities decreased -¥76.5B, so rebuilding advance receipts via new orders is essential to stabilize cash flows.
Foreign exchange volatility and uncertainty of overseas earnings: FX gains ¥10.6B accounted for 18.8% of Ordinary Income ¥56.3B, with yen depreciation boosting results. Foreign currency translation adjustment of ¥9.0B (OCI) also occurred, reflecting volatility in consolidated translation amounts. Overseas sales ratio totals 54.9% (U.S. 17.9%, Korea 17.0%, China 13.7%, Taiwan 6.3%), so FX movements directly affect revenue and profit. Yen appreciation could cause FX losses and weaken yen-denominated margins on overseas projects. Geopolitical risk is evident: China segment sales -23.0% and margin 1.2% are depressed, and U.S.-China semiconductor tensions and export control tightening could constrain project execution. Korea expanded sales +131.5% but margin remains low at 4.2%, with competition and initial investment costs pressuring profitability.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 11.9% | 7.8% (4.6%–12.3%) | +4.1pt |
| Net Margin | 7.4% | 5.2% (2.3%–8.2%) | +2.3pt |
Profitability exceeds industry median, confirming margin preservation through technological advantage and high value-added projects.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -41.6% | 3.7% (-0.4%–9.3%) | -45.3pt |
Revenue growth lags industry median significantly, reflecting a temporary drop due to the prior-year large project pullback.
※Source: Company compilation
Turning point in semiconductor investment cycle and visibility of order recovery: This period saw a large revenue decline of -41.6% due to the prior-year U.S. ultra-large project pullback, but gross margin improved to 22.6% (+0.7pt), suggesting intact pricing power based on technological advantage. Full-year guidance assumes a strong V-shaped recovery to Revenue ¥970B (+72.5%), reliant on semiconductor OEM capex reacceleration. Contract assets ¥773.6B are the potential revenue source; project progress and acceptance timing are key to recovery. Korea’s revenue +131.5% indicates progress in geographic diversification away from U.S. dependence, a structural improvement sign. While backlog disclosure is not provided, contract assets/revenue ratio of 1.38x is high, making new order accumulation and normalization of project schedules important for investment decisions.
Progress in financial strengthening and interest burden reduction: Short-term borrowings ¥510.7B (100% of interest-bearing debt), Debt/EBITDA 6.11x, and Interest Coverage 2.87x show leverage and interest burden are constraining profitability. Interest payments ¥23.2B are 34.8% of Operating Income, heavily eroding ordinary profitability. Free Cash Flow ¥32.1B covered dividends ¥30.3B, but liquidity remains limited (cash ¥104.3B, cash/short-term debt 0.20x), and refinancing risk is apparent. The decision to cut next-year dividend to ¥30 and prioritize financial repair is a positive sign. Whether the company can refinance into long-term debt, secure commitment lines, and reduce interest-bearing debt through higher OCF will be key to enhancing shareholder value.
Reversal of operating leverage and sustainability of profitability recovery: SG&A ratio rose to 10.7% (prior year 6.0%) by 4.7pt, revealing weak fixed cost absorption amid declining sales. Operating Margin of 11.9% still exceeds industry median 7.8% but fell 4.1pt from 16.0% last year; reversing operating leverage declines is necessary to restore earnings power. Recovery of high-margin projects in the U.S. and Taiwan (margins 23.4% and 21.3%) and improvement in Korea and China profitability (currently 4.2% and 1.2%) would support sustainable margin improvement. Note that FX gains ¥10.6B are a one-time factor, so ordinary profitability sustainability depends on operating recovery and easing of interest burden.
This report is an AI-generated earnings analysis produced by analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are compiled by the firm based on public financial statements as reference information. Investment decisions are your responsibility; please consult a professional advisor as necessary before making investment decisions.