| Metric | This Period | Prior Year | 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 / Net Profit | ¥41.9B | ¥48.4B | -13.5% |
| ROE | 10.5% | 13.1% | - |
For the fiscal year ended March 2026, Revenue was ¥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 was ¥41.9B (YoY -¥6.5B -13.5%). Revenue declined sharply due to the swing from a large U.S. semiconductor project in the prior year, resulting in a material reduction in operating-scale profits. Gross margin improved to 22.6% (+0.7pt from 21.9% in the prior year), but operating margin fell to 11.9% (-4.0pt from 15.9% in the prior year) as fixed-cost absorption weakened. The gap between Ordinary Income and Net Income was small and special gains/losses were immaterial. Operating Cash Flow was ¥43.6B, a swing to positive from -¥202.0B in the prior year, and Free Cash Flow was ¥32.1B, largely self-funding the dividend payout.
Revenue of ¥562.5B represented a large YoY decline of -41.6%. By region, the U.S. was ¥100.8B (-80.8%), hit directly by the swing from the prior-year large semiconductor project for Samsung Austin (¥524B), which led the company-wide revenue decline. Korea grew to ¥95.8B (+131.5%), driven by expanded projects for SK Hynix. Japan remained resilient at ¥290.9B (+0.9%), with LAPIS Semiconductor as a core customer. China decreased to ¥77.0B (-23.0%) and Taiwan to ¥35.4B (-17.6%). The core water treatment equipment design and construction business faced a trough in the semiconductor capex cycle and a timing gap between large projects.
Cost of sales was ¥435.4B (77.4% of sales), yielding Gross Profit of ¥127.1B and a Gross Margin of 22.6% (+0.7pt YoY), supported by improved project mix and maintained pricing. SG&A was ¥60.4B (10.7% of sales), up from ¥57.4B (6.0% of sales) in the prior year; fixed-cost reductions did not keep pace with the revenue decline, worsening the SG&A ratio. Operating Income of ¥66.7B (Operating Margin 11.9%) was down ¥87.0B from ¥153.7B (15.9%) in the prior year; operating leverage reversed, reducing margins by -4.0pt. Non-operating income totaled ¥13.0B, primarily ¥10.6B in foreign exchange gains, while non-operating expenses were ¥23.4B, mostly interest expense of ¥23.2B. Ordinary Income was ¥56.3B (Ordinary Income Margin 10.0%), down from ¥134.0B (13.9%); interest burden amplified the decline from operating-level profitability. Special gains were ¥0.2B (gain on sale of investment securities) and special losses were ¥0.0B, effectively neutral. Pre-tax income of ¥56.5B less income taxes of ¥18.3B (effective tax rate 32.4%) resulted in Net Income of ¥41.9B (Net Margin 7.4%). In conclusion, the company experienced a revenue decline accompanied by profit decline.
Japan: Revenue ¥290.9B (+0.9%), Operating Income ¥30.8B (-23.1%), Margin 10.6%. Domestic semiconductor customers are the core; revenue was resilient but margin fell from 13.9% in the prior year due to intensified competition and tougher project profitability.
U.S.: Revenue ¥100.8B (-80.8%), Operating Income ¥23.6B (-72.3%), Margin 23.4%. The swing from the prior-year Samsung Austin large project hit hard, but margin remains the highest among segments, reflecting selection of high value-added projects.
Korea: Revenue ¥95.8B (+131.5%), Operating Income ¥4.0B (+25.7%), Margin 4.2%. Growth was driven by SK Hynix projects; revenue expanded rapidly but profitability remains low as startup costs weigh on margins.
China: Revenue ¥77.0B (-23.0%), Operating Income ¥0.9B (-90.5%), Margin 1.2%. Demand slowdown and intensified competition severely eroded profitability, approaching breakeven.
Taiwan: Revenue ¥35.4B (-17.6%), Operating Income ¥7.5B (-51.4%), Margin 21.3%. Revenue decline led to profit reduction, but margin remains high after the U.S., supported by technically advantaged projects.
Profitability: Operating Margin of 11.9% declined -4.0pt from 15.9% due mainly to reduced fixed-cost absorption from scale contraction. Gross Margin improved to 22.6% (+0.7pt) supported by project mix and pricing. ROE 10.5% declined sharply from 31.4% in the prior year, driven by deterioration in Net Margin to 7.4% (prior year 10.6%) and Total Asset Turnover falling to 0.51x (prior year 0.83x). ROA (Ordinary Income basis) was 5.0%, down from 14.3%, reflecting lower revenue and Ordinary Income margin.
Cash Quality: Operating Cash Flow (OCF) was ¥43.6B, a swing to positive from -¥202.0B, aided by a reduction in trade receivables of ¥66.9B and reversal in contract liabilities of -¥76.5B. OCF/Net Income was 1.04x (Net Income base ¥41.9B), indicating reasonable cash conversion of profits. OCF/EBITDA was 0.52x (EBITDA ¥83.6B = Operating Income ¥66.7B + Depreciation ¥16.9B), a low level, pressured by trade payables decrease of -¥23.3B, corporate tax payments of -¥22.6B, and interest payments of -¥30.7B. Free Cash Flow was ¥32.1B, covering total dividends of ¥30.3B.
Investment Efficiency: Total Asset Turnover was 0.51x (Total Assets ¥1,102.9B), down from 0.83x, affected by elevated contract assets of ¥773.6B and declining sales. Capital expenditure was ¥13.8B, below depreciation of ¥16.9B, with CapEx/Depreciation at 0.82x, indicating restraint.
Financial Soundness: Equity Ratio was 36.1% (Net Assets ¥398.5B / Total Assets ¥1,102.9B), improved from 31.7%, aided by asset contraction and retained earnings accumulation. Current Ratio was 146.6% (Current Assets ¥999.9B / Current Liabilities ¥682.1B), superficially indicating short-term liquidity. Interest-bearing debt is dominated by short-term borrowings of ¥510.7B, with Debt/EBITDA 6.1x and Interest Coverage 2.9x (Operating Income ¥66.7B / Interest Paid ¥23.2B), reflecting high leverage and heavy interest burden. Cash and deposits of ¥104.3B versus short-term borrowings of ¥510.7B gives Cash / Short-term Interest-bearing Debt of 0.20x, highlighting refinancing risk.
OCF was ¥43.6B, a swing to positive from -¥202.0B in the prior year. Subtotal (before working capital changes) was ¥95.4B; trade receivables decrease +¥66.9B and advance payments received decrease +¥11.1B contributed to inflows, while contract liabilities decrease -¥76.5B, trade payables decrease -¥23.3B, and inventories increase -¥9.1B were outflow factors. Interest and dividend income +¥1.5B was offset by interest paid -¥30.7B and corporate tax paid -¥22.6B. Investing CF was -¥11.5B, led by CapEx -¥13.8B, partly offset by time deposits net +¥2.9B. Financing CF was -¥69.1B, driven by net decrease in short-term borrowings -¥36.1B (draws ¥21.7B - repayments ¥57.8B), dividend payments -¥30.3B, and lease liability repayments -¥6.5B. Free Cash Flow of ¥32.1B covered dividends, but foreign exchange impact -¥29.1B resulted in cash and deposits decreasing by -¥66.1B to ¥104.3B. On working capital, trade receivables collection progressed, but the decrease in contract liabilities reflects variability in project progress and acceptance timing; trade payables reduction reflects normalization of payment terms. Improving cash conversion efficiency requires earlier acceptance of in-process projects and optimization of payables and inventory.
Core earnings derive from design, construction, and maintenance of water treatment equipment, generating Operating Income of ¥66.7B from recurring business activities. Non-operating income of ¥13.0B (2.3% of sales) was minor and largely one-off FX gains of ¥10.6B. Most of non-operating expenses ¥23.4B were interest expense ¥23.2B, indicating a structural interest burden on ¥510.7B of interest-bearing debt. Special gains ¥0.2B (gain on sale of investment securities) and special losses ¥0.0B were neutral, with minimal impact on Net Income. Comprehensive income was ¥48.6B, ¥6.7B above Net Income; Other Comprehensive Income +¥10.5B comprised foreign currency translation adjustments +¥9.0B and unrealized gains on securities +¥1.5B, reflecting benefits from a weaker yen on overseas assets. OCF of ¥43.6B was 1.04x Net Income ¥41.9B, indicating reasonable cash backing of profits and limited accruals—quality of accounting earnings is not a major concern. However, the divergence between Operating Income ¥66.7B and Net Income ¥41.9B (a -37.2% gap) is primarily due to interest expense ¥23.2B and an effective tax rate of 32.4%; reducing interest burden would directly improve quality of earnings.
The company forecasts for the fiscal year ending March 2027: Revenue ¥970.0B (YoY +72.5%), Operating Income ¥160.0B (+140.0%), Ordinary Income ¥150.0B (+166.5%), Parent Company Net Income ¥111.0B, EPS ¥289.90. The revenue recovery assumes resumption of large projects following the prior-year swing and an acceleration of the semiconductor equipment investment cycle. Progress rates at the half-year are Revenue ¥562.5B / ¥970.0B = 58.0%, Operating Income ¥66.7B / ¥160.0B = 41.7%, Ordinary Income ¥56.3B / ¥150.0B = 37.5%, indicating front-loaded revenue and back-loaded profitability. Achieving the full-year plan requires order accumulation in H2, resumption of large U.S. projects, and improved profitability of Korean projects. Recovery to an Operating Margin of 16.5% (¥160B/¥970B) depends on maintaining Gross Margin and normalizing SG&A ratio; acceleration of contract asset turnover and normalization of acceptance timing are critical. Dividend forecast of ¥30 (down from ¥81) signals a significant payout cut to prioritize leverage reduction and cash preservation. Risks to the plan include changes in U.S. customers’ investment plans, delays in Korean project ramp-ups, yen appreciation, and higher interest rates increasing funding costs.
Annual dividend was ¥81 (interim ¥20, year-end ¥61), with total dividends of ¥30.3B (Payout Ratio 72.3%) relative to Net Income ¥41.9B, a high level. This represented a large increase from prior-year interim dividend ¥20 (Payout Ratio 29.7%), reflecting both a prior-year suppressed dividend from underperformance and that Net Income fell less than Operating Income. Free Cash Flow of ¥32.1B slightly exceeded dividends of ¥30.3B, covering shareholder payouts on an annual basis. Share buybacks were -¥0.0B (none executed). The dividend forecast for FY2027 of ¥30 is a substantial reduction from ¥81, implying a Payout Ratio of 10.3% against forecast EPS ¥289.90, reflecting a conservative stance prioritizing leverage reduction and financial flexibility. DOE (Dividend on Equity) was 9.2% (Dividends ¥30.3B / Shareholders’ Equity ¥367.2B), relatively high, but expected to decline as net assets accumulate next fiscal year. Given short-term borrowing dependence and cash conversion efficiency issues, dividend sustainability depends on performance recovery and normalization of Operating Cash Flow.
Refinancing risk from short-term borrowing dependence: All interest-bearing debt ¥510.7B is short-term borrowings, and with Cash ¥104.3B Cash / Short-term Interest-bearing Debt is 0.20x, leaving a fragile liquidity buffer. Debt/EBITDA is 6.1x and Interest Coverage is 2.9x, indicating high leverage; interest rate increases or deterioration in refinancing terms could sharply impact liquidity and earnings. Securing longer-term financing and committed lines is urgent.
Dependence on large projects and project progress variability: Contract assets ¥773.6B (70.2% of Total Assets) and work-in-progress ¥35.9B remaining high indicate prolonged large semiconductor project timelines. The prior-year swing from the Samsung Austin project, resulting in U.S. revenue -80.8%, demonstrates that changes in major customers’ investment plans or delays in acceptance can have outsized effects on revenue, profits, and cash. Diversifying projects and strengthening progress management are key.
Operating leverage reversal and margin deterioration risk: SG&A of ¥60.4B did not decline in line with revenue, worsening the SG&A ratio to 10.7% (prior year 6.0%). China and Korea margins are in the 1–4% range, keeping overall profitability pressured by regional and project mix shifts. Even with continued Gross Margin improvement, weakened fixed-cost absorption risks continued -4.0pt decline in Operating Margin unless order recovery and SG&A optimization occur.
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 |
Operating Margin is +4.1pt above the industry median, reflecting the high value-added nature of water treatment technology.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -41.6% | 3.7% (-0.4%–9.3%) | -45.3pt |
Revenue growth is -45.3pt below the industry median, showing a pronounced temporary decline due to the swing from large projects.
※Source: Company compilation of public financial statements
While revenue declined -41.6% and Operating Income fell -56.6% amid a trough in the large-project cycle, Gross Margin of 22.6% (+0.7pt) and Operating Margin of 11.9% (industry median +4.1pt) remain at upper-quartile levels, confirming resilience in technological advantage and pricing power. High margins in the U.S. and Taiwan segments (23.4% / 21.3%) demonstrate selection of high value-added projects, and Korea’s rapid expansion (+131.5% in revenue) suggests progress in geographic diversification. The FY2027 plan (Revenue ¥970B, Operating Income ¥160B) is ambitious (+72.5% / +140.0%), but visibility of order recovery and acceleration of contract asset turnover are key to achievement.
Dependence on short-term borrowings of ¥510.7B (100% of interest-bearing debt), Debt/EBITDA 6.1x, and Cash / Short-term Interest-bearing Debt 0.20x highlight acute leverage and liquidity risks; securing longer-term financing and committed lines is a top priority. Although OCF turned positive to ¥43.6B from -¥202.0B, OCF/EBITDA 0.52x indicates low cash conversion efficiency, and improvements are needed via payables and inventory management and reducing interest payments -¥30.7B. Dividend cut from ¥81 to ¥30 shows a shift to a conservative policy prioritizing financial flexibility. Sustainability of shareholder returns depends on a V-shaped recovery in performance and normalization of cash generation.
This report was automatically generated by AI analyzing XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are compiled by the firm based on public financial statements and are for reference only. Investment decisions are your responsibility; consult a professional as needed.