HIRATA Corporation FY2026 FY Earnings Report

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Executive Summary

For the fiscal year ended March 2026, Revenue was ¥949.1B (YoY +¥64.2B +7.3%), Operating Income was ¥83.2B (YoY +¥14.2B +20.5%), Ordinary Income was ¥83.8B (YoY +¥14.9B +21.6%), and Net Income attributable to owners of parent was ¥60.8B (YoY +¥13.0B +27.2%), resulting in year-over-year increases in both sales and profit. Operating margin improved to 8.8% (up +1.0pt from 7.8% a year earlier) and gross margin was 21.9%; cost control proved effective and SG&A ratio improved to 13.2% reflecting efficiency gains. By segment, Semiconductor-related business led high growth with sales +19.6%, Automotive Business maintained high profitability with Operating Income of ¥51.4B and margin of 11.8%, while the Semiconductor Business saw a decline in operating margin to 6.7%, creating profitability dispersion. Cash flow was robust with Operating Cash Flow (OCF) of ¥165.5B (YoY +75.5%), securing FCF of ¥127.8B and covering dividend payments of ¥12.3B by 5.7x. On the balance sheet, short-term borrowings were reduced by 84.4%, improving to a net cash position; Debt/EBITDA was 1.01x and interest coverage 30.2x, indicating very strong financial health. Contract liabilities rose to ¥44.5B (YoY +97.2%), indicating an increase in advance-received demand; construction in progress (CIP) up +438% is a leading indicator of an expanding CapEx pipeline. Against the full-year company plan (Revenue ¥1,000B, Operating Income ¥90B), results achieved 95% of Revenue and 92% of Operating Income, largely covering conservative guidance. Going forward, restoring profitability in the Semiconductor segment and improving inventory turnover (current 86 days) and work-in-progress ratio (55.6%) will be key to margin expansion.

Drivers of Performance

[Revenue] Revenue ¥949.1B (YoY +7.3%) was driven by Semiconductor-related sales of ¥361.1B (+19.6%) showing double-digit growth, while Automotive Business was steady at ¥434.8B (+1.0%). Other industrial automation equipment was ¥125.7B (-4.0%) a slight decline, and Other segments (non-reportable) expanded to ¥27.5B (+28.4%). Sales composition was Automotive 45.8%, Semiconductor 38.0%, Other industrial automation equipment 13.3%, maintaining a two-pillar structure of Automotive and Semiconductor. Contract liabilities increased from ¥22.6B to ¥44.5B (+97.2%), indicating accumulated advance-received orders and a positive bridge to future sales. Contract assets decreased from ¥304.6B to ¥208.6B (-31.5%) as amounts recognized as assets were converted to cash following progress in acceptance. Regional breakdown is not specified, but forex gains ¥0.77B and forex losses ¥1.02B yielded net impact of -¥0.25B, which is minor, suggesting limited impact from the overseas sales ratio.

[Profitability] Gross profit was ¥208.1B, with gross margin 21.9% (up +0.5pt from 21.4% prior year). SG&A was ¥124.9B; SG&A growth was restrained relative to revenue growth (+7.3%), improving the SG&A ratio to 13.2% (down -0.4pt from 13.6%) and demonstrating positive operating leverage. Operating Income was ¥83.2B (+20.5%), expanding margin to 8.8%. By segment, Automotive Business delivered Operating Income ¥51.4B (+22.6%) with margin 11.8%, contributing roughly 62% of consolidated Operating Income as the core business. Semiconductor-related segment posted Operating Income ¥24.2B (-15.4%) with margin down to 6.7%, suggesting impacts from product mix and project-level profitability. Other industrial automation equipment improved substantially with Operating Income ¥6.7B (+758.4%), and Other segments produced Operating Income ¥0.8B (+239.8%) turning profitable. Non-operating income was ¥5.4B (including dividend income ¥0.8B and forex gains ¥0.8B) and non-operating expenses were ¥4.9B (including interest expense ¥2.8B and forex losses ¥1.0B), resulting in Ordinary Income of ¥83.8B (up +21.6%) roughly in line with Operating Income growth. Extraordinary items were income ¥0.2B and losses ¥0.4B, net -¥0.2B, minor and reflecting gains on disposal of fixed assets versus impairment/retirement losses. Pre-tax income ¥83.5B less corporate taxes ¥22.8B, and after non-controlling interests contribution of -¥0.08B, Net Income attributable to owners of parent was ¥60.8B (+27.2%), outpacing Operating Income growth; effective tax rate fell to 27.3% from 31.5% a year earlier. In conclusion, the company achieved revenue and profit growth, margin improvement, supported by high margins in Automotive Business and cost containment.

Segment Analysis

Automotive Business reported Revenue ¥434.8B (YoY +1.0%) and Operating Income ¥51.4B (+22.6%), achieving margin 11.8% and accounting for approximately 62% of consolidated Operating Income as the primary segment. The margin improved substantially from 9.7% a year earlier, likely reflecting a higher mix of high-margin projects and cost efficiencies. Semiconductor-related business achieved high growth with Revenue ¥361.1B (+19.6%) but Operating Income declined to ¥24.2B (-15.4%) and margin fell to 6.7%. The deterioration from 8.5% indicates product mix and individual project profitability issues, making recovery of this segment a priority. Other industrial automation equipment saw Revenue ¥125.7B (-4.0%) but Operating Income improved sharply to ¥6.7B (+758.4%) with margin 5.3%, indicating progress in correcting the earnings structure. Other segments (non-reportable) posted Revenue ¥27.5B (+28.4%) and Operating Income ¥0.8B (+239.8%) with margin 2.9%, reflecting monetization of solar power generation and point management systems. Margin dispersion across segments is significant: while Automotive sustains high profitability and drives consolidated earnings, restoring profitability in Semiconductor will be key to further improving overall margins.

Key Financial Metrics

[Profitability] Operating margin 8.8% (up +1.0pt from 7.8% prior year), EBITDA margin 10.8% (EBITDA ¥102.4B = Operating Income ¥83.2B + Depreciation ¥19.2B) achieving double digits. Gross margin 21.9% reflects effective cost containment and SG&A ratio 13.2% indicates efficiency improvement. ROE is 6.8% (XBRL reported), consistent with Net Profit Margin 6.4% × Total Asset Turnover 0.723 × Financial Leverage 1.71x; improvement in net profit margin and asset turnover contributed to ROE uplift. ROA (based on Ordinary Income) is 6.4%, improved from 5.3% last year, confirming better asset efficiency. Return on equity relative to net income is 6.8%, higher than prior year, indicating shareholder value creation via retained earnings. [Cash Quality] OCF ¥165.5B is 2.72x Net Income ¥60.8B, showing excellent conversion of profit to cash; OCF/EBITDA is 1.62x, demonstrating superior cash conversion. Accrual ratio is -8.0%, favorable, and extraordinary items are minimal (net -¥0.2B), indicating high quality of earnings. On working capital, inventory turnover days are 86 days (inventory ¥17.45B ÷ (COGS ¥741.0B ÷365)) which is relatively long, and WIP ratio is 55.6% (WIP ¥6.00B ÷ inventory ¥17.45B) high, suggesting project progress bottlenecks. Days sales outstanding are 48 days ((Accounts receivable ¥11.90B + Notes receivable ¥1.32B + Contract assets ¥20.86B) ÷ (Revenue ¥949.1B ÷365)), which is standard. [Investment Efficiency] CapEx ¥3.51B is 1.83x depreciation ¥1.92B, indicating growth investment mode and capacity expansion ahead of returns. CIP increased from ¥0.49B to ¥2.62B (+438%), confirming an expanding investment pipeline. OCF ¥165.5B sufficiently funds CapEx and produced FCF ¥127.8B. [Financial Soundness] Equity Ratio 58.6% (up +5.8pt from 52.8% prior year), Current Ratio 211.7%, Quick Ratio 166.5% indicating very healthy liquidity. Interest-bearing debt is ¥10.34B (estimated from short-term borrowings ¥1.40B + short/long repayment portions ¥12.55B + long-term borrowings ¥8.94B), and cash ¥13.00B exceeds this, yielding a net cash position. Debt-to-equity ratio is 0.71x, Debt/EBITDA 1.01x, and interest coverage 30.2x (EBIT ¥83.2B ÷ interest expense ¥2.8B), showing strong financial resilience. Improvements from prior year include reduction of short-term borrowings from ¥8.95B to ¥1.40B (-¥7.55B, -84.4%), significantly reducing maturity mismatch risk.

Cash Flow Analysis

Operating Cash Flow was ¥165.5B, a substantial increase of +75.5% from ¥94.3B prior year, aided by improvements in working capital relative to pre-tax profit ¥83.5B. Operating cash flow subtotal (before working capital changes) was ¥186.8B; after adjusting non-cash items including Depreciation ¥19.2B, the main positive drivers were decrease in accounts receivable +¥76.4B (including effects from decline in contract assets) and increase in contract liabilities +¥20.1B. Inventory increased by -¥16.6B causing cash outflow, and corporate tax payments -¥19.4B, resulting in FCF of ¥127.8B. Investing CF was -¥37.6B, primarily CapEx -¥35.1B; purchase of investment securities -¥0.5B and sales +¥0.1B were minor net. Financing CF was -¥129.8B, prioritizing reduction of interest-bearing debt via long-term borrowings proceeds +¥119.5B versus repayments -¥156.8B and net reduction in short-term borrowings -¥75.6B. Dividend payments -¥12.3B and share buybacks -¥0.03B were both small, reflecting balanced capital allocation alongside financial repair. After forex impact +¥3.1B, ending cash was ¥13.00B (slight increase from ¥12.88B prior year), maintaining ample liquidity. OCF/Net Income 2.72x and OCF/EBITDA 1.62x indicate excellent cash realization, with working capital management improvements and increased contract liabilities (advance cash) boosting OCF.

Quality of Earnings

Earnings quality is high and driven by recurring operations. Non-operating income ¥5.4B (0.6% of sales) comprised dividend income ¥0.8B, forex gains ¥0.8B, subsidies ¥0.6B, and other ¥1.6B — all small and with some repeatability. Non-operating expenses ¥4.9B (0.5% of sales) included interest expense ¥2.8B, forex losses ¥1.0B, and other ¥0.4B; net forex impact was -¥0.25B (about 0.3% of Operating Income), minor. Extraordinary items were special gains ¥0.2B (gain on disposal of fixed assets) and special losses ¥0.4B (loss on retirement of fixed assets), net -¥0.2B (0.2% of Operating Income), indicating minimal one-off effects. Accrual ratio is -8.0% (estimated as (total working capital change − OCF) ÷ total assets), and OCF ¥165.5B is 2.72x Net Income ¥60.8B, signaling strong cash generation. The small difference between Ordinary Income ¥83.8B and Pre-tax profit ¥83.5B is minor; the gap between pre-tax profit and Net Income aligns with corporate taxes ¥22.8B (effective tax rate 27.3%). Comprehensive income was ¥92.2B exceeding Net Income ¥60.8B by ¥31.4B, primarily due to Other Comprehensive Income (currency translation adjustments ¥3.2B, valuation difference on available-for-sale securities ¥8.4B, retirement benefit adjustments ¥20.4B, etc.), indicating mainly temporary valuation movements. Overall, earnings are largely recurring and high quality, with limited influence from extraordinary items or non-operating items.

Forecasts & Guidance

The full-year company plan was Revenue ¥1,000B, Operating Income ¥90B, Ordinary Income ¥89B, and Net Income attributable to owners of parent ¥65B. Actuals were Revenue ¥949.1B (95% achieved), Operating Income ¥83.2B (92%), Ordinary Income ¥83.8B (94%), and Net Income attributable to owners of parent ¥60.8B (93%), broadly covering conservative guidance. The primary reason for shortfall is presumed to be the decline in Semiconductor segment operating margin (down to 6.7%), while Automotive’s high margin (11.8%) supported consolidated results. Order momentum appears solid as indicated by contract liabilities up +97.2%, and the remaining 5% shortfall in Revenue likely reflects slippage or margin erosion in some semiconductor projects. The 8% shortfall in Operating Income was dragged by Semiconductor segment’s -15.4% decline, but Automotive +22.6% and other improvements offset to deliver consolidated high growth of +20.5%. Ordinary Income and Net Income achieved levels similar to Operating Income achievement rates, with non-operating and extraordinary items within expected ranges. Dividend guidance matches actual at year-end ¥70 per share. If Semiconductor profitability is restored and inventory efficiency improves (shortening inventory turnover from 86 days and reducing WIP ratio 55.6%), upside is likely in the next fiscal year.

Shareholder Returns

Year-end dividend was ¥70 per share with payout ratio around 37% (XBRL reported payout ratio 25.9% may reflect a different EPS-based definition). FCF coverage was 5.66x (FCF ¥127.8B ÷ total dividends ¥22.6B), indicating ample capacity. Total dividends include ¥0.2B paid to the stock compensation trust for directors, with effective dividends of ¥12.5B and share buybacks essentially zero (-¥0.003B), so total return ratio is dividend-centric. Given low financial leverage (Equity Ratio 58.6%, net cash) and strong OCF ¥165.5B, the current dividend level appears sustainable, and there is scope for dividend increases in line with earnings growth. However, balancing with growth investments (CapEx/Depreciation = 1.83x) seems to be the base policy, making sudden large increases in shareholder returns unlikely. The XBRL-reported dividend payout ratio 25.9% is within typical manufacturing sector norms and suggests limited concerns about dividend continuity. Absence of share buybacks makes future capital allocation choices — dividend increases, special dividends, or share repurchases — a focal point for investors.

Risk Factors

1. Risk of further deterioration in Semiconductor segment profitability: Operating margin at 6.7% (down from 8.5% prior year) suggests project mix and large individual project profitability deterioration. Margin decline despite +19.6% sales growth indicates structural issues; delayed improvement would limit upside in consolidated margins (current weighted average 8.8% versus Automotive margin 11.8%). Semiconductor investment cycle volatility and evolving customer requirements could further pressure profitability.

2. Risk of working capital efficiency deterioration: Inventory turnover days 86 and WIP ratio 55.6% indicate pronounced inventory/wip retention. Although WIP decreased from ¥8.53B to ¥6.00B, it remains high relative to sales and, absent throughput improvements, may lead to inventory valuation losses or increases in provision for construction losses (current ¥0.5B). Prolonged supply chain constraints or procurement delays could worsen inventory efficiency and reduce OCF generation.

3. Risk from automotive and semiconductor investment cycle fluctuations: The core Automotive Business (62% of consolidated Operating Income) and Semiconductor Business (29% contribution) are dependent on customers’ CapEx cycles. Slowdown in EV/automation investments in automotive or inventory adjustments in semiconductors could cause sharp order declines. While contract liabilities up +97.2% provide short-term support, sustained demand weakness would not be fully mitigated. Project-based business inherently faces revenue and profit volatility and the risk of individual project losses that could materially impact consolidated earnings.

Industry Benchmarks (Reference, Company Estimates)

Profitability & Returns

Operating margin is 1.0pt above the industry median and net profit margin slightly exceeds the median, placing the company in a favorable profitability range within manufacturing.

Growth & Capital Efficiency

Revenue growth outperforms the industry median by 3.6pt, indicating above-median growth within peers.

※ Source: Company aggregation

Earnings Highlights

1. Note the combination of revenue and profit growth, margin improvement, and strong cash generation. Operating margin 8.8% (up +1.0pt from 7.8%), OCF ¥165.5B (up +75.5%), and FCF ¥127.8B all exceed industry medians. Coupled with a strong financial base (net cash, Debt/EBITDA 1.01x, interest coverage 30.2x), the company is positioned to balance sustained shareholder returns and growth investment. Contract liabilities +97.2% indicate accumulation of advance orders and serve as a positive leading indicator for next fiscal year revenue.

2. Restoring Semiconductor segment profitability and improving inventory efficiency are key to additional margin upside next fiscal year. Although Semiconductor sales grew +19.6%, margin fell to 6.7%; inventory turnover 86 days and WIP ratio 55.6% indicate bottlenecks. If these are addressed, consolidated operating margin could expand into the 10% range. CIP +438% increase points to an expanding CapEx pipeline; post-investment utilization improvements could drive incremental EBITDA margin expansion (current 10.8%).

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This report was auto-generated by AI analyzing XBRL financial statement data and is a financial analysis document. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your responsibility; consult advisors as needed.