NISSEI ASB MACHINE (6284) FY2026 Q1 Earnings Report

Quick View

Executive Summary

Although the company achieved operating income growth exceeding its revenue growth rate, Ordinary Income and Net Income did not increase to the same extent as Operating Income, indicating some variation in earnings quality. Revenue was ¥113.4B (+20.1% YoY), Operating Income was ¥25.9B (+25.7%), Ordinary Income was ¥27.4B (+11.2%), and Net Income was ¥19.0B (+10.9%). Growth in operating income was driven by higher revenue and profits in East Asia, South and West Asia, and Europe, while the Americas recorded higher revenue but lower segment profit. Together with the slowdown in the growth of non-operating income, this restrained the growth rates below the operating level.

Factors Affecting Performance

【Revenue】Revenue was ¥113.4B (+20.1% YoY). By region, the Americas at ¥37.7B (+24.8%), Europe at ¥24.3B (+48.6%), and South and West Asia at ¥33.6B (+14.4%) drove growth, while East Asia recorded a slight decline in revenue to ¥18.5B (△2.5%). The composition of revenue from external customers was 33.0% for the Americas, 29.7% for South and West Asia, 21.4% for Europe, and 16.3% for East Asia, indicating a certain degree of regional diversification.

【Profit and Loss】Operating Income was ¥25.9B (+25.7% YoY), and the Operating Margin improved to 22.8% from 21.8% in the same period of the previous year (estimated). Segment profit increased in East Asia to ¥22.6B (+22.1%), South and West Asia to ¥7.6B (+51.9%), and Europe to ¥4.1B (+69.0%), while the Americas declined to ¥2.1B (△57.6%), resulting in divergent performance across regions. Ordinary Income was limited to ¥27.4B (+11.2%), as foreign exchange gains recorded in the same period of the previous year decreased to ¥0.7B from ¥3.4B in the previous year, slowing the growth of non-operating income. Net Income was ¥19.0B (+10.9%). Thus, despite higher Operating Income, the growth rates below the operating level were restrained, and overall performance is classified as higher revenue and higher profit.

Segment Analysis

East Asia accounted for the largest share of total segment profit at 62.1% and remains the company’s core profit-generating region. South and West Asia (profit of ¥7.6B, profit margin of 11.5%) and Europe (profit of ¥4.1B, profit margin of 16.9%) achieved higher revenue and higher profit, increasing their contribution to earnings. In contrast, despite a 24.8% increase in revenue in the Americas, segment profit declined 57.6% to ¥2.1B, with the profit margin falling to 5.5%, suggesting the impact of higher costs, project mix, and the timing of acceptance inspections. Variations in regional profitability will continue to warrant monitoring as a factor affecting consolidated profit margins.

Key Financial Metrics

【Profitability】The Operating Margin was 22.8%, improving from 21.8% in the same period of the previous year (estimated), while the gross margin remained high at 48.1%. Meanwhile, the Ordinary Income Margin declined to 24.1% from 26.1% in the previous year, and the Net Income Margin declined to 16.7% from 18.1% in the previous year, indicating that the improvement at the operating level has not fully flowed through to the final profit margin.【Cash Flow Quality】Cash and deposits were ample at ¥312.2B; however, in addition to accounts receivable of ¥97.6B and inventories of ¥30.3B, the company held work in process of ¥76.5B. This working capital structure, characterized by prolonged DSO and DIO, is a constraint on cash conversion.【Investment Efficiency】ROE was 3.2% on a quarterly basis, which is estimated to correspond to approximately 12.8% on an annualized basis. The low total asset turnover ratio is the primary constraint on ROE expansion.【Financial Soundness】The Equity Ratio was high at 74.5%. Cash and deposits of ¥312.2B substantially exceeded interest-bearing debt of ¥57.4B, resulting in a net cash position.

Cash Flow Analysis

As no cash flow statement has been disclosed, cash flow trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥312.2B, down from ¥324.7B in the same period of the previous year. The increase in inventories (raw materials of ¥82.4B, work in process of ¥76.5B, and finished products of ¥30.3B) and accounts receivable of ¥97.6B suggests that a certain amount of funds is tied up in working capital. Contract liabilities (advances received) increased to ¥60.2B from ¥47.6B in the previous year, indicating that advances received for contracted projects are partially supporting working capital. Current assets amounted to ¥621.0B, compared with current liabilities of only ¥139.9B, maintaining substantial liquidity with a current ratio of 444%. Long-term borrowings were ¥42.5B, slightly reduced from ¥46.2B in the previous year, and financial cash outflows are considered limited.

Earnings Quality

Non-operating income included interest income of ¥0.7B, foreign exchange gains of ¥0.7B, and dividend income of ¥0.1B. Of total non-operating income of ¥1.9B, foreign exchange gains declined from ¥3.4B in the same period of the previous year. This decline in foreign exchange gains was the primary reason why Ordinary Income growth slowed relative to Operating Income growth. Accordingly, the divergence between Ordinary Income and Operating Income should be interpreted with the understanding that it includes a temporary foreign exchange factor. Comprehensive Income was ¥32.9B, substantially exceeding Net Income of ¥19.0B. The difference was primarily attributable to foreign currency translation adjustments of ¥13.8B, reflecting valuation gains from the translation of overseas subsidiaries into yen. The divergence between Net Income and Comprehensive Income does not represent the business’s recurring earning power itself; it is appropriate to interpret it as an accounting valuation difference arising from fluctuations in foreign exchange rates.

Earnings Forecast and Guidance

The full-year plan remains unchanged at Revenue of ¥468.0B (+7.2% YoY), Operating Income of ¥115.0B (+8.1%), and Ordinary Income of ¥116.0B (+6.3%). Q1 progress rates were 24.2% for Revenue, 22.5% for Operating Income, and 23.6% for Ordinary Income, based on Ordinary Income of ¥27.4B. All were slightly below the simple progress benchmark of 25%. In particular, Operating Income progress was 2.5pt below the plan-based level, suggesting that improvement in profitability in the Americas and higher profit margins in subsequent quarters will be necessary to achieve the full-year plan. The company has not revised either its earnings forecast or dividend forecast.

Shareholder Returns

The full-year dividend forecast is ¥200.00 per share, and the forecast Payout Ratio based on full-year forecast EPS of ¥540.32 is approximately 37.0%. Treasury shares were almost negligible (50 shares), and no shareholder returns through share repurchases have been identified; therefore, the assessment is based on the Payout Ratio. Given the financial base of net assets of ¥592.4B and cash and deposits of ¥312.2B, a Payout Ratio of 37.0% is considered reasonable relative to the level of profit.

Risk Factors

1. Working Capital and Project Progress Risk: Inventories consist of raw materials of ¥82.4B, work in process of ¥76.5B, and finished products of ¥30.3B. Work in process accounts for 40.5% of total inventories. Delays in the completion and acceptance inspection of made-to-order projects could pressure capital efficiency through inventory accumulation and prolonged cash collection.

2. Regional Earnings Concentration Risk: East Asia accounts for 62.1% of segment profit, meaning that changes in demand trends and project profitability in the region have a significant impact on consolidated profitability. Meanwhile, revenue in the Americas increased 24.8%, while segment profit declined 57.6%, indicating a widening profitability gap among regions.

3. Foreign Exchange Risk: Foreign exchange gains recorded in non-operating income were ¥0.7B, equivalent to 2.9% of Operating Income, down from ¥3.4B in the same period of the previous year. As the overseas revenue composition ratio reached 67% (the total of the Americas, Europe, and South and West Asia), foreign exchange fluctuations could affect consolidated performance and Comprehensive Income through non-operating gains and losses and translation adjustments for overseas subsidiaries.

Industry Benchmark (For Reference; Company Research)

Industry Benchmark (manufacturing)

Profitability and Returns

The company’s Operating Margin and Net Income Margin both substantially exceed the industry median, positioning it among the high-profitability group within the industry.

Growth and Capital Efficiency

The Revenue Growth Rate also substantially exceeds the industry median, positioning the company among the high-growth group within the industry.

※Source: Company research

Key Points from the Financial Results

1. The Operating Margin of 22.8% and Net Income Margin of 16.7% indicate high profitability. However, the growth rates of Ordinary Income and Net Income slowed relative to Operating Income, and attention should be paid to the impact of the temporary factor of declining foreign exchange gains.

2. While East Asia remains the primary profit-generating region, the Americas recorded higher revenue and lower profit. Regional dispersion in profitability is observed as a factor affecting fluctuations in the consolidated profit margin.

3. Q1 progress against the full-year Operating Income plan was 22.5%, slightly below the standard progress rate. Based on balances of contract liabilities of ¥60.2B and work in process of ¥76.5B, progress in recognizing future revenue and improving profit margins will be key areas of focus.

Theoretical Share Price (Reference Value)

Sensitivity: ¥4,390–¥4,647 at Cost of Equity ±1%, and ¥4,502–¥4,535 at ω±0.1.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference relative to the full-year forecast).
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson type; explicit 5-year fade) / Interest rate reference month: 2026-07 / This is a mechanically calculated value based solely on publicly disclosed data; it is not a forecast of the market share price or a recommendation for any specific investment action, and does not predict or guarantee the future share price.)

---

This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting a professional as necessary.

---End of Report---

---

AI Financial Analysis

Executive Summary

ASB Machinery delivered a strong FY2026 Q1 operating performance, with revenue, operating income and attributable net income all rising year on year. Revenue increased 20.1% YoY to ¥11.34bn. Operating income grew faster, by 25.7% YoY to ¥2.59bn. The operating margin improved 100bp YoY to 22.8%, reflecting positive gross-margin development despite elevated overhead growth. Gross profit increased 23.3% YoY to ¥5.45bn. The gross margin expanded 130bp YoY to 48.1% from 46.8%. SG&A expenses rose 21.3% YoY to ¥2.87bn, slightly faster than sales growth, but the gross-margin gain was sufficient to preserve positive operating leverage. Ordinary income rose a slower 11.2% YoY to ¥2.74bn because non-operating income declined to ¥0.19bn from ¥0.43bn. In particular, foreign-exchange gains fell to ¥0.07bn from ¥0.34bn in the previous-year quarter. Net income attributable to owners increased 11.0% YoY to ¥1.90bn, while the net margin compressed 140bp YoY to 16.7%. The lower net-margin conversion primarily reflects the diminished non-operating FX contribution rather than weaker core operations. Annualized ROE was 12.8%, a solid level underpinned by a 16.7% net margin and low financial leverage of 1.34x. The balance sheet remains exceptionally liquid, with cash and deposits of ¥31.22bn, a current ratio of 444.0%, and cash equal to 20.91x short-term debt. Regional results were mixed: East Asia remained the principal profit contributor, while the Americas recorded a substantial profit decline despite higher sales. Management maintained its full-year outlook, and Q1 progress is broadly in line with the usual seasonal benchmark. The principal operational issue is working-capital intensity, as receivable days, inventory days and the cash conversion cycle all exceed the stated warning thresholds. Accordingly, the earnings trajectory remains supported by high core profitability and a strong balance sheet, but conversion of production and sales into cash should be a central monitoring item through the remainder of the year.

Profitability Analysis

Annualized DuPont ROE is 12.8%, comprising a 16.7% net profit margin, 0.571x asset turnover, and 1.34x financial leverage. The principal driver of profitability is the very high margin structure rather than balance-sheet leverage, consistent with the conservative capital structure. Operating margin improved to 22.8% from 21.8% a year earlier, while gross margin improved to 48.1% from 46.8%; this indicates that gross-profit expansion exceeded the increase in operating cost burden. SG&A rose 21.3% YoY, marginally above the 20.1% sales increase, so overhead discipline should be monitored even though operating income still outgrew revenue. The tax burden was 0.694, equivalent to a 30.7% effective tax rate, which reduced conversion from pre-tax income to net income. Interest burden was favorable at 1.058x because interest income exceeded interest expense, and interest coverage was exceptionally high at 369.43x. Net-margin compression to 16.7% from 18.1% was caused by lower non-operating income, notably the decline in FX gains, rather than deterioration in operating profitability. East Asia is the core business by segment profit contribution, generating ¥2.26bn of segment profit on ¥1.85bn of external revenue; segment profit increased 22.1% YoY despite a 2.5% decline in sales. South and West Asia generated ¥0.76bn of segment profit, up 51.9% YoY, on revenue growth of 14.4% to ¥3.36bn. Europe generated ¥0.41bn of segment profit, up 69.0% YoY, with revenue up 48.6% to ¥2.39bn. The Americas generated ¥0.21bn of segment profit, down 57.6% YoY, despite revenue growth of 24.8% to ¥3.73bn, indicating a sharp regional margin normalization or adverse project mix. Unallocated corporate costs increased to ¥0.90bn from ¥0.74bn, partially offsetting segment-profit growth.

Growth Assessment

Growth in Q1 was broad-based in revenue terms, led by Europe and the Americas, while South and West Asia also posted double-digit sales growth. East Asia sales were modestly lower, but its segment-profit increase demonstrates continued earnings resilience in the company’s most important profit center. Consolidated revenue growth of 20.1% exceeded the full-year forecast growth rate of 7.2%, although quarterly project timing can be material for machinery businesses. Q1 revenue represents 24.2% of the ¥46.80bn full-year forecast, only 0.8 percentage points below the standard 25% Q1 progress level. Operating-income progress was 22.5% of the ¥11.50bn forecast, 2.5 percentage points below the standard level but not a material deviation. Ordinary-income progress was 23.6% of forecast, and attributable-net-income progress was 23.4% of forecast. The maintained forecast therefore appears consistent with first-quarter execution, rather than requiring an acceleration assumption that is unusually aggressive. The quality of revenue growth differs by region: Europe and South/West Asia paired sales growth with segment-profit growth, while the Americas did not. For a capital-equipment manufacturer, the high proportion of work in process indicated by the quality alert suggests a sizable production pipeline but also raises execution and completion-timing sensitivity. The decline in FX gains means further earnings growth will depend more directly on operating performance, shipment mix, pricing, and production execution than on non-operating currency benefits.

Financial Health

Financial health is strong. The current ratio is 444.0% and the quick ratio is 422.3%, indicating that current assets substantially exceed current liabilities. Working capital totaled ¥48.11bn, supported by ¥31.22bn of cash and deposits. Interest-bearing debt was ¥5.74bn, equivalent to a conservative debt-to-equity ratio of 0.34x and debt-to-capital ratio of 8.8%. Long-term loans of ¥4.25bn exceeded short-term loans of ¥1.49bn, limiting maturity-mismatch risk. Cash covered short-term loans by 20.91x, providing substantial refinancing flexibility. Interest expense was only ¥0.07bn against ¥2.59bn of operating income, resulting in 369.43x interest coverage. Total liabilities represented 25.5% of total assets and equity represented 74.5%, demonstrating a highly equity-funded balance sheet. Contract liabilities increased 26.4% YoY to ¥6.02bn, which may provide funding support for order execution but also increases obligations to deliver contracted equipment. Defined-benefit liabilities of ¥1.22bn and directors’ retirement-benefit provisions of ¥0.65bn are manageable relative to total equity of ¥59.24bn. There is no liquidity warning because the current ratio is well above 1.0, and there is no leverage warning because D/E is well below 2.0.

Notable B/S Changes

Contract liabilities: +¥1.26bn (+26.4% YoY) to ¥6.02bn - increased customer advances can support order funding, but raise delivery and revenue-recognition execution obligations. Foreign currency translation adjustment: +¥1.37bn (+215.0% YoY) to ¥2.01bn - equity and comprehensive income remain sensitive to exchange-rate movements. Accumulated other comprehensive income: +¥1.39bn (+142.4% YoY) to ¥2.37bn - the increase was principally associated with translation effects and contributed to balance-sheet equity resilience. Long-term loans: -¥0.37bn (-8.1% YoY) to ¥4.25bn - modest debt reduction further strengthens an already conservative capital structure.

Cash Flow Quality

Cash-flow quality cannot be assessed directly because operating, investing and financing cash-flow figures are not provided. Consequently, OCF-to-net-income conversion, free-cash-flow generation, and cash coverage of capital investment cannot be quantified. Balance-sheet indicators nevertheless identify a working-capital risk: annualized receivable days are 79 days, above the 60-day warning threshold. Annualized inventory days are 293 days, substantially above the 90-day warning threshold. The annualized cash conversion cycle is 344 days, above the 120-day warning threshold, implying a long period between cash outlay and collection. High work in process, at 40.4% of inventory according to the quality alert, may reflect long-cycle equipment production, but it also heightens the risk of delayed acceptance, shipment deferral, or cost overruns. Receivables increased 3.5% YoY to ¥9.76bn, while reported finished goods increased 14.7% YoY to ¥3.03bn. The ¥6.02bn contract-liability balance provides some offset through customer advances, but it does not eliminate completion and collection risk. Cash declined 3.8% YoY to ¥31.22bn while net income rose, reinforcing the importance of monitoring actual operating cash conversion in subsequent quarters.

Dividend Sustainability

The full-year dividend forecast is ¥200 per share, with no dividend revision disclosed. Against forecast EPS of ¥540.32, the implied dividend payout ratio is 37.0%. This is below the 60% sustainability benchmark and leaves a meaningful earnings retention buffer. The company’s low leverage, substantial liquidity, and high interest coverage further support balance-sheet capacity for the forecast dividend. However, free-cash-flow coverage cannot be quantified from the available information. Dividend sustainability will therefore depend principally on whether the elevated receivable, inventory, and work-in-process balances convert into operating cash as projects are completed and collected. No share buyback information is provided, so a total return ratio is not calculated.

Risk Assessment

Business risks include Working-capital and project-execution risk is elevated: annualized DSO of 79 days, DIO of 293 days, and a 344-day cash conversion cycle point to slow conversion of production activity into cash., Production-bottleneck risk is elevated because work in process represents 40.4% of inventory under the quality-alert calculation, exceeding the 40% warning threshold. In capital-equipment manufacturing, this can reflect extended build cycles, delayed commissioning, customer acceptance risk, or cost-overrun exposure., Americas profitability risk is material: segment revenue rose 24.8% YoY but segment profit fell 57.6% YoY to ¥0.21bn, implying adverse mix, pricing, execution, or cost conditions., Regional concentration risk remains relevant because East Asia generated ¥2.26bn of segment profit, the largest contribution among reporting segments., FX sensitivity remains relevant for an internationally diversified machinery supplier. Q1 FX gains were ¥0.07bn, down from ¥0.34bn a year earlier, illustrating that non-operating earnings can vary with currency movements., Manufacturing-specific risks include customer capital-spending cyclicality, supply-chain disruption, material and component cost inflation, and potential delays in large equipment delivery and installation..

Financial risks include Liquidity and refinancing risk are low given the 444.0% current ratio, 20.91x cash-to-short-term-debt coverage, and 0.34x debt-to-equity ratio., Cash-conversion risk is more significant than funding risk: a cash-rich balance sheet could be gradually consumed if long-cycle inventory and receivables remain elevated without corresponding customer collections., Contract liabilities of ¥6.02bn create delivery obligations; delayed fulfillment could defer revenue recognition or require use of cash and production capacity..

Key concerns include HIGH_RECEIVABLE_DAYS: DSO of 79 days exceeds the 60-day threshold. The root cause is slow collection relative to annualized sales; this may be partly characteristic of project-based machinery shipments, but it raises collection and customer-acceptance risk. The impact is weaker near-term cash conversion despite reported profitability., HIGH_INVENTORY_DAYS: DIO of 293 days exceeds the 90-day threshold. The root cause is a large inventory commitment relative to annualized cost of sales; long manufacturing lead times can contribute, but the level increases exposure to demand changes, execution delays, and inventory valuation risk. The impact is higher working-capital funding needs and potentially more volatile future cash flow., LONG_CCC: the 344-day cash conversion cycle exceeds the 120-day threshold. The root cause is the combination of slow collections and high inventory intensity relative to supplier financing. The impact is that earnings quality depends heavily on eventual project completion and cash collection., HIGH_WIP_RATIO: work in process at 40.4% of inventory exceeds the 40% threshold. The root cause is a high share of partially completed production, which can be normal for engineered equipment but may also signal constrained throughput or delayed delivery. The impact is heightened sensitivity of cash flow and margins to production completion, installation, and customer inspection timing..

Investment Implications

Key takeaways include Core profitability strengthened: operating income rose 25.7% YoY and operating margin expanded 100bp to 22.8%., Net-income growth of 11.0% YoY lagged operating-income growth because FX gains and total non-operating income declined materially year on year., The company has a conservatively financed balance sheet, with ¥31.22bn cash, 0.34x D/E, and 369.43x interest coverage., East Asia remains the core earnings contributor, while the Americas require monitoring after a 57.6% YoY decline in segment profit despite higher revenue., The maintained full-year forecast is broadly supported by Q1 progress, with sales and operating-income attainment at 24.2% and 22.5%, respectively., Working-capital efficiency, rather than solvency, is the central financial issue..

Metrics to watch include Americas segment margin and profit recovery, East Asia sales trajectory and segment-profit resilience, Annualized receivable days, inventory days, and cash conversion cycle, Work-in-process balance and completion/acceptance timing, Operating cash flow relative to attributable net income, Contract-liability movement and associated delivery execution, Foreign-exchange gains or losses relative to operating income, Progress against the ¥46.80bn revenue and ¥11.50bn operating-income forecasts.

Regarding relative positioning, ASB Machinery combines excellent operating and net margins with a far stronger liquidity and leverage profile than a typical debt-funded industrial expansion case. Its annualized 12.8% ROE is good but remains below the 15% excellent benchmark because the business employs low leverage and modest asset turnover rather than because of weak margins. Relative positioning is therefore defined by a high-margin, cash-rich balance sheet offset by unusually long manufacturing working-capital cycles and uneven regional profitability.