| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥514.7B | ¥461.8B | +11.5% |
| Operating Income / Operating Profit | ¥26.0B | ¥13.8B | +88.5% |
| Ordinary Income | ¥25.5B | ¥9.8B | +160.4% |
| Net Income / Net Profit | ¥17.2B | ¥15.9B | +8.3% |
| ROE | 2.2% | 2.0% | - |
FY2026 Q1 results: Revenue ¥514.7B (YoY +¥52.9B +11.5%), Operating Income ¥26.0B (YoY +¥12.2B +88.5%), Ordinary Income ¥25.5B (YoY +¥15.7B +160.4%), Quarterly Net Income Attributable to Owners of the Parent ¥14.9B (YoY -¥0.3B -1.9%). Revenue achieved double-digit growth driven by firm domestic and overseas demand and successful pass-through of price increases; gross margin improved to 31.0% (YoY +1.1pt) and operating margin improved to 5.1% (YoY +2.1pt). Ordinary Income rose substantially due to higher operating profit and limited FX headwinds, while Net Income declined slightly due to the absence of last year’s special gain (fixed asset sales gain ¥8.7B). Operating Cash Flow was a large outflow of -¥89.3B, driven mainly by working capital expansion from an increase in accounts receivable ¥117.3B and inventories ¥7.0B; the company arranged funding via an increase in short-term borrowings ¥104.8B.
[Revenue] Revenue ¥514.7B, up +11.5% YoY. Domestically, demand was supported by subsidy policies and ongoing farmer equipment replacement needs; overseas shipments to local dealers remained firm. Price pass-through and mix improvement raised gross profit margin by 1.1pt to 31.0%, so gross profit rose to ¥159.8B (YoY +¥21.9B +15.8%), outpacing sales growth. Cost of goods sold ratio fell to 69.0%, with raw material cost increases largely absorbed via price pass-through. The Group operates a single segment focused on agriculture-related businesses; no segment disclosure is provided.
[Profitability] Operating Income ¥26.0B (YoY +88.5%), a substantial increase. SG&A was ¥133.8B (YoY +¥9.5B +7.7%) but was absorbed by the ¥21.9B gross profit increase, improving operating margin by 2.1pt to 5.1%. Ordinary Income ¥25.5B (YoY +160.4%); non-operating items included interest expense ¥3.6B (prior year ¥3.8B) and FX loss ¥1.9B (offset in part by FX gain recorded in non-operating income ¥0.8B), while operating profit growth was the main contributor. Extraordinary items: fixed asset sale gain ¥0.6B, impairment loss ¥1.3B, loss on disposal of fixed assets ¥0.5B; absence of the prior-year large special gain (fixed asset sale gain ¥8.7B) left pre-tax income at ¥24.3B. After corporate taxes ¥7.1B and non-controlling interests ¥2.3B, Net Income Attributable to Owners of the Parent was ¥14.9B (YoY -1.9%), and net income margin declined to 2.9% from 3.3% a year earlier. In conclusion, revenue and operating profit increased, but Net Income decreased slightly due to one-off factor lapse.
[Profitability] Operating margin 5.1% (YoY +2.1pt) improved, supported by gross margin 31.0% (+1.1pt) and SG&A ratio 26.0% (-1.0pt). ROE 2.2% (annualized) remains low, composed of net income margin 2.9%, total asset turnover 0.23x (annualized estimate 0.93x), and financial leverage 2.78x. EBITDA ¥39.1B (Operating Income ¥26.0B + Depreciation ¥13.1B), EBITDA margin 7.6%. [Cash Quality] Operating CF / Net Income is -5.2x, indicating poor cash conversion of profit; working capital expansion is pressuring cash flow. DSO 271 days, DIO 601 days, CCC 698 days—extended cycles indicating a need to improve working capital efficiency. [Investment Efficiency] Capital expenditures ¥25.6B, approximately twice depreciation ¥13.1B, indicating ongoing replacement and efficiency investments. [Financial Soundness] Current ratio 104.1%, quick ratio 58.5%—short-term liquidity is fragile. Equity Ratio 36.0% (prior year 37.4%), debt-to-equity ratio 1.78x, Debt/EBITDA (annualized) 14.2x indicating high leverage. Interest coverage 7.2x (Operating Income / Interest Expense), indicating sufficient interest-paying capacity from an earnings perspective.
Operating Cash Flow was a large outflow of -¥89.3B, primarily due to working capital expansion: increase in trade receivables ¥117.3B and inventories ¥7.0B. Subtotal of operating CF, adding back non-cash charges such as depreciation ¥13.1B to pre-tax quarterly profit before tax ¥24.3B, was -¥69.9B; together with working capital changes and corporate tax payments -¥9.9B, total operating CF was -¥89.3B. Investing Cash Flow was -¥26.7B, mainly cash outflows for acquisition of tangible and intangible fixed assets ¥25.6B, partially offset by proceeds from disposals ¥1.5B. Free Cash Flow was a large negative -¥116.0B; shareholder returns including dividends paid ¥8.5B were not covered by operating CF. Financing Cash Flow was an inflow of +¥77.6B: net increase in short-term borrowings ¥104.1B funded working capital needs, while repayments of long-term borrowings ¥21.5B, lease obligation repayments ¥3.6B, and dividends paid ¥8.5B were executed. Cash and cash equivalents decreased ¥35.5B from ¥128.4B at the beginning of the period to ¥92.9B, and the Cash/Short-term Debt ratio is 0.24x, indicating a thin liquidity buffer.
Of Ordinary Income ¥25.5B, Operating Income accounted for ¥26.0B, indicating earnings driven by core operations. Non-operating income ¥3.6B included FX gain ¥0.8B and dividend income ¥0.3B; non-operating expenses ¥4.1B included interest expense ¥3.6B and FX loss ¥1.9B. FX affected both income and expense sides, resulting in a small net burden. Extraordinary gain ¥0.6B (fixed asset sale gain) and extraordinary loss ¥1.8B (impairment loss ¥1.3B, loss on disposal of fixed assets ¥0.5B) were one-off items; the lapse of prior-year special gain ¥8.7B (fixed asset sale gain) was the main driver of the Net Income decline. Comprehensive income was ¥26.3B, exceeding Net Income ¥17.2B by ¥9.1B, mainly due to an increase in valuation difference on available-for-sale securities ¥9.4B. From an accrual perspective, Operating CF / Net Income at -5.2x is deeply negative; working capital increases in receivables and inventories are impeding the cash realization of profits, and the quality of earnings has deteriorated in the short term.
Full Year / FY forecast remains unchanged: Revenue ¥1,800B (YoY -3.1%), Operating Income ¥60B (YoY +42.0%), Ordinary Income ¥49B (YoY +18.9%), Net Income Attributable to Owners of the Parent ¥30B. Q1 progress rates against FY forecasts: Revenue 28.6%, Operating Income 43.3%, Ordinary Income 52.0%, Net Income 49.5%—profitability metrics are well ahead of standard linear progress (25%), indicating an accelerated pace. The FY revenue forecast being down YoY likely reflects assumed normalization from last year’s large projects and temporary demand increases. FY operating margin forecast 3.3% vs Q1 actual 5.1%—cost improvements are evident. Dividend forecast is maintained at annual ¥45 (no interim, year-end ¥45), implying a forecast payout ratio of approximately 34%. No revisions to earnings or dividend forecasts were made in this quarter.
Dividend plan: annual ¥45 (lump-sum at year-end), a ¥5 increase from prior year ¥40. Payout ratio against FY Net Income forecast ¥30B is approximately 34%, a reasonable level. Based on ~22.99M shares outstanding (after treasury shares ~22.63M), annual dividend total is approximately ¥1.02B. No dividends were paid in Q1 (no interim), maintaining the year-end lump-sum policy. No share buybacks were confirmed; shareholder returns remain conservatively dividend-centric. However, Q1 Free Cash Flow of -¥116.0B indicates limited short-term room to expand shareholder returns from internal funds alone. Normalization of working capital and turning OCF positive are prerequisites for sustainably increasing shareholder returns.
Working Capital Expansion Risk: Accounts receivable increased ¥117.3B; inventories ¥485.3B (21.9% of total assets); DSO 271 days, DIO 601 days, CCC 698 days—working capital efficiency has significantly deteriorated. Q1 Operating CF was a large outflow of -¥89.3B, and funding was arranged via an increase in short-term borrowings ¥104.8B. Continued working capital stagnation could necessitate additional borrowings and increase financing costs, deteriorating both profitability and financial health.
Liquidity & Maturity Mismatch Risk: Short-term borrowings ¥392.2B represent 37% of current liabilities ¥1,064B, and cash ¥95.4B yields a Cash/Short-term Debt ratio of 0.24x—fragile liquidity. Quick ratio 58.5%, current ratio 104.1% indicate near-minimum short-term liquidity. In a rising interest rate environment, refinancing terms could worsen, and additional working capital needs could heighten funding stress. High leverage, Debt/EBITDA 14.2x (annualized), may also negatively affect credit conditions.
Demand & Price-Pass-Through Risk: Agricultural machinery demand is sensitive to subsidy policy, crop conditions, and commodity prices; FY revenue is forecast down YoY -3.1%. Delays in passing through raw material and logistics cost increases, or intensified competition forcing price reductions, could make it difficult to sustain gross margin 31.0% and operating margin 5.1%. Prolonged inventory stagnation of 601 days could also raise obsolescence and impairment risk.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 5.1% | 6.8% (2.9%–9.0%) | -1.8pt |
| Net Margin | 3.3% | 5.9% (3.3%–7.7%) | -2.6pt |
Profitability metrics are below the manufacturing median; both operating margin and net margin place the company in the lower tier within the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 11.5% | 13.2% (2.5%–28.5%) | -1.7pt |
Revenue growth is slightly below the median but remains at a mid-level growth rate within the industry.
※ Source: Company compilation
Coexistence of profit improvement and working capital issues: Operating margin improved to 5.1% (+2.1pt), with progress on both gross margin 31.0% and SG&A ratio 26.0%. Progress against full-year operating income forecast is 43.3%, indicating front-loaded performance and improved earnings power from price pass-through and mix. Conversely, Operating CF was a large outflow of -¥89.3B and working capital metrics (DSO 271 days, DIO 601 days, CCC 698 days) have markedly worsened; reducing receivables and inventories is the top priority.
High leverage and liquidity stress: Debt/EBITDA 14.2x, short-term borrowings ¥392.2B (37% of current liabilities), Cash/Short-term Debt 0.24x—maturity mismatch and high leverage coexist. Interest coverage 7.2x indicates capacity to service interest, but continued working capital expansion could necessitate additional borrowings and increase interest burden, weakening financial health. Progress in receivables collection, inventory reduction in H2, and OCF turning positive are key to mitigating refinancing risk.
Sustainability of shareholder returns: Dividend forecast ¥45 (payout ratio 34%) is reasonable, but FCF -¥116.0B means dividends are funded partly by borrowings in the short term. Normalization of working capital and OCF turning positive are prerequisites for sustainably expanding dividend increases.
This report is an AI-generated earnings analysis document based on XBRL financial statement data. It does not constitute a recommendation to invest in any specific securities. Industry 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.