| Metric | This Period | YoY Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥148.1B | ¥145.0B | +2.1% |
| Operating Income / Operating Profit | ¥34.8B | ¥30.0B | +15.9% |
| Ordinary Income | ¥35.2B | ¥30.5B | +15.3% |
| Net Income / Net Profit | ¥24.3B | ¥21.2B | +14.9% |
| ROE | 8.1% | 7.6% | - |
FY2026 Q1 (Jan–Mar 2026) results: Revenue ¥148.1B (YoY +¥3.1B +2.1%), Operating Income ¥34.8B (YoY +¥4.8B +15.9%), Ordinary Income ¥35.2B (YoY +¥4.7B +15.3%), Net Income ¥24.3B (YoY +¥3.2B +14.9%). Revenue showed a slight increase, but improvement in gross margin and a higher-margin mix in the Trading Business expanded the operating margin to 23.5% (prior year 20.7%) (+2.8pt), driving significant profit growth. Progress against the full-year plan is substantially front-loaded: Revenue 33.7%, Operating Income 55.2%, Net Income 54.1%, suggesting concentration of high-margin projects in the early fiscal period.
Revenue: Revenue ¥148.1B (YoY +2.1%) was led by growth in the Trading Business (¥39.97B, +29.1%), while the Engineering Business declined to ¥85.73B (-6.2%) and the Manufacturing Business slightly decreased to ¥22.44B (-1.4%). Segment revenue composition: Engineering 57.9%, Trading 27.0%, Manufacturing 15.1%. By customer type: Government/public sector ¥104.3B (70.4% of total), Private sector ¥43.8B (29.6%), with a slight decline in government sales offset by expanded private sales in Trading.
Profitability: Cost of goods sold ¥94.0B (prior ¥96.5B) decreased, improving gross margin to 36.6% (prior 33.5%) (+3.1pt). SG&A ¥19.4B (prior ¥18.5B) increased slightly, raising the SG&A ratio to 13.1% (prior 12.8%) (+0.3pt), but gross margin improvement absorbed this, expanding operating margin to 23.5% (prior 20.7%) (+2.8pt). Non-operating income ¥0.8B (including dividend income ¥0.3B) and non-operating expenses ¥0.4B (including interest expense ¥0.0B) had minor impact, with Ordinary Income ¥35.2B driven by operating profit. Extraordinary gains ¥0.0B (gain on sale of investment securities ¥0.0B) and extraordinary losses ¥0.0B (loss on disposal of fixed assets ¥0.0B) indicate no one-off factors. Profit before tax ¥35.1B, income taxes ¥10.8B (effective tax rate 30.8%), Net Income ¥24.3B. Segment profits: Engineering ¥24.1B (prior ¥21.6B, +11.5%), Trading ¥8.6B (prior ¥5.9B, +47.4%), Manufacturing ¥5.4B (prior ¥5.8B, -6.5%), with Trading high-margin projects and Engineering margin improvement driving profit growth. Conclusion: revenue and profit increase.
Manufacturing Business: Revenue ¥22.44B (prior ¥22.76B, -1.4%), Segment Profit ¥5.44B (prior ¥5.82B, -6.5%), slight decline in sales and profit. Profit margin 24.2% remains the highest company-wide. Engineering Business: Revenue ¥85.73B (prior ¥91.31B, -6.2%), yet Segment Profit ¥24.07B (prior ¥21.59B, +11.5%) increased. Margin improved to 28.1% (prior 23.6%) (+4.5pt), reflecting notable improvement in project profitability. Trading Business: Revenue ¥39.97B (prior ¥30.96B, +29.1%), Segment Profit ¥8.62B (prior ¥5.85B, +47.4%), strong revenue and profit growth. Margin improved to 21.6% (prior 18.9%) (+2.7pt), supported by expansion into private-sector sales and margin improvement. Consolidated Operating Income ¥34.80B is derived from total segment profits ¥38.14B less adjustments of ▲¥3.34B (corporate overhead).
Profitability: Operating margin 23.5% (prior 20.7%) improved +2.8pt. Gross margin 36.6% (prior 33.5%) up +3.1pt; SG&A ratio 13.1% (prior 12.8%) rose slightly but operating leverage remains positive. Net margin 16.4% (prior 14.6%) improved +1.8pt. ROE 8.1% supported by net income growth but total asset turnover is low at 0.294x, with accounts receivable increase (¥199.7B) constraining asset efficiency. Cash quality: DSO (days sales outstanding) 492 days—very long—reflecting long acceptance/collection terms in engineering and public projects. Inventories decreased 33.4% to ¥8.6B (prior ¥12.9B), with finished goods ¥8.6B, work-in-progress ¥3.9B, raw materials ¥5.2B—appropriate levels. Contract liabilities (advances received) decreased to ¥16.1B (prior ¥18.3B), indicating digestion of advance-received projects. Investment efficiency: Total assets ¥504.4B with investment securities ¥93.5B (18.5% of total assets), valuation gains ¥58.6B supporting equity. CAPEX: tangible fixed assets ¥32.2B, intangible fixed assets ¥1.1B—lightweight. Financial soundness: Equity Ratio 59.6% (prior 57.7%) up +1.9pt. Current Ratio 211.4%, Quick Ratio 206.4%—high levels. Interest-bearing debt ¥14.4B (short-term ¥10.1B, long-term ¥4.3B) vs. Cash ¥138.8B, net cash ¥124.4B. Interest Coverage 1,160x (Operating Income ¥34.8B / Interest expense ¥0.0B) indicates extremely high debt-servicing ability. Short-term debt ratio 70.2% indicates reliance on short-term liabilities, but Cash / Short-term Debt ratio 13.75x strongly mitigates this.
With Operating Income ¥34.8B and minor non-operating/extraordinary impacts, core earnings quality is favorable. In working capital, Accounts Receivable rose to ¥199.7B (prior ¥170.7B) (+¥29.0B), DSO 492 days—very long—suggesting cash conversion delays due to acceptance/collection lead times in engineering and public projects. Conversely, Inventories decreased by ▲¥4.3B to ¥8.6B, contributing to liquidity through inventory reduction. Contract liabilities decreased by ▲¥2.3B to ¥16.1B, indicating consumption of advance payments. Accounts Payable decreased by ▲¥1.1B to ¥113.9B. Overall, earnings are robust but working capital expansion—especially receivables—somewhat suppresses cash generation. Cash balance decreased by ▲¥12.9B to ¥138.8B (prior ¥151.7B), but net-cash position is maintained. Progress in collections will be key to improving Operating Cash Flow and ROE.
Ordinary Income ¥35.2B is largely driven by Operating Income ¥34.8B (contribution ratio 98.9%). Non-operating income ¥0.8B (Dividend income ¥0.3B, Other ¥0.1B) and non-operating expenses ¥0.4B (Interest expense ¥0.0B, FX losses ¥0.0B, Other ¥0.1B) are limited, totaling 0.3% of Revenue. Dividend income is recurring but small—dependence on non-core income is low. Extraordinary items are nil: Extraordinary gains ¥0.0B (gain on sale of investment securities ¥0.0B), Extraordinary losses ¥0.0B (loss on disposal of fixed assets ¥0.0B). The gap between Ordinary Income ¥35.2B and Net Income ¥24.3B (▲30.8%) is mainly due to income taxes ¥10.8B (effective tax rate 30.8%), a standard tax burden. Comprehensive Income ¥30.9B equals Net Income ¥24.3B plus valuation difference on investment securities ¥6.6B, indicating significant fair-value effects on equity. On accruals, the growth of receivables is strong and cash conversion takes time—this is a point of attention—but allowance for doubtful accounts ¥0.0B suggests conservative provisioning for credit risk.
Full-year forecast: Revenue ¥440.0B (YoY +6.8%), Operating Income ¥63.0B (YoY +2.9%), Ordinary Income ¥65.0B (YoY +2.9%), Net Income ¥45.0B, EPS ¥189.09. Q1 progress vs. full-year forecast: Revenue 33.7%, Operating Income 55.2%, Ordinary Income 54.1%, Net Income 54.1%, significantly above a typical Q1 25% progress. Operating Income and Net Income have cleared over half of the full-year forecasts, suggesting early concentration of high-margin projects or timing shifts. Decline in contract liabilities indicates digestion of advance-received projects; future buildup of new advance receipts and timing of second-half project recognition will be key to full-year attainment. No forecast revision at this time; given conservative plan setting, upside remains possible, but beware of potential second-half slowdown due to front-loading.
FY2026 annual dividend forecast ¥37.5 per share (post 2-for-1 stock split effective Jan 1, 2026. Pre-split basis: ¥150). FY2025 actual dividend ¥120 (ordinary dividend ¥100 + 80th anniversary commemorative dividend ¥20), with the ordinary dividend being ¥100 excluding the commemorative payment. Dividend payout ratio versus forecast EPS ¥189.09 is approx. 19.8%, low and indicating high dividend sustainability. With Net Income ¥24.3B (Q1 results), Cash ¥138.8B and Net Cash ¥124.4B, ample liquidity exists to support short-term dividend payments. No share buyback disclosure; shareholder returns appear to be via dividends only.
Quarterly performance variability risk due to project timing/seasonality: Q1 operating income progress 55.2% far exceeds the norm, suggesting concentration of high-margin projects early in the year. Recognition timing for Engineering and Trading projects can vary with contract terms and customer circumstances; if project recognition does not concentrate evenly and second-half recognition is weak, full-year visibility could decline. Contract liabilities ¥16.1B decreased from ¥18.3B, indicating advance projects are being consumed—if new advance receipts weaken, forward indicators of revenue could deteriorate.
Receivables collection delays and cash-flow pressure risk: Accounts Receivable ¥199.7B (prior ¥170.7B, +¥29.0B) with DSO 492 days is very long, likely structural due to acceptance/billing terms for engineering and public projects. Receivables growth (+17.0%) far exceeds revenue growth (+2.1%), highlighting working capital expansion. Prolonged collection delays could further lower total asset turnover 0.294x and constrain potential ROE improvement from 8.1%. Concentration of credit exposure to specific customers or their financial deterioration could create latent bad-debt risk.
Market and margin volatility risk in the Trading Business: Trading Business revenue ¥39.97B (+29.1%) and Segment Profit ¥8.62B (+47.4%) rose sharply, but the 21.6% margin is sensitive to market conditions, transaction terms, and competition. Expansion into private-sector sales is more exposed to demand swings; an economic downturn or intensified price competition could compress margins and slow consolidated operating profit growth.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 23.5% | 6.8% (2.9%–9.0%) | +16.7pt |
| Net Margin | 16.4% | 5.9% (3.3%–7.7%) | +10.5pt |
Profitability substantially exceeds industry medians, suggesting a high-margin project mix and strong pricing competitiveness.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 2.1% | 13.2% (2.5%–28.5%) | -11.1pt |
Revenue growth trails the industry median, indicating impacts from order environment and project timing.
※ Source: Company aggregation
Clear trend of improving gross margin and operating margin; Q1 progress is front-loaded with Operating Income 55.2% and Net Income 54.1% of full-year forecasts. Trading Business high-margin projects and Engineering margin improvement drove profit growth; continued favorable project mix could yield upside to full-year forecasts. However, the high progress rates suggest early recognition concentration, making second-half project composition and timing critical to full-year achievement.
Financial position is very healthy with Net Cash ¥124.4B and Equity Ratio 59.6%; high short-term debt ratio 70.2% is strongly mitigated by Cash / Short-term Debt ratio 13.75x. Nevertheless, DSO 492 days is extremely long and working capital expansion suppresses total asset turnover 0.294x and ROE 8.1%. Inventories decreased 33.4% improving inventory efficiency; progress in receivables collections is the top priority for cash generation and asset-efficiency improvement.
This report is an earnings analysis document automatically generated by AI analyzing XBRL earnings release data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your responsibility; consult a professional advisor as needed.