| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥842.4B | ¥592.0B | +42.3% |
| Operating Income / Operating Profit | ¥91.8B | ¥56.9B | +61.2% |
| Ordinary Income | ¥94.6B | ¥56.3B | +68.2% |
| Net Income | ¥68.2B | ¥44.0B | +55.0% |
| ROE | 15.2% | 11.5% | - |
For the fiscal year ended March 2026, Revenue was ¥842.4B (YoY +¥250.2B +42.3%), Operating Income was ¥91.8B (YoY +¥34.9B +61.2%), Ordinary Income was ¥94.6B (YoY +¥38.4B +68.2%), and Net Income attributable to owners of parent was ¥68.2B (YoY +¥24.2B +55.0%), representing substantial top- and bottom-line growth. The GX Business expanded rapidly to Revenue ¥183.2B (+273.0%) and drove company-wide growth. The Engineering Business improved profitability with Revenue ¥457.5B (+25.2%) and Operating Income ¥31.2B (+92.8%). The Machinery Business maintained high profitability with Revenue ¥201.7B (+13.6%) and Operating Income ¥54.1B (+32.1%, margin 26.8%). Operating margin improved to 10.9% from 9.6% a year earlier (+1.3pt). Gross margin was 21.7% (down -0.6pt from 22.3% prior year) but SG&A ratio was restrained at 10.8%, enabling operating leverage. Extraordinary gains totaled ¥14.5B (gain on sale of fixed assets ¥14.5B, gain on sale of investment securities ¥9.4B, etc.) less extraordinary losses of ¥5.1B (impairment losses ¥5.1B) produced a net uplift of ¥9.4B, meaning about 13.8% of Net Income was from one-off items. ROE was 15.2% and ROA (on Ordinary Income basis) was 13.1%, showing marked improvement in profitability metrics.
[Revenue] Revenue was ¥842.4B (prior year ¥592.0B, +42.3%), a substantial increase. By region, Domestic was ¥762.8B (prior year ¥526.1B), far exceeding Asia ¥58.6B (prior year ¥47.6B) and Other ¥21.0B (prior year ¥18.3B), driven by strong domestic demand and concentration of GX-related projects. Sales to Nippon Steel amounted to ¥148.8B (17.7% of total), indicating high dependency on Machinery and GX businesses. By segment, GX Business grew rapidly to ¥183.2B (prior year ¥49.1B, +273.0%), rising to a 21.8% share; Engineering Business remained core at ¥457.5B (prior year ¥365.4B, +25.2%, 54.3% share); Machinery Business was ¥201.7B (prior year ¥177.5B, +13.6%, 23.9% share). Trade receivables and contract assets totaled ¥352.1B (prior year ¥269.8B, +30.5%), suggesting expansion of progress-basis projects and lengthening collection cycles.
[Profitability] Cost of sales was ¥659.8B (prior year ¥460.0B, +43.4%), outpacing revenue growth and causing gross margin to decline to 21.7% (prior year 22.3%, -0.6pt). SG&A was ¥90.8B (prior year ¥75.1B, +20.9%), below revenue growth, improving SG&A ratio to 10.8% (prior year 12.7%, -1.9pt) and contributing to operating margin improvement to 10.9% (prior year 9.6%, +1.3pt) via fixed-cost absorption. R&D expense increased to ¥8.2B (1.0% of sales; 1.6x prior year ¥5.1B), reflecting stronger growth investment. Operating Income ¥91.8B (prior year ¥56.9B, +61.2%) plus non-operating income ¥6.9B (foreign exchange gains ¥4.5B, dividend income ¥1.9B, etc.) less non-operating expenses ¥4.1B (interest and fees ¥2.4B, etc.) resulted in Ordinary Income ¥94.6B (prior year ¥56.3B, +68.2%). Extraordinary gains amounted to ¥14.5B (gain on sale of fixed assets ¥14.5B, gain on sale of investment securities ¥9.4B) and extraordinary losses ¥5.1B (impairment losses ¥5.1B, valuation loss on investment securities ¥0.9B), netting ¥9.4B that boosted Net Income. Profit before tax was ¥104.0B (prior year ¥68.2B, +52.5%), with income taxes ¥28.6B (effective tax rate 27.5%), yielding Net Income attributable to owners of parent ¥68.2B (prior year ¥44.0B, +55.0%). Conclusion: significant revenue and profit growth.
The Engineering Business delivered Revenue ¥457.5B (prior year ¥365.4B, +25.2%), Operating Income ¥31.2B (prior year ¥16.2B, +92.8%), and margin 6.8% (prior year 4.4%, +2.4pt), indicating substantial profitability improvement. It covers city gas/oil plants, various chemical plants, hydrogen production equipment, sewage and industrial wastewater treatment equipment, etc.; improvements came from better project mix and strengthened project management. The Machinery Business reported Revenue ¥201.7B (prior year ¥177.5B, +13.6%), Operating Income ¥54.1B (prior year ¥41.0B, +32.1%), margin 26.8% (prior year 23.1%, +3.7pt), accounting for 58.9% of consolidated Operating Income as the core high-margin business. Products include oil purification equipment, various separators and filters, seawater intake dust removal equipment, agitators, etc.; high value-added products and strict order profitability management maintained high returns. The GX Business expanded to Revenue ¥183.2B (prior year ¥49.1B, +273.0%), Operating Income ¥6.5B (prior year ¥0.2B, +3031.8%), margin 3.5% (prior year -0.4%, +3.9pt), turning profitable and emerging as a growth engine. It consists of new businesses and application development of existing technologies; strategic investments and project ramp-ups progressed, but margins remain low and future monetization is a challenge. Goodwill balance ¥7.4B (prior year ¥8.0B) is entirely attributable to the Engineering Business, with amortization this period ¥0.6B.
[Profitability] Operating margin 10.9% (prior year 9.6%, +1.3pt), Net margin 8.1% (prior year 7.4%, +0.7pt), Gross margin 21.7% (prior year 22.3%, -0.6pt), SG&A ratio 10.8% (prior year 12.7%, -1.9pt). SG&A control and operating leverage drove operating margin improvement, while gross margin decline suggests changes in project mix (increase in low-margin GX projects) and higher subcontracting costs. ROE 15.2% (prior year estimated 13.4%), ROA (Ordinary Income basis) 13.1% (prior year 8.7%, +4.4pt) — profitability metrics improved significantly. [Cash Quality] Operating Cash Flow / Net Income is 0.26x (prior year -0.75x), recovering from negative to positive but still low. OCF/EBITDA is 0.18x (EBITDA ¥100.3B vs. Operating CF ¥18.0B) indicating issues in converting profits to cash. Increases in contract assets and trade receivables (-¥49.4B), inventory increases (-¥13.0B), and decrease in contract liabilities (-¥25.7B) are primary drivers, highlighting working capital strain from project activity. Accrual ratio (Net Income - Operating CF)/Total Assets is 6.4%, somewhat elevated. [Investment Efficiency] Total asset turnover improved to 1.08x (prior year 0.89x), and invested capital turnover rose. For backlog/sales insight, contract liabilities ¥54.3B (prior year ¥79.4B, -31.8%) indicate decrease in advance receipts as work-in-progress is recognized. [Financial Soundness] Equity Ratio 57.5% (prior year 57.8%, -0.3pt) stable, D/E ratio 0.11x (interest-bearing debt ¥48.0B / Net Assets ¥449.3B) indicating very low leverage, current ratio 207.5% (current assets ¥566.3B / current liabilities ¥272.9B), quick ratio 207.5% — strong short-term liquidity. Interest coverage approx. 340x (Operating CF ¥18.0B / interest paid ¥0.3B, noting low OCF level), Debt/EBITDA 0.48x — credit profile is sound.
Operating CF was ¥18.0B (prior year -¥33.1B, improvement +¥51.1B), turning positive from negative, but low relative to Net Income (0.26x). Operating CF before working capital changes was ¥35.8B; after adding non-cash items such as depreciation ¥8.4B and impairment losses ¥5.1B, Operating CF still fell short of Net Income. Working capital movements included increases in trade receivables -¥49.4B (prior year -¥54.7B), inventory increase -¥13.0B (prior year -¥0.1B), decrease in contract liabilities -¥25.7B (prior year +¥22.9B) which were cash outflows, partially offset by increase in accounts payable ¥37.6B (prior year -¥31.1B) as cash inflow. Income taxes paid were -¥19.4B (prior year -¥26.8B). Investing CF was -¥35.3B (prior year +¥0.4B), primarily due to acquisitions of tangible fixed assets -¥47.0B and acquisitions of subsidiary shares -¥20.0B, partially offset by proceeds from sale of fixed assets ¥19.6B and business transfer income ¥5.4B. Free Cash Flow was -¥17.3B (prior year -¥32.7B), remaining negative but improved. Financing CF was -¥1.8B (prior year -¥10.5B), with dividends -¥21.5B and share buybacks -¥3.6B offset by short-term borrowings ¥35.0B, long-term borrowings ¥3.0B, and long-term repayments -¥16.0B, resulting in net borrowings. Cash and cash equivalents were ¥90.2B (prior year ¥108.2B, -¥18.0B), so liquidity remains ample but normalization of working capital is an urgent issue.
Of Operating Income ¥91.8B, most is recurring, but non-operating income ¥6.9B includes foreign exchange gains ¥4.5B which are temporary. Net extraordinary gains ¥9.4B (extraordinary gains ¥14.5B less extraordinary losses ¥5.1B) constitute about 13.8% of Net Income ¥68.2B, limiting sustainability into next year. Impairments consisted of demolition of buildings related to head office and Kawasaki plant restructuring ¥4.9B and reduced profitability at a subsidiary factory ¥0.2B, indicating asset replacement progress. Comprehensive income was ¥90.2B, ¥22.0B higher than Net Income ¥68.2B; principal components were valuation gains on securities ¥9.5B and actuarial differences on retirement benefits ¥5.6B, indicating significant valuation gains. Accrual (Net Income ¥68.2B - Operating CF ¥18.0B = ¥50.2B) over total assets ¥780.9B is 6.4%, in the neutral-to-caution range; working capital increases are the main driver and there are no signs of accounting manipulation, but monitoring cash conversion is required given significant contract assets ¥167.7B, work in progress ¥34.5B, and construction in progress ¥36.7B.
For FY ending March 2027, company guidance calls for Revenue ¥800.0B (YoY -¥42.4B -5.0%), Operating Income ¥88.0B (YoY -¥3.8B -4.2%), Ordinary Income ¥89.0B (YoY -¥5.6B -5.9%), and Net Income attributable to owners of parent ¥68.5B (YoY +¥0.3B +0.4%), reflecting a conservative plan with modest declines. The forecast incorporates the completion of large GX projects in the current period, normalization of Engineering project mix, and the expected decline in extraordinary gains and foreign exchange gains. Annual dividend forecast is ¥60 (pre-split equivalent ¥360) and is maintained from current period dividend of ¥115 (pre-split equivalent ¥115). Progress rates are already above plan at 105.3% of full-year revenue forecast and 104.3% of operating income, assuming some second-half pullback. Estimated EPS forecast ¥300.74 vs. current period actual ¥331.34 is a +10.2% beat.
Annual dividend was increased significantly to a total of ¥115 (interim ¥40, year-end ¥75) (prior year ¥50, +¥65 +130.0%). Payout ratio was 32.7% (same level as prior-year payout ratio 32.7%), maintaining profit-linked distribution policy. Share buybacks totaled ¥3.6B (prior year ¥0.5B), and treasury stock dispositions ¥1.4B, bringing Total Return Ratio to 34.4%. Against Free Cash Flow -¥17.3B, total returns were ¥26.6B (dividends ¥21.5B + net share buybacks ¥5.2B), coverage -1.5x (negative), but with cash ¥90.2B and low leverage (D/E 0.11x), distribution capacity is sufficient. Implementation of year-end dividend ¥75 results in an appropriate payout ratio; forecast dividend for next year ¥60 (post-split basis) is effectively maintained and supports continuity of the return policy.
Working Capital Expansion Risk: Trade receivables and contract assets totaled ¥352.1B (prior year ¥269.8B, +30.5%), and contract liabilities were ¥54.3B (prior year ¥79.4B, -31.8%), indicating conversion from advance receipts to progress billings/receivables and weak cash conversion (Operating CF ¥18.0B, Operating CF/Net Income 0.26x). Work in progress ¥34.5B (prior year ¥24.7B, +39.7%) and construction in progress ¥36.7B (prior year ¥4.6B, +698.9%) show notable project backlog, raising risk of collection delays or project prolongation that could strain liquidity. DSO (days sales outstanding) is approximately 73 days and trending longer.
Business Portfolio Concentration Risk: Machinery Business Operating Income ¥54.1B accounts for 58.9% of consolidated Operating Income, indicating high dependence on this high-margin segment. Sales to major customer Nippon Steel ¥148.8B (17.7% of total) are concentrated, so changes in that customer's capex or demand could directly impact results. GX Business, while expanding to Revenue ¥183.2B (21.8% share), has low margin at 3.5%, so delayed monetization or prolonged investment recovery could compress profitability.
Investment & Impairment Risk: Tangible fixed assets ¥80.5B (prior year ¥53.3B, +51.0%) and construction in progress ¥36.7B indicate accelerated capex, yet the company recorded impairment losses ¥5.1B this period (building demolition ¥4.9B related to head office/Kawasaki restructuring, subsidiary factory ¥0.2B). Further impairments or delayed investment payback, along with lower utilization leading to higher depreciation burden, are risks. Investment securities ¥67.6B (prior year ¥44.3B, +52.4%) are at a post-valuation level, increasing sensitivity to market swings and potential valuation losses if stock prices decline.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 10.9% | 7.8% (4.6%–12.3%) | +3.1pt |
| Net Margin | 8.1% | 5.2% (2.3%–8.2%) | +2.9pt |
Both Operating and Net margins exceed the manufacturing median by roughly 3pt, positioning the company in the upper tier for profitability within the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 42.3% | 3.7% (-0.4%–9.3%) | +38.6pt |
Revenue growth is markedly above the industry median by 38.6pt, driven by rapid GX business expansion.
※ Source: Company compilation
The Machinery Business’s high profitability (margin 26.8%, 58.9% of Operating Income) continues to underpin consolidated earnings. Engineering Business profitability also improved (margin 6.8%, +2.4pt from 4.4%), evidencing benefits from enhanced project controls. GX Business expanded rapidly to Revenue ¥183.2B (+273.0%) and turned profitable, but with a margin of 3.5% it remains low; the pace of future monetization and investment recovery will be key to medium-term growth. Next year’s guidance is conservative, yet maintenance of machinery’s high margins and accumulation of GX pipeline could drive a rebound from the second year onward.
Financial stability is strong with Equity Ratio 57.5%, D/E 0.11x, and Current Ratio 207.5%, indicating a solid defensive position. However, Operating CF ¥18.0B (Operating CF/Net Income 0.26x) and Free CF -¥17.3B show weak cash conversion. Expansion of contract assets and work in progress (contract assets ¥167.7B, work in progress ¥34.5B, construction in progress ¥36.7B) is the primary factor; progress on project collections and normalization of working capital are the top short-term monitoring items. Dividend of ¥115 (payout ratio 32.7%) is profit-linked and sustainable, but FCF coverage -1.5x means distributions are not fully funded by internal cash flow, so attention should be paid to liquidity-dependent distribution structure.
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 from public financial statements for reference. Investment decisions are your responsibility; consult professionals as necessary.