| Metric | Current Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1489.5B | ¥1392.3B | +7.0% |
| Operating Income / Operating Profit | ¥98.4B | ¥89.2B | +10.4% |
| Ordinary Income | ¥109.9B | ¥102.5B | +7.2% |
| Net Income | ¥123.2B | ¥37.6B | +227.7% |
| ROE | 10.5% | 3.4% | - |
For the fiscal year ended March 2026, Revenue was ¥1489.5B (¥+97.2B YoY, +7.0%), Operating Income was ¥98.4B (¥+9.3B YoY, +10.4%), Ordinary Income was ¥109.9B (¥+7.3B YoY, +7.2%), and Net Income attributable to owners of parent was ¥123.2B (¥+85.6B YoY, +227.7%). The company achieved revenue and profit growth, with Operating Income growing faster than revenue, indicating operating leverage. Operating margin improved by 0.2pt to 6.6% (prior year 6.4%), and gross margin also improved to 20.9% (prior year 20.7%). Net income surged 3.3x due to recognition of ¥120.3B gain on sale of fixed assets and ¥33.1B gain on sale of investment securities—total special gains of ¥156.2B. Ordinary Income continued a steady uptrend, while special gains significantly boosted the bottom line.
[Revenue] Revenue was ¥1489.5B (+7.0%), with domestic sales at ¥1379.4B accounting for 92.6% of the total; Asia ¥87.3B (-11.8%) and Other regions ¥22.9B (+28.5%) represent small overseas exposure. By segment, the Water Environment Business recorded ¥986.1B (+6.2%), representing 66.2% of revenue as the core business, and the Industrial Business posted ¥501.8B (+7.9%) with strong growth representing 33.7%. Other operations ¥54.1B (-10.3%) (real estate, printing, etc.) accounted for 3.6%. The Industrial Business grew faster than Water Environment, improving portfolio balance. Contract assets increased to ¥374.0B (prior year ¥261.2B), +43.2%, reflecting accelerated progress on large projects. Days sales outstanding were 104 days, roughly unchanged, indicating stable collection cycles.
[Profitability] Cost of sales was ¥1178.3B (cost ratio 79.1%), yielding gross profit ¥311.2B (gross margin 20.9%), a 0.2pt improvement YoY. SG&A was ¥212.8B (SG&A ratio 14.3%), controlled to +6.7% versus revenue growth, resulting in Operating Income ¥98.4B (Operating margin 6.6%), +10.4% YoY. By segment, Water Environment Business Operating Income was ¥58.0B (margin 5.9%), slightly down -5.4% YoY, while Industrial Business Operating Income was ¥41.5B (margin 8.3%), up +95.5% YoY, driving consolidated profits. Progress of high-margin Industrial projects improved margins, while Water Environment saw margin pressure from project mix and higher construction costs. Non-operating income contributed ¥16.7B (dividend income ¥7.7B, interest income ¥2.8B) and non-operating expenses were ¥5.2B (interest expense ¥1.1B, fees ¥2.6B), resulting in Ordinary Income ¥109.9B (+7.2%). Special gains of ¥156.2B (gain on sale of fixed assets ¥120.3B, gain on sale of investment securities ¥33.1B) were recorded, with special losses of ¥5.1B (impairment ¥1.8B, disaster losses ¥1.4B, etc.), bringing Profit before Income Taxes to ¥260.9B. After deducting corporate taxes of ¥74.8B and non-controlling interests of ¥17.0B, Net Income attributable to owners of parent was ¥123.2B (+227.7%), largely driven by special gains. Comprehensive income was ¥228.7B, exceeding net income due to OCI items including valuation difference on securities ¥25.9B and retirement benefit adjustments ¥12.7B. In conclusion, the company achieved stable operating and financial income growth, and one-off asset sales substantially boosted final profit.
The Water Environment Business posted Revenue ¥986.1B (+6.2%) and Operating Income ¥58.0B (margin 5.9%), with Operating Income down -5.4% YoY. The business is centered on water treatment, sewage, and biomass plant projects; while revenue expanded steadily, project profitability deterioration and higher construction costs compressed margins. The Industrial Business recorded Revenue ¥501.8B (+7.9%) and Operating Income ¥41.5B (margin 8.3%), with Operating Income up +95.5% YoY. High-margin projects in chemical and secondary battery manufacturing equipment and waste liquid/solid waste treatment plants progressed, improving margins from 4.6% to 8.3% (+3.7pt). The Industrial Business’s margin improvement was the main driver of consolidated profit growth, while correcting profitability in Water Environment remains a key challenge.
[Profitability] Operating margin improved 0.2pt to 6.6% (prior year 6.4%), and gross margin improved 0.2pt to 20.9% (prior year 20.7%). By segment, Industrial margin improved materially to 8.3% (prior year 4.6%), leading consolidated performance, while Water Environment declined slightly to 5.9% (prior year 6.1%). ROE was 10.5% (prior year data insufficient for comparison); Net Income attributable to owners of parent was ¥123.2B against average equity of approximately ¥1174B.
[Cash Quality] Operating Cash Flow (OCF) was ¥51.6B, which is 0.31x relative to Net Income ¥169.1B (consolidated), indicating a low conversion rate driven by increases in receivables and contract assets. OCF/EBITDA (Operating Income + Depreciation) = ¥51.6B ÷ (¥98.4B + ¥32.9B) = 0.39x, at a low level. Contract assets increased substantially to ¥374.0B (+43.2%), continuing to lock up cash in progress-basis projects.
[Investment Efficiency] Total asset turnover was 0.73x (Revenue ¥1489.5B ÷ Total Assets ¥2030.2B), slightly improved YoY due to fixed asset compression. Tangible fixed assets were ¥322.2B (prior year ¥445.3B), down -27.6%, with capital expenditures ¥10.5B versus depreciation ¥32.9B, a net reduction of ¥-22.4B. Investment securities were ¥270.6B (prior year ¥243.6B), +11.1%.
[Financial Soundness] Equity Ratio was 57.9% (Net Assets ¥1174.7B ÷ Total Assets ¥2030.2B), a stable level. Interest-bearing debt totaled ¥149.5B (long-term borrowings ¥99.5B, corporate bonds ¥50.0B), with Debt/EBITDA (Operating Income + Depreciation) at 1.14x, low. Current Ratio was 235% (Current Assets ¥1315.5B ÷ Current Liabilities ¥560.0B), ample. Cash and deposits were ¥300.5B and short-term investment securities ¥101.0B, giving liquidity on hand ¥401.5B.
Operating Cash Flow was ¥51.6B. Profit before tax ¥260.9B adjusted for depreciation ¥32.9B and other items produced operating cash subtotal ¥69.1B, but payments for corporate taxes ¥27.3B and increases in trade receivables ¥104.0B (including increases in contract assets) were major deductions. Contract liabilities increased ¥9.9B partially offsetting advances received, but the build-up of contract assets for large projects absorbed working capital and compressed OCF to ¥51.6B. Investing Cash Flow was +¥271.7B, primarily from proceeds from fixed asset sales (estimated net positive from disposal of fixed assets), with capital expenditures ¥10.5B and intangible asset acquisitions ¥3.5B modest. Financing Cash Flow was -¥216.4B, driven by share buybacks ¥128.0B, dividend payments ¥39.4B (parent ¥34.0B + non-controlling interests ¥17.8B), and long-term borrowings repayment ¥39.3B. Free Cash Flow (Operating CF + Investing CF) was ¥323.3B and ample, but most investing cash was one-off asset sales; operating cash alone is insufficient to cover dividends and capex sustainably. Cash and cash equivalents increased from ¥274.7B at the beginning of the period to ¥381.7B at the end (+¥107.0B). Despite strong liquidity, low Operating CF/Net Income 0.31x and OCF/EBITDA 0.39x highlight the need to normalize working capital.
Ordinary Income ¥109.9B was built steadily on operating and non-operating income, with non-operating income ¥16.7B (dividend income ¥7.7B, interest income ¥2.8B) complementing Operating Income ¥98.4B. However, special gains ¥156.2B (gain on sale of fixed assets ¥120.3B, gain on sale of investment securities ¥33.1B) accounted for 60% of Profit before Income Taxes ¥260.9B, so most of the final Net Income ¥123.2B depends on one-off items. Special losses were limited at ¥5.1B (impairment ¥1.8B, disaster losses ¥1.4B, etc.). Comprehensive income ¥228.7B exceeded Net Income ¥169.1B by ¥59.6B, driven by OCI items such as valuation differences on securities ¥25.9B and retirement benefit adjustments ¥12.7B. From an accrual perspective, the gap between Operating CF ¥51.6B and Net Income ¥169.1B is substantial, reflecting increases in contract assets and receivables that decouple accounting profit from cash. While the recurring revenue base is stable through Ordinary Income, the quality of Net Income is highly dependent on special gains, and a reversal is expected next fiscal year.
Full Year guidance: Revenue ¥1520.0B (YoY +2.0%), Operating Income ¥110.0B (+11.8%), Ordinary Income ¥117.0B (+6.5%), EPS ¥214.86 (prior year ¥412.69). Compared with current results, Revenue is at ¥1489.5B against full-year ¥1520.0B target (progress 98.0%), and Operating Income is ¥98.4B against ¥110.0B target (progress 89.5%), broadly on track. However, Net Income attributable to owners of parent forecast ¥85.0B (estimated with limited data) is below current period ¥123.2B, because company guidance assumes absence of special gains. Dividend guidance is annual ¥44 (including interim ¥42 which included a ¥2 commemorative dividend for the 120th anniversary; year-end forecast ¥43), implying a payout ratio around 20%, a stable level. Full year Operating margin of 7.2% (¥110.0B ÷ ¥1520.0B) is expected to improve 0.6pt from the current 6.6%, assuming continued high margins in Industrial Business and profitability improvement in Water Environment.
Dividends are annual ¥85 (interim ¥42: including ¥2 commemorative dividend, year-end ¥43), with total dividends approximately ¥34.0B. Against Net Income attributable to owners of parent ¥123.2B, payout ratio is about 27.6% (dividend total ÷ net income basis), but DPS ¥85 against EPS ¥412.69 implies a payout ratio of 20.6% on an EPS basis, a conservative level. Share buybacks of ¥128.0B were executed, and combined with dividends ¥34.0B total shareholder returns were about ¥162.0B, giving a Total Return Ratio of 131.5% (¥162.0B ÷ ¥123.2B), exceeding net income—an aggressive return level. However, current Net Income was inflated by special gains; on an Ordinary Income basis total return is 147.4% (¥162.0B ÷ ¥109.9B). Next fiscal year dividend guidance is ¥44, with forecast EPS ¥214.86 implying payout ratio 20.5%, maintaining a stable level. With FCF ¥323.3B versus total returns ¥162.0B, there is capacity for returns, but Operating CF ¥51.6B alone cannot cover both dividends and buybacks—sustainable returns depend on improving operating cash generation.
Deterioration in operating cash conversion: Operating CF ¥51.6B is 0.31x of Net Income ¥169.1B and OCF/EBITDA 0.39x, with contract assets ¥374.0B (+43.2% YoY) accumulating and absorbing working capital. DSO 104 days indicates stable collection cycles, but long-term lock-up of contract assets may widen the gap between accounting profit and cash. Delays in project acceptance or additional costs could materialize into cash flow pressure.
Concerns about quality of earnings: Of Net Income attributable to owners of parent ¥123.2B, special gains ¥156.2B (fixed asset sales ¥120.3B, securities sales ¥33.1B) constitute the bulk, with recurring profitability at Ordinary Income ¥109.9B. Next fiscal year is expected to see a reversal of special gains, with Net Income estimated around ¥85.0B (▲31.0% YoY). Reliance on asset sales reduces sustainability; if core margins do not improve, shareholder value could be affected.
Polarization of segment profitability: Water Environment Business (66.2% of revenue) had Operating margin 5.9% (▲0.2pt YoY), with profitability deterioration in large public projects. Industrial Business maintains high margin 8.3% but is sensitive to order mix. If Water Environment profitability recovery lags and high-margin Industrial projects do not continue, consolidated margins could fall sharply and achieving the full-year Operating Income target ¥110.0B may become difficult.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 6.6% | 7.8% (4.6%–12.3%) | -1.1pt |
| Net Profit Margin | 8.3% | 5.2% (2.3%–8.2%) | +3.1pt |
Operating margin is 1.1pt below industry median, placing the company in the middle among manufacturers, while Net Profit Margin exceeds the median by 3.1pt due to contribution from special gains.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 7.0% | 3.7% (-0.4%–9.3%) | +3.3pt |
Revenue growth outperformed the industry median by 3.3pt, indicating relatively high growth among manufacturers.
※ Source: Company aggregation
The focus going forward will be sustaining high margins in the Industrial Business and improving profitability in the Water Environment Business. Industrial margin improved to 8.3% from 4.6% (+3.7pt) and led profit growth, but it is sensitive to order mix. Water Environment accounts for 66.2% of revenue yet had a margin of 5.9% (▲0.2pt), with profitability management on large public projects a key issue. Achieving full-year Operating Income ¥110.0B requires suppressing construction costs in Water Environment and continuation of high-margin Industrial projects.
Improvement in Operating CF and normalization of working capital are critical for sustainable growth. Operating CF ¥51.6B is only 0.31x of Net Income ¥169.1B, and contract assets ¥374.0B (+43.2%) are tying up funds. From next fiscal year, improving contract asset turnover and optimizing project acceptance timing could restore OCF/EBITDA above 0.6x. FCF ¥323.3B depends on asset sales and is not easily reproducible; recovery of operating cash generation will determine sustainability of dividends and growth investments.
With a payout ratio in the 20% range and continued share buybacks, shareholder returns are aggressive. Total returns ¥162.0B (dividends ¥34.0B + buybacks ¥128.0B) exceed Net Income ¥123.2B, but this period reflects special gains; going forward, return capacity based on operating cash will be the focus. Next fiscal year dividend guidance ¥44 (payout ratio 20.5%) is stable, and liquidity on hand ¥401.5B plus Debt/EBITDA 1.14x provides a sound financial base to support returns.
This report is an earnings analysis document automatically generated by AI from XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information aggregated by the Company based on public financial statements. Investment decisions are your responsibility; please consult a professional advisor as needed.