SHIBUYA CORPORATION FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥30.60B
• Operating Income: ¥1.50B
• Net Income: ¥2.32B
• EPS: ¥40.13

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Integrated Analysis

Analysis integrating XBRL data (GPT-5) and PDF earnings presentation (Claude)

Executive Summary

Shibuya Corporation (TSE:6340) reported FY2026 Q1 consolidated results under JGAAP with revenue of ¥30.6bn, up 9.1% year on year, indicating ongoing topline resilience in its core equipment and systems businesses. Despite the solid revenue growth, profitability compressed materially: operating income declined 56.7% YoY to ¥1.5bn, and net income fell 52.1% YoY to ¥1.11bn, implying sharp margin pressure in the quarter. The gross profit of ¥6.13bn translates to a 20.0% gross margin, while the operating margin was 4.9% and the net margin was 3.63%, highlighting significant cost absorption below gross profit. Ordinary income of ¥1.58bn modestly exceeded operating income, suggesting a small net positive non-operating balance; interest expense was minimal at ¥9m with interest coverage of about 167x, underscoring limited financial burden from debt. DuPont decomposition points to a quarterly ROE of 1.02%, driven by a 3.63% net margin, 0.193x asset turnover, and 1.47x financial leverage. Balance sheet strength remains a key positive: total assets were ¥158.8bn, total liabilities ¥51.5bn, and total equity ¥108.3bn, implying an equity ratio around 68% (despite a reported 0.0% figure that reflects undisclosed XBRL items). Liquidity is ample, with current assets of ¥105.6bn and current liabilities of ¥42.7bn, yielding a current ratio of approximately 2.47x and working capital of ¥62.9bn. The quick ratio shown equals the current ratio because inventories are unreported; this likely overstates true quick liquidity, a limitation to note. Operating leverage appears unfavorable this quarter, with opex growth outpacing revenue, compressing operating margin despite stable gross margin levels. Effective tax metrics in the calculated section are not meaningful due to data gaps, though the reported income tax expense (¥1.05bn) is sizable relative to net income, implying a high tax/one-off burden dynamic under JGAAP classifications. Cash flow figures (OCF, investing CF, financing CF, cash) are unreported and shown as zeros; as such, free cash flow and cash conversion cannot be evaluated this quarter from the provided data. Dividend data are also unreported (DPS and payout shown as zero), so capital return policy and coverage cannot be assessed from this release alone. Overall, the quarter reflects healthy demand but pronounced margin compression, with the strong balance sheet and low interest burden cushioning financial risk. Near-term focus should be on cost normalization, project mix, and timing of revenue and profit recognition, which likely drove the sharp YoY decline in profits. Given the data limitations, conclusions on earnings quality and sustainability are provisional and should be revisited when cash flow and inventory details are disclosed.

From Earnings Presentation: Shibuya Corporation's Q1 FY06/2026 results showed revenue of 30,597 million yen (+9.1% YoY), up from the previous year, but operating profit of 1,500 million yen (-56.7% YoY), a significant decline. The Packaging Plant business achieved 44.0% revenue growth but saw profit margin decline from 17.6% to 12.8%. Mechatronics Systems and Agricultural Equipment segments saw both revenue and profit declines. The primary reason for the profit decline was 'product mix impact,' with increased turnkey projects leading to higher incorporation of third-party products and deteriorating cost ratios. Order intake decreased slightly by -1.1% YoY, and order backlog decreased by -11.3%. Full-year forecasts remain unchanged from initial announcement: revenue of 133,000 million yen (+3.1%) and operating profit of 13,000 million yen (-5.4%), a conservative outlook. Increased fixed costs including personnel expenses and depreciation, as well as rising raw material and energy prices, also contributed to profit decline. Financially, the company maintains a very solid position with an equity ratio of 68.2% and current ratio of 247%, providing ample capacity for strategic investments.

Financial Analysis

Profitability

ROE_decomposition: ROE (DuPont) = Net margin 3.63% × Asset turnover 0.193 × Leverage 1.47 ≈ 1.02% for the quarter. The primary drag is the low net margin in Q1, with modest asset efficiency and conservative leverage. margin_quality: Gross margin at 20.0% (¥6.13bn/¥30.60bn) suggests stable manufacturing/project economics, but operating margin of 4.9% indicates elevated SG&A/R&D or project-related costs. Net margin of 3.63% reflects additional burdens below operating income (taxes/one-off items). Ordinary income (¥1.58bn) slightly above operating income (¥1.50bn) suggests small non-operating gains offsetting minimal interest expense. operating_leverage: Revenue grew 9.1% YoY while operating income fell 56.7% YoY, indicating negative operating leverage in the quarter. Fixed-cost absorption and/or temporary cost overruns, mix shifts toward lower-margin orders, or timing of project acceptance likely pressured opex relative to revenue.

Growth

revenue_sustainability: Topline growth of 9.1% YoY to ¥30.6bn indicates a healthy order-to-revenue conversion and demand resilience across end-markets. Without order backlog and new orders disclosed, sustainability cannot be fully assessed, but the growth pace is consistent with steady market demand. profit_quality: The divergence between revenue growth and profit contraction points to timing/mix effects and cost inflation. The 20.0% gross margin is acceptable, but the step-down to a 4.9% operating margin implies overhead or project execution burdens; without D&A and cash flow data, the quality of earnings (cash conversion) is indeterminable this quarter. outlook: Assuming normalization of cost timing and improved mix in subsequent quarters, margins could recover from Q1 trough levels, aided by a strong balance sheet. However, near-term visibility is limited due to missing cash flow and inventory data, and the high reported income tax burden suggests potential non-linear earnings progression across the year.

Financial Health

liquidity: Current assets ¥105.6bn vs current liabilities ¥42.7bn yields a current ratio of ~2.47x and working capital of ¥62.9bn. The quick ratio equals the current ratio due to unreported inventory; true quick liquidity is likely lower but still appears robust. solvency: Total liabilities ¥51.5bn vs equity ¥108.3bn implies a liabilities-to-equity ratio of 0.48x and an implied equity ratio around 68%. Interest expense is negligible (¥9m) with interest coverage ~167x, indicating low financial risk. capital_structure: Leverage is conservative at 1.47x assets/equity. The company retains balance sheet flexibility to absorb earnings volatility and invest for growth without reliance on external debt.

Cash Flow

earnings_quality: OCF is unreported (shown as zero), so cash conversion from earnings cannot be assessed. The reported OCF/Net Income of 0.00 is not meaningful given data gaps. FCF_analysis: Free cash flow is unreported. Capex and D&A are also unreported, preventing assessment of maintenance vs growth investment and FCF coverage of dividends. working_capital: Inventories are unreported; thus, changes in working capital cannot be analyzed. Given project-based businesses, quarter-to-quarter swings in receivables, inventories, and customer advances can materially affect OCF—monitor when disclosed.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio are shown as zero due to undisclosed data. Withholding a payout assessment is prudent until full-year guidance or dividend policy disclosures are available. FCF_coverage: Unavailable; FCF is unreported. Balance sheet strength (net liabilities-to-equity 0.48x, ample working capital) suggests capacity for distributions in principle, but coverage cannot be validated without OCF/Capex data. policy_outlook: No policy details provided in this dataset. Historically, Japanese industrials target stable or progressive dividends; confirmation requires management commentary and full-year forecasts.

Business Outlook

Full-year outlook remains unchanged from initial announcement (August 13, 2025). Revenue of 133,000 million yen (+3.1% YoY) assumes order backlog execution and recovery in Packaging Plant business, but operating profit of 13,000 million yen (-5.4% YoY) anticipates decline. Three main profit decline factors: ①Increased fixed costs including personnel and depreciation (front-loaded investment in production system strengthening and R&D), ②Rising raw material and energy prices (price pass-through partially progressing but not fully absorbed), ③Product mix impact in plants (cost ratio deterioration due to increased turnkey project ratio). Q1 progress rates of 23.0% for revenue and 11.5% for operating profit are low, reflecting business characteristics of order booking and large project acceptance concentrated in second half. Mechatronics Systems business outlook remains cautious due to uncertain timing of semiconductor/EV demand recovery; Agricultural Equipment depends on timing of large projects. With increasing dependence on Packaging Plant business, progress in price pass-through and cost normalization will be key to achieving full-year targets.

Management Guidance

Management positioned 'product mix impact' as the most critical factor for Q1's significant profit decline, explaining that increased turnkey orders responding to customer needs expanded construction scope, and higher incorporation of third-party products as peripheral equipment drove up cost ratios. This impact may be a structural change rather than temporary, expected to continue as a profit margin pressure factor for the full year. On the other hand, orders for food and pharmaceutical/cosmetic plants remain solid, with strong inquiries for high-value-added areas such as vial filling systems for injectable drugs. Mechatronics Systems awaits recovery in semiconductor demand for EVs and smartphones, with medical equipment expected to recover in second half assuming resolution of parts supply constraints. Agricultural Equipment shows significant quarterly volatility due to variations in timing of large project orders and deliveries. Full-year forecast maintains 'no need for revision at this time' stance, aiming to achieve targets through order backlog execution and advancing price pass-through despite headwinds from increased fixed costs and high material prices. Dividends not specified in materials, awaiting future disclosure.

Strategic Initiatives

• Packaging Plant Business: Continue focus on high-value-added areas such as beverage aseptic filling systems and vial filling systems for injectable drugs. While strengthening turnkey order response capabilities (flexible response to customer needs), improve profit margins through enhanced cost management and advanced project management
• Mechatronics Systems Business: Continue technology development and production system preparation in anticipation of semiconductor manufacturing system demand recovery for EVs and smartphones. Strengthen resilience in medical equipment through supply chain diversification and promotion of in-house manufacturing
• Agricultural Equipment Business: Strengthen development of differentiated technologies such as labor-saving, high-speed processing, and AI utilization in sorting and grading plants for citrus, deciduous fruits, and vegetables. Consider building up small to medium projects and service revenue to mitigate dependence on large project order timing
• Cost Structure Reform: Increased fixed costs (personnel and depreciation) result from front-loaded production capacity expansion and R&D investment, positioned as groundwork for medium to long-term growth. For rising raw material and energy prices, pursue gradual price pass-through negotiations while achieving cost absorption through procurement source diversification and process improvements
• Financial Strategy: Leverage strong financial foundation with 68.2% equity ratio and D/E=0.48x to maintain flexible investment capacity for M&A, capital expenditures, and R&D. Working capital of 62,851 million yen provides sufficient capacity to support large project order expansion

Risk Assessment

Business Risks:

• Project timing and acceptance risk leading to quarterly profit volatility
• Input cost inflation and supply chain constraints impacting margins
• Product mix shift toward lower-margin systems reducing operating leverage
• Customer capex cycles in end-markets (e.g., beverage/food, electronics) affecting orders
• Competitive pricing pressure in equipment and automation markets

Financial Risks:

• Potential working capital build in receivables or inventories constraining OCF
• Foreign exchange exposure on imports/exports affecting margins
• Tax and extraordinary item volatility under JGAAP classification affecting net income
• Limited visibility due to unreported cash flow and inventory data in the quarter

Key Concerns:

• Sharp YoY decline in operating income (-56.7%) despite revenue growth
• Operating margin compressed to 4.9%, indicating negative operating leverage
• Unavailable OCF/FCF data prevents assessment of earnings quality and dividend capacity

Risk Factors from Presentation:

• Product Mix Fluctuations: Risk of significant cost and profit margin variations by project due to changes in turnkey order ratio. Managing third-party product incorporation ratio is a challenge
• Rising Raw Material and Energy Prices: If steel, electronic components, and energy costs remain elevated, delays in price pass-through will pressure profits
• Increased Fixed Costs Including Personnel and Depreciation: Front-loaded production system strengthening and R&D investment creates risk that profit growth cannot keep pace with revenue growth in the short term
• Delayed Semiconductor/EV Demand Recovery: If capital investment restraint by EV and smartphone manufacturers, key customers for Mechatronics Systems business, is prolonged, order and revenue recovery will be delayed
• Medical Equipment Parts Supply Constraints: Risk of continued or recurring production reduction impacts due to some parts shortages
• Large Project Order/Acceptance Timing: Agricultural Equipment and large plant projects tend to concentrate or disperse order and delivery timing, amplifying quarterly performance volatility
• Foreign Exchange Fluctuations: No quantitative mention of FX risk for overseas sales/procurement in materials (awaiting separate disclosure)

Investment Implications

Key Takeaways:

• Revenue grew 9.1% YoY to ¥30.6bn, indicating solid demand
• Operating income fell 56.7% YoY to ¥1.5bn; operating margin 4.9%
• Net margin at 3.63% drove quarterly ROE of 1.02% despite low leverage
• Balance sheet is strong with implied equity ratio ~68% and liabilities/equity 0.48x
• Interest burden is de minimis with ~167x coverage, lowering solvency risk
• Cash flow and inventory data are unreported, limiting earnings quality analysis

Metrics to Watch:

• Order intake and backlog to gauge revenue sustainability
• Gross and operating margin trajectory by segment and project mix
• Working capital movements (AR, inventory, advances) and OCF when disclosed
• Capex and D&A trends to assess maintenance needs and FCF capacity
• Tax rate normalization and any extraordinary gains/losses
• FX impacts on margin and pricing

Relative Positioning: Within Japanese industrial equipment peers, Shibuya exhibits a stronger-than-average balance sheet and low financial risk, but Q1 profitability underperformed given negative operating leverage; near-term positioning hinges on margin normalization and conversion of orders to cash.

Supplementary Insights (Key Highlights)

• Packaging Plant Business: Significant 44.0% revenue increase driven by domestic and international beverage aseptic filling systems in food applications and vial filling systems for injectable drugs in pharmaceutical/cosmetics applications. However, profit increased only 4.7% due to higher incorporation of peripheral equipment (third-party products) from increased turnkey orders responding to customer needs, leading to higher cost ratios
• Mechatronics Systems Business: Semiconductor manufacturing systems declined due to delayed recovery in EV and smartphone demand; medical equipment also decreased -22.7% due to parts shortages causing production cuts, resulting in an operating loss of 254 million yen
• Agricultural Equipment Business: Revenue declined -46.9% due to fewer deliveries of large sorting and grading plants for citrus, deciduous fruits, and vegetables, resulting in an operating loss of 308 million yen
• Order Trends: Packaging Plant +16.0%, Mechatronics -20.4%, Agricultural -20.9%, with overall company orders -1.1%, showing slight weakness. Order backlog decreased -11.3% YoY to 90,160 million yen, indicating a declining trend
• Full-year forecast unchanged: Revenue 133,000 million yen (+3.1%), operating profit 13,000 million yen (-5.4%). Q1 progress rates of 23.0% for revenue and 11.5% for operating profit are low, assuming heavy weighting toward second half
• Management explicitly identified three profit decline factors: ①Product mix (increased turnkey ratio), ②Increased fixed costs including personnel and depreciation, ③Rising raw material and energy prices
• Inventory increased to 20,511 million yen (+3,119 million yen from prior fiscal year-end), suggesting growth in work-in-progress projects
• Tangible fixed assets also expanded to 45,376 million yen (+1,566 million yen), suggesting continued investment in production capacity expansion and new technology development

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
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