| Indicator | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥2463.1B | ¥2126.5B | +15.8% |
| Operating Income | ¥267.5B | ¥226.0B | +18.4% |
| Profit Before Tax | ¥269.4B | ¥230.9B | +16.7% |
| Net Income | ¥186.4B | ¥162.4B | +14.8% |
| ROE | 3.5% | 3.1% | - |
FY2026 Q1 results showed Revenue of ¥2,463.1B (YoY +¥336.6B +15.8%), Operating Income of ¥267.5B (YoY +¥41.5B +18.4%), Ordinary Income of ¥267.8B (YoY +¥44.8B +19.4%), and Quarterly Net Income attributable to owners of the parent of ¥183.2B (YoY +¥25.3B +16.0%). Growth was driven by the core Precision & Electronics segment (+32.9%) and the Environmental Business (+28.4%). Operating margin improved by +0.3pt to 10.9% (prior year 10.6%), with SG&A efficiency (20.8%, prior year 21.7%, -0.9pt) offsetting a decline in gross margin (31.6%, prior year 32.2%, -0.6pt). However, the Energy segment swung to an operating loss of ¥16.7B (prior year ¥+19.8B, -184.2%), and progress toward the full-year operating income target is slightly behind at 21.4%.
[Revenue] Revenue expanded strongly to ¥2,463.1B, up +15.8% YoY. By segment, Precision & Electronics recorded ¥829.5B (+32.9%) driven by expanded semiconductor-related demand and was the largest contributor to company growth. Environmental Business grew to ¥301.4B (+28.4%), Water & Infrastructure to ¥232.7B (+8.1%), and Building & Industrial to ¥630.8B (+12.0%), all showing solid performance. In contrast, Energy declined to ¥465.8B (-4.2%), partially offsetting momentum in core segments. Overall, double-digit growth in Precision & Electronics and Environmental Business produced double-digit consolidated top-line growth.
[Profitability] Operating Income rose to ¥267.5B (+18.4%), outpacing revenue growth, and Operating Margin improved to 10.9% from 10.6% (+0.3pt). Gross margin declined to 31.6% (prior year 32.2%, -0.6pt), but SG&A ratio improved to 20.8% (prior year 21.7%, -0.9pt), with cost efficiency offsetting gross margin headwinds. By segment, Precision & Electronics delivered Operating Income of ¥135.3B (+63.9%) with a margin of 16.3%, demonstrating high profitability and accounting for 50.6% of consolidated operating income. Environmental Business posted Operating Income of ¥61.7B (+103.2%) with a margin of 20.5%, markedly improved. Water & Infrastructure delivered Operating Income of ¥61.3B (+9.4%) with a margin of 26.3%. Conversely, Energy swung to an operating loss of ¥16.7B (prior year ¥+19.8B, -184.2%) depressing consolidated profit growth. Financial income was ¥5.7B against financial expenses of ¥15.5B, and equity-method investment income contributed +¥11.7B, resulting in Profit Before Tax of ¥269.4B (+16.7%). After deducting corporate taxes of ¥83.0B (effective tax rate 30.8%), Quarterly Net Income was ¥186.4B (+14.8%) and Net Income attributable to owners of the parent was ¥183.2B (+16.0%), achieving revenue and profit growth.
Precision & Electronics: Revenue ¥829.5B (+32.9%), Operating Income ¥135.3B (+63.9%), margin 16.3%. Expanded semiconductor-related equipment demand drove substantial increases in both revenue and profit, making this segment the largest earnings source at 50.6% of consolidated operating income.
Environmental Business: Revenue ¥301.4B (+28.4%), Operating Income ¥61.7B (+103.2%), margin 20.5%. Rapid growth as a high-margin business contributing 23.1% of consolidated profit.
Water & Infrastructure: Revenue ¥232.7B (+8.1%), Operating Income ¥61.3B (+9.4%), margin 26.3%. Maintained top-tier margins and comprised 22.9% of consolidated profit as a stable earnings source.
Building & Industrial: Revenue ¥630.8B (+12.0%) maintained growth, but Operating Income was ¥44.1B (+1.8%) with a margin of 7.0%, indicating limited profit expansion relative to revenue growth.
Energy: Revenue ¥465.8B (-4.2%) declined and it swung to an operating loss of ¥16.7B (prior year ¥+19.8B, -184.2%), with a margin of -3.6%, reducing overall corporate profitability.
Other: Revenue ¥3.0B, Operating Loss ¥16.8B, remaining an adjustment item.
[Profitability] Operating Margin 10.9% (prior year 10.6%), Net Profit Margin 7.4% (prior year 7.4%) largely flat. ROE 3.5% (annualized ~14%). High profitability in Precision & Electronics and Environmental Business lifted consolidated margins, while the Energy division’s swing to loss offset gains. [Cash Quality] Operating Cash Flow (OCF) turned positive to ¥257.1B (prior year -¥15.4B). OCF/Net Income ratio was 1.40x versus Net Income of ¥183.2B, indicating good cash backing for profits. However, trade receivables increased by ¥248.1B and contract assets totaled ¥959.2B, with inventories high at ¥2,009.5B, indicating significant working capital tie-ups. [Investment Efficiency] Free Cash Flow was approximately ¥89B (OCF ¥257.1B - CapEx ¥168.0B); Q1 FCF did not cover dividend payments of ¥141.5B. Total asset turnover annualized was about 0.89x, reflecting slow capital turnover due to long-duration projects. [Financial Health] Equity Ratio 46.8% (FY-end prior year 47.0%) remained moderate. Interest-bearing debt totaled ¥239.1B (current ¥99.9B, non-current ¥139.2B), and Net Interest-Bearing Debt was ¥92.7B (after deducting Cash and Cash Equivalents ¥1,463.8B), minor. Interest coverage (EBIT / Financial Expenses) about 17x, indicating sufficient payment capacity.
OCF improved significantly to ¥257.1B from -¥15.4B in the prior year, demonstrating solid cash conversion relative to Profit Before Tax of ¥269.4B. Depreciation & amortization were ¥99.7B. Contract asset decreases of ¥253.7B, increases in trade payables of ¥45.4B, and increases in consumption taxes payable and similar items of ¥135.8B were cash sources. Cash outflows included increases in trade receivables of ¥364.9B, increases in inventories of ¥14.8B, decreases in contract liabilities of ¥12.1B, and corporate income tax payments of ¥145.8B. Investing Cash Flow was -¥196.5B, mainly due to acquisitions of tangible and intangible assets of ¥168.0B and acquisition of subsidiary shares associated with changes in scope of consolidation of ¥18.9B. Financing Cash Flow was -¥49.2B, comprising net decrease in short-term borrowings of ¥299.2B, proceeds from long-term borrowings of ¥460.0B, repayment of long-term borrowings of ¥31.1B, dividend payments of ¥141.5B (to parent), and dividends to non-controlling interests of ¥21.7B. Free Cash Flow was approximately ¥89B; although insufficient to cover dividends in Q1, liquidity was maintained through borrowings and Cash and Cash Equivalents of ¥1,463.8B. Including foreign exchange translation gains of +¥17.4B, Cash and Cash Equivalents increased by ¥29.0B from the prior period-end to ¥1,463.8B.
Quality of earnings is generally sound; Operating Income of ¥267.5B reflects ordinary business activities. Other income ¥10.2B and other expenses ¥7.3B are minor at 0.4% and 0.3% of revenue respectively. Financial income ¥5.7B and financial expenses ¥15.5B are limited at 0.2% and 0.6% respectively, indicating small distortion from non-operating items. Equity-method investment income of ¥11.7B equals 4.4% of operating income and is a steady contributor. The transition from Ordinary Income of ¥267.8B to Profit Before Tax of ¥269.4B is reasonable; after deducting corporate taxes of ¥83.0B (effective tax rate 30.8%), Net Income reached ¥186.4B, within normal bounds. OCF being 1.40x Net Income indicates strong cash backing, but high levels of trade receivables increase of ¥364.9B and contract assets of ¥959.2B suggest timing differences between revenue recognition and cash collection, so accrual quality warrants monitoring. Comprehensive Income was ¥238.7B (owners of the parent ¥233.1B), with OCI such as foreign currency translation differences contributing +¥52.3B, adding depth to profit on a comprehensive basis.
Full-year plan: Revenue ¥10,200B (Q1 results ¥2,463.1B, progress 24.1%), Operating Income ¥1,250B (Q1 results ¥267.5B, progress 21.4%), Net Income attributable to owners of the parent ¥995B (Q1 results ¥183.2B, progress 18.4%). Revenue progress is near the normal pace (25%), but Operating Income is behind by -3.6pt relative to the standard and Net Income behind by -6.6pt. The Energy segment’s swing to a loss, slight decline in gross margin, and some expense prepayments are likely causes of profit progress lag. The full-year plan contemplates YoY increases of Operating Income +9.8% and Net Income +29.8%; achieving targets depends on improved Energy profitability in H2, conversion of contract assets to revenue, and working capital recovery. The earnings forecast was revised this quarter, but the dividend forecast remains at the initial annual plan of ¥33 per share.
The dividend is planned at ¥33 per share for the full year, implying a Payout Ratio of approximately 15.1% against FY EPS of 217.91 yen, a conservative level. Q1 Free Cash Flow of approximately ¥89B was below dividend payments of ¥141.5B (parent portion), but seasonality and borrowings ensured dividend coverage. Cash and Cash Equivalents of ¥1,463.8B and interest-bearing debt of ¥239.1B leave Net Interest-Bearing Debt at ¥92.7B, modest, supporting dividend sustainability. Share buybacks in Q1 were minimal (acquisition amount ¥0.0B), but treasury stock cancellation of ¥179.7B was executed, reducing treasury stock balance from -¥203.3B (prior period-end) to -¥23.6B, contributing to per-share value enhancement and capital efficiency. Total Return Ratio is about 15% from dividends only, reflecting a conservative capital policy prioritizing growth investment and financial soundness.
Continued losses in the Energy business: The Energy segment reported Revenue ¥465.8B (-4.2%) and an Operating Loss of ¥16.7B (prior year ¥+19.8B, -184.2%), undermining consolidated profit growth. H2 improvement in profitability is a premise for achieving full-year targets; continued cost increases or deterioration in project economics would materialize the risk of missing full-year profit plans.
Working capital constraints reducing capital efficiency: Increases in trade receivables ¥248.1B, contract assets ¥959.2B, and inventories ¥2,009.5B result in significant working capital tie-up. Even considering long-duration project characteristics, collection delays or inventory stagnation would reduce cash generation and constrain ROIC improvement.
Demand volatility in Precision & Electronics: Precision & Electronics accounts for 50.6% of consolidated operating income and is sensitive to semiconductor investment cycles. Demand slowdown or deferral of capital expenditure could cause substantial downside to consolidated revenue and profit.
Profitability & Returns
| Indicator | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 10.9% | 6.8% (2.9%–9.0%) | +4.0pt |
| Net Profit Margin | 7.6% | 5.9% (3.3%–7.7%) | +1.7pt |
Profitability significantly exceeds the industry median, with high-margin Precision & Electronics and Environmental Business lifting consolidated margins.
Growth & Capital Efficiency
| Indicator | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 15.8% | 13.2% (2.5%–28.5%) | +2.6pt |
Revenue growth outpaces the industry median, driven by double-digit growth in Precision & Electronics and Environmental Business.
※ Source: Company compilation
High growth and high profitability in Precision & Electronics and Environmental Business are raising consolidated profitability, with Operating Margin at 10.9% (industry median +4.0pt), indicating competitive strength within the industry. Sustainability of semiconductor-related demand and expansion in environmental businesses through H2 will determine continuity of this performance track.
The Energy segment’s swing to an operating loss (¥16.7B) is hindering progress toward the full-year target (Operating Income progress 21.4%), and improvement in profitability is a focal point for investors. If H2 improvement materializes, the probability of achieving full-year targets increases.
OCF turned positive at ¥257.1B, providing good cash backing for profits, but large working capital tie-ups (trade receivables +¥364.9B, contract assets ¥959.2B, inventories ¥2,009.5B) are significant; FCF of approximately ¥89B fell short of dividend payments of ¥141.5B. Progress in collections and inventory reductions in H2 will support improvements in capital efficiency and sustain shareholder returns.
This report is an earnings analysis document auto-generated by AI analyzing XBRL earnings release data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are compiled by the company based on public financial statements and are provided for reference. Investment decisions are your responsibility; consult a professional advisor as needed.