| Metric | Current Period | Prior Year Comparable | YoY |
|---|---|---|---|
| Revenue | ¥929.3B | ¥865.0B | +7.4% |
| Operating Income | ¥50.0B | ¥54.5B | -8.2% |
| Ordinary Income | ¥52.0B | ¥45.4B | +14.6% |
| Net Income | ¥38.9B | ¥31.0B | +25.4% |
| ROE | 6.4% | 5.5% | - |
For the fiscal year ended March 2026, Revenue was ¥929.3B (YoY +¥64.3B +7.4%), Operating Income was ¥50.0B (YoY -¥4.4B -8.2%), Ordinary Income was ¥52.0B (YoY +¥6.6B +14.6%), and Net Income was ¥38.9B (YoY +¥7.9B +25.4%). Revenue growth was driven by expansion in large Middle East projects (prior year ¥158.9B → current period ¥248.3B, +56.3%) and steady performance in the Japanese market (+11.7%). At the operating level, increases in selling, general and administrative expenses (¥193.1B, YoY +6.7%) absorbed the gross profit improvement, resulting in lower operating profitability. Ordinary Income improved due to a reduction in foreign exchange losses (prior year ¥17.1B → current period ¥4.7B) and higher dividend income (¥3.9B), delivering a gain. Net Income rose substantially following the recognition of investment securities disposal gains of ¥28.4B (prior year ¥13.3B). Operating margin declined to 5.4% (prior year 6.3%, -0.9pt) while Net Income margin improved to 4.2% (prior year 3.6%, +0.6pt).
[Revenue] Revenue of ¥929.3B (YoY +7.4%) was led by the Middle East at ¥248.3B (+56.3%), with Japan also performing solidly at ¥364.4B (+11.7%). Africa contracted significantly to ¥73.5B (-50.1%), and Asia declined to ¥119.4B (-16.3%). In the single-segment Pump Business, project-based, high-ticket models lifted consolidated sales through large Middle East project awards. Contract liabilities (advances received) rose to ¥83.8B (prior year ¥65.4B, +28.2%), confirming an increase in order backlog as a future revenue source. Gross margin slipped slightly to 26.2% (prior year 27.2%, -1.0pt), with lingering pressure from higher raw material and logistics costs.
[Profitability] Operating Income was ¥50.0B (YoY -8.2%), primarily due to higher SG&A of ¥193.1B (prior year ¥180.9B, +6.7%). The SG&A ratio was slightly lower at 20.8% (prior year 20.9%), but cost increases outpaced revenue growth, lowering the operating margin to 5.4% (prior year 6.3%, -0.9pt). Within SG&A, transportation and packing expenses decreased to ¥6.6B (prior year ¥11.0B), while rent remained high at ¥8.1B (prior year ¥8.7B) and retirement benefit expense stayed elevated at ¥2.1B (prior year ¥2.3B). Goodwill amortization rose to ¥1.7B (prior year ¥0.5B). Ordinary Income of ¥52.0B (+14.6%) was supported by improved non-operating items: foreign exchange losses narrowed to ¥4.7B (prior year ¥17.1B), dividend income increased to ¥3.9B (prior year ¥3.1B, +26.6%), and interest income was ¥1.1B (prior year ¥1.3B). Equity-method investment income declined to ¥0.4B (prior year ¥0.8B). Special gains of ¥28.4B (gain on sale of investment securities) led Pre-tax Income to ¥80.5B (prior year ¥59.1B, +36.2%). After corporate taxes of ¥20.6B (effective tax rate 25.6%), Net Income was ¥38.9B (+25.4%). In summary: revenue up but operating profit down; ordinary profit up due to FX improvement; and net profit significantly up driven by special gains.
[Profitability] Operating margin 5.4% (prior year 6.3%, -0.9pt), Net Income margin 4.2% (prior year 3.6%, +0.6pt), Gross margin 26.2% (prior year 27.2%, -1.0pt). ROE improved to 6.4% (prior year 5.5%, +0.9pt) but remains short of exceeding the cost of capital. EBITDA margin is 8.3% (Operating Income ¥50.0B + Depreciation ¥27.2B = ¥77.2B / Revenue ¥929.3B), indicating maintained earnings power. [Cash Quality] Operating Cash Flow/Net Income is 1.17x (OCF ¥45.3B / Net Income ¥38.9B), reflecting good cash conversion. The accrual ratio is -0.02 ((Net Income ¥38.9B - OCF ¥45.3B) / Total Assets ¥1,202.2B), low and indicating healthy earnings quality. OCF/EBITDA is 0.59x, below threshold, suggesting room to improve working capital. [Investment Efficiency] Total Asset Turnover is 0.77x (Revenue ¥929.3B / Total Assets ¥1,202.2B), Fixed Asset Turnover is 4.33x (Revenue / Fixed Assets ¥214.5B). Simplified ROIC estimate is 4.2% (NOPAT ¥36.8B / Invested Capital ¥875B = Interest-bearing Debt ¥222B + Equity ¥606B + Retirement benefit liability ¥47B), below the cost of capital. Capital expenditures of ¥19.3B amount to 71% of depreciation ¥27.2B, indicating restrained renewal investment. [Financial Soundness] Equity Ratio 50.4% (prior year 48.8%, +1.6pt), Current Ratio 218%, Quick Ratio 217% indicate robust liquidity. Debt/Equity is 0.37x (Interest-bearing Debt ¥222.0B / Equity ¥606.2B), and Debt/EBITDA is 2.87x, reflecting moderate leverage. Interest Coverage is 17.2x (Operating Income ¥50.0B / Interest Expense ¥2.9B), showing ample debt-servicing capacity.
Operating Cash Flow turned positive to ¥45.3B (improved ¥52.0B from prior year -¥6.7B). The operating subtotal was ¥55.8B, with working capital movements negatively impacted by an increase in trade receivables of -¥50.6B (DSO increase) and a decrease in trade payables of -¥28.3B; offsetting positives included a decrease in inventories of +¥33.5B (mainly WIP compression) and an increase in contract liabilities of +¥17.1B (accumulation of advances received). After income tax payments of -¥13.4B, final OCF was ¥45.3B. Investing Cash Flow was -¥2.6B: capital expenditures -¥19.3B and intangible asset acquisitions -¥0.5B were more than offset by proceeds from sale of securities of ¥32.1B, leaving a small net outflow. Financing Cash Flow was -¥40.0B: proceeds from long-term borrowings of ¥80.0B were offset by repayments -¥9.3B, net decrease in short-term borrowings -¥0.5B, dividend payments -¥16.2B, and share buybacks -¥10.0B. Free Cash Flow was ¥42.7B (OCF ¥45.3B + Investing CF -¥2.6B), providing ample liquidity; cash and deposits increased to ¥183.3B (prior year ¥171.2B, +¥12.1B). Including FX translation adjustment +¥4.1B, cash and cash equivalents at period-end were ¥177.7B. Working capital improvement was mainly driven by WIP compression, but receivables expansion persists; strengthening collections management is key to improving capital efficiency.
Of Net Income ¥38.9B, special gains of ¥28.4B (gain on sale of investment securities) account for 73%, leaving recurring profit at approximately ¥10.5B. Non-operating income of ¥11.1B comprises dividend income ¥3.9B and interest income ¥1.1B, reflecting steady financial income, while foreign exchange losses of ¥4.7B remain the largest component of non-operating expense. Comprehensive income of ¥66.5B substantially exceeds Net Income ¥38.9B; the ¥27.6B difference is attributable to items including retirement benefit-related adjustments of ¥9.5B (improved fair value of pension assets), foreign currency translation adjustments ¥3.5B, and deferred hedge gains/losses -¥5.7B. The accrual (Net Income - OCF) is -¥6.4B, indicating good cash backing of profits. Working capital detail shows receivables increase and payables decrease constrained cash, while WIP reduction and contract liability increases offset this, demonstrating the project-based business’s characteristic volatility. Excluding one-off items (gain on sale of securities), core earnings recovery requires improvement in operating margins and containment of FX losses; FY2027 should factor in a likely reversal of special gains.
Full Year guidance is Revenue ¥955.0B (YoY +2.8%), Operating Income ¥52.0B (YoY +3.9%), Ordinary Income ¥44.0B (YoY -15.4%), and Net Income ¥38.0B (YoY +22.6%). Progress through Q2: Revenue 97.3% (¥929.3B / ¥955.0B), Operating Income 96.2% (¥50.0B / ¥52.0B), Ordinary Income 118.2% (¥52.0B / ¥44.0B), Net Income 102.4% (¥38.9B / ¥38.0B). While Revenue and Operating Income are slightly short of forecast, Ordinary Income and Net Income have exceeded expectations. The outperformance on Ordinary Income is attributed to a larger-than-assumed reduction in FX losses, and Net Income outperformance is likely due to upside in special gains. With near-achievement of full-year guidance at the Q2 point, limited upside is expected in H2; focus for H2 will be recovery of the operating margin (forecasted 5.4%) and monitoring foreign exchange risk.
Annual dividend is ¥63 per share (¥31 at Q2-end, ¥32 at year-end), with a payout ratio of 39.3% (total dividends ¥16.6B / Net Income ¥38.9B (before deduction for non-controlling interests)), a reasonable level. This represents a substantial increase from prior year dividend of ¥30 (+¥33), demonstrating an enhanced shareholder return stance. Against Free Cash Flow ¥42.7B, total return of dividends ¥16.6B + share buybacks ¥10.0B equals ¥26.6B, yielding an FCF coverage of 1.61x and indicating sustainability. Share buybacks increased treasury stock to ¥26.4B, aiming to improve capital efficiency. Dividend ¥63 relative to BPS ¥2,284.64 equates to a yield of approximately 2.8% (BPS basis), which may be attractive depending on share price. Forecasted year-end dividend is ¥32 (payout ratio 22.2% against forecast EPS ¥144.39), set conservatively, leaving room for potential increases if performance improves. Total Return Ratio (dividends + buybacks) is roughly 45%, maintaining a balance between retained earnings and shareholder returns.
Working capital expansion risk: Trade receivables increased to ¥445.2B (YoY +14.2%), pushing DSO to 175 days and prolonging the cash conversion cycle. Although WIP of ¥142.8B (YoY -19.8%) was somewhat compressed, it remains high and CCC is estimated at 208 days. Accumulation of contract liabilities ¥83.8B signals growing backlog but project-based long collection cycles structurally pressure capital efficiency and increase OCF volatility.
Downward trend in operating margin: Operating margin declined to 5.4% (prior year 6.3%, -0.9pt). Although SG&A ratio edged down slightly, cost increases outpaced revenue growth, compressing profitability. Rising proportion of large Middle East projects incurs higher initial project costs and sustained raw material/logistics prices, and if price pass-through lags or project margins deteriorate, sustained ROE improvement will be difficult.
Regional concentration risk and FX exposure: Sales to the Middle East expanded rapidly to ¥248.3B (26.7% of total, YoY +56.3%), increasing exposure to geopolitical and country risks. Although foreign exchange losses narrowed to ¥4.7B (prior year ¥17.1B), a high proportion of transactions are foreign-currency denominated and hedge effectiveness is limited (deferred hedge gains/losses -¥5.7B), leaving residual volatility.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 5.4% | 7.8% (4.6%–12.3%) | -2.4pt |
| Net Income Margin | 4.2% | 5.2% (2.3%–8.2%) | -1.0pt |
Operating margin trails the industry median by 2.4pt, indicating relatively low profitability within manufacturing. Efficiency of SG&A and project profitability improvements are key issues.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 7.4% | 3.7% (-0.4%–9.3%) | +3.7pt |
Revenue growth outpaces the industry median by 3.7pt, driven by Middle East market development. Top-line expansion rate ranks in the upper tier within the sector.
※ Source: Company aggregation
Expansion of large Middle East project orders and accumulation of contract liabilities (¥83.8B, YoY +28%) underpin future revenue, but the decline in operating margin (-0.9pt) and rising SG&A weigh on profitability. Price pass-through and cost control will be key to margin recovery in FY2027 and monitoring whether operating margin reverses is a focal point.
Special gains of ¥28.4B (gain on sale of investment securities) account for 73% of Net Income, leaving recurring earnings around ¥10.5B. FY2027 is expected to see a reversal of special gains; stabilization of FX losses and recurring non-operating income (dividends/interest) will support Ordinary Income. Recovery of core earnings requires operating-level margin improvement.
Working capital expansion (Receivables +¥55B, Payables -¥28B) leaves room to improve OCF quality, but WIP compression and increased contract liabilities secured Free Cash Flow ¥42.7B. Total shareholder return of ¥26.6B (dividends + buybacks) is sustainable given Equity Ratio 50.4% and Debt/EBITDA 2.87x, indicating solid financial health. Strengthening collections and shortening CCC will directly improve capital efficiency.
This report was automatically generated by AI analyzing XBRL financial statement data and is a financial analysis document. 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; consult advisors as needed before making investment decisions.