| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥4028.9B | ¥3888.1B | +3.6% |
| Operating Income | ¥582.9B | ¥499.2B | +16.8% |
| Profit Before Tax | ¥581.6B | ¥507.1B | +14.7% |
| Net Income | ¥162.9B | ¥207.1B | -21.3% |
| ROE | 4.7% | 6.1% | - |
The fiscal year ended March 2026 results showed Revenue of ¥4028.9B (YoY +¥140.7B +3.6%), Operating Income of ¥582.9B (YoY +¥83.7B +16.8%), Ordinary Income of ¥305.0B (YoY +¥87.7B +40.4%), and Net Income of ¥162.9B (YoY -¥44.1B -21.3%). Continuing operations recorded revenue and profit growth with Operating Margin improving to 14.5% (prior year 12.8%) (+1.7pt), while a final-period decline was driven by a non‑continuing business loss of ¥239.4B related to Pentagon Technologies. Profit from continuing operations was ¥402.3B (prior year ¥367.2B, +9.6%) and performance metrics improved: Gross Margin 38.0% (+1.1pt) and SG&A ratio 23.8% (-0.1pt). Operating profit in the general water treatment market increased substantially by +34.0% YoY, strengthening the company’s two-pillar revenue structure.
[Revenue] Revenue was ¥4028.9B (+3.6%), with the General Water Treatment market at ¥2310.9B (+5.3%) and the Electronics market at ¥1717.9B (+1.4%), both segments achieving growth. Regionally, Japan ¥2118.9B (+7.8%) and EMEA ¥439.8B (+20.0%) led growth, while Asia ¥899.0B (-10.6%, China ¥364.0B -27.0%) declined due to a slowdown in semiconductor-related capex. By product, General Water Treatment equipment ¥371.9B (+15.8%) and maintenance ¥507.4B (+3.8%) expanded; in the Electronics market maintenance ¥251.1B (+20.6%) offset a decline in equipment ¥718.4B (-2.6%). Recurring contract services totaled ¥670.0B (+0.8%), supporting the stock revenue base.
[Profitability] Cost of sales was ¥2497.3B (+2.1%), improving Gross Margin to 38.0% (prior year 36.9%) (+1.1pt). SG&A was ¥958.1B (+3.3%), reducing the SG&A ratio to 23.8% (prior year 23.9%). Operating Income was ¥582.9B (+16.8%), Operating Margin 14.5% (+1.7pt), indicating significant profitability improvement. Net financial income was net -¥2.4B (Financial income ¥16.1B, Financial expenses ¥18.5B), and Equity-method investment income ¥1.2B, resulting in Profit Before Tax of ¥581.6B (+14.7%). Against continuing operations profit of ¥402.3B, a non‑continuing business loss of ¥239.4B (prior year ¥160.1B loss, including ¥199.1B fair value measurement loss on disposal group held for sale) was recorded, yielding Net Income of ¥162.9B (-21.3%). Continuing operations EPS was ¥361.82 (prior year ¥322.85), indicating solid underlying performance. In conclusion, continuing operations delivered revenue and profit growth, but an one‑off non‑continuing loss drove the final-period decline.
Electronics Market Segment: Revenue ¥1717.9B (+1.4%), Operating Income ¥287.1B (+3.2%), Operating Margin 16.7% (prior year 16.4%). Equipment ¥718.4B (-2.6%) declined due to semiconductor capex slowdown, but maintenance ¥251.1B (+20.6%) and recurring contract services ¥545.4B (-0.4%) supported recurring revenue. Regionally Asia ¥657.9B (-13.7%, China ¥293.3B -31.6%) declined, while EMEA ¥80.3B (+161.6%) grew strongly. General Water Treatment Market Segment: Revenue ¥2310.9B (+5.3%), Operating Income ¥295.9B (+34.0%), Operating Margin 12.8% (prior year 10.1%), showing large profitability improvement. Equipment ¥372.8B (+15.8%), chemicals ¥1211.7B (+2.6%), and maintenance ¥507.4B (+3.8%) all increased, with improved project profitability in Japan and EMEA contributing to margin expansion. Segment assets are balanced: Electronics ¥2547.6B, General Water Treatment ¥2305.0B.
[Profitability] Operating Margin 14.5% (prior year 12.8%, +1.7pt), Gross Margin 38.0% (prior year 36.9%, +1.1pt) indicating improving profitability. EBITDA margin is 22.7% (Operating Income ¥582.9B + Depreciation ¥332.4B = ¥915.3B / Revenue ¥4028.9B) at a high level, but note the gap with weak cash conversion (see below). ROE 4.7% (prior year 6.1%) declined due to the one‑off reduction in Net Income; continuing-operations ROE is estimated around 9.4% (continuing operations profit ¥402.3B / Equity ¥3439.8B × Financial leverage 1.64x), indicating solid underlying return. [Cash Quality] Operating Cash Flow (OCF) ¥555.9B is 3.4x Net Income ¥162.9B, with an accrual ratio of -7.0%—favorable—but OCF/EBITDA ratio at 0.61x is weak, and working capital headwinds (trade receivables +¥175.1B, trade payables -¥67.0B) have emerged. Trade receivables growth of 15.2% (¥1456.3B/¥1264.1B) vs Revenue growth 3.6% results in estimated DSO 132 days (trade receivables ¥1456.3B ÷ Revenue ¥4028.9B × 365 days; prior year 118 days), indicating longer collections. [Investment Efficiency] Total asset turnover 0.71x (Revenue ¥4028.9B / Total assets ¥5644.2B), Inventory Turnover 19.8x (COGS ¥2497.3B / Inventory ¥203.5B). CapEx ¥259.6B vs Depreciation ¥332.4B yields CapEx/Depreciation 0.78x, indicating restrained replacement investment. Goodwill ¥614.9B is 17.9% of Net Assets and 0.67x of EBITDA, suggesting reasonable impairment resilience. [Financial Soundness] Equity Ratio 60.4% (prior year 61.2%), Interest‑bearing debt ¥798.3B (short-term ¥158.8B + long-term ¥639.5B) vs Cash ¥652.5B yields Net Debt ¥145.8B, Debt/EBITDA 0.87x—conservative. Interest Coverage 31.4x (Operating Income ¥582.9B / Financial expenses ¥18.5B) shows minimal interest burden. Current Ratio 209.1% (Current assets ¥2489.8B / Current liabilities ¥1190.7B) indicates strong short-term liquidity.
Operating Cash Flow was ¥555.9B (prior year ¥877.6B, -36.7%). Excluding non‑continuing business loss of ¥218.0B from Profit Before Tax ¥581.6B, continuing operations show strong underlying capability, but deterioration in working capital (trade receivables -¥175.1B, trade payables -¥67.0B, total headwind -¥242.1B) materially pressured cash. Subtotal was ¥709.0B, and after corporate tax payments of ¥144.6B, OCF/EBITDA ratio remained weak at 0.61x. Investing Cash Flow was -¥340.2B (prior year -¥520.7B), with CapEx ¥259.6B (prior year ¥498.6B) reflecting a shift to a restraint mode; investing includes acquisition of investment securities ¥25.5B and intangible assets ¥36.7B. Free Cash Flow was ¥215.7B (prior year ¥356.9B) positive, but dividends ¥113.4B (+13.8%) plus share buybacks ¥151.7B totaled ¥265.0B, exceeding FCF by ¥49.3B. Dividend-only coverage vs FCF is 1.9x, indicating high sustainability for dividends alone. Financing Cash Flow was -¥233.1B; the company raised long-term borrowings ¥199.4B and issued bonds ¥99.6B while redeeming bonds ¥300.0B, and short-term borrowings net increased ¥113.4B, reflecting refinancing toward long-term debt. Cash at period end was ¥652.5B (+¥23.0B, including foreign exchange effect +¥40.4B). Normalization of trade receivables collection is key to restoring next-period cash generation.
Recurring earnings are centered on Operating Income ¥582.9B. Of Financial income ¥16.1B, Equity-method income ¥1.2B provided stable contribution; other financial income was minor. This period’s Net Income ¥162.9B was heavily impacted by the one‑off non‑continuing business loss ¥239.4B, while continuing operations profit ¥402.3B reflects the company’s underlying strength. Continuing operations EPS ¥361.82 (prior year ¥322.85) is robust, indicating no structural erosion of earning power. Accrual ratio is -7.0% ((Net Income ¥162.9B - Operating Cash Flow ¥555.9B) / Net Income ¥162.9B × -1)—favorable—but OCF/EBITDA 0.61x signals working capital deterioration that needs monitoring. Comprehensive income ¥317.9B exceeds Net Income ¥162.9B by ¥155.0B, mainly due to foreign currency translation differences +¥134.4B and fair value changes on financial assets +¥20.1B. Retained earnings ¥3147.5B (prior year ¥3099.8B, +1.5%) indicate steady internal reserves and adequacy of dividend funding. Overall, excluding the one‑off non‑continuing item, earnings quality is high; if continuing operations margins and cash generation align further, sustainability will strengthen.
For FY ending March 2027 the company guides Revenue ¥4250.0B (YoY +5.5%), Operating Income ¥605.0B (YoY +3.8%), and Net Income attributable to owners ¥420.0B (YoY +163.2%, assuming the non‑continuing business loss cycles through), with EPS forecast ¥392.49. Operating Margin is projected at 14.2% (this year 14.5%, -0.3pt), essentially flat. The large increase in Net Income is driven by the assumed resolution of non‑continuing losses. Full‑year progress ratios are Revenue 94.8% (¥4028.9B/¥4250.0B) and Operating Income 96.4% (¥582.9B/¥605.0B), indicating high progress, and considering the seasonality toward H2 this is a solid pace. Dividend guidance is DPS ¥67 (actual this year ¥112 comprised of interim ¥56 + year‑end ¥56), but alignment at full‑year level warrants attention. Forecast payout ratio is 17.1% (¥67/¥392.49) — a significant decline — and disclosure of total return policy details will be a focus. Achievement of the forecast depends on the General Water Treatment project pipeline and recovery momentum in Asia demand, plus normalization of trade receivables collections.
Actual dividends were interim ¥56 + year‑end ¥56, total ¥112 (prior year ¥46, +143.5%), with total dividends ¥113.4B (prior year ¥99.3B). Dividend payout ratio relative to Net Income ¥162.9B is 69.6%, while on a continuing operations profit basis ¥402.3B it is 28.2%, indicating ample capacity. Dividend coverage vs FCF ¥215.7B is 1.90x, suggesting high sustainability. Share buybacks totaled ¥151.7B, and combined with dividends total shareholder returns were ¥265.0B, yielding a Total Return Ratio of 162.7% (¥265.0B/¥162.9B) which is high; on a continuing operations profit basis it is 65.9%, within an appropriate range. Although FCF fell ¥49.3B short of total returns, with cash ¥652.5B and room to reduce interest‑bearing debt, this temporary excess is within acceptable limits. Forecast DPS next year ¥67 represents a substantial reduction from actual ¥112 and requires further policy clarification, though it may signal a return to a dividend policy aligned with continuing operations earnings.
Working capital deterioration risk: DSO 132 days (prior year 118 days) and prolonged receivable collections with trade receivables ¥1456.3B (+15.2%) and trade payables ¥534.5B (-15.5%) moving concurrently. Operating Cash Flow ¥555.9B remains 3.4x Net Income, but OCF/EBITDA ratio declined markedly to 0.61x (prior year 0.89x), lowering cash conversion efficiency. Prolonged lax credit control or worsening trading terms could squeeze liquidity and capital efficiency. Strengthening collections and reviewing contract terms are urgent.
Risk of delays or additional costs from disposal of non‑continuing operations: Assets held for sale ¥82.1B and related liabilities ¥103.5B recorded, and a fair value measurement loss of ¥199.1B on disposal group held for sale was recognized this period. If the Pentagon Technologies‑related sale process is delayed, further valuation losses or holding costs could arise. Worsening sale terms or realization of contingent liabilities could result in additional losses.
Regional demand variability risk: Asia Revenue ¥899.0B (-10.6%), including China ¥364.0B (-27.0%), shows marked slowdown in a core electronics region. Prolonged delays in semiconductor capex recovery or geopolitical factors could pressure both equipment and maintenance revenues. While EMEA ¥439.8B (+20.0%) is strong, concentration in infrastructure projects implies volatility risk. Geographic portfolio diversification and expansion beyond the Electronics market are medium‑ to long‑term priorities.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| ROE | 4.7% | 6.3% (3.2%–9.9%) | -1.6pt |
| Operating Margin | 14.5% | 7.8% (4.6%–12.3%) | +6.7pt |
| Net Margin | 4.0% | 5.2% (2.3%–8.2%) | -1.1pt |
Operating Margin exceeds the industry median by +6.7pt, indicating profitability advantage, though ROE is below the industry median due to one‑off factors.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 3.6% | 3.7% (-0.4%–9.3%) | -0.1pt |
Revenue growth is in line with the industry median, maintaining steady growth.
※Source: Company aggregation of public financial statements
Improvement in continuing operations profitability and expected turnaround of non‑continuing losses: Operating Margin 14.5% (+1.7pt), Gross Margin 38.0% (+1.1pt) show strengthened core earning power; Operating Income in the General Water Treatment market +34.0% supports the two‑pillar structure. The non‑continuing business loss of ¥239.4B is a one‑off, and Continuing Operations EPS ¥361.82 (prior year ¥322.85) demonstrates underlying strength. Next fiscal year expects Net Income to rise +163% as non‑continuing losses cycle through, normalizing dividend resources.
Normalization of working capital management is key to next‑period cash generation: DSO 132 days (prior year 118 days) and OCF/EBITDA 0.61x (prior year 0.89x) show a marked decline in cash conversion efficiency. Despite high EBITDA margin 22.7%, trade receivables increase ¥175.1B is a clear headwind. Strengthening collections and credit management could restore OCF/EBITDA to >0.70x next year, materially improving FCF and sustainability of total returns. Although dividend + buybacks totaled ¥265.0B exceeding FCF ¥215.7B, this is within a level that could be covered by normalization of receivables.
Rebalancing regional portfolio and foundation for long‑term growth: Japan +7.8% and EMEA +20.0% drove performance while Asia -10.6% (China -27.0%) reflects adjustment from semiconductor capex declines. General Water Treatment equipment +15.8% and domestic infrastructure renewal demand support results, and Electronics maintenance +20.6% strengthens recurring revenue. Achievement of next‑year Revenue ¥4250B (+5.5%) depends on Asia demand bottoming and continued EMEA projects. Goodwill ¥614.9B (EBITDA 0.67x) poses limited impairment risk, and financial soundness (Equity Ratio 60.4%, Net Debt ¥145.8B) preserves investment capacity, leaving options for M&A or capex to accelerate growth.
This report is an AI‑generated earnings analysis based on XBRL financial statement data. It is not a recommendation to invest in any particular security. Industry benchmarks are company‑compiled reference information based on public financial statements. Investment decisions should be made at your own responsibility and, where appropriate, after consulting a professional advisor.