ANEST IWATA Corporation FY2027 Q1 Earnings Report

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Executive Summary

The Q1 of the fiscal year ending March 2027 delivered solid results, with higher revenue and profits accompanied by improved margins. Revenue was ¥13.70B (+13.3% YoY), Operating Income was ¥1.23B (+32.8%), Ordinary Income was ¥1.76B (+34.1%), and Net Income was ¥1.37B (+26.6%). The Operating Income margin improved to 9.0% from the previous year, primarily due to the emergence of operating leverage resulting from a lower SG&A expense ratio. At the Ordinary Income level, contributions from non-operating income, including foreign exchange gains and equity-method investment income, were also significant, further lifting the profit growth rate.

Factors Affecting Results

【Revenue】Revenue increased in all regions, with the top line rising 13.3% to ¥13.70B. Japan and Asia, the core regions, generated ¥7.34B (+17.3%), accounting for 53.6% of total company revenue. Europe, Australia, and Africa recorded ¥3.34B (+23.3%), the highest growth rate among the regions. The Americas and India generated ¥2.92B (+16.4%), while China and ASEAN generated ¥2.91B (+4.2%), showing relatively slower growth.

【Profit and Loss】Although the gross margin declined slightly to 47.7% due to an increase in the cost of sales, the SG&A expense ratio was contained at 38.7% (down year on year), resulting in a 32.8% increase in Operating Income to ¥1.23B and an improvement in the Operating Income margin to 9.0%. Ordinary Income increased to ¥1.76B (+34.1%), supported by ¥0.55B in non-operating income, including ¥0.15B in foreign exchange gains and ¥0.26B in equity-method investment gains and losses, widening the gap from Operating Income. Net Income was ¥1.37B (+26.6%), while Net Income attributable to owners of the parent, excluding ¥0.23B attributable to non-controlling interests, was ¥1.14B (+27.0%). Profit growth was achieved through both improved core business profitability and the uplift from non-operating income amid higher revenue and profits.

Segment Analysis

By segment, Japan and Asia recorded Operating Income of ¥0.83B (+98.1%), accounting for approximately 67% of total company profit, with the margin improving substantially to 11.3%. Europe, Australia, and Africa generated profit of ¥0.44B (+81.7%) and secured the highest regional margin at 13.1%. The Americas and India generated profit of ¥0.40B (+40.4%), with a margin of 13.7%. China and ASEAN recorded profit of ¥0.13B (+57.6%), representing substantial growth, but the margin remained at 4.6%, highlighting the gap with other regions. The Other segment posted an Operating Loss of ¥0.03B. Regional margin differences are significant: while improvements in Japan and Asia are driving overall company profit, the low-profitability structure in China and ASEAN remains an issue to monitor going forward.

Key Financial Indicators

【Profitability】The Operating Income margin of 9.0% (7.7% in the previous year) and the Net Income margin of 10.0% both improved year on year, primarily due to greater SG&A efficiency.【Cash Flow Quality】Non-operating income is equivalent to approximately 45% of Operating Income. The fact that non-operating factors such as foreign exchange gains and equity-method gains are driving the growth in Ordinary Income is an important consideration when assessing earnings quality.【Investment Efficiency】ROE was 2.4%, while the total asset turnover ratio remained low at 0.18x, indicating room for improvement in asset efficiency.【Financial Soundness】The Equity Ratio was 74.9%, and interest-bearing debt was minimal relative to total assets, indicating a highly sound financial foundation.

Cash Flow Analysis

As the company has not disclosed a cash flow statement in these results, funding trends are assessed based on changes in the balance sheet. Cash and deposits stood at ¥16.73B, down from ¥20.75B in the same period of the previous year. The accumulation of working capital, together with accounts receivable of ¥11.78B and inventories of ¥7.44B, appears to have been one factor behind the use of funds. Accounts receivable and inventory are large relative to accounts payable of ¥6.53B, resulting in a structure in which funds remain tied up on the asset side. Meanwhile, goodwill increased to ¥0.92B following the acquisition of SANWA as a subsidiary, suggesting that funds may have been directed toward investment activities. Overall, abundant equity capital and low interest-bearing debt ensure funding safety, but the company’s future cash-generation capacity will depend on its ability to reduce working capital.

Earnings Quality

Against Operating Income of ¥1.23B, non-operating income of ¥0.55B—including ¥0.15B in foreign exchange gains, ¥0.26B in equity-method gains and losses, and ¥0.10B in interest and dividend income—boosted Ordinary Income, with the divergence between Ordinary Income and Operating Income widening from the previous year. These non-operating income items are susceptible to market fluctuations, creating uncertainty regarding their sustainability from the next fiscal year onward. Extraordinary income was ¥0.06B, compared with extraordinary losses of ¥0.13B, representing a modest net negative factor, although the impact on total Net Income was limited. The effective tax rate was approximately 19.3%, a normal level, with no temporary tax-related factors identified. Comprehensive Income was ¥1.88B, exceeding Net Income of ¥1.37B, primarily due to a ¥0.41B foreign currency translation adjustment. Core business profitability is trending upward, as indicated by the improvement in the Operating Income margin; however, attention should be paid to the somewhat higher dependence of Ordinary Income growth on non-operating factors.

Earnings Forecast and Guidance

The Q1 progress rates against the Full-Year plan were 22.6% for Revenue (¥13.70B / ¥60.70B), 22.9% for Operating Income (¥1.23B / ¥5.40B), 27.3% for Ordinary Income (¥1.76B / ¥6.46B), and 28.8% for Net Income (¥1.37B / ¥4.75B). Compared with standard quarterly progress of 25%, Revenue and Operating Income are slightly behind schedule, while Ordinary Income and Net Income are ahead. The outperformance reflects contributions from non-operating factors such as foreign exchange gains and equity-method gains. Given that the Full-Year plan assumes a 16.3% year-on-year decline in Ordinary Income, consistency with this forecast will need to be confirmed in subsequent quarters. The company revised its earnings forecast in these results.

Shareholder Returns

The Full-Year dividend forecast is ¥93 per share, including a ¥2 dividend at the end of Q2 and a ¥3 dividend at year-end to commemorate the company’s 100th anniversary. This represents an increase from the previous year’s annual dividend of ¥41 (the level after aggregating the interim and year-end dividends). The Payout Ratio against the company’s planned EPS of ¥100.45 is high at approximately 92.6%; however, given the financial foundation of ¥16.73B in cash and deposits and an Equity Ratio of 74.9%, the company appears to have sufficient near-term payment capacity. The dividend forecast has not been revised. Due to special factors, including the commemorative dividend, the Payout Ratio may be adjusted toward a normal level from the next fiscal year onward.

Risk Factors

1. Regional profitability gap: The Operating Income margin in China and ASEAN is 4.6%, significantly below that of other regions (11%–14%), weighing on overall company profitability.

2. Dependence on non-operating income: Non-operating income, including foreign exchange gains and equity-method gains, has made a significant contribution to the growth in Ordinary Income. If these factors reverse due to market fluctuations, they could become a source of volatility in Ordinary Income.

3. Increase in goodwill: Goodwill increased 121.1% year on year to ¥0.92B following the acquisition of SANWA as a subsidiary. Although it remains small at 1.6% of net assets, the contribution to earnings after integration should be monitored.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The Operating Income margin is in line with the industry median, while the Net Income margin exceeds the industry median, reflecting the contribution of non-operating income to the relatively high Net Income margin.

Growth and Capital Efficiency

The Revenue growth rate is significantly above the industry median and is close to the upper bound of the IQR.

※Source: Compiled by the Company

Key Takeaways from the Results

1. The Operating Income margin improved to 9.0%, reflecting operating leverage from greater SG&A efficiency. The fact that this improvement originated in the core business is a positive factor in assessing earnings quality.

2. Although the progress of Ordinary Income and Net Income is ahead of the Full-Year plan, this is largely attributable to contributions from non-operating income such as foreign exchange gains and equity-method gains. Operating Income progress is only at a similar level to Revenue progress, and the gap between core business progress and progress at the Ordinary Income level is a notable feature of the results.

3. The low margin in China and ASEAN (4.6%) is substantially below that of other regions and is noteworthy when examining the regional earnings structure. Changes in this region’s margin in subsequent quarters could affect overall company profitability.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,316–¥1,387 at ±1% for the cost of equity, and ¥1,348–¥1,352 at ±0.1 for ω.

Notes:

• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end are used (there is a timing difference from the Full-Year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson-type; explicit 5-year fade) / Interest-rate reference month: 2026-07 / Mechanically calculated from publicly available data only; this does not constitute a forecast of the market share price or a recommendation of any specific investment action, nor does it predict or guarantee the future share price.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting with a professional as necessary.

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