| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1386.2B | ¥1306.4B | +6.1% |
| Operating Income / Operating Profit | ¥170.8B | ¥165.7B | +3.1% |
| Ordinary Income | ¥179.4B | ¥171.8B | +4.5% |
| Net Income / Net Profit | ¥122.8B | ¥120.8B | +1.6% |
| ROE | 10.8% | 11.7% | - |
FY2026 results: Revenue 1,386.2B (YoY +79.8B +6.1%), Operating Income 170.8B (YoY +5.1B +3.1%), Ordinary Income 179.4B (YoY +7.7B +4.5%), Net Income 122.8B (YoY +2.0B +1.6%). While both revenue and profit increased, SG&A rose (+20.2B +10.4%), causing the operating margin to compress to 12.3% (down 0.4pt from 12.7% a year ago). Revenue growth continued for the third consecutive period, with large-scale capital expenditure (CapEx 139.9B, YoY +92.7%) expanding production capacity. Cash and deposits stood at 480.5B and the Equity Ratio was 73.4%, indicating a solid financial base, but Free Cash Flow was -70.0B as the company is in an investment-frontloaded phase.
[Revenue] Revenue progressed steadily at 1,386.2B (YoY +6.1%). Segment information is not disclosed because the company reports a single segment, but Cost of Sales was 999.9B (+5.8%), slightly lagging revenue growth, and Gross Margin improved to 27.9% (up 0.3pt from 27.6% a year ago). Top-line expansion is attributed to capacity increases from capital investment and demand capture. Foreign exchange gains were limited at 2.1B, so FX impact on Operating Income was modest.
[Profitability] Operating Income was 170.8B (+3.1%), and the operating margin was 12.3% (down 0.4pt from 12.7%). Gross profit expanded to 386.3B (+8.0%) driven by revenue growth, but SG&A rose to 215.5B (from 195.0B a year ago, +10.4%), outpacing revenue growth and limiting operating leverage. Ordinary Income was 179.4B (+4.5%), supported by non-operating income of 9.8B (dividends received 1.6B, interest income 1.3B, FX gains 2.1B, etc.). Extraordinary items were net -2.0B (including securities disposal gains 2.1B against valuation losses 0.9B, etc.), modest. Profit before tax was 177.5B; after deducting corporate taxes of 54.7B (effective tax rate 30.8%), Net Income attributable to owners of the parent was 122.0B (+1.6%), yielding a net margin of 8.8% (down 0.4pt from 9.2%). In summary, revenue and profit increased, but SG&A growth led to a slight decline in operating margin.
[Profitability] Operating margin 12.3% (prior year 12.7%), Net margin 8.8% (prior year 9.2%)—both slightly lower, but ROE 10.8% (prior year 12.3%) remains at a healthy level. The decline in ROE is mainly due to an expanded denominator as Net Assets increased to 1,133.9B (prior year 1,032.1B, +9.9%) and a contraction in net margin. Gross margin 27.9% improved by +0.3pt year-over-year, indicating cost control is functioning.
[Cash Quality] Operating Cash Flow (OCF) 120.9B is 0.98x Net Income 122.8B, showing close alignment and good cash conversion. However, OCF/EBITDA (Operating Income + Depreciation) remains at 0.64x (120.9B ÷ 188.8B), constrained by working capital movements (accounts payable outflow -44.2B). Days Sales Outstanding (DSO) is approximately 61 days and inventory days about 14 days, indicating generally healthy collection efficiency.
[Investment Efficiency] Total asset turnover was 0.90x (prior year 0.92x), a slight decline. This is due to Property, Plant & Equipment increasing to 380.6B (prior year 261.1B, +45.8%), with Construction in Progress at 102.7B (prior year 29.0B, +253%), expanding total assets to 1,544.3B (prior year 1,415.6B, +9.1%). Financial leverage is low and stable at 1.36x.
[Balance Sheet Strength] Equity Ratio 73.4% (prior year 72.9%), Current Ratio 255% (prior year 267%), Quick Ratio 245%—liquidity is very high. Interest-bearing debt is virtually zero (Debt-to-Equity 0.36x), and cash and deposits of 480.5B exceed current liabilities of 365.6B, indicating no short-term payment concerns.
Operating Cash Flow was 120.9B (YoY +16.5%), consistent with Net Income of 122.8B; adding back Depreciation of 18.0B, the subtotal of operating cash was 159.9B. However, working capital movement caused a cash outflow of -36.0B: accounts payable decrease -44.2B (YoY -19.7%), accounts receivable decrease +9.1B, inventories increase -0.9B. The decrease in accounts payable suggests tightened payment terms or accelerated payments, pressuring cash flow. Corporate tax payments were 54.0B, consistent with profitability levels. Investing Cash Flow was -190.9B, of which capital expenditures were 139.9B (7.8x depreciation, 10.1% of revenue), roughly double the prior year 72.6B. The buildup of Construction in Progress (102.7B, 27% of PPE) implies assets awaiting commissioning and depreciation; delays in project ramp-up pose a risk of delayed investment recovery. Subsidy income of 13.2B temporarily boosted OCF, so baseline cash-generation capacity should be discounted somewhat. Free Cash Flow was -70.0B, and Financing Cash Flow was -35.4B (including dividend payments of 29.6B). Cash balance declined to 480.5B (prior year 534.1B, -10.0%) but liquidity remains ample and need for debt financing is low.
Ordinary Income of 179.4B vs Operating Income of 170.8B shows net non-operating income contributing +8.6B, consisting of dividends received 1.6B, interest income 1.3B, FX gains 2.1B, etc. Non-operating income is mainly recurring sources and one-off items are limited. Extraordinary items were net -2.0B (securities disposal gains 2.1B vs valuation losses 0.9B, etc.), modest, affecting Net Income by about 1.6%. Comprehensive income was 136.0B, exceeding Net Income 122.8B; the 13.2B difference was mainly unrealized gains on securities +9.5B, actuarial gains/losses adjustment +3.0B, and foreign currency translation adjustments +0.7B. The ratio of OCF to Net Income is 0.98x and accrual (Net Income - OCF) is about +1.9B, slightly positive; excluding working capital movements, profit and cash are aligned and earnings quality is generally good. However, OCF/EBITDA at 0.64x is low, and reductions in accounts payable and higher tax payments have restrained cash conversion, indicating room to improve working capital management.
Full Year guidance: Revenue 1,449.2B (YoY +4.5%), Operating Income 171.5B (YoY +0.4%), Ordinary Income 179.7B (YoY +0.2%), Net Income 123.7B. Achievement rates against year-to-date results are: Revenue 95.6% (1,386.2B ÷ 1,449.2B), Operating Income 99.6% (170.8B ÷ 171.5B), Ordinary Income 99.8% (179.4B ÷ 179.7B), Net Income 99.3% (122.8B ÷ 123.7B). Revenue is slightly behind target but profits are almost on plan, suggesting cost control is functioning. However, full-year projected YoY increases for Operating Income and Ordinary Income are limited at +0.4%/+0.2%, with the second half assumed to add Revenue +62.9B but only Operating Income +0.7B and Ordinary Income +0.3B—essentially flat. This implies SG&A growth pace is expected to continue in H2, suggesting a structure where operating leverage is difficult to realize.
A year-end dividend of ¥82 per share (Payout Ratio 24.7%) was paid. The dividend amount is unchanged from the prior year, reflecting a stable dividend policy. Total dividends were 29.6B, representing 24.1% of Net Income 122.8B, indicating sustainability relative to profit. However, Free Cash Flow was -70.0B this period; although dividends were covered by Operating Cash Flow, post-investment cash was insufficient and the company relied on cash on hand. Cash balance of 480.5B is ample, so there is no immediate concern for dividend payments, but in an investment-frontloaded phase it is rational to prioritize retained earnings and consider dividend increases or share buybacks after Construction in Progress is commissioned and OCF recovers. The Payout Ratio is at a reasonable level, and the Total Return Ratio currently stands at 24.7% (dividends only), which is conservative.
Recovery risk of large-scale capital investment: The high level of Construction in Progress at 102.7B (27% of PPE) shows ongoing capacity expansion. If commissioning is delayed or demand falls short, increased depreciation and missed revenue could lower ROIC and lengthen investment payback periods. CapEx of 139.9B is 7.8x depreciation of 18.0B, implying future fixed-cost increases.
Continued pace of SG&A growth: SG&A rose to 215.5B (YoY +10.4%), outpacing revenue growth of +6.1%. Structural factors such as hiring, logistics, and energy costs are likely drivers; if this trend continues and operating leverage remains weak, margin erosion risk persists. Full-year guidance also implies very limited operating income growth (+0.4%), suggesting this trend may continue in H2.
Deterioration in working capital management: Accounts payable declined to 182.2B (YoY -19.7%), causing pressure on OCF. If this is a temporary effect related to payment timing it may not be problematic, but if persistent it could sustain cash outflows from working capital and prolong negative Free Cash Flow. DSO of 61 days also suggests room for improvement in shortening the collection cycle.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 12.3% | 7.8% (4.6%–12.3%) | +4.6pt |
| Net Margin | 8.9% | 5.2% (2.3%–8.2%) | +3.7pt |
Profitability metrics exceed industry medians, and Operating Margin is at a top-tier level.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 6.1% | 3.7% (-0.4%–9.3%) | +2.4pt |
Revenue growth outperformed the industry median by +2.4pt, maintaining a steady growth trajectory.
※ Source: Company compilation
Timing of commissioning for major CapEx is the pivotal mid-term inflection point for earnings and cash flow. If Construction in Progress of 102.7B (27% of PPE) is capitalized and commissioned, depreciation expense will rise but Revenue, Operating Income and OCF/EBITDA are expected to improve. Monitoring project progress and ramp-up status is important.
Operating margin is 12.3%, a top-tier industry level, but it decreased by 0.4pt YoY. If SG&A continues to grow faster than revenue, there is a mid-term risk of margin compression. H2 SG&A control and the degree of operating leverage recovery are key watchpoints.
Free Cash Flow is negative at -70.0B due to front-loaded investment, but cash and deposits of 480.5B and Equity Ratio 73.4% indicate a very robust financial base. A Payout Ratio of 24.7% is sustainable, and after the investment recovery phase the capacity for dividend increases is expected to expand. Improvements in working capital management (recovery of accounts payable, shortening DSO) are key to returning to positive FCF.
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 specific securities. Industry benchmarks are reference information compiled by the company based on publicly available financial statements. Investment decisions are your own responsibility; consult a professional advisor as needed.