| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥3395.8B | ¥3686.4B | -7.9% |
| Operating Income | ¥297.5B | ¥420.3B | -29.2% |
| Profit Before Tax | ¥246.6B | ¥346.1B | -28.8% |
| Net Income | ¥156.0B | ¥248.9B | -37.3% |
| ROE | 7.1% | 12.1% | - |
For the fiscal year ended March 2026, Revenue was ¥3,395.8B (YoY -¥290.6B, -7.9%), Operating Income was ¥297.5B (YoY -¥122.8B, -29.2%), Ordinary Income was ¥243.2B (YoY -¥102.9B, -29.7%), and Net Income attributable to owners of the parent was ¥153.9B (YoY -¥91.2B, -37.2%), resulting in a decline in both top-line and profitability. Weakening demand in domestic financial, retail & transportation, and gaming markets pressured overall revenue, and increases in SG&A reversed operating leverage. Overseas markets supported consolidated profits by delivering year-on-year increases in revenue and profit, but could not fully offset declines in domestic segments. Operating margin fell to 8.8% from 11.4% a year earlier (down 2.6ppt), and net margin contracted to 4.5% from 6.6% (down 2.1ppt). Meanwhile, Operating Cash Flow was ¥427.8B and Free Cash Flow was ¥360.2B, maintaining strong cash generation; Equity Ratio was 48.2% and interest-bearing debt to EBITDA was approximately 1.5x, indicating a solid financial base.
[Revenue] Revenue was ¥3,395.8B (YoY -7.9%), a decline. By segment, Overseas markets recorded ¥2,160.9B (+2.9%) and increased their share to 63.6%, while the three domestic markets all posted declines. The Financial market fell sharply to ¥370.6B (-31.9%), Retail & Transportation fell to ¥576.4B (-17.3%), and Gaming fell to ¥210.9B (-23.2%). Delays in domestic capital expenditures and weaker demand were primary factors, and headwinds from price pass-through and product mix also pressured revenue. Cost of sales ratio improved to 54.3% from 55.1% a year ago (improvement of 0.8ppt), and gross profit margin was steady at 45.7% (prior year 44.9%).
[Profitability] Operating Income was ¥297.5B (YoY -29.2%), and operating margin deteriorated materially to 8.8% (prior year 11.4%, -2.6ppt). SG&A increased to ¥1,257.3B (+2.1%) despite lower sales, worsening fixed cost absorption and reversing operating leverage. Recognition of impairment losses of ¥5.5B (prior year ¥0.7B) also pressured profits. On non-operating items, financial expenses were ¥63.6B (prior year ¥74.9B), and a decline in financial income to ¥7.9B (prior year ¥25.9B) further weighed on results, resulting in Ordinary Income of ¥243.2B (YoY -29.7%), a reduction similar to Operating Income. Equity-method investment gains were ¥4.8B (prior year loss ¥25.1B), an improvement but with limited contribution to the aggregate. Profit Before Tax was ¥246.6B and income taxes were ¥90.6B (effective tax rate 36.7%), yielding Net Income attributable to owners of the parent of ¥153.9B (YoY -37.2%) and a net margin of 4.5% (prior year 6.6%, -2.1ppt). In conclusion, weak domestic demand and higher SG&A resulted in declines in both revenue and profit.
Overseas markets delivered ¥2,160.9B (+2.9%) in revenue, Operating Income of ¥211.1B (+17.1%), and a margin of 9.8%, achieving both revenue and profit growth and underpinning consolidated profits. Strong demand from major retailers and financial institutions and a favorable currency impact contributed, establishing the segment as a core business accounting for 71.0% of consolidated Operating Income. Gaming posted revenue of ¥210.9B (-23.2%), Operating Income of ¥51.2B (-33.7%), and a margin of 24.3%, maintaining high profitability but declining due to demand contraction. Financial market revenue was ¥370.6B (-31.9%) with Operating Income of ¥39.1B (-50.3%) and margin of 10.5%, reflecting reduced capital spending by domestic financial institutions. Retail & Transportation revenue was ¥576.4B (-17.3%) and Operating Income ¥0B (prior year ¥87.2B profit), turning to breakeven/loss as weakness in domestic retail and transportation demand materialized. Other revenue was ¥77.0B (+10.0%) but an operating loss of ¥3.9B continued. Profitability divergence across segments is pronounced, increasing reliance on overseas markets to offset domestic declines.
[Profitability] ROE of 7.3% fell 5.2ppt from 12.5% year-on-year, primarily due to contraction in net margin. Operating margin was 8.8% (prior year 11.4%), and net margin was 4.5% (prior year 6.6%). Gross profit margin improved to 45.7% from 44.9% (+0.8ppt), but the rise in SG&A ratio to 37.0% (prior year 33.4%) pressured operating margin. [Cash Quality] Operating CF was ¥427.8B, and Operating CF / Net Income ratio was 2.78x, indicating robust cash generation. However, OCF/EBITDA (Operating Income + depreciation) ratio was 0.85x, slightly below the 0.9x guideline, suggesting scope to improve working capital efficiency. Accrual ratio was -6.0%, in a favorable range, indicating high cash realization of profits. [Investment Efficiency] ROIC (Operating Income × (1 - tax rate) / (interest-bearing debt + equity)) was approximately 5.0%, below the cost of capital. CapEx / Depreciation ratio was 0.22x, indicating a restrained investment stance that supports short-term FCF generation but raises concerns for medium- to long-term asset replacement and competitiveness. [Financial Soundness] Equity Ratio was 48.2% (prior year 46.1%). Interest-bearing debt was ¥752.7B and EBITDA (Operating Income + depreciation) was ¥517.4B, giving Net interest-bearing debt / EBITDA of approximately 0.5x and low leverage. Interest coverage (Operating Income / financial expenses) was 4.7x, maintaining a neutral level.
Operating CF was ¥427.8B (YoY -16.6%), approximately 2.74x Net Income of ¥156.0B, which is favorable. From Profit Before Tax of ¥246.6B, adding Depreciation of ¥203.9B and impairment losses of ¥5.5B, the subtotal for Operating CF was ¥516.8B. A decrease in inventories (cash realization) contributed +¥75.9B, while a decrease in accounts payable contributed -¥48.7B, leaving only slight overall improvement in working capital. After deducting corporate tax payments of ¥71.4B, interest payments of ¥23.5B, and lease payments of ¥65.2B, Operating CF amounted to ¥427.8B. Investing CF was -¥67.6B, mainly driven by capital expenditures of ¥44.9B and intangible asset acquisitions of ¥38.6B. Proceeds from sale of other financial assets of ¥13.1B and distribution from investment partnerships of ¥2.2B contributed to cash inflows. Free Cash Flow was ample at ¥360.2B, well above depreciation of ¥203.9B. Financing CF was -¥389.8B, with dividend payments of ¥60.5B, share buybacks of ¥134.8B, repayment of long-term borrowings of ¥49.5B, and acquisition of non-controlling interests of ¥70.2B as the main cash outflows. Lease payments of ¥65.2B were also a continuing cash outflow. Adding foreign exchange translation gains of ¥15.3B, cash & cash equivalents declined ¥14.3B from opening balance ¥514.7B to closing balance ¥500.4B, while maintaining high liquidity.
Earnings quality is generally recurring. Against Operating Income of ¥297.5B, impairment losses of ¥5.5B (approx. 3.6% of Net Income) were minor, and the net of Other income ¥15.7B and Other expenses ¥5.9B (net +¥9.8B) was small relative to Net Income. On non-operating items, financial income of ¥7.9B versus financial expenses of ¥63.6B resulted in a net negative of ¥55.7B, causing an 18.7% reduction from Operating Income to Ordinary Income. Most financial expenses comprise borrowing interest and currency-related losses, representing a recurring burden. The ¥4.8B gain from equity-method investments had limited contribution to Net Income. Non-operating income represented 0.2% of Revenue, indicating a revenue structure concentrated on core operations. Accrual ratio was -6.0% ((Operating Income - Operating CF) / Operating Income), in a favorable range, signaling high cash realization of profits. Operating CF / Net Income ratio of 2.78x also indicates soundness; however, OCF/EBITDA ratio of 0.85x, slightly below the 0.9x guideline, suggests room to improve working capital turnover (inventories, trade receivables, trade payables). Inventory optimization and receivables/payables management should improve earnings quality.
For the fiscal year ending March 2027, guidance is Revenue ¥3,600.0B (vs. current period +6.0%), Operating Income ¥320.0B (vs. current period +7.6%), Net Income attributable to owners of the parent ¥200.0B (vs. current period +30.0%), and EPS ¥370.03. Progress to date is high, with current period Revenue representing 94.3% of the full-year forecast, leaving limited upside, but the forecast assumes domestic demand recovery and continued expansion in overseas markets. Operating Income through the current period represents 93.0% of the full-year forecast, reflecting assumed SG&A restraint and cost optimization to restore margins. Net Income progress is 77.0% of the forecast, expectedly low, as the company assumes significant profit improvement in H2 from temporary tax burdens and improved financial expenses. Dividend guidance is annual ¥77, implying a reduction from current period annual dividend of ¥112, with a payout ratio of 20.8%—a conservative, sustainability-focused stance. Keys to achieving the profit targets are a bottoming of the domestic market, continued expansion of overseas projects, improvements in working capital efficiency (normalization of inventory and receivables turnover), and containment of SG&A growth.
The dividend for the period was annual ¥112 (interim ¥56, year-end ¥56). Against Net Income attributable to owners of the parent of ¥153.9B, dividend payments were ¥60.5B, implying a payout ratio of 39.3%. Prior year dividend was annual ¥132 (payout ratio 27.3%); although per-share dividends declined, payout ratio after share count adjustment increased. Share buybacks totaling ¥134.8B were conducted, bringing total shareholder returns (dividends + buybacks) to ¥195.3B, with a Total Return Ratio of 126.9% of Net Income, an aggressive level. With Free Cash Flow of ¥360.2B, total returns of ¥195.3B indicate substantial capacity to return cash, and cash & deposits of ¥500.4B plus low leverage support sustainability. For FY2027, dividend guidance is annual ¥77 (a ¥35 reduction), but based on forecast Net Income of ¥200.0B, the payout ratio would be 20.8%, a conservative level; the return policy appears focused on stable dividends combined with opportunistic share buybacks to enhance capital efficiency.
Deterioration in working capital efficiency: Days Sales Outstanding (DSO) 72 days, Days Inventory Outstanding (DIO) 169 days, and Cash Conversion Cycle (CCC) 208 days show a lengthening trend, with excessive inventory and receivable buildup pressuring Operating CF. OCF/EBITDA ratio of 0.85x, below the 0.9x guideline, means delayed normalization of working capital could constrain cash generation and financial flexibility.
Continued weakness in domestic demand and deteriorating profitability: The three domestic markets—Financial, Retail & Transportation, and Gaming—are uniformly posting revenue and profit declines (Retail & Transportation Operating Income ¥0B, Financial Operating Income ¥39.1B YoY -50.3%, Gaming Operating Income ¥51.2B YoY -33.7%), and rising SG&A ratio has reversed operating leverage. If domestic demand recovery is delayed, fixed SG&A burdens could further compress margins and prolong the decline in consolidated ROE.
Lowered medium- to long-term competitiveness due to investment restraint: CapEx of ¥44.9B is only 22% of Depreciation ¥203.9B, supporting short-term FCF but raising concerns about asset aging and erosion in technology/product competitiveness. As dependence on overseas markets rises to 63.6%, insufficient local bases and development investment could cause loss of future growth opportunities.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Return on Equity | 7.3% | 6.3% (3.2%–9.9%) | +1.0pt |
| Operating Margin | 8.8% | 7.8% (4.6%–12.3%) | +1.0pt |
| Net Margin | 4.6% | 5.2% (2.3%–8.2%) | -0.6pt |
ROE and Operating Margin exceed the industry median, maintaining average profitability within manufacturing, but Net Margin trails the median by 0.6ppt due to heavy non-operating expenses and tax burden weighing on bottom-line profits.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -7.9% | 3.7% (-0.4%–9.3%) | -11.6pt |
Revenue growth underperforms the industry median by 11.6ppt, with a pronounced downtrend within manufacturing. Domestic demand weakness is the main divergence factor; acceleration of overseas growth and domestic recovery are keys to returning to industry-level performance.
※ Source: Company aggregation
The decline in Operating Margin to 8.8% (prior year 11.4%) and Net Margin to 4.5% (prior year 6.6%) is attributable to weakening demand in the three domestic markets and rising SG&A, while Overseas Operating Income of ¥211.1B (+17.1%, 71.0% share) underpinned consolidated profits. For next fiscal year management targets Revenue +6.0%, Operating Income +7.6%, and Net Income +30.0%; achieving these targets depends on domestic demand bottoming, continued overseas expansion, and SG&A restraint.
Strong Free Cash Flow of ¥360.2B and low leverage (interest-bearing debt / EBITDA approx. 1.5x, net approx. 0.5x) provide a robust financial base. After paying dividends ¥60.5B and executing share buybacks ¥134.8B (Total Return Ratio 126.9%), cash & deposits of ¥500.4B were maintained. Next fiscal year dividend guidance of ¥77 (a cut) implies a payout ratio of 20.8%, supporting sustainability, but the low CapEx/Depreciation ratio (0.22x) leaves medium- to long-term competitiveness an open question.
Deterioration in working capital efficiency (CCC 208 days, OCF/EBITDA 0.85x) constrains earnings quality and cash generation, making inventory and receivables reduction and turnover improvement critical to margin recovery and ROE improvement. The first year of IFRS transition produced Other Comprehensive Income of ¥159.96B (foreign currency translation gains ¥131.47B), strengthening capital cushions, but expanded foreign exchange volatility could increase P/L and pricing competition volatility.
This report is an AI-generated financial analysis document produced by analyzing XBRL financial statement data. 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 appropriate before making investment decisions.