Quick View
| Metric | Current Period | Same Period of Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥114.5B | ¥122.3B | −6.4% |
| Operating Income | ¥11.8B | ¥16.6B | −29.1% |
| Ordinary Income | ¥15.3B | ¥19.2B | −19.9% |
| Net Income | ¥9.8B | ¥13.0B | −24.4% |
| ROE | 1.4% | 1.9% | - |
Executive Summary
FY2027 Q1 was characterized by lower revenue and earnings, with the decline in earnings significantly exceeding the decrease in revenue, resulting in deteriorating profitability. Revenue was ¥114.5B (-6.4% YoY), Operating Income was ¥11.8B (-29.1%), Ordinary Income was ¥15.3B (-19.9%), and Net Income attributable to owners of the parent was ¥9.8B (company-disclosed basis; -24.4% YoY). The primary causes of the earnings decline were lower margins in the core Japan Business and widening losses in the Asia Business, while dividend income within non-operating income provided support for Ordinary Income.
Factors Affecting Performance
【Revenue】Revenue was ¥114.5B, a 6.4% YoY decline. By segment, Japan, which accounts for 91.4% of consolidated revenue, generated ¥104.6B (-4.9%), while Asia generated ¥10.0B (-19.7%). Both regions experienced lower revenue, with the decline particularly pronounced in Asia.
【Profit and Loss】Operating Income was ¥11.8B (-29.1%), a decline substantially larger than the decrease in revenue. Japan segment profit was ¥13.4B (-21.9%), and its margin declined to 12.8% from 15.5% in the previous year, indicating reduced fixed-cost absorption. The Asia segment recorded a loss of ¥1.7B, widening from a loss of ¥0.6B in the previous year. Ordinary Income was ¥15.3B (-19.9%), with non-operating income of ¥4.2B, including ¥3.1B in dividend income, mitigating the decline. Net Income was ¥9.8B (-24.4%). In conclusion, the Company experienced lower revenue and earnings, with deteriorating profitability weighing on performance more heavily than the decline in revenue.
Segment Analysis
The Japan segment generated revenue of ¥104.6B (-4.9% YoY) and segment profit of ¥13.4B (-21.9%), while its margin declined to 12.8% from 15.5% in the previous year. Although it remains the core consolidated segment, profitability has deteriorated. The Asia segment generated revenue of ¥10.0B (-19.7%) and recorded a segment loss of ¥1.7B, compared with a loss of ¥0.6B in the previous year, resulting in a wider loss and diluting the consolidated profit margin. Japan generated ¥13.4B of the ¥11.8B in consolidated Operating Income, while losses in Asia reduced the total. The recovery of profitability in Japan and the reduction of losses in Asia will be key areas of focus going forward.
Key Financial Indicators
【Profitability】The Operating Income margin was 10.3%, down 3.3pt from 13.6% in the same period of the previous year. The Ordinary Income margin was 13.4% (15.7% in the previous year), and the Net Income margin was 9.4% (10.7% in the previous year), with both also deteriorating. The gross margin remained at 38.7%, suggesting that the decline in profitability was attributable to a relative increase in the burden of SG&A expenses and lower fixed-cost absorption.【Cash Quality】Cash and deposits were ¥177.0B, and together with accounts receivable and notes receivable of ¥161.4B, indicate a large working capital base.【Investment Efficiency】ROE remained at 1.4% (based on Q1 actual results), while investment securities of ¥230.3B accounted for 24.2% of total assets, indicating that capital allocation to assets other than operating assets is affecting asset efficiency.【Financial Soundness】The Equity Ratio was high at 72.6%. Current assets of ¥434.9B substantially exceeded current liabilities of ¥112.9B, indicating a conservative and stable financial foundation.
Cash Flow Analysis
Although the Company does not disclose a cash flow statement, cash trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥177.0B, remaining broadly flat compared with ¥174.3B in the same period of the previous year. Meanwhile, accounts receivable and notes receivable were ¥161.4B, and operating receivables including electronically recorded monetary claims reached approximately ¥215B, suggesting that the collection cycle may be long relative to revenue. Inventories were ¥21.2B, mainly consisting of finished products. Operating receivables substantially exceeded accounts payable and notes payable of ¥55.9B, indicating a structure in which the expansion of trade receivables, rather than trade payables, is placing pressure on working capital. Although the cash position remains stable, the collection status of trade receivables is an important monitoring item affecting capital efficiency.
Quality of Earnings
Of Ordinary Income of ¥15.3B, non-operating income of ¥4.2B, including ¥3.1B in dividend income, contributed to an increase exceeding Operating Income from the core business of ¥11.8B. This indicates that a portion of Ordinary Income depends on investment income. Dividend income was equivalent to 2.8% of revenue and 26.8% of Operating Income. The fact that investment income is compensating for deteriorating profitability in the core business should be considered when assessing earnings quality. Comprehensive Income was ¥41.8B, substantially exceeding Net Income of ¥9.8B, primarily due to ¥29.8B in valuation differences on other securities and ¥2.1B in foreign currency translation adjustments. These gains mainly reflect valuation gains arising from market price and foreign exchange movements rather than the results of business activities themselves. Accordingly, the increase in net assets does not directly indicate an improvement in sustainable earnings power.
Earnings Forecast and Guidance
The full-year company forecasts are revenue of ¥630.0B (+6.2% YoY), Operating Income of ¥100.0B (+5.9%), and Ordinary Income of ¥106.0B (+5.3%), with no revisions to the earnings forecasts. As of Q1, progress rates were 18.2% for revenue, 11.8% for Operating Income, 14.5% for Ordinary Income, and 14.9% for Net Income, all below the 25% level based on simple quarterly allocation. In particular, the Operating Income progress rate was 13.2pt below the standard level. Achieving the full-year earnings growth plan will require a recovery in profitability in the Japan Business and a reduction in losses in the Asia Business from Q2 onward.
Shareholder Returns
The full-year dividend forecast is ¥50.00 per share, with no revision. The Payout Ratio calculated using the company forecast EPS of ¥107.23 is approximately 46.6%, within the guideline of less than 60%. Retained earnings of ¥509.4B, cash and deposits of ¥177.0B, and an Equity Ratio of 72.6% support the Company’s ability to pay dividends. However, the dividend plan assumes achievement of the full-year earnings plan, and the low Operating Income progress rate as of Q1 should be noted as a variable going forward.
Risk Factors
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Declining profitability in the Japan Business: The core Japan segment recorded a 4.9% YoY decline in revenue and a 21.9% decline in segment profit, with its margin falling from 15.5% to 12.8%. This was the primary cause of the deterioration in the consolidated Operating Income margin, and a delay in revenue recovery could result in continued insufficient fixed-cost absorption.
-
Widening losses in the Asia Business: Asia revenue declined 19.7% YoY to ¥10.0B, while the segment loss widened from ¥0.6B to ¥1.7B. Although the revenue scale is small, continued losses will dilute the consolidated profit margin.
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Working capital and trade receivable accumulation: Operating receivables, comprising accounts receivable and notes receivable of ¥161.4B plus electronically recorded monetary claims, substantially exceed operating liabilities, namely accounts payable and notes payable of ¥55.9B. The collection status of receivables during a period of declining revenue is an important item to monitor from a capital efficiency perspective.
Industry Benchmark (Reference; Compiled by the Company)
Profitability and Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Income Margin | 10.3% | 8.7% (4.2%–14.3%) | +1.6pt |
| Net Income Margin | 8.6% | 7.1% (3.2%–10.6%) | +1.5pt |
The Company’s profitability indicators exceed the industry median and are relatively high within the industry.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | −6.4% | 6.2% (-1.1%–14.6%) | −12.6pt |
The Company’s revenue growth rate is substantially below the industry median, placing it among the companies with the most pronounced revenue declines in the industry.
※Source: Compiled by the Company
Key Points from the Earnings Results
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The Operating Income margin remained at a certain level of 10.3%, but declined 3.3pt YoY, indicating deteriorating earnings momentum. The full-year Operating Income progress rate of 11.8% is below the standard level, making the realization of the profitability improvement plan in the second half a key point of focus.
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Dividend income of ¥3.1B accounted for 20.5% of Ordinary Income. Distinguishing core business profit from investment income is therefore useful for understanding earnings quality. Investment securities of ¥230.3B accounted for 24.2% of total assets, and net assets have a meaningful degree of sensitivity to market price fluctuations.
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Profitability in the Japan Business is declining while losses in the Asia Business are widening simultaneously. Whether changes in the earnings structures of both regions represent an inflection point for consolidated performance will be an important area to monitor going forward.
Theoretical Share Price (Reference Value)
| Scenario | Theoretical Share Price |
|---|---|
| bear (Bearish) | ¥1,003 |
| base (Base) | ¥1,030 |
| bull (Bullish) | ¥1,070 |
| Valuation Assumption | Value |
|---|---|
| Book Value Per Share (BPS) | ¥975 |
| Adjusted Forecast EPS | ¥114.9 |
| Cost of Equity r | 9.77% (10-year Japanese Government Bond 2.77% + Equity Risk Premium 6.00% + Size Premium 1.00%) |
| Residual Income Persistence Coefficient ω / Explicit Forecast Period | 0.62 / 5 years |
| Assumed Payout Ratio | 46.6% |
| Forecast EPS Reliability Adjustment | ×1.071 (based on the industry’s historical guidance achievement rate) |
| Implied PBR / PER | 1.06x / 9.0x |
Sensitivity: ¥1,002–¥1,060 at ±1% for the cost of equity, and ¥1,029–¥1,032 at ±0.1 for ω.
Notes:
- Net assets as of the end of the quarter are used (there is a timing difference from the full-year forecast).
(Calculation model: Residual Income Model (Ohlson-type; explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices)
This report is an earnings analysis document automatically generated by AI through analysis of 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 responsibility, after consulting experts as necessary.
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AI Financial Analysis
Executive Summary
FY2027 Q1 was a weaker start to the year, with sales and operating earnings declining while the balance sheet remained highly liquid and conservatively leveraged. Revenue fell 6.4% year on year to ¥11.45bn. Operating income declined 29.1% to ¥1.18bn, materially underperforming the revenue trend. Profit attributable to owners of parent decreased 18.3% to ¥1.07bn, equivalent to EPS of ¥15.97. The gross margin improved by approximately 90bp year on year to 38.7%, versus approximately 37.8% in the prior-year quarter. This indicates that the principal pressure was not at the gross-profit level. The operating margin compressed by approximately 330bp to 10.3% from 13.6%, as SG&A expenses increased 9.4% to ¥3.25bn despite lower revenue. The SG&A-to-sales ratio rose approximately 410bp to 28.4%, demonstrating adverse operating leverage. The net profit margin declined approximately 130bp to 9.4% from 10.7%, although the decline was moderated by non-operating income. Dividend income of ¥315m accounted for 74% of non-operating income of ¥423m and lifted ordinary income to ¥1.54bn. Consequently, ordinary income fell less sharply than operating income, down 19.9% year on year. Comprehensive income rose to ¥4.18bn from ¥2.36bn, principally reflecting a ¥2.98bn valuation gain on securities recognized in other comprehensive income rather than stronger operating earnings. Japan remained the core business, producing ¥10.46bn of external sales and ¥1.34bn of segment profit, but its earnings declined materially. Asia's sales also declined and its segment loss widened, creating an additional drag on consolidated profitability. Q1 achievement versus the full-year plan is below the standard 25% seasonal benchmark across sales and profits, requiring a substantial acceleration through the remainder of FY2027. The company nevertheless retains substantial liquidity, net cash, and a large securities portfolio, which provide financial resilience while management addresses the earnings slowdown and working-capital cycle.
Profitability Analysis
The reported annualized DuPont ROE is 6.2%, decomposed into a 9.4% net profit margin, 0.482x annualized asset turnover, and 1.38x financial leverage. This level of ROE is below the 8% benchmark generally viewed as a minimum acceptable return threshold, with the low asset-turnover component reflecting a balance sheet containing substantial cash, property and investment securities relative to quarterly sales. Financial leverage is modest, so the company is not relying on debt to support shareholder returns. The largest year-on-year operational deterioration was in operating leverage: revenue contracted 6.4% while SG&A rose 9.4%, reducing operating income by 29.1%. Gross margin expanded to 38.7%, suggesting product mix, pricing, procurement, or project-level gross profitability was not the central cause of the earnings decline. In contrast, the SG&A ratio increased to 28.4%, from approximately 24.3% a year earlier, and more than offset the gross-margin gain. Operating margin therefore fell to 10.3% from approximately 13.6%; it remains within the “good” 8-15% range, but the direction is unfavorable. Ordinary income margin was 13.4%, exceeding operating margin because dividend income was significant. The five-factor tax burden was 0.698, broadly normal, while the interest burden of 1.306x reflects net non-operating income rather than financing stress. Interest coverage of 106.82x confirms that interest costs are immaterial to current profitability. Japan is the core business by operating-income contribution: its segment margin declined to 12.8% from 15.5%, with segment profit falling 21.9% to ¥1.34bn on a 4.9% sales decline. Asia reported a segment loss of ¥167m, compared with a ¥60m loss in the prior year, and its negative margin widened to 17.0% from 4.8% on sales declining 19.7% to ¥984m. A recovery in fixed-cost absorption in Japan and a narrowing of the Asia loss are central to restoring consolidated margin.
Growth Assessment
The Q1 revenue decline was broad-based geographically, with Japan down ¥541m year on year and Asia down ¥242m. Japan represented approximately 91% of consolidated external sales, making domestic demand, project timing and execution the dominant determinants of near-term growth. The larger 19.7% decline in Asia indicates a more severe regional slowdown, although its smaller sales base limits its revenue contribution relative to Japan. Consolidated gross profit fell only 4.4% to ¥4.43bn, less than the revenue decline, consistent with improved gross margin. However, the increase in SG&A prevented this gross-profit resilience from translating into operating-profit stability. Full-year company guidance calls for revenue of ¥63.0bn, operating income of ¥10.0bn, ordinary income of ¥10.6bn and profit attributable to owners of ¥7.2bn. Q1 progress is 18.2% for revenue, 11.8% for operating income, 14.5% for ordinary income and 14.9% for profit attributable to owners. Each measure is more than 10 percentage points below the standard 25% Q1 progress rate, especially operating income at 13.2 percentage points below standard. The full-year forecast embeds 6.2% sales growth and 5.9% operating-income growth, implying that the company expects a marked improvement from the Q1 run rate. Achieving the plan requires the remaining three quarters to generate ¥51.56bn of sales and ¥8.83bn of operating income, equivalent to an operating margin of approximately 17.1%, versus 10.3% in Q1. This required exit rate underscores dependence on seasonality, project delivery timing, improved cost absorption, or both. Management has not revised either earnings or dividend forecasts, preserving the stated outlook but leaving execution risk elevated after the first quarter.
Financial Health
Liquidity is very strong, with a current ratio of 385.3%, a quick ratio of 366.5%, and working capital of ¥32.20bn. Cash and deposits of ¥17.70bn exceeded short-term loans of ¥1.30bn by 13.61x, providing substantial immediate refinancing capacity. Current assets of ¥43.49bn also comfortably covered current liabilities of ¥11.29bn, so there is no current-asset versus short-term-liability maturity mismatch. Interest-bearing loans were limited to ¥2.40bn, comprising ¥1.30bn of short-term loans and ¥1.10bn of long-term loans. The reported debt-to-equity ratio of 0.38x and debt-to-capital ratio of 3.4% indicate a conservative capital structure. The balance sheet also includes ¥6.00bn of convertible bond-type bonds with subscription rights to shares, which should be considered in assessing financing obligations and potential dilution. The short-term debt ratio of 54.2% triggers the refinancing-risk alert because more than half of reported loan debt is short-term. Its root cause is the ¥1.30bn short-term-loan balance relative to ¥2.40bn of reported loan debt. The practical impact is limited by cash holdings and the exceptionally high cash-to-short-term-debt ratio, but the maturity profile should still be monitored, particularly if operating conditions remain soft. Inventories rose 132.6% year on year to ¥2.12bn, while short-term loans increased 44.4% to ¥1.30bn. The inventory increase raises the amount of capital tied up in operations and may reflect inventory build, project timing, or finished-product accumulation. Investment securities increased ¥4.39bn year on year to ¥23.03bn and represented 24.2% of total assets, creating material exposure of equity and comprehensive income to market-value movements. Equity increased to ¥68.95bn, supported in part by accumulated other comprehensive income of ¥12.64bn, including valuation differences on securities of ¥12.10bn. Provisions include a ¥5.60bn bonus provision and a ¥9.11bn net defined-benefit liability, which are meaningful non-debt obligations within the liability structure.
Notable B/S Changes
Inventories: +¥1.21bn (+132.6%) to ¥2.12bn - material working-capital build that heightens shipment, obsolescence and cash-conversion monitoring needs. Investment securities: +¥4.39bn (+23.6%) to ¥23.03bn - now 24.2% of assets, increasing exposure to equity-market valuation movements and OCI volatility. Valuation difference on securities: +¥2.98bn (+32.6%) to ¥12.10bn - principal contributor to stronger comprehensive income and equity, rather than operating earnings. Short-term loans: +¥0.40bn (+44.4%) to ¥1.30bn - raises the short-term debt share to 54.2%, although cash liquidity remains ample. Trade receivables: -¥4.63bn (-22.3%) to ¥16.14bn - lower balance is positive in absolute terms, but annualized DSO remains elevated at 129 days when electronic receivables are considered. Bonus provision: -¥2.71bn (-32.6%) to ¥5.60bn - reduces current liabilities and may reflect payment timing or changes in accrued bonus obligations.
Cash Flow Quality
Cash-flow quality cannot be assessed from operating, investing, or financing cash-flow figures in the available period data. Accordingly, no conclusion can be drawn on operating-cash-flow conversion, free-cash-flow generation, or coverage of capital investment and shareholder distributions. The earnings mix nonetheless warrants attention because dividend income of ¥315m represented a substantial portion of non-operating income and supported ordinary profit. This income is economically distinct from the operating performance of the air-conditioning equipment business and should not be treated as a direct indicator of core demand. Working-capital indicators raise a clear cash-conversion concern. The quality alert identifies annualized receivable days of 129 days, well above the 60-day warning level. Its root cause is a large receivables position, including ¥16.14bn of trade receivables and ¥5.39bn of electronically recorded monetary claims, relative to annualized Q1 sales. The impact is that a sizable portion of reported revenue remains uncollected for an extended period, increasing sensitivity to customer payment timing and potentially delaying cash realization. The annualized cash conversion cycle is 120 days, at the warning threshold. The increase in inventories to ¥2.12bn adds to funds tied up in the operating cycle. These indicators are particularly relevant for a project-oriented manufacturer, where billing and acceptance timing can cause quarter-end swings, but sustained elevated collection days would weaken earnings-to-cash conversion. Accounts payable were ¥5.59bn and electronically recorded obligations were ¥456m, providing some supplier financing, though not enough to eliminate the long collection cycle. Monitoring receivable collections, inventory normalization and subsequent operating cash flow is important in evaluating whether Q1 earnings convert into cash.
Dividend Sustainability
The full-year dividend forecast is ¥50 per share, unchanged from the announced outlook. Against forecast EPS of ¥107.23, the implied dividend payout ratio is approximately 46.6%, which is within the sub-60% sustainability benchmark. The projected cash dividend is therefore covered by forecast earnings on an accounting basis. Q1 EPS was ¥15.97, so quarterly earnings represented approximately 32% of the full-year dividend per share; this is not itself a coverage test because dividends are generally paid on a semiannual or annual schedule and earnings are seasonal. The company has retained earnings of ¥50.94bn and cash and deposits of ¥17.70bn, providing substantial balance-sheet support for shareholder distributions. The strong liquidity position reduces near-term dividend funding risk. However, operating income progress of 11.8% versus the annual plan is below the normal 25% Q1 benchmark, so continued weakness would place greater reliance on later-period earnings recovery to maintain the forecast payout profile. No share repurchase data is available for the period, so no total return ratio is calculated. Dividend sustainability should be assessed primarily against execution of the full-year profit plan, cash conversion from receivables, and management's unchanged ¥50 per-share forecast.
Risk Assessment
Business risks include Domestic demand and project-execution risk: Japan accounts for approximately 91% of external sales, and Japan segment profit fell 21.9% year on year to ¥1.34bn., Asia turnaround risk: Asian sales declined 19.7% to ¥984m and the segment loss widened to ¥167m, reducing the likelihood of regional profit contribution without corrective action., Cost absorption risk: SG&A increased 9.4% despite a 6.4% sales decline, producing a 330bp consolidated operating-margin contraction., Manufacturing working-capital risk: annualized DSO of 129 days and a 120-day cash conversion cycle indicate slow cash realization and elevated sensitivity to customer acceptance and collection timing., Inventory risk: inventory increased 132.6% year on year to ¥2.12bn; a sustained build could signal slower shipment, project timing effects, or inventory-obsolescence exposure., Market-value risk in strategic securities: investment securities of ¥23.03bn equal 24.2% of assets, and securities valuation gains materially influenced comprehensive income..
Financial risks include Refinancing risk alert: 54.2% of reported loan debt is short-term, above the 40% alert threshold. The impact is moderated by ¥17.70bn of cash and a 13.61x cash-to-short-term-debt ratio., Convertible financing and dilution risk: ¥6.00bn of convertible bond-type bonds with subscription rights to shares represent a financing obligation and potential future equity dilution., Pension-related obligation risk: the net defined-benefit liability is ¥9.11bn and should be assessed against investment returns, discount-rate movements and future funding requirements., Receivable collection risk: large trade and electronic receivables can increase credit-loss and liquidity risk if collection timing deteriorates..
Key concerns include Highest priority is whether the company can bridge from Q1 operating-margin performance of 10.3% to the approximately 17.1% margin required on the remaining annual sales to meet guidance., The second priority is resolution of the Asia loss and containment of SG&A growth, as both directly depress consolidated operating leverage., The third priority is cash conversion: the receivables cycle and inventory increase require confirmation through subsequent-period collections and operating cash flow., Comprehensive income should be separated from operating performance because the ¥4.18bn result was heavily supported by securities-related other comprehensive income..
Investment Implications
Key takeaways include Core operating performance weakened materially in Q1: revenue declined 6.4% and operating income fell 29.1%., Gross-margin expansion was encouraging, but higher SG&A relative to sales drove the operating-margin decline., Japan remains profitable and is the core earnings contributor, whereas Asia remains loss-making and deteriorated year on year., The company retains strong liquidity, low reported loan leverage and substantial net cash, limiting near-term balance-sheet stress., Large investment-security holdings enhance financial flexibility but make equity and comprehensive income sensitive to market valuation changes., The unchanged full-year plan requires a significant earnings acceleration after below-standard Q1 progress..
Metrics to watch include Japan segment sales growth and segment margin, Asia segment loss reduction and sales recovery, SG&A growth relative to revenue growth, Consolidated operating margin and progress toward the ¥10.0bn annual operating-income target, Annualized receivable days, receivable collections and cash conversion cycle, Inventory level and inventory turnover trend, Operating cash flow and free cash flow in subsequent disclosures, Investment-security valuation movements and their effect on other comprehensive income, Short-term loan refinancing and convertible bond developments.
Regarding relative positioning, New Akira is financially resilient relative to typical leveraged manufacturers, supported by a 385.3% current ratio, modest reported loan debt and 106.82x interest coverage. Operationally, its 10.3% Q1 operating margin remains within a solid mid-range profitability band, but its 6.2% annualized ROE is below the 8% benchmark and the sharp margin deterioration, long collection cycle and loss-making Asian operation constrain the quality of current relative positioning.