NACHI-FUJIKOSHI (6474) FY2026 Q3 Earnings Report

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Executive Summary

For the cumulative Q3 period, the company recorded higher revenue and income, with profits rising sharply on the back of improved gross margin. The results highlighted an improving earnings structure. Revenue was ¥192.33B (+10.4% YoY), and Operating Income was ¥11.46B (+72.8%). Ordinary Income was ¥10.87B (+111.5%), and net income attributable to owners of the parent was ¥6.63B (+82.1%). The main driver was the improvement in gross margin, as the increase in cost of sales was contained, lifting gross profit by +21.8% YoY. However, after factoring in non-operating expenses and extraordinary losses, growth in net income was lower than at the operating level.

Factors Behind Earnings Changes

【Revenue】Revenue increased by ¥18.13B YoY, with all segments—Components, Machine Tools, and Other—recording higher sales. Components generated external revenue of ¥117.08B (+7.9%), accounting for approximately 60.9% of consolidated revenue. Machine Tools generated ¥60.6B (+11.1%), while Other generated ¥14.64B (+31.6%). Revenue growth was broadly based rather than concentrated in a particular business.

【Profit and Loss】The increase in Operating Income was primarily driven by an improvement in gross margin. Gross margin expanded by approximately 2.2pt, from 22.0% in the prior-year period to 24.2%. SG&A expenses were ¥35.14B, up +11.1% YoY, slightly exceeding revenue growth. The SG&A ratio edged up from 18.2% to 18.3%. Non-operating income was ¥2.05B versus expenses of ¥2.64B, resulting in net non-operating expenses of ¥0.59B. Extraordinary income was ¥0.07B versus extraordinary losses of ¥1.32B; one-off factors, including an impairment loss of ¥0.33B, weighed on earnings. Profit before tax was ¥9.62B, and income taxes were ¥2.98B. Overall, the company recorded higher revenue and income.

Segment Analysis

Components generated Operating Income of ¥5.95B (+60.8%), with a margin of 5.1%, making it the largest source of profit and accounting for approximately 52% of consolidated Operating Income. Machine Tools generated Operating Income of ¥3.81B (+52.5%), with a margin of 6.3%, approximately 1.2pt higher than Components. Other generated Operating Income of ¥1.64B, rising substantially from ¥0.4B in the prior year, with a margin of approximately 11.2%. Components recorded an impairment loss of ¥0.33B, meaning structural costs were incurred alongside profit growth. Given the business mix, the profitability of Components is likely to have a significant impact on consolidated results.

Key Financial Indicators

【Profitability】The Operating Income margin was 6.0% (3.8% in the prior-year period), gross margin was 24.2% (22.0%), and net margin was approximately 3.5%. Annualized ROE was 4.8%; in a DuPont analysis, the increase in net margin was the primary driver of improvement. 【Cash Quality】Cash and deposits were ¥39.01B, up from ¥32.2B at the end of the prior-year period. Trade and notes receivable were ¥56.05B, and inventories were ¥35.15B, indicating that a substantial amount of funding remains tied up in working capital. 【Investment Efficiency】EPS was ¥304.28 (¥161.29 in the prior year, +88.7%). Property, plant and equipment was ¥105.71B, down from ¥108.88B at the end of the prior-year period. 【Financial Soundness】The Equity Ratio was 53.2%, and the current ratio was approximately 212.5%. Short-term borrowings increased to ¥16.95B (¥5.71B at the end of the prior-year period), while commercial paper increased to ¥15B (¥10B). A higher proportion of short-term funding is a notable feature.

Cash Flow Analysis

As no cash flow statement is disclosed, funding trends are assessed based on changes in the balance sheet. Cash and deposits increased by ¥6.8B, from ¥32.2B at the end of the prior-year period to ¥39.01B. During this period, short-term borrowings increased by ¥11.24B and commercial paper by ¥5B, indicating that short-term borrowing made a substantial contribution to the accumulation of cash on hand. Meanwhile, electronically recorded obligations decreased by ¥9.63B, from ¥16.89B to ¥7.26B, reducing the funding support provided by trade payables. Trade receivables increased from ¥53.56B to ¥56.05B, and work in process increased from ¥12.3B to ¥14.36B, absorbing cash through higher working capital. Property, plant and equipment declined, potentially limiting cash outflows for capital investment relative to other uses. Whether stronger earnings translate into cash generation will depend on the recovery of working capital.

Earnings Quality

Ordinary Income was ¥10.87B compared with Operating Income of ¥11.46B, with net non-operating expenses of ¥0.59B, indicating that the core business was the main source of recurring earnings. Of non-operating income of ¥2.05B, dividend income was ¥0.71B and foreign exchange gains were ¥0.09B, reflecting limited reliance on foreign exchange factors. Interest expense of ¥0.78B accounted for most non-operating expenses. Extraordinary losses of ¥1.32B included an impairment loss of ¥0.33B, among other items. After offsetting extraordinary income of ¥0.07B, net extraordinary losses of approximately ¥1.25B reduced net income. In the prior year, a gain on the sale of investment securities of ¥1.93B was the main source of extraordinary income. There was little contribution from similar items in the current period, meaning the increase in earnings was more heavily attributable to the core business. Comprehensive income was ¥13.51B, substantially exceeding net income attributable to owners of the parent of ¥6.63B. Foreign currency translation adjustments of ¥3.38B and valuation differences on securities of ¥3.76B boosted OCI. These were valuation gains arising from market fluctuations and should be distinguished from sustainable earnings.

Earnings Forecast and Guidance

The full-year forecast is Revenue of ¥255B, Operating Income of ¥15.3B, Ordinary Income of ¥13.3B, and net income attributable to owners of the parent of ¥7.5B, with no revisions this quarter. Progress against the full-year forecast through Q3 was 75.4% for Revenue, 74.9% for Operating Income, 81.7% for Ordinary Income, and 88.4% for Net Income. Revenue and Operating Income are tracking at the standard level of around 75%; achieving the full-year forecast will require approximately ¥3.84B in Operating Income in Q4. This is close to the quarterly average of approximately ¥3.82B for the cumulative period.

Net Income progress is high, and the amount required in Q4 is approximately ¥0.87B, well below the quarterly average of approximately ¥2.2B. This may indicate that the full-year forecast conservatively incorporates Q4 extraordinary gains and losses, tax burden, and other factors.

Shareholder Returns

The full-year dividend forecast is ¥110 per share. As the Q2-end dividend is ¥0, the forecast assumes a single year-end dividend. The forecast Payout Ratio against full-year forecast EPS of ¥344.2 is approximately 32.0%, and total dividends against forecast Net Income of ¥7.5B amount to approximately ¥2.4B. This level leaves earnings headroom. Cash and deposits of ¥39.01B also support the company’s ability to fund dividends. However, if working capital continues to tie up funds, the company’s cash-generation capacity—the source of dividend funding—will need to be monitored.

Risk Factors

1. Business concentration risk: Components accounts for approximately 60.9% of consolidated revenue and approximately 52% of Operating Income. Changes in demand or price competition can readily affect consolidated results. The segment also recorded an impairment loss of ¥0.33B in the current period.

2. Working capital and inventory risk: Trade and notes receivable of ¥56.05B and inventories of ¥35.15B account for approximately 50% of current assets of ¥184.31B. Work in process increased approximately 16.7% from the end of the prior-year period, exceeding revenue growth. Demand fluctuations could result in inventory write-downs or delayed collections.

3. Short-term funding and capital efficiency risk: Short-term borrowings increased 196.8% from the end of the prior-year period, and commercial paper increased 50%. Although the current ratio is high, sensitivity to refinancing conditions has increased. Annualized ROE is 4.8%, indicating that capital efficiency remains low relative to earnings growth.

Industry Benchmark (Reference; Company Estimates)

Profitability and Returns

Both the Operating Income margin and net margin are below the median, but remain within the IQR.

Growth and Capital Efficiency

Revenue growth exceeds the upper end of the IQR of 8.9%, placing the company among the stronger performers in the industry.

※Source: Company calculations

Key Points to Watch in the Results

1. Gross margin improved by approximately 2.2pt, and the Operating Income margin rose from 3.8% to 6.0%. Whether margin improvement continues will remain a key point to monitor in future results.

2. Components is the largest source of profit, while its margin is below the 6.3% margin of Machine Tools. The trend in Components profitability, including impairment developments, will affect the quality of consolidated results.

3. Cash and deposits and the current ratio are substantial, but working capital remains tied up and short-term borrowings have increased. Full-year Net Income progress is high at 88.4%; Q4 earnings should be reviewed alongside this progress.

Theoretical Share Price (Reference)

Sensitivity: 7,031円〜7,437円 for a ±1% change in the cost of equity, and 7,188円〜7,257円 for a ±0.1 change in ω.

Notes:

• Since Net Income progress against the full-year forecast (88%) exceeds the standard level (75%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies that are ahead of schedule tend to exceed forecasts. The adjustment may be excessive for businesses with strong seasonality).
• Net Income is substantially compressed relative to Operating Income (Net Income ÷ Operating Income 49%) due to taxes, acquisition-related expenses, non-controlling interests, and other factors. This valuation reflects that compression at face value; if the factors are temporary, underlying earnings power may be higher.
• Since 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 relative to the full-year forecast).
• Since net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

（Valuation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-09 / Mechanically calculated using only publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and it does not predict or guarantee future share prices）

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the company based on publicly disclosed earnings data. Please make investment decisions at your own responsibility and consult a professional as necessary.

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