| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥594.8B | ¥579.9B | +2.6% |
| Operating Income | ¥121.1B | ¥113.3B | +6.8% |
| Ordinary Income | ¥129.5B | ¥114.7B | +12.8% |
| Net Income | ¥80.1B | ¥70.9B | +13.0% |
| ROE | 10.1% | 9.6% | - |
The fiscal year ended March 2026 (FY2026) delivered revenue of ¥594.8B (YoY +¥14.9B, +2.6%), Operating Income of ¥121.1B (YoY +¥7.7B, +6.8%), Ordinary Income of ¥129.5B (YoY +¥14.8B, +12.8%), and Net Income of ¥80.1B (YoY +¥9.2B, +13.0%), achieving both revenue and profit growth. Operating margin improved to 20.4% (up 0.9ppt from 19.5% last year), and Gross Margin expanded significantly to 41.0% (up 2.3ppt from 38.7% last year). By segment, the Electronic Equipment Business recorded stable growth with revenue of ¥393.6B (66.2% of sales, +0.8%), while the Industrial Equipment Business accelerated to ¥200.8B (33.8%, +6.2%); Industrial Equipment Operating Income rose to ¥30.2B (+20.8%), contributing double-digit profit growth. Non-operating items included foreign exchange gains of ¥7.5B (¥0.3B prior year) which boosted Ordinary Income, while extraordinary items comprised investment securities sale gains of ¥8.1B offset by extraordinary losses of ¥11.4B, resulting in a net headwind of -¥2.8B. Operating Cash Flow (OCF) was ¥151.3B (+6.6%), maintaining a level equal to 1.89x Net Income; Free Cash Flow was ¥92.4B and ample, enabling dividends of 130円/share (Payout Ratio 35.1%) and share buybacks of ¥20.4B. The FY2027 Full Year plan is bullish: Revenue ¥700B (+17.7%), Operating Income ¥155B (+28.0%), assuming an increase in Operating Margin to 22.1% (+1.7ppt).
[Revenue] Revenue of ¥594.8B (+2.6%) was composed of Electronic Equipment ¥393.6B (+0.8%), Industrial Equipment ¥200.8B (+6.2%), and Other ¥0.3B. Electronic Equipment—led by the core Pilaflon products—recorded ¥393.6B (from ¥390.3B prior year, +0.8%), reflecting stable demand from semiconductor manufacturing equipment. Industrial Equipment comprised Mechanical Seal products ¥154.6B (from ¥142.7B, +8.3%) and Gland Packing & Gasket products ¥46.3B (from ¥46.5B, -0.4%), with seal product growth driving the segment. By region: Japan ¥388.4B (65.3%), Asia ¥142.5B (23.9%), Other ¥63.9B (10.7%); Asia grew sharply from ¥108.7B to +31.1%, contributing to accelerated global expansion. Sales to major customer SCREEN Semiconductor Solutions amounted to ¥77.6B (from ¥96.5B, -19.6%), but customer diversification limited the overall impact on consolidated revenue.
[Profitability] Cost of Sales was ¥350.9B (from ¥355.6B, -1.3%) while Revenue grew +2.6%, resulting in Gross Margin improvement to 41.0% (from 38.7%, +2.3ppt). This reflects product mix improvement and effective pricing measures, indicating structural profitability enhancement. SG&A was ¥122.8B (from ¥110.9B, +10.7%), rising faster than revenue; SG&A ratio increased to 20.6% (from 19.1%, +1.5ppt). Goodwill amortization of ¥4.7B is included; the primary drivers of SG&A growth are assumed to be upfront recognition of personnel and R&D expenses tied to growth investments. Consequently, Operating Income reached ¥121.1B (+6.8%), with an Operating Margin of 20.4% (+0.9ppt). Non-operating income included dividend income ¥1.8B and foreign exchange gains ¥7.5B (¥0.3B prior year), totaling non-operating income of ¥10.7B, while non-operating expenses including interest paid ¥0.4B amounted to ¥2.3B, producing a net uplift of ¥8.4B and Ordinary Income of ¥129.5B (+12.8%). Extraordinary income totaled ¥8.6B, mainly investment securities sale gains ¥8.1B, but Extraordinary losses were ¥11.4B (details not disclosed), leaving Pre-tax Income at ¥126.6B (+5.7%). After taxation of ¥37.2B (effective tax rate 29.4%), Net Income was ¥80.1B (+13.0%), reflecting operating profit growth, positive non-operating effects, and partial offset by extraordinary losses.
The Electronic Equipment Business posted Revenue ¥393.6B (+0.8%), Operating Income ¥90.6B (+2.9%), and margin 23.0% (from 22.4%, +0.6ppt), maintaining stable high profitability as the core segment. The Industrial Equipment Business delivered Revenue ¥200.8B (+6.2%), Operating Income ¥30.2B (+20.8%), and margin 15.0% (from 13.2%, +1.8ppt), with profitability improving faster than revenue growth. The increase in demand for Mechanical Seal products and a shift to higher value-added products are considered primary drivers of margin improvement. Other reported Revenue ¥0.3B and Operating Income ¥0.2B (margin 62.9%), reflecting stable income such as real estate leasing. Segment assets: Electronic Equipment ¥577.3B (54.7% of total assets), Industrial Equipment ¥290.9B (27.5%), indicating continued asset concentration in Electronic Equipment. If Industrial Equipment’s profit growth pace persists, segment balance should improve and portfolio risk diversification is expected.
[Profitability] Operating Margin 20.4% (from 19.5%, +0.9ppt) and Net Margin 13.5% (from 12.2%, +1.3ppt) show stepwise margin improvement. Gross Margin expansion to 41.0% (from 38.7%, +2.3ppt) is the main driver of Operating Margin improvement, reflecting product mix and pricing execution. EBITDA Margin is 24.1% (EBITDA ¥155.1B / Revenue ¥594.8B), at a high level, demonstrating earnings power that sustains Operating Margin in the 20% range after absorbing Depreciation & Amortization ¥34.0B. ROE 10.1% (from 11.5%, -1.4ppt) declined slightly, partly due to reduction in Equity from share buybacks, but capital efficiency remains above 10%.
[Cash Quality] OCF ¥151.3B is 1.89x Net Income ¥80.1B, indicating cash-backed earnings. OCF/EBITDA ratio is 0.98x, high, and the accrual ratio ((Net Income - OCF)/Total Assets) is -6.7%, negative, indicating high earnings quality.
[Investment Efficiency] Total Asset Turnover is 0.56x (Revenue ¥594.8B / Total Assets ¥1,056.3B), down slightly from 0.59x, signaling that inventory reduction and accounts receivable collection efficiency remain challenges. Capital expenditures were effectively ¥69.6B (adjusted from Investing CF -¥58.8B to account for proceeds from tangible asset sales etc.), roughly 2.0x Depreciation ¥34.0B, maintaining a growth investment stance.
[Financial Soundness] Equity Ratio 75.2% (from 75.3%) remains high and stable. Interest-bearing debt amounted to ¥12.3B (short-term borrowings ¥7.5B + corporate bonds ¥100B + long-term borrowings ¥4.8B total) while Cash was ¥255.3B, resulting in net cash of ¥243B. Debt/EBITDA ratio is 0.08x and Interest Coverage is 318x (EBITDA ¥155.1B / (interest paid ¥0.4B + corporate bond interest ¥0.1B)), indicating negligible debt burden and substantial capacity for additional investment and shareholder returns.
OCF was ¥151.3B (from ¥141.8B, +6.6%), reconciling Pre-tax Income ¥126.6B with Depreciation ¥34.0B, Goodwill Amortization ¥4.7B and other non-cash items, adjusted for working capital changes and corporate tax payments ¥35.0B. Within working capital, a decrease in Trade Receivables of ¥12.0B contributed to CF improvement, while Inventories rose slightly by ¥0.2B and Accounts Payable increased by ¥4.6B, supporting liquidity. However, Days Sales Outstanding (DSO) is 71 days (Accounts Receivable ¥115.7B / Daily Sales ¥1.63B), Days Inventory Outstanding (DIO) is 112 days (Inventories ¥107.6B / Daily Sales ¥0.96B), and Cash Conversion Cycle (CCC) is 158 days (DSO + DIO - DPO 25 days), indicating lengthening and room for working capital efficiency improvement. Investing CF was -¥58.8B, mainly acquisitions of tangible and intangible fixed assets -¥69.6B (from -¥70.4B prior year), partially offset by investment securities sales ¥11.9B. Free Cash Flow was ¥92.4B (OCF ¥151.3B + Investing CF -¥58.8B), ample enough to cover dividends ¥28.0B and share buybacks ¥20.4B totaling ¥52.2B, with surplus remaining. Financing CF was -¥53.2B, comprised of long-term debt repayments -¥3.0B, long-term borrowings proceeds ¥1.0B, dividends -¥28.0B, share buybacks -¥20.4B, and disposal of treasury stock ¥0.8B. Cash and cash equivalents rose from ¥218.8B at the beginning of the period to ¥255.3B at the end (+¥36.5B), further strengthening liquidity.
Of Ordinary Income ¥129.5B, Operating Income ¥121.1B was derived from core operations, yielding a core-business ratio of 93.5%, indicating high earnings quality. Major non-operating items included foreign exchange gains ¥7.5B (approx. 5.8% of Ordinary Income) and dividend income ¥1.8B; the FX gains are largely one-off, and their contribution to this period’s Ordinary Income uplift is estimated around 6%. Extraordinary items resulted in net -¥2.8B (Extraordinary Income ¥8.6B including investment securities sale gains ¥8.1B, minus Extraordinary Losses ¥11.4B), a limited impact equal to -2.3% of Operating Income. The accrual measure (Net Income ¥80.1B - OCF ¥151.3B) is -¥71.2B, which is -6.7% of Total Assets ¥1,056.3B, indicating profit is backed by cash. Comprehensive Income ¥102.9B exceeded Net Income by ¥22.8B, driven by Other Securities Valuation Differences ¥12.1B and Foreign Currency Translation Adjustments ¥4.8B, partly offset by actuarial adjustments related to retirement benefits -¥3.5B. The expansion of unrealized gains on securities can be a source of future realized gains but also carries market value volatility risk. Overall, over 90% of Ordinary Income is core business-derived, OCF is 1.89x Net Income demonstrating strong cash conversion, one-off effects are limited, and earnings quality is high.
The FY2027 Full Year plan targets Revenue ¥700B (+17.7%), Operating Income ¥155B (+28.0%), Ordinary Income ¥155B (+19.7%), Net Income ¥107B (+33.6% YoY), and EPS 468.04円, representing a confident outlook. The plan assumes raising Operating Margin to 22.1% (from 20.4%, +1.7ppt), premised on further Gross Margin improvement and restraint in SG&A growth. The plan envisions incremental Revenue +¥105.2B and incremental Operating Income +¥33.9B, implying a Contribution Margin on incremental sales of 32.2%, a high level. Dividend guidance indicates annual dividend of 188円 (interim 50円, year-end TBD), implying a large increase of +58円 from this year’s 130円, with a Payout Ratio of 40.2% (based on EPS forecast 468.04円), slightly higher than this year’s 35.1% but within a sustainable range. Key execution factors for achieving the plan include: (i) continued margin improvement in Industrial Equipment (this year +1.8ppt → further improvement next year), (ii) demand recovery and price maintenance in Electronic Equipment, and (iii) acceleration of CF generation via working capital efficiency improvements. If OCF this year of ¥151.3B can be sustained or improved next year, balancing higher dividends with growth investments should be feasible; downside risks include FX reversal and raw material cost increases.
This year’s annual dividend was 130円 (interim 50円, year-end 80円), representing a Payout Ratio of 35.1% (dividend 130円 / EPS 388.19円). Total dividends amounted to ¥28.1B (interim ¥11.5B, year-end ¥16.5B), and FCF coverage of dividends (FCF ¥92.4B) was 3.29x, indicating ample headroom. Share buybacks totaled ¥20.4B; combined with dividends, total shareholder returns were ¥48.5B and the Total Return Ratio was 60.5% (Total return ¥48.5B / Net Income ¥80.1B). Next year’s dividend guidance of 188円 annually (+58円, +44.6%) implies a substantial increase; the Payout Ratio on EPS forecast 468.04円 would be 40.2%, modestly higher but balanced with growth investment. With net cash of ¥243B and ROE 10.1%—exceeding the cost of capital—the company’s intent to strengthen shareholder returns via both dividends and buybacks is clear. There is no publicly disclosed history confirming consecutive dividend increases, but this year’s higher payout policy and next year’s projected large increase suggest a direction toward expanding returns linked to profit growth.
Segment concentration risk: The Electronic Equipment Business accounts for 66.2% of Revenue and approximately 75% of Operating Income; demand swings for Pilaflon products directly affect results. Sales to major customer SCREEN Semiconductor Solutions fell to ¥77.6B this year (from ¥96.5B, -19.6%), though customer diversification limited consolidated impact. Nevertheless, the capital expenditure cycle in the semiconductor equipment market poses a risk of material revenue and profit volatility. Continued margin improvement (+15.0%) and growth acceleration (+6.2%) in Industrial Equipment would improve portfolio balance.
Working capital efficiency deterioration: DSO 71 days, DIO 112 days, CCC 158 days indicate elongation year-on-year. Trade Receivables ¥115.7B and Inventories ¥107.6B together represent 21.2% of Total Assets ¥1,056.3B, expanding capital tied up in operations. The Working Capital / Revenue ratio is 37.5% (Net working capital ¥223.3B / Revenue ¥594.8B), high; delayed improvement could slow FCF growth and constrain dividend and investment capacity.
FX and raw material cost risk: This year FX gains of ¥7.5B boosted Ordinary Income by about 6%, but FX reversal could compress earnings. Although Gross Margin improved to 41.0% (+2.3ppt), raw material price increases and delayed pass-through could narrow margins. Achieving next year’s Operating Margin target of 22.1% assumes stable raw material costs and maintained pricing; external shocks pose downside risk.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 20.4% | 7.8% (4.6%–12.3%) | +12.6pt |
| Net Margin | 13.5% | 5.2% (2.3%–8.2%) | +8.3pt |
Both Operating and Net Margins significantly exceed industry medians, indicating top-tier profitability among manufacturers.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 2.6% | 3.7% (-0.4%–9.3%) | -1.1pt |
Revenue growth is slightly below the median, but high margins secure earnings growth.
※ Source: Company compilation of public financial statements
High-profitability profile and margin improvement trend: Operating Margin 20.4% (from 19.5%, +0.9ppt) and Gross Margin 41.0% (+2.3ppt) show stepwise improvement. The FY2027 plan targets Operating Margin 22.1% (+1.7ppt). Product mix improvement and pricing measures point to structural margin enhancement, offering a competitive advantage of +12.6ppt over the industry Operating Margin median (7.8%). The margin improvement in Industrial Equipment (15.0%, from 13.2%, +1.8ppt) is accelerating; continued segment rebalancing would enhance portfolio diversification and sustain profit growth.
Strong cash generation and active shareholder returns: OCF ¥151.3B and FCF ¥92.4B support dividends of 130円 (Payout Ratio 35.1%) and share buybacks ¥20.4B, achieving a Total Return Ratio of 60.5%. Net cash ¥243B and Debt/EBITDA 0.08x underpin the capacity for the planned FY2027 dividend of 188円 (+44.6%) while maintaining growth investments. If working capital efficiency (CCC 158 days) improves, FCF growth could accelerate and enable further return expansion.
Execution tasks to meet next year’s plan: To achieve Revenue ¥700B (+17.7%) and Operating Income ¥155B (+28.0%), the company must: (i) contain SG&A ratio (current 20.6%) to realize scale benefits from revenue expansion, (ii) sustain Industrial Equipment margin improvements, and (iii) accelerate CF generation via working capital efficiency. The FX gain of ¥7.5B (approx. +6% of Ordinary Income) is a one-off; organic business growth is the key driver for plan achievement. Monitoring progress on compressing DSO/DIO and the recovery pace of Electronic Equipment demand are critical.
This report is an AI-generated earnings analysis based on XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company from public financial statements. Investment decisions should be made at your own responsibility, and, as appropriate, consult professional advisors prior to making investment decisions.
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