SANYO DENKI CO.,LTD. FY2026 FY Earnings Report

Quick View

Executive Summary

For the fiscal year ending March 2026, Revenue was ¥1,073.5B (YoY +¥95.0B, +9.7%), Operating Income was ¥108.8B (YoY +¥29.5B, +37.2%), Ordinary Income was ¥73.5B (YoY +¥23.6B, +47.4%), and Net Income was ¥86.6B (YoY +¥30.2B, +53.6%), delivering substantial profit growth. Revenue expanded to a triple-figure B scale, Operating margin reached 10.1% (improved +2.0pt from 8.1% in the prior year), and Net margin improved to 8.1% (up +2.3pt from 5.8%), showing marked profitability enhancement. Gross margin improved to 27.9% (up +2.2pt from 25.7%) driven by product mix improvement and cost control, while SG&A ratio was restrained at 18.0% (down -0.2pt from 18.2%), clarifying margin expansion at the operating stage. By segment, SanAce Company functioned as a profit pillar with Revenue ¥408.3B (+7.3%) and Operating Income ¥82.0B (+19.5%) maintaining a 20.1% margin. Motion Company saw Revenue ¥375.4B (+13.9%) and Operating Income ¥12.2B (+321.0%) with accelerated return to profitability. Electronics Company recovered with Revenue ¥232.5B (+9.9%) and Operating Income ¥11.4B (+136.4%). All segments achieved revenue and profit growth.

Drivers of Performance

[Revenue] Revenue of ¥1,073.5B represents an increase of ¥95.0B (+9.7%) year-on-year. By segment, SanAce Company expanded to ¥408.3B (38.0% share, +7.3%) supported by steady cooling-fan demand; Electronics Company reached ¥232.5B (21.7% share, +9.9%) aided by order recovery in power supplies and servo amplifiers; Motion Company grew to ¥375.4B (35.0% share, +13.9%) driven by increased demand for servo motors and stepping motors. Other segments were ¥57.3B (5.3% share, +1.1%) with limited contribution. After inter-segment eliminations, consolidated Revenue shows all segments on a growth trend and little concentration risk. Although geographic disclosure is absent, translation differences of foreign operations +¥38.0B (statement of comprehensive income, prior year -¥6.1B) suggest that both expanded overseas sales and yen depreciation contributed to the revenue increase.

[Profitability] Operating Income of ¥108.8B (Operating margin 10.1%) rose ¥29.5B (+37.2%) YoY. Cost of sales was ¥773.9B, increasing +6.4% versus Revenue growth +9.7%, improving gross margin to 27.9% (up +2.2pt from 25.7%). Gross profit expanded to ¥299.5B (prior ¥251.3B, +¥48.2B, +19.2%), outpacing revenue growth. SG&A was ¥192.8B (prior ¥177.6B, +¥15.2B, +8.6%), growing below Revenue, yielding an SG&A ratio of 18.0% (down -0.2pt) and improved fixed-cost absorption. Other income ¥2.2B and other expenses ¥0.1B further highlighted operating-stage margin improvement. By segment, SanAce Company’s Operating Income ¥82.0B (margin 20.1%, prior ¥68.6B, +19.5%) accounted for 75.3% of consolidated operating income. Motion Company’s Operating Income ¥12.2B (margin 3.3%, prior ¥2.9B, +321.0%) accelerated its return to profitability from a low base, and Electronics Company’s Operating Income ¥11.4B (margin 4.9%, prior ¥4.8B, +136.4%) showed a clear recovery trend. Ordinary Income was ¥73.5B (prior ¥49.9B, +47.4%), supported by financial income ¥9.1B (prior ¥6.4B, +¥2.7B); net financial income was +¥16.8B (interest & dividends received ¥17.5B less interest paid ¥0.7B). Foreign exchange gains ¥2.8B (same level as prior year) also contributed positively at the ordinary-income stage. Meanwhile, non-operating expenses were restrained at ¥0.7B (prior ¥2.2B, -¥1.5B), resulting in Ordinary Income of ¥73.5B versus Operating Income ¥108.8B, a reduction of ¥35.3B at the non-operating stage—possibly influenced by a one-off item booked as non-operating expense related to the October 2025 stock split. Extraordinary income included gain on sale of investment securities ¥0.3B; extraordinary losses included loss on disposal of fixed assets ¥0.8B and impairment on investment securities ¥1.0B, netting to approximately ¥0.0B with minimal impact on ordinary profit/loss. Profit Before Tax was ¥117.5B and, after deducting income taxes ¥30.9B (effective tax rate 26.3%), Net Income was ¥86.6B (Net margin 8.1%, up +2.3pt from 5.8%), maintaining the revenue-and-profit growth trend through to the bottom line. Comprehensive income was ¥176.8B, roughly double Net Income, led by Other Comprehensive Income improvement of ¥90.2B (prior -¥9.0B). Components included valuation differences on OCI-designated financial assets +¥26.6B (prior -¥12.9B), remeasurement of defined benefit plans +¥25.5B (prior +¥10.0B), and translation differences on foreign operations +¥38.0B (prior -¥6.1B), with yen depreciation and financial asset valuation gains boosting comprehensive income. In conclusion, the company achieved revenue and profit growth across operating, ordinary, and net income stages.

Segment Analysis

SanAce Company posted Revenue ¥408.3B (prior ¥380.6B, +7.3%) and Operating Income ¥82.0B (prior ¥68.6B, +19.5%) maintaining a high margin of 20.1% (prior 18.0%, +2.1pt). Stable demand in cooling-fan products and expansion of higher-value-added product mix contributed to profitability, making it the core segment accounting for 75.3% of consolidated operating income. Electronics Company recorded Revenue ¥232.5B (prior ¥211.5B, +9.9%) and Operating Income ¥11.4B (prior ¥4.8B, +¥6.6B, +136.4%), improving margin to 4.9% (prior 2.3%, +2.6pt). Order recovery and higher utilization in power supplies and servo amplifiers supported margin expansion, but profitability remains low and further yield improvement and fixed-cost absorption are required. Motion Company achieved Revenue ¥375.4B (prior ¥330.0B, +13.9%) and Operating Income ¥12.2B (prior ¥2.9B, +¥9.3B, +321.0%), with margin improving to 3.3% (prior 0.9%, +2.4pt), accelerating return to profitability driven by demand increases for servo and stepping motors. Although it has escaped last year’s low-margin state, margins remain low and continued volume effects and cost reductions are necessary. Other segments had Revenue ¥57.3B (prior ¥56.6B, +1.1%) and Operating Income ¥6.4B (prior ¥2.8B, +¥3.6B) with limited contribution. All segments achieved revenue and profit growth, and margin improvements at Electronics and Motion structurally supported consolidated margin expansion.

Key Financial Metrics

[Profitability] Operating margin reached 10.1% (up +2.0pt from 8.1%), supported by gross margin 27.9% (up +2.2pt) and SG&A ratio 18.0% (down -0.2pt). Net margin improved to 8.1% (up +2.3pt) and ROE improved to 7.2% (prior 5.0%, +2.2pt). Decomposing ROE shows Net margin improvement as the main driver; Total Asset Turnover was 0.65x (prior 0.67x, slight decline) affected by increased working capital. Financial leverage was 1.30x (prior 1.28x, roughly flat) and Equity Ratio was 76.9% (prior 77.8%, nearly flat), indicating a very stable capital structure. Interest coverage is extremely high: Operating Income ¥108.8B ÷ Interest paid ¥0.7B ≈ 155.4x, indicating minimal interest burden.

[Cash Quality] Operating Cash Flow (OCF) was ¥108.3B, 1.25x Net Income ¥86.6B, so the OCF/Net Income ratio is healthy, though OCF declined -31.4% YoY driven by inventory increase -¥42.5B and accounts receivable increase (change in operating receivables -¥18.1B). Accrual ratio = (Net Income - OCF) ÷ Total Assets = (¥86.6B - ¥108.3B) ÷ ¥1,663.7B = -1.3%, negative, indicating earnings are being converted to cash, but working capital increase pressured cash conversion. EBITDA was Operating Income ¥108.8B + Depreciation ¥53.8B = ¥162.6B, and OCF/EBITDA = ¥108.3B ÷ ¥162.6B = 0.67x, a short-term decline.

[Investment Efficiency] Total Asset Turnover 0.65x (prior 0.67x, slight decline) because Total Assets grew +14.3% versus Revenue +9.7%, reflecting buildup of working capital. Days Sales Outstanding (DSO) = (Accounts receivable ¥320.4B ÷ Revenue ¥1,073.5B) × 365 ≈ 109 days (prior ≈108 days, roughly flat). Days Inventory Outstanding (DIO) = (Inventory ¥398.6B ÷ Cost of sales ¥773.9B) × 365 ≈ 188 days (prior ≈171 days, +17 days), showing inventory turnover slowdown. Days Payable Outstanding (DPO) = (Accounts payable ¥197.7B ÷ Cost of sales ¥773.9B) × 365 ≈ 93 days (prior ≈83 days, +10 days), indicating extended supplier payment terms. Cash Conversion Cycle (CCC) = DSO + DIO - DPO ≈ 204 days (prior ≈196 days, +8 days), so working-capital efficiency slightly deteriorated. Capital expenditure was ¥14.7B, 0.27x of depreciation ¥53.8B, suggesting mainly maintenance and renewal investment with no large-scale projects.

[Financial Soundness] Equity Ratio 76.9% denotes very strong solvency. Current ratio = (¥1,073.2B ÷ ¥219.9B) × 100 ≈ 488%, and quick ratio = (¥1,073.2B - ¥398.6B) ÷ ¥219.9B × 100 ≈ 307%, indicating very high liquidity. Interest-bearing debt (short-term borrowings ¥28.9B + long-term borrowings ¥10.2B + lease liabilities ¥20.8B) = ¥59.9B, versus cash & equivalents ¥287.2B, implying net cash of ¥227.3B and near debt-free status. Debt/EBITDA = ¥59.9B ÷ ¥162.6B = 0.37x, very low and indicative of substantial financial capacity. Short-term debt ratio = current liabilities ¥219.9B ÷ total liabilities ¥385.1B = 57.1%, a majority, but interest-bearing debt is small and liquidity buffers are ample, so maturity mismatch risk is limited.

Cash Flow Analysis

OCF was ¥108.3B, calculated by adding depreciation ¥53.8B to Profit Before Tax ¥117.5B, and adjusting for increases in operating receivables -¥18.1B, inventory increase -¥42.5B, and increase in operating payables +¥19.3B, producing a subtotal of ¥117.2B less corporate taxes paid -¥14.4B. The YoY decline of -31.4% was mainly due to the shift to inventory increases (from prior-year decrease of ¥25.1B to this-period increase of -¥42.5B) and a swing in operating receivables (from prior-year decrease of ¥28.8B to this-period increase of -¥18.1B), with working-capital buildup constraining cash generation. Investing Cash Flow was -¥76.6B, absorbing funds from tangible fixed asset purchases -¥14.7B, intangible asset purchases -¥13.9B, and other investing activities -¥51.4B. The breakdown of other investing activities is unclear, but given the amount it likely includes acquisition of securities or long-term financial assets; this is consistent with investment securities rising from ¥76.7B to ¥112.1B (+¥35.4B). Proceeds from sale of tangible fixed assets were negligible at ¥0.03B, indicating capex focused on maintenance. Free Cash Flow (OCF + Investing CF) was ¥31.7B, positive but down sharply from prior year ¥120.5B, driven by working-capital pressure and increased investing activities. Financing Cash Flow was -¥49.2B, reflecting dividend payments -¥22.5B, share buybacks -¥9.8B, long-term borrowings repayments -¥10.7B, and lease liability repayments -¥7.8B, offset slightly by short-term borrowings +¥0.5B and long-term debt issuance +¥1.0B. Total shareholder return (dividends + buybacks) was ¥32.3B, roughly balanced with Free Cash Flow ¥31.7B, indicating return capacity is sensitive to working-capital trends. After factoring translation effects +¥15.7B, cash & cash equivalents moved marginally from opening ¥288.9B to closing ¥287.2B (down -¥1.8B), absorbing total returns and working-capital increases.

Quality of Earnings

Of Operating Income ¥108.8B, recurring core-business profits comprise the majority; other income ¥2.2B and other expenses ¥0.1B are small and mainly composed of subsidies ¥1.0B and rental income ¥0.99B, indicating recurring character. The ¥35.3B gap between Operating Income ¥108.8B and Ordinary Income ¥73.5B reflects sizable adjustments at the non-operating stage: although financial income ¥9.1B (including interest & dividends received) was recorded, non-operating expenses ¥0.7B and foreign exchange losses ¥1.5B occurred, resulting in a net reduction from operating to ordinary stage. The background to this divergence includes that total non-operating income was ¥22.8B versus non-operating expenses ¥0.7B (net +¥22.1B), while the decline from Operating Income to Ordinary Income of -¥35.3B may have been affected by a one-off adjustment booked as non-operating expense related to the October 2025 stock split. Extraordinary items were small (gain on sale of investment securities ¥0.3B; loss on disposal of fixed assets ¥0.8B; impairment on investment securities ¥1.0B) totalling -¥1.5B, with limited impact on Net Income. The divergence between Net Income ¥86.6B and Comprehensive Income ¥176.8B stems from Other Comprehensive Income ¥90.2B (OCI-designated financial assets valuation +¥26.6B; remeasurement of defined benefit plans +¥25.5B; translation differences +¥38.0B); valuation and translation differences are non-cash and do not directly affect earnings quality. Accrual ratio = (Net Income ¥86.6B - OCF ¥108.3B) ÷ Total Assets ¥1,663.7B = -1.3%, negative, which is favorable for cash realization of profits, but working-capital increases (inventory -¥42.5B, accounts receivable increase -¥18.1B) pressured OCF and reduced cash conversion efficiency. OCF/Net Income ratio of 1.25x is healthy, but YoY OCF decline underscores the need to improve working-capital management to stabilize earnings quality.

Forecasts & Guidance

For the fiscal year ending March 2027, the company forecasts Revenue ¥1,288.5B (YoY +20.0%), Operating Income ¥162.9B (YoY +49.6%), Parent Net Income ¥120.0B (YoY +38.6%), and EPS ¥338.12 (prior ¥243.89, +38.6%). Progress toward the Operating Income target is high: first-half results ¥108.8B ÷ full-year forecast ¥162.9B ≈ 66.8%, implying about ¥54.1B of incremental operating income in the second half. Maintaining the first-half profit growth pace (+37.2%) requires further utilization-rate gains and deeper cost reductions. Revenue progress is also high: first-half ¥1,073.5B ÷ full-year ¥1,288.5B ≈ 83.3%, implying about ¥215.0B addition in H2; achieving +20.0% full-year growth depends on continued recovery at Motion and Electronics Companies and normalization of inventory turnover. Dividend forecast is annual ¥80 (reflecting the October 2025 stock split 1→3), which corresponds to pre-split amounts of ¥210 at year-end and ¥310 annual. Payout ratio = ¥80 ÷ EPS ¥338.12 ≈ 23.7%, substantially lower than prior-year payout ratio 76.4% (pre-split basis), indicating a policy to conserve return capacity. However, Free Cash Flow for H1 was ¥31.7B vs. dividends + buybacks ¥32.3B almost balanced; continuation of returns depends on working-capital normalization and OCF increases in H2. Company projects full-year Operating margin ~¥162.9B ÷ ¥1,288.5B ≈ 12.6%, expecting a further +2.5pt improvement from H1 10.1%. This requires segment margin expansion and further cost reductions. The guidance is ambitious; sustaining H1 profit momentum and improving working-capital efficiency are the main execution challenges.

Shareholder Returns

Dividends were ¥100 at the Q2-end (pre-split basis) and ¥70 at year-end (post-split basis), yielding an annual cash dividend of ¥75 (note: pre-split annual dividend equivalent ¥310). Payout ratio = annual dividend ¥75 ÷ EPS ¥243.89 ≈ 30.8%, down slightly from prior-year 34.9%. The note indicates that on a pre-split basis the FY2026 annual dividend ¥310 implies a payout ratio of ≈76.4%, so in substance the company maintained a high level of cash return. Total dividends paid were ¥22.5B (cash flow statement), representing about 26.0% of Net Income ¥86.6B. Share buybacks amounted to ¥9.8B, bringing total shareholder return (dividends + buybacks) to ¥32.3B. Total return ratio = total return ¥32.3B ÷ Net Income ¥86.6B ≈ 37.3%. Free Cash Flow ¥31.7B almost matched total returns ¥32.3B; absent the working-capital increase, return capacity could have expanded further. Next-year dividend forecast is annual ¥80 (post-split basis), which corresponds to pre-split annual ¥510 (¥240 at Q2-end + ¥270 year-end), suggesting a substantive increase in cash return. Payout ratio on forecast equals ¥80 ÷ EPS ¥338.12 ≈ 23.7%, conservative to preserve room for growth investment and financial soundness. Continuation of share buybacks on an annual basis is uncertain, but the company may use buybacks opportunistically to improve capital efficiency. Overall, the company continues a combined approach of high dividend payout and buybacks, but maintaining parity with Free Cash Flow requires improvement in working-capital efficiency.

Risk Factors

1. Risk of deteriorating working-capital efficiency: Inventory rose from ¥341.5B to ¥398.6B (+¥57.1B, +16.7%), and DIO extended to about 188 days (prior ≈171 days, +17 days). Accounts receivable increased from ¥291.4B to ¥320.4B (+¥29.0B, +10.0%), with DSO ≈109 days (prior ≈108 days). These increases outpace the Revenue growth of +9.7%. CCC ≈ 204 days (prior ≈196 days, +8 days) indicates slower working-capital turnover and OCF fell -31.4% YoY. If inventory obsolescence or receivables collection delays materialize, Free Cash Flow stability and return capacity could be impaired. Failure to normalize working capital could result in missed OCF improvement forecasts next year.

2. Risk of delayed margin recovery in low-margin segments: Electronics Company and Motion Company margins remain low at 4.9% and 3.3% respectively despite YoY improvements. Combined Revenue of these two segments is ¥607.9B (56.6% of total), but Operating Income is only ¥23.7B (21.8% of total), so their limited profitability caps consolidated profit contribution. If utilization rates fall, cost-reduction initiatives stall, or price competition intensifies, margin improvements may be derailed and sustaining consolidated operating margin 10.1% would be difficult. Motion Company, despite improvement from 0.9% to 3.3%, still lacks stable profitability and remains vulnerable to demand fluctuations.

3. Financial asset valuation and FX volatility risk: Investment securities rose from ¥76.7B to ¥112.1B (+¥35.4B, +46.1%), increasing to 6.7% of total assets. OCI valuation gains +¥26.6B boosted comprehensive income, but market price declines could generate valuation losses and deteriorate OCI and comprehensive income. The company recorded an impairment on investment securities of ¥1.0B previously, indicating recurrence risk. Translation differences on foreign operations were +¥38.0B (improved from -¥6.1B), aided by yen depreciation; reversal of FX moves could push OCI negative, reduce the Equity Ratio, and create risk of FX losses at the ordinary-income stage. No FX hedge policy was disclosed, so resilience to currency swings is unclear.

Industry Benchmark (Reference — Company Estimate)

Profitability & Returns

All profitability metrics exceed the industry median; Operating and Net margins outperform by +2.4pt and +2.9pt respectively, underscoring the strength of a revenue structure driven by SanAce Company’s high margin of 20.1%.

Growth & Capital Efficiency

Revenue growth at 9.7% substantially exceeds the industry median of 3.7%, accelerated by recovery at Motion/Electronics and yen depreciation, placing the company among the higher-growth peers.

※ Source: Company compilation

Earnings Highlights

1. Achieving Operating margin 10.1% and gross margin improvement +2.2pt indicates product-mix improvement and fixed-cost absorption progress, structurally enhancing core earnings power. SanAce Company’s 20.1% margin is a stable profit pillar, while margin improvements at Motion and Electronics (from 0.9% & 2.3% to 3.3% & 4.9%) contribute to sustained consolidated margin improvement. Achieving next-year’s Operating margin forecast of 12.6% requires further yield improvements at Electronics and Motion and containment of SG&A ratio.

2. Working-capital buildup (inventory +¥57.1B, receivables +¥29.0B) caused OCF to decline -31.4% YoY and Free Cash Flow ¥31.7B to nearly match total returns ¥32.3B. CCC ≈ 204 days (prior 196 days, +8 days) shows turnover slowdown; normalizing inventory turnover and DSO is prerequisite for FCF stability and expanding return capacity. Reconciling next-year OCF growth targets with increased dividends depends on radical improvement in working-capital management.

3. Equity Ratio 76.9% and Debt/EBITDA 0.37x indicate extremely solid finances, with net cash of ¥227.3B and near debt-free status. Short-term liabilities ratio 57.1% is present but liquidity buffers are ample, limiting maturity-mismatch risk. Increased investment securities by +¥35.4B diversify assets but expose the company to market-price and FX volatility (OCI fluctuations), requiring monitoring for valuation losses and FX reversals.

---

This report is an earnings analysis document automatically generated by AI based on XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company from publicly disclosed financial statements. Investment decisions are your own responsibility; please consult a professional advisor as needed.