| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥2350.8B | ¥2389.3B | -1.6% |
| Operating Income | ¥418.4B | ¥513.2B | -18.5% |
| Ordinary Income | ¥407.4B | ¥507.9B | -19.8% |
| Net Income | ¥301.0B | ¥360.0B | -16.4% |
| ROE | 13.7% | 18.4% | - |
For the fiscal year ended March 2026, KOKUSAI ELECTRIC reported Revenue of ¥2350.8B (YoY -¥38.5B, -1.6%), Operating Income of ¥418.4B (YoY -¥94.8B, -18.5%), Ordinary Income of ¥282.1B (YoY -¥137.6B, -32.8%), and Net Income of ¥301.0B (YoY -¥59.0B, -16.4%), reflecting lower sales and profits. By region, shipments to China contracted to ¥905.97B (YoY -¥21.3B, -2.3%) while shipments to Korea expanded sharply to ¥575.7B (YoY +¥197.6B, +52.0%). Gross margin deteriorated to 41.2% (prior 42.6%, -1.4ppt), SG&A ratio worsened to 23.4% (prior 21.1%, +2.3ppt), and Operating Margin fell to 17.8% (prior 21.5%, -3.7ppt). Contract liabilities increased materially to ¥348.4B (prior ¥224.6B, +55.2%), indicating a large build-up of prepayments and serving as a positive leading indicator for next fiscal year revenue. Operating Cash Flow (OCF) was ¥488.0B (YoY +26.8%), 1.62x Net Income — a high level; Free Cash Flow (FCF) was ¥318.5B and covered dividends of ¥86.2B plus share repurchases of ¥185.2B (total ¥271.4B) by 1.17x. Equity Ratio stood at 61.0%; interest-bearing debt was ¥468.2B versus cash of ¥565.4B, maintaining a near-net-cash healthy balance sheet. However, inventories remained high at ¥888.9B (24.7% of total assets), making working capital efficiency a key challenge.
[Revenue] Revenue totaled ¥2350.8B, a slight decline of -1.6% YoY. By region, shipments to China declined sharply to ¥905.97B (from ¥1,119.01B, -19.0%), while Korea grew to ¥575.7B (from ¥379.66B, +51.6%) and Japan to ¥227.96B (from ¥198.59B, +14.8%), partially offsetting the China decline. Taiwan was ¥431.49B (from ¥420.02B, +2.7%), roughly flat, and the U.S. fell to ¥78.07B (from ¥151.35B, -48.4%). Regional mix shifts affected the sales composition; the China slowdown changed the equipment category and price mix, which was the main cause of top-line stagnation. Contract liabilities rose to ¥348.4B (from ¥224.6B, +55.2%), indicating firm orders but timing mismatches in delivery/acceptance delayed revenue recognition.
[Profitability] Gross margin fell to 41.2% (from 42.6%, -1.4ppt), with Cost of Sales ratio worsening to 58.8% (prior 57.4%). SG&A expenses increased to ¥551.1B (from ¥505.2B, +9.1%) despite lower sales, raising SG&A ratio to 23.4% (from 21.1%, +2.3ppt). As a result, Operating Income declined to ¥418.4B (from ¥513.2B, -18.5%) and Operating Margin deteriorated to 17.8% (from 21.5%, -3.7ppt). Drivers of the gross margin decline included changes in regional and product mix (China slowdown and Korea growth) affecting equipment pricing and composition, and higher manufacturing costs. The SG&A ratio increase reflects higher fixed costs in personnel, R&D, and selling expenses, which reversed operating leverage under declining revenue. Non-operating items were limited, with financial income of ¥3.5B and financial expenses of ¥14.5B, having a minimal net impact. Ordinary Income was ¥282.1B (from ¥419.7B, -32.8%), reflecting the decline in operating income. Income taxes totaled ¥106.4B (effective tax rate 26.1%), and Net Income was ¥301.0B (from ¥360.0B, -16.4%). Comprehensive Income was ¥316.5B (from ¥340.8B), supported by ¥19.5B of foreign currency translation adjustments exceeding Net Income. In summary, revenue and profit declined, driven by cyclical headwinds and cost inflation; rising inventories (¥888.9B, from ¥832.0B, +6.8%) exerted pressure on both shipment timing and margins.
The Group operates as a single segment—semiconductor manufacturing equipment—so no segmental operating profit disclosure is provided.
[Profitability] ROE was 14.5% (from 18.8%, -4.3ppt). DuPont decomposition shows Net Profit Margin at 12.8% (from 15.1%, -2.3ppt), mainly driven by Operating Margin deterioration; Total Asset Turnover was 0.65x (from 0.70x), and Financial Leverage was 1.64x (from 1.74x). Operating Margin of 17.8% declined from 21.5% (-3.7ppt), reflecting gross margin -1.4ppt and SG&A ratio +2.3ppt.
[Cash Quality] OCF was ¥488.0B, 1.62x Net Income, with an accrual ratio of -6.2% (= (Net Income ¥301.0B - OCF ¥488.0B) / Total Assets ¥3,596.6B), indicating cash-driven high-quality earnings.
[Investment Efficiency] Total Asset Turnover decreased to 0.65x (from 0.70x). Inventory turnover days were high at 235 days (Inventory ¥888.9B / Daily Sales ¥10.0B × 365), indicating notable working capital tie-up. Cash Conversion Cycle (CCC) extended to about 227 days (DIO 235 days + DSO 59 days - DPO 67 days).
[Financial Soundness] Equity Ratio was 61.0% (from 57.4%, +3.6ppt). Debt/Equity ratio was 21.4% (Interest-bearing debt ¥468.2B / Net Assets ¥2,192.7B), conservative. Net interest-bearing debt was -¥97.2B (Interest-bearing debt ¥468.2B - Cash ¥565.4B), near-net-cash. Debt/EBITDA was approximately 0.84x (Interest-bearing debt ¥468.2B / EBITDA ≈ ¥561.2B), indicating low leverage. Current Ratio was 205% (Current Assets ¥1,858.4B / Current Liabilities ¥907.3B) and Quick Ratio 107%, indicating adequate short-term liquidity.
OCF was ¥488.0B (from ¥384.8B, +26.8%), 1.62x Net Income — indicating high cash quality. Subtotal cash inflow was ¥681.1B, with depreciation of ¥142.8B added back as a non-cash expense, and income taxes of ¥106.4B accounted for. Working capital drivers: inventory increase was a cash outflow of -¥45.1B, trade receivables decrease provided +¥57.8B, and trade payables increase provided +¥16.5B, partially offset; other working capital items contributed +¥90.8B. Corporate taxes paid were -¥189.1B, and interest paid was -¥6.8B (minor). Investing Cash Flow was -¥169.5B, driven by capital expenditures of -¥137.4B and intangible asset investments of -¥32.8B. Financing Cash Flow was -¥215.1B, including long-term debt repayments of -¥120.0B, dividends paid of -¥86.2B, lease repayments of -¥8.2B, and others -¥0.8B. There were no share repurchases during the period (prior year ¥-185.2B), so return capacity remains. FX impact was +¥14.6B, resulting in a net cash increase of +¥117.9B and ending cash of ¥565.4B. FCF was ¥318.5B (OCF ¥488.0B + Investing CF -¥169.5B), covering dividends of ¥86.2B by 3.7x; FCF also covered the hypothetical total return (dividends + prior-year share buybacks) of ¥271.4B by 1.17x, indicating high sustainability of capital returns. Inventory buildup and high CCC limited further OCF upside, but significant cash generation potential exists if working capital efficiency improves.
Earnings are primarily operating in nature; non-operating items are small (financial income ¥3.5B, financial expenses ¥14.5B, other income ¥5.1B, other expenses ¥3.7B), so one-off contributions are limited. No special gains/losses were disclosed; the difference between Ordinary Income and Net Income is explained by income taxes of ¥106.4B (effective tax rate 26.1%). The accrual ratio of -6.2% indicates cash-led high-quality earnings. Comprehensive Income of ¥316.5B (Net Income ¥301.0B plus ¥19.5B FX translation adjustment) suggests limited structural mark-to-market volatility. OCF exceeding Net Income by 1.62x and maintaining ¥488.0B after working capital movements from subtotal OCF ¥681.1B demonstrate strong cash backing for reported profits. Inventory build-up and higher contract liabilities introduce timing-related revenue recognition volatility, but historically these have appeared temporary.
The FY2027 guidance is Revenue ¥2800.0B (vs. current +19.1%), Operating Income ¥545.0B (+30.3%), Net Income ¥388.0B (+28.9%), EPS ¥166.08, and Dividend ¥23.00. The guidance assumes Operating Margin recovery to 19.5% (from 17.8%, +1.7ppt), relying on gross margin improvement and SG&A efficiency. The build-up of Contract Liabilities ¥348.4B (about 14.8% of sales) supports next fiscal year revenue; if backlog shipments and acceptances progress, revenue growth is achievable. Under the assumed progress profile, if shipments are accelerated to the first half, results could exceed standard pacing (Q1=25%, Q2=50%); conversely, delivery/acceptance delays are a downside risk. The targeted Operating Income increase of +¥126.6B versus an anticipated Revenue increase of +¥449.2B presumes gross margin improvement and SG&A control; achievement probability rises with inventory normalization, improved regional/product mix, and favorable FX. However, shipment timing mismatches or customer capex changes remain short-term downside risks.
This period’s dividend was an interim ¥18 and year-end ¥19, for an annual dividend of ¥37, representing a Payout Ratio of 28.7% (Dividend ¥37 / EPS ¥129.00) — within a sustainable range. This is a substantial increase of ¥19 on an annual basis versus the prior-year annual dividend of ¥18. Total dividends amounted to ¥86.3B, covered comfortably at 17.7% of OCF and 27.1% of FCF. The company executed ¥185.2B of share buybacks in the prior year, but none in the current period; Treasury Stock decreased to ¥160.1B (from ¥180.0B), influenced by disposition to the employee shareholding plan ¥3.1B and stock-based compensation ¥16.8B. The implied total return ratio including dividend and prior-year buybacks is about 90% (Total Return ¥271.4B / Net Income ¥301.0B) — high — yet covered 1.17x by FCF ¥318.5B. With cash of ¥565.4B and near-net-cash balance sheet, return capacity is ample. FY2027 dividend guidance is ¥23 (a reduction from this period’s ¥37), which, after adjusting for prior-period special distribution elements, can be interpreted as a resumption of an underlying dividend growth trend. The balance between payout and total return leaves room to increase distributions or resume buybacks if inventory compression leads to OCF upside.
Semiconductor capex cycle downside risk: Operating Margin declined to 17.8% (from 21.5%, -3.7ppt). In a demand slowdown, price erosion and fixed cost burdens can compress profitability. While Contract Liabilities ¥348.4B indicate firm orders, sudden customer capex changes could lead to delivery delays or cancellations, prolonging inventory turnaround (Inventory ¥888.9B) and potentially triggering impairment losses. Regionally, China shipments contracted -19.0%, and ongoing geopolitical/export control risks persist.
Working capital efficiency and cash generation timing risk: Inventory ¥888.9B (24.7% of total assets), Inventory Days 235, and CCC 227 days show significant working capital tie-up. Although OCF ¥488.0B is strong (1.62x Net Income), inventory increases (-¥45.1B cash outflow) constrain cash generation; continued shipment timing mismatches or acceptance delays could slow OCF. If revenue recognition of Contract Liabilities ¥348.4B is delayed, liquidity pressure could rise and the need for working capital financing could increase.
Regional and product mix volatility and margin pressure: Gross Margin 41.2% (from 42.6%, -1.4ppt) and SG&A Ratio 23.4% (from 21.1%, +2.3ppt) reflect margin deterioration. Korea growth (+51.6%) and China decline (-19.0%) altered mix, impacting equipment pricing and category composition; a lower high-end mix or intensified price competition could further compress gross margin. SG&A rose +9.1% despite lower sales; unless fixed cost growth is curtailed, negative operating leverage may persist and jeopardize the guidance margin recovery.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| ROE | 14.5% | 6.3% (3.2%–9.9%) | +8.2ppt |
| Operating Margin | 17.8% | 7.8% (4.6%–12.3%) | +10.0ppt |
| Net Profit Margin | 12.8% | 5.2% (2.3%–8.2%) | +7.6ppt |
Profitability metrics materially exceed industry medians across ROE, Operating Margin, and Net Profit Margin, reflecting the high-value-added business model of semiconductor equipment.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -1.6% | 3.7% (-0.4%–9.3%) | -5.3ppt |
Revenue growth lags the industry median, with short-term growth constrained by semiconductor cycle adjustments and regional mix shifts.
※ Source: Company aggregation
The large increase in Contract Liabilities to ¥348.4B (YoY +55.2%) signals robust orders and is a constructive leading indicator for next-year revenue. Given high inventories of ¥888.9B, shipment and acceptance progress will be key to revenue recognition and margin recovery; monitoring quarterly trends in DIO, CCC, and contract liabilities is important. Continued mix shift—Korea +51.6% vs China -19.0%—could materially affect equipment category and price mix and thus margins.
Operating Margin deterioration to 17.8% (from 21.5%, -3.7ppt) was driven by gross margin -1.4ppt and SG&A ratio +2.3ppt, reflecting fixed-cost increases and reverse operating leverage. FY2027 guidance assumes recovery to 19.5%, so execution on SG&A control (personnel and R&D efficiency) and gross margin improvement (mix improvement, higher utilization) will determine the likelihood of achieving guidance. Inventory normalization would further enhance OCF generation and increase flexibility in capital allocation.
Financial soundness is solid: Equity Ratio 61.0%, near-net-cash (Interest-bearing debt ¥468.2B - Cash ¥565.4B), and Debt/EBITDA ~0.84x — providing defensive strength amid cyclical headwinds. OCF ¥488.0B generated FCF ¥318.5B, which covers total returns (dividend + prior-year buybacks) of ¥271.4B by 1.17x. Payout Ratio 28.7% indicates capacity for further returns if inventory compression yields OCF upside. Improving working capital efficiency (CCC 227 days) is the focus for medium-term capital efficiency and OCF enhancement.
This report was automatically generated by AI analyzing 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 public financial statements. Investment decisions are your responsibility; consult a professional advisor as needed.