| 指標 | 当期 | 前年同期 | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1127.3B | ¥1319.4B | -14.6% |
| Operating Income / Operating Profit | ¥12.1B | ¥21.5B | -43.7% |
| Ordinary Income | ¥11.1B | ¥16.5B | -32.7% |
| Net Income / Net Profit | ¥3.0B | ¥-25.0B | +111.8% |
| ROE | 1.7% | -16.3% | - |
In the cumulative Q2 of FY2026 (fiscal year ending March 2026), the Company reported Revenue ¥1,127.3B (YoY -¥192.1B -14.6%), Operating Income ¥12.1B (YoY -¥9.4B -43.7%), Ordinary Income ¥11.1B (YoY -¥5.4B -32.7%), and Net Income attributable to owners of the parent ¥3.0B (YoY +¥28.0B +111.8%), marking a turnaround to profit at the bottom line despite declines in sales and operating profit. The P&L structure is Revenue → Cost of Sales ¥1,062.0B → Gross Profit ¥65.2B (Gross Margin 5.8%, from 5.7% prior year +0.1pt) → SG&A ¥53.1B (SG&A ratio 4.7%) → Operating Income ¥12.1B (Operating Margin 1.1%, from 1.6% prior year -0.5pt), indicating a notable deterioration in operating profitability. At the ordinary level, interest expense ¥4.4B and foreign exchange losses ¥0.2B weighed down results, and with Profit Before Tax ¥11.2B, an effective tax rate of 73.4% imposed a heavy tax burden that compressed Net Income. Comprehensive income was ¥21.6B, with foreign currency translation adjustments ¥18.6B causing divergence from Net Income. Total assets were ¥758.1B (YoY +¥21.8B), net assets ¥171.4B (YoY +¥18.2B), improving the Equity Ratio to 22.6% (from 20.8%), but liquidity remains thin with current liabilities ¥483.4B centered on short-term borrowings ¥227.7B versus cash ¥106.0B, and a high-leverage structure persists.
[Revenue] Revenue was ¥1,127.3B, a large decline YoY of -¥192.1B (-14.6%). The Company primarily conducts EMS (Electronics Manufacturing Services) business and omits segment disclosures due to a single-business structure. The main causes of the revenue decline are assessed as inventory adjustments at key customers, a slowdown in the demand cycle, and reduced orders for some product lines. Gross profit was ¥65.2B, Gross Margin 5.8% (from 5.7% prior year +0.1pt), a marginal increase, indicating limited cost reduction impact relative to the revenue decline. Of total inventories ¥174.2B (raw materials ¥142.5B, finished goods ¥25.9B, work-in-progress ¥5.8B), raw materials account for about 82%, making optimization of raw materials and yield improvement critical in response to order variability.
[P&L] Operating Income was ¥12.1B (YoY -¥9.4B -43.7%). SG&A was ¥53.1B (YoY -¥3.1B), slightly lower, but fixed-cost rigidity relative to the revenue decline (-14.6%) worsened operating leverage. Operating Margin fell to 1.1% (from 1.6% prior year -0.5pt), further highlighting the low-margin nature of the EMS industry. Ordinary Income was ¥11.1B (YoY -¥5.4B -32.7%), with non-operating income ¥15.4B nearly offset by non-operating expenses ¥16.4B. Breakdown: interest income ¥0.8B, dividend income ¥0.0B versus interest expense ¥4.4B, foreign exchange loss ¥0.2B, and other non-operating expenses ¥1.2B. Extraordinary items were minor: extraordinary gains ¥0.7B (gain on sale of fixed assets) and extraordinary losses ¥0.6B (loss on disposal of fixed assets ¥0.3B, etc.). With Profit Before Tax ¥11.2B and corporate taxes ¥8.2B (effective tax rate 73.4%), Net Income was limited to ¥3.0B (turned positive from prior year loss ¥-25.0B, +111.8%). The high tax rate is thought to be influenced by restrictions on recognizing deferred tax assets and timing of reversal of temporary differences. In conclusion, although the Company swung from a large loss in the prior year to profit, deterioration in operating profitability and high tax burden have constrained profit recovery.
[Profitability] Operating Margin 1.1%, Net Margin 0.3%, ROE 1.7% remain low. Gross Margin 5.8% is slightly up from 5.7% prior year, but the difference versus SG&A ratio 4.7% is limited, leaving little operating leverage. ROE is decomposed as Net Margin 0.3% × Asset Turnover 1.49x × Financial Leverage 4.42x, indicating low margins are being supplemented by turnover and leverage, but capital efficiency remains low.
[Cash Quality] Operating Cash Flow (OCF) ¥25.9B is 8.6x Net Income ¥3.0B, a high multiple driven mainly by inventory reduction ¥16.8B and last period tax payments ¥35.9B, so the working capital release effect is transitory. OCF/EBITDA (Operating CF ÷ [Operating Income + Depreciation]) = ¥25.9B ÷ (¥12.1B + ¥35.4B) = 0.54x, low and indicating limited cash conversion of EBITDA.
[Investment Efficiency] Capital expenditures ¥35.3B, depreciation ¥35.4B — investment and depreciation are nearly balanced. Intangible assets increased to ¥13.7B (from ¥8.9B prior year +53.4%), with software ¥7.5B and construction-in-progress: software ¥6.1B, indicating accumulated development investment.
[Financial Soundness] Equity Ratio improved to 22.6% (from 20.8% prior year +1.8pt) but remains low. Current Ratio 95.2%; cash and deposits ¥106.0B versus short-term borrowings ¥227.7B gives cash/short-term debt ratio 0.47x and short-term debt ratio 72.1%, showing a maturity mismatch. D/E ratio = (short-term borrowings ¥227.7B + long-term borrowings ¥88.1B) ÷ Net Assets ¥171.4B = 184.3%, slightly down YoY but still high. Debt/EBITDA (interest-bearing debt ÷ [Operating Income + Depreciation]) = ¥315.8B ÷ ¥47.5B = 6.6x. Interest coverage (Operating Income ÷ Interest Expense) = ¥12.1B ÷ ¥4.4B = 2.8x, indicating vulnerability to rising interest rates or business deterioration.
OCF was ¥25.9B (from ¥103.5B prior year -75.0%), a significant decline. Breakdown: subtotal of operating CF (Profit Before Tax + Depreciation etc.) ¥65.3B; working capital effects were inventory decrease +¥16.8B, accounts receivable increase -¥7.6B, accounts payable decrease -¥7.6B, resulting in small working capital outflow, and corporate tax payments -¥35.9B made the net figure ¥25.9B. Prior year saw large working capital release (inventory decrease +¥47.0B, accounts receivable increase +¥12.0B), so current inventory effect (+¥16.8B) is relatively small and increased tax payments (from -¥7.9B prior year to -¥35.9B) were a driver of the decline. Investing CF was -¥43.3B: capital expenditures -¥35.3B, acquisitions of intangible fixed assets -¥2.6B, others -¥4.5B. Financing CF was +¥5.8B: net increase in short-term borrowings +¥33.4B and long-term borrowings procured +¥10.0B versus long-term borrowings repayment -¥19.8B, lease liabilities repayment -¥4.5B, dividend payments -¥3.3B, and treasury stock acquisition -¥10.5B were outflows. Free Cash Flow was negative ¥17.4B (OCF ¥25.9B + Investing CF -¥43.3B), indicating investments and returns are not covered by internal funds. Cash and deposits declined from ¥115.6B at the beginning of the period to ¥106.0B at period-end (-¥9.6B, including FX effect +¥2.1B). Cash conversion efficiency (OCF/EBITDA) 0.54x is below industry standard; if inventory cycle improvement stalls, liquidity could tighten again. As orders and utilization recover, inventory release effects will fade and OCF is expected to revert to normal levels; extending borrowing maturities and improving working capital efficiency are keys to stabilizing liquidity.
Ordinary Income ¥11.1B versus Net Income ¥3.0B shows tax expense ¥8.2B (effective tax rate 73.4%) as the main source of divergence. One-off items are minor: extraordinary gains ¥0.7B and extraordinary losses ¥0.6B, net +¥0.1B. Comprehensive income ¥21.6B substantially exceeds Net Income ¥3.0B, mainly due to foreign currency translation adjustments ¥18.6B. This FX difference arises from translation of assets and liabilities of overseas subsidiaries and differs in nature from FX losses recognized in P&L (foreign exchange loss ¥0.2B), representing a temporary balance-sheet valuation difference. Non-operating income ¥15.4B includes interest income ¥0.8B and other non-operating income ¥2.1B, but non-operating expenses ¥16.4B including interest expense ¥4.4B and other non-operating expenses ¥1.2B offset this, limiting uplift at the ordinary level. The high tax rate is likely due to constraints on recognizing deferred tax assets and timing of tax effect reversals; "core profit" (excluding extraordinary items from Operating Income ¥12.1B and adjusted at standard tax rate) is estimated at approximately ¥7–8B. Although OCF is 8.6x Net Income, this is mainly driven by working capital release (inventory decrease +¥16.8B), and sustainable cash generation is limited as indicated by OCF/EBITDA 0.54x. Overall, quality of earnings depends on low operating margins, high tax burden, and temporary working capital effects; improving recurring profit generation and cash conversion are key challenges.
For FY2027 (fiscal year ending March 2027) the Company forecasts Revenue ¥1,150.0B (YoY +2.0%), Operating Income ¥8.0B (YoY -33.9%), Ordinary Income ¥6.0B (YoY -45.8%), and Net Loss -¥4.0B (EPS forecast -14.21 yen), projecting revenue growth but substantial profit decline. The cumulative Q2 results represent 98.0% of full-year Revenue plan (Revenue ¥1,127.3B), 151.3% of Operating Income plan (¥12.1B), and 185.0% of Ordinary Income plan (¥11.1B), indicating the first half substantially outperformed the plan. However, the Company assumes further deterioration of margins in the second half due to prolonged demand adjustments by key customers, delays in price revisions, and ongoing interest burden. The projected Net Loss -¥4.0B likely incorporates continued high tax burden and potential one-off expenses, reflecting a conservative stance. Given the large gap between H1 results and the full-year plan, future order trends and gross margin trajectory will be critical to achieving the plan.
Annual dividend is 5 yen at the end of Q2 and 5 yen at year-end, total 10 yen/share, with total dividends approximately ¥2.8B. Dividend payout ratio relative to Net Income ¥3.0B is about 93.3%, high, but the Company maintained an annual dividend of 5 yen even when Net Loss was ¥-25.0B in the prior year, indicating a stable dividend policy. Treasury share repurchases amounted to ¥10.5B; combined with dividends ¥2.8B, total shareholder returns were approximately ¥13.3B. Total Return Ratio relative to Net Income ¥3.0B is approximately 443%, extremely high. Free Cash Flow is negative ¥17.4B, so dividends and investments were not funded from internal cash but supplemented by net increase in short-term borrowings +¥33.4B and long-term borrowings procured +¥10.0B. High returns under liquidity constraints (cash and deposits ¥106.0B, current ratio 95.2%, cash/short-term debt 0.47x) raise sustainability concerns. Considering the next fiscal year plan forecasts a Net Loss -¥4.0B, dividend policy may need to be reviewed to prioritize cash generation and balance sheet repair.
Liquidity Risk: Current Ratio 95.2%; cash and deposits ¥106.0B versus short-term borrowings ¥227.7B (cash/short-term debt 0.47x), short-term debt ratio 72.1% — a clear maturity mismatch. Under Free Cash Flow deficit -¥17.4B, deterioration in refinancing terms could rapidly tighten liquidity, constraining investment capacity and shareholder returns. Extending part of short-term borrowings to long-term and stabilizing OCF (inventory efficiency improvement, smoothing tax burden) are urgent.
High Leverage Risk: D/E 184.3%, Debt/EBITDA 6.6x, Interest Coverage 2.8x — a continued high-leverage profile. In a rising interest rate environment, interest expense would rise and low margins (Operating Margin 1.1%) could quickly depress Ordinary Income. Although interest expense decreased from ¥6.3B prior year to ¥4.4B this period, short-term borrowings rose to ¥227.7B (from ¥184.9B prior year), leaving vulnerability to interest rate movements.
Earnings Structure Risk: Gross Margin 5.8%, Operating Margin 1.1% — low margins subject to EMS industry price competition and customer concentration risk. Operating leverage is high: Revenue -14.6% vs Operating Income -43.7%; demand swings directly impact profits. High raw material ratio 82% of inventories and lower utilization push up cost ratios; delayed price pass-through and fixed-cost rigidity impede margin improvement. Without order/mix improvement and yield gains, structurally low profitability will persist.
Profitability & Returns
| 指標 | 自社 | 中央値 (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 1.1% | 7.8% (4.6%–12.3%) | -6.7pt |
| Net Margin | 0.3% | 5.2% (2.3%–8.2%) | -4.9pt |
Profitability is well below the manufacturing median, reflecting EMS-specific low margins and the impact of lower operating utilization.
Growth & Capital Efficiency
| 指標 | 自社 | 中央値 (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -14.6% | 3.7% (-0.4%–9.3%) | -18.3pt |
Growth is far below the industry median, affected by inventory adjustments by key customers and a slowdown in the demand cycle.
※Source: Company compilation
Operating Margin 1.1% and ROE 1.7% indicate continued low profitability; subtracting SG&A 4.7% from Gross Margin 5.8% leaves only 1.1% operating buffer. With Revenue -14.6% and Operating Income -43.7%, operating leverage is high; if demand recovery stalls or price revisions lag, deterioration to the next fiscal plan Operating Income ¥8.0B (Operating Margin 0.7%) is plausible. Inventory optimization, fixed-cost reduction, and mix shift to higher value-added products are keys to lifting margins.
Liquidity is fragile: Current Ratio 95.2%, cash/short-term debt 0.47x, short-term debt ratio 72.1%; Free Cash Flow deficit -¥17.4B makes the Total Return Ratio 443% unsustainable. Debt/EBITDA 6.6x and Interest Coverage 2.8x reflect high leverage sensitive to rate hikes and business deterioration. Extending part of short-term borrowings and reducing borrowing dependence are urgent. With the next-year plan forecasting Net Loss -¥4.0B, the feasibility of maintaining 10 yen dividends and continuing buybacks is a central capital policy issue.
Intangible assets increased to ¥13.7B (YoY +53.4%), with software ¥7.5B and software CIP ¥6.1B, indicating accumulated development investment. Total investment ¥37.9B (CapEx ¥35.3B plus intangibles) exceeds depreciation ¥35.4B, showing investment toward digitalization/automation though short-term earnings contribution is limited. Progress on investment returns and timing of Gross Margin/ROIC improvements will be triggers for re-rating in the medium term.
This report is an automated earnings analysis document generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your sole responsibility; please consult professionals as necessary before making any investment decisions.