TAKAOKA TOKO CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

The Company posted higher revenue and profit, driven by growth in its core Power Equipment and Metering businesses; however, the sharp increase in net income was primarily attributable to the one-time gain on the sale of fixed assets. Revenue was ¥252.9B (¥231.0B in the previous year, YoY +9.5%), Operating Income was ¥21.3B (¥14.7B, YoY +44.5%), and Ordinary Income was ¥21.8B (¥15.8B, YoY +38.3%). Consolidated Net Income was ¥60.7B (¥10.6B in the previous year, YoY +473.2%), of which Net Income attributable to owners of the parent was ¥58.5B (¥9.5B in the previous year, YoY +514.6%). This was largely attributable to the recognition of ¥67.4B in extraordinary income, including a ¥54.0B gain on the sale of fixed assets. The Operating Income margin was 8.4%, improving by approximately 2.1pt from 6.4% in the previous year, with both gross margin improvement (26.3%→27.9%) and cost absorption contributing.

Factors Driving Performance Changes

【Revenue】The primary driver of revenue growth was expansion in both core businesses, Power Equipment and Metering. Revenue was ¥252.9B (YoY +9.5%). The segment composition (on a total basis including intersegment transactions, with composition ratios) was as follows: Power Equipment ¥145.8B (53.5% composition ratio, YoY +12.5%), Metering ¥110.5B (40.5%, +20.9%), GX ¥12.4B (4.5%, -47.7%), Other, including real estate leasing, ¥3.5B (1.3%, -6.7%), and Optical Application Inspection Equipment ¥0.5B (0.2%, -28.8%). While the two core businesses drove company-wide revenue growth, GX and Optical Application Inspection Equipment contracted.

【Profit and Loss】Operating Income was ¥21.3B (YoY +44.5%), and the Operating Income margin improved by +2.1pt to 8.4% from 6.4% in the previous year. The gross margin was 27.9% (26.3% in the previous year, +1.6pt), while the SG&A expense ratio was 19.5% (19.9% in the previous year, -0.4pt). Both cost improvements and SG&A absorption contributed to operating leverage. Ordinary Income was ¥21.8B (+38.3%), indicating improvement on an underlying basis. Meanwhile, the recognition of ¥67.4B in extraordinary income, including a ¥54.0B gain on the sale of fixed assets, and ¥0.3B in extraordinary losses raised Profit Before Tax to ¥88.8B. Consolidated Net Income reached ¥60.7B (+473.2%), while the portion attributable to owners of the parent reached ¥58.5B (+514.6%). The divergence between Ordinary Income and Net Income was attributable to this one-time factor; overall, the Company achieved higher revenue and profit.

Segment Analysis

The Power Equipment Business generated revenue of ¥145.8B (+12.5%), Operating Income of ¥24.5B (+24.3%), and a 16.8% profit margin, securing higher revenue and profit as the core business. The Metering Business generated revenue of ¥110.5B (+20.9%), Operating Income of ¥16.3B (+43.7%), and a 14.7% profit margin, recording the highest profit growth rate company-wide. The GX Solutions Business generated revenue of ¥12.4B (-47.7%), an Operating Loss of ¥3.7B (expanding from a loss of ¥3.1B in the previous year), and a -29.7% profit margin, as its investment phase continued and the loss widened. The Optical Application Inspection Equipment Business generated revenue of ¥0.5B (-28.8%) and an Operating Loss of ¥0.9B (essentially flat from a loss of ¥0.9B in the previous year, with a profit margin of -180.8%), with losses continuing despite the business’s small scale. Other businesses, including real estate leasing, generated revenue of ¥3.5B (-6.7%), Operating Income of ¥1.7B (+4.4%), and a 47.9% profit margin, serving as a stable source of earnings. The combined Power Equipment and Metering businesses accounted for the majority of the ¥36.1B in reported segment profit and were central to the improvement in the company-wide margin, while the widening loss in GX remained a dilutive factor.

Key Financial Indicators

【Profitability】The Operating Income margin was 8.4%, improving by +2.1pt from 6.4% in the previous year, with both the 27.9% gross margin (26.3% in the previous year) and the 19.5% SG&A expense ratio (19.9% in the previous year) contributing. The consolidated Net Income margin was high at 24.0%; however, it was significantly boosted by ¥67.4B in extraordinary income, including a ¥54.0B gain on the sale of fixed assets. The Ordinary Income margin of 8.6% is closer to the Company’s underlying profitability. ROE was 8.0%, achieved under a conservative capital structure with limited financial leverage. 【Cash Quality】Work in process inventory of ¥181.9B was equivalent to 71.9% of quarterly revenue, while accounts receivable and notes receivable of ¥185.4B reached 73.3% of revenue, indicating significant working capital tied up in the project-based business. Contract liabilities, or advances received, increased to ¥32.2B (¥23.95B in the previous year, +34.4%), providing partial support for working capital. 【Investment Efficiency】Total asset turnover remained low, with large inventory and accounts receivable balances weighing on asset efficiency. Property, plant and equipment declined to ¥354.4B (¥384.4B in the previous year), indicating progress in asset reduction through the sale of fixed assets. 【Financial Soundness】The Equity Ratio was 64.5% (approximately 61.3% in the previous year, +3.2pt improvement), while the current ratio was approximately 299.7% (current assets of ¥746.0B / current liabilities of ¥248.9B), both at high levels. Interest-bearing debt remained limited at a total of ¥18.7B, consisting of ¥9.7B in short-term debt and ¥9.0B in long-term debt, and was more than covered by cash and deposits of ¥141.6B and current securities of ¥90.0B, resulting in a net cash position.

Cash Flow Analysis

Cash and deposits increased to ¥141.6B (¥135.6B in the previous year), while short-term securities increased to ¥90.0B (¥30.0B in the previous year, +200%), expanding financial flexibility. Property, plant and equipment declined to ¥354.4B (¥384.4B in the previous year), and land declined to ¥179.9B (¥199.4B in the previous year), indicating progress in asset reduction consistent with the recognition of the ¥54.0B gain on the sale of fixed assets. Long-term borrowings decreased to ¥9.0B (¥12.0B in the previous year, -25.0%), indicating a more conservative financial position through the reduction of interest-bearing debt. Meanwhile, treasury stock increased significantly to ¥23.75B (¥4.26B in the previous year), suggesting an enhanced shareholder return policy. Contract liabilities, or advances received, increased to ¥32.2B (¥23.95B in the previous year, +34.4%), with the accumulation of advances associated with order fulfillment partially supplementing working capital. Since the high levels of work in process inventory and accounts receivable create a structural time lag before conversion into cash, future inventory and accounts receivable turnover will determine cash-generation capacity.

Quality of Earnings

The increase in consolidated Net Income to ¥60.7B was primarily driven by extraordinary, one-time factors, namely ¥67.4B in extraordinary income, including a ¥54.0B gain on the sale of fixed assets. Ordinary Income of ¥21.8B (+38.3%) more closely reflects the underlying growth of the business. Non-operating income was ¥0.9B, including ¥0.2B in dividend income, while non-operating expenses were ¥0.5B, including ¥0.1B in interest expense and ¥0.1B in foreign exchange losses; both were small, and factors affecting income at the Ordinary Income level were limited. Comprehensive income was ¥61.1B, of which ¥58.9B was attributable to owners of the parent, nearly equal to Net Income attributable to owners of the parent of ¥58.5B. Other comprehensive income items, including +¥0.7B in valuation difference on securities and -¥0.7B in adjustments related to retirement benefits, largely offset one another. Accordingly, the divergence between comprehensive income and Net Income was small; however, Net Income remained highly dependent on the gain on the sale of fixed assets, and it should be noted that earnings may normalize from the next fiscal year onward due to the reversal of this one-time factor.

Earnings Forecast and Guidance

Progress toward the Full-Year forecast was 22.0% for Revenue (¥252.9B / ¥1150.0B), 21.3% for Operating Income (¥21.3B / ¥100.0B), and 21.6% for Ordinary Income (¥21.8B / ¥101.0B), slightly below the simple quarterly progress benchmark of 25%. By contrast, EPS progress was significantly ahead at 58.8% (¥366.21 / forecast of ¥623.00), due to the temporary boost to Net Income from the gain on the sale of fixed assets. The Full-Year Ordinary Income forecast is expected to be essentially flat at +0.2% compared with the previous year, representing a conservative plan that incorporates a slowdown in profit growth toward the second half of the year when compared with Q1 Ordinary Income growth of YoY +38.3%. The earnings forecast and dividend forecast remain unchanged.

Shareholder Returns

The Full-Year dividend forecast is ¥67, implying a Payout Ratio of approximately 10.8% based on forecast EPS of ¥623, a conservative level. The dividend forecast remains unchanged. Treasury stock increased to ¥23.75B (¥4.26B in the previous year), suggesting that share repurchases were conducted. While the Payout Ratio based solely on dividends is low at 10.8%, given the Company’s financial foundation—with an Equity Ratio of 64.5% and cash and deposits of ¥141.6B plus securities of ¥90.0B against interest-bearing debt of ¥18.7B—it appears to have ample capacity to secure funds for dividends.

Risk Factors

1. Persistently high working capital: Work in process inventory of ¥181.9B was equivalent to 71.9% of quarterly revenue, while accounts receivable and notes receivable of ¥185.4B were equivalent to 73.3% of revenue. The time lag before conversion into cash, characteristic of project-based businesses, remains a structural risk.

2. Widening losses in the GX Business: Against revenue of ¥12.4B (YoY -47.7%), the Operating Loss widened to ¥3.7B (from ¥3.1B in the previous year), with a profit margin of -29.7%. The continuation of the investment phase is diluting the company-wide margin.

3. Dependence on extraordinary income: Of the ¥58.5B in Net Income attributable to owners of the parent, ¥54.0B was attributable to the gain on the sale of fixed assets. Earnings may fluctuate from the next fiscal year onward due to the reversal of this one-time factor.

Industry Benchmark (Reference; Compiled by the Company)

Profitability and Returns

The Operating Income margin was slightly below the industry median, while the Net Income margin was significantly above the industry median due to the impact of extraordinary income.

Growth and Capital Efficiency

The Revenue growth rate exceeded the industry median, securing a relatively high rate of revenue growth within the industry.

※Source: Compiled by the Company

Key Points from the Financial Results

1. Core profitability is improving on a trend basis. The Operating Income margin rose to 8.4% (6.4% in the previous year), with simultaneous improvement in the gross margin (26.3%→27.9%) and decline in the SG&A expense ratio (19.9%→19.5%). Profit growth in the core Power Equipment and Metering businesses is driving the Company as a whole.

2. The sharp increase in Net Income (+473.2%) was primarily attributable to ¥67.4B in extraordinary income, including a ¥54.0B gain on the sale of fixed assets. The growth in Ordinary Income (+38.3%) is closer to the actual growth rate of the business and is therefore an important observation point when assessing the quality of the financial results.

3. High levels of working capital, centered on work in process inventory and accounts receivable, and widening losses in the GX Business are structural issues that remain beneath the improvement in profit margins. The pace of order fulfillment and trends in cost management will require monitoring going forward.

Theoretical Stock Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly available data using the Residual Income Model (Ohlson-type model with an explicit 5-year fade). It is not a forecast of the market price or a recommendation to take any specific investment action.

Sensitivity: ¥5,336–¥5,663 at ±1% for the cost of equity, and ¥5,479–¥5,522 at ±0.1 for ω.

Notes:

• Since progress of Net Income toward the Full-Year forecast (59%) exceeds the standard benchmark (25%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies ahead of plan tend to exceed forecasts; the adjustment may be excessive for businesses with strong seasonality).
• Net assets as of the quarter-end have been used (there is a timing gap relative to the Full-Year forecast).
• Since net assets include non-controlling interests, the theoretical value may be calculated at a somewhat high level.

（Calculation model: Residual Income Model / Interest rate reference month: 2026-06 / This value does not predict or guarantee the future stock price）

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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. The industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own responsibility, after consulting with a professional as necessary.

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