| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥2377.3B | ¥2263.8B | +5.0% |
| Operating Income / Operating Profit | ¥187.8B | ¥161.7B | +16.1% |
| Ordinary Income | ¥201.0B | ¥171.8B | +17.0% |
| Net Income / Net Profit | ¥87.1B | ¥63.0B | +38.2% |
| ROE | 5.1% | 4.1% | - |
For the fiscal year ended March 2026, DAIHEN achieved revenue of ¥2377.3B (YoY +¥113.5B +5.0%), Operating Income of ¥187.8B (YoY +¥26.0B +16.1%), Ordinary Income of ¥201.0B (YoY +¥29.2B +17.0%), and Net Income attributable to owners of the parent of ¥87.1B (YoY +¥24.1B +38.2%), recording both top-line and bottom-line growth. Operating margin improved by +0.8pt to 7.9% (prior year 7.1%), supported by an increase in gross margin to 28.8% (prior year 28.2%). At the Ordinary Income level, non-operating income such as foreign exchange gains of ¥9.7B and dividend income of ¥7.7B boosted results, and at the Net Income level, special gains of ¥39.4B including gains on sale of investment securities of ¥33.2B contributed to a large YoY increase of +38.2%. However, Operating Cash Flow declined sharply to ¥49.4B (prior year ¥240.1B, -79.4%), reflecting a significant increase in working capital that weakened cash conversion of profits.
[Revenue] Revenue of ¥2377.3B (YoY +5.0%) was driven by progress in high-margin projects in the Energy Management Business and steady demand in the Material Processing Business. By segment, Energy Management recorded ¥1282.2B (+6.1%), representing 53.9% of revenue and the largest share; Material Processing posted ¥764.3B (+5.2%) for 32.2%; and Factory Automation reported ¥329.3B (+0.5%) for 13.9%. By region, Japan was central with ¥1887.5B (prior year ¥1797.9B), while North America, Asia, and other regions also increased. Major customers supporting revenue included Tokyo Electron Miyagi with ¥383.3B and Kansai Electric Power Group with ¥234.4B in orders.
[Profitability] Cost of sales was ¥1692.2B (prior year ¥1625.2B), rising in line with revenue, but the cost of sales ratio improved by -0.6pt to 71.2% (prior year 71.8%), expanding gross margin to 28.8% (prior year 28.2%). Selling, General and Administrative Expenses were ¥497.4B (prior year ¥476.9B), up +4.3%, but expense control outpaced the revenue increase of +5.0%, securing Operating Income of ¥187.8B (+16.1%) and improving Operating Margin to 7.9% (prior year 7.1%, +0.8pt). Non-operating items included foreign exchange gains of ¥9.7B and dividend income of ¥7.7B, producing non-operating income of ¥35.8B, offset by non-operating expenses of ¥22.5B (including interest expense of ¥11.1B), resulting in Ordinary Income of ¥201.0B (+17.0%). Extraordinary items were net +¥16.4B (Extraordinary gains ¥39.4B - Extraordinary losses ¥22.9B), where gains on sale of investment securities of ¥33.2B contributed. Pre-tax income of ¥217.4B less income taxes of ¥61.0B (effective tax rate 28.0%) produced Net Income attributable to owners of the parent of ¥87.1B (+38.2%). Overall, revenue and profits increased and margin metrics outperformed the prior year at each stage.
The Energy Management Business drove company profitability with revenue of ¥1282.2B (YoY +6.1%), Operating Income of ¥141.7B (+23.4%), and an Operating Margin of 11.0%. Expansion in utility and renewable energy-related projects and an improved high-margin mix contributed to gains; this business accounts for 75.5% of consolidated Operating Income and is the core segment. The Material Processing Business posted revenue of ¥764.3B (+5.2%), Operating Income of ¥74.2B (+6.3%), and an Operating Margin of 9.7%, maintaining near double-digit profitability supported by steady demand for semiconductor manufacturing equipment. Conversely, the Factory Automation Business remained flat at ¥329.3B (+0.5%) in revenue, with Operating Income of ¥19.7B (-13.4%) and an Operating Margin of 6.0%, reflecting lower profitability. This segment bears relatively higher fixed costs, and modest revenue increases have been insufficient to absorb those costs, dampening company-wide margin expansion.
[Profitability] Operating Margin improved to 7.9% (prior year 7.1%) and Gross Margin to 28.8% (prior year 28.2%). ROE stands at 5.1% (prior year 4.1%); Dupont decomposition shows Net Profit Margin 3.7% × Total Asset Turnover 0.74x × Financial Leverage 1.88x. Compared with industry benchmarks (median Operating Margin 7.8%, median Net Profit Margin 5.2%), Operating Margin is roughly in line while Net Profit Margin at 3.7% is -1.5pt below the median. ROA (on an Ordinary Income basis) is 6.6% (prior year 6.1%), exceeding the company’s two-year average of 6.4%. [Cash Quality] Operating Cash Flow of ¥49.4B is only 0.57x of Net Income ¥87.1B, reflecting weak cash conversion due to a large increase in working capital (Inventories -¥49.2B, Trade Receivables -¥12.5B, Trade Payables -¥93.4B). Operating Cash Flow/EBITDA (Operating Income + Depreciation ¥68.7B = ¥256.5B) is 0.19x, significantly deteriorated from 0.89x in the prior year. [Investment Efficiency] Total Asset Turnover is 0.74x (prior year 0.78x), slightly down; Inventory Turnover is 6.1x (prior year 7.2x) and Receivables Turnover is 4.1x (prior year 4.1x), with inventory efficiency deterioration being a factor. [Financial Soundness] Equity Ratio improved to 53.3% (prior year 52.8%); increase in interest-bearing debt to ¥765.9B (prior year ¥686.9B) was outpaced by accumulation of Net Assets to ¥1707.5B (prior year ¥1532.8B). Debt/Equity ratio is 0.48x and Current Ratio is 206%, indicating ample liquidity, but Short-term Borrowings rose to ¥399.4B (prior year ¥238.9B), +67%, raising short-term liabilities ratio to 52%. Interest Coverage is 17.0x (Operating Income ¥187.8B / interest expense ¥11.1B), indicating strong capacity.
Operating Cash Flow was ¥49.4B (prior year ¥240.1B, -79.4%). Starting from Pre-tax profit ¥217.4B and adjustments before working capital changes totaling ¥110.0B, increases in Inventories of -¥49.2B, decreases in Trade Payables of -¥93.4B, increases in Trade Receivables of -¥12.5B and tax payments of -¥61.8B considerably compressed cash flow. Investing Cash Flow was -¥108.4B, centered on capital expenditures of -¥123.7B (1.80x depreciation expense of ¥68.7B), indicating continued growth investment. Financing Cash Flow was +¥74.7B, financed by net increase in Short-term Borrowings ¥153.9B and long-term borrowings ¥60.1B, while covering long-term borrowings repayments of -¥61.1B, share buybacks of -¥35.6B, and dividend payments of -¥39.9B. Free Cash Flow was -¥59.0B (Operating CF + Investing CF), turning negative from prior year ¥94.1B, meaning dividends and share buybacks were funded externally. Cash and cash equivalents increased to ¥326.3B (prior year ¥288.6B, +¥37.7B), mainly due to financing proceeds and foreign exchange effects of ¥20.9B.
Operating Income of ¥187.8B forms the core recurring earnings. Net non-operating items were +¥13.2B (foreign exchange gains ¥9.7B, dividend income ¥7.7B, interest expense -¥11.1B, etc.), with non-operating income representing 1.5% of revenue and boosting Net Income by about +7%. Extraordinary items were net +¥16.4B, where extraordinary gains of ¥39.4B (centered on gains on sale of investment securities ¥33.2B) contributed and lifted Net Income by approximately 19%. These one-off items have uncertain reproducibility in the following year, so recurring earning power should be evaluated at the Operating Income level. Accrual quality is low: Operating CF/Net Income 0.57x and OCF/EBITDA 0.19x, mainly driven by increases in working capital, leading to a large divergence between profit and cash. Comprehensive Income of ¥249.4B (¥230.0B attributable to owners of the parent) significantly exceeded Net Income of ¥87.1B, supported by foreign currency translation adjustments of ¥52.2B, valuation differences on available-for-sale securities of ¥16.9B, and retirement benefit adjustments of ¥23.9B.
Guidance for the fiscal year ending March 2027 is bullish: Revenue ¥2800.0B (YoY +17.8%), Operating Income ¥250.0B (+33.1%), Ordinary Income ¥255.0B (+26.9%), Net Income attributable to owners of the parent ¥165.0B (+89.4%), EPS ¥698.95, and annual dividend ¥105. Progress against first-half results is 84.9% for Revenue and 75.1% for Operating Income, with expectation of further acceleration in the second half. Keys to achieving guidance include continued orders for high-margin projects in the Energy Management Business, increased production capacity from newly commissioned equipment, recovery in profitability of the Factory Automation Business, compression of inventories and receivables to shorten CCC and improve cash generation. Risks include reproducibility of foreign exchange gains and extraordinary items, demand trends in Factory Automation, and pace of working capital normalization.
An annual dividend of ¥180 (interim ¥84, year-end ¥96) was implemented, with a Payout Ratio of 33.4% (based on EPS ¥591.35), a sustainable level. The dividend increased +118% from prior year dividend of ¥82.5, and the dividend policy continues an increasing trend. Share buybacks totaled ¥35.6B; combined with dividends of ¥39.9B, total returns amounted to approximately ¥75.5B, giving a Total Return Ratio of about 87% relative to Net Income of ¥87.1B. However, Free Cash Flow is negative at -¥59.0B, and shareholder returns were financed by Operating Cash Flow and external funding (increase in Short-term Borrowings). Sustainability of future returns requires improvement in Operating Cash Flow via working capital compression and a return to positive Free Cash Flow.
Working Capital Deterioration Risk: Inventories increased significantly to ¥390.9B (prior year ¥313.3B, +24.8%), extending DIO (days inventory outstanding) to 236 days. Trade Receivables at ¥585.1B (+5.4%) and Trade Payables at ¥204.2B (-5.4%) led to CCC extending to about 281 days, and Operating Cash Flow fell to ¥49.4B (prior year ¥240.1B, -79.4%), severely weakening cash generation. Risks of inventory obsolescence, pricing pressure, and delayed receivable collection are heightened; improving working capital management is urgent.
Short-term Liability Concentration Risk: Short-term Borrowings rose sharply to ¥399.4B (prior year ¥238.9B, +67.2%), accounting for 39.2% of Current Liabilities of ¥1018.3B. Short-term Borrowings now exceed cash and deposits of ¥341.6B, increasing rollover risk. Of total interest-bearing debt ¥765.9B (including Long-term Borrowings ¥366.5B), the short-term ratio is 52.1%, heightening sensitivity to refinancing conditions.
Segment Concentration and Profitability Gap Risk: The Energy Management Business accounts for 75.5% of Operating Income, so delays in its projects, pricing competition, or regulatory changes would directly affect company results. Meanwhile, the Factory Automation Business shows revenue +0.5% but Operating Income -13.4%, with heavy fixed cost burdens being a problem. Improving profit balance among segments and reducing dependence on major customers (Tokyo Electron Miyagi, Kansai Electric Power Group) are necessary for medium-to-long-term risk diversification.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.9% | 7.8% (4.6%–12.3%) | +0.1pt |
| Net Profit Margin | 3.7% | 5.2% (2.3%–8.2%) | -1.5pt |
| Operating Margin is roughly at the industry median, maintaining competitiveness, but Net Profit Margin is below the median, affected by tax burden and non-controlling interests. |
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 5.0% | 3.7% (-0.4%–9.3%) | +1.3pt |
| Revenue growth rate exceeds the industry median by +1.3pt, indicating relatively favorable growth. |
※ Source: Company compilation based on public financial statements
Trend of improving profitability metrics: Operating Margin 7.9% (prior year 7.1%), Gross Margin 28.8% (prior year 28.2%), with margin expansion at each stage led by high-margin projects in the Energy Management Business. Segment margin dispersion (EM 11.0%, MP 9.7%, FA 6.0%) indicates structural strengths and weaknesses; key areas to watch are continuity of EM projects and the pace of earnings recovery in FA.
Focus on restoring cash generation: Operating CF ¥49.4B (0.57x of Net Income ¥87.1B) and Free CF -¥59.0B indicate rapid deterioration of cash conversion. Increases in working capital (Inventories +¥77.7B, Trade Payables -¥17.2B) are the main cause, extending CCC to about 281 days. To achieve the bullish 2027 guidance (Revenue +17.8%, Operating Income +33.1%), normalization of Operating CF via compression of inventories and receivables and turning Free CF positive are essential; progress in shortening CCC will be the most important monitoring metric for investment decisions.
Shareholder returns and financial balance: Annual dividend ¥180 (Payout Ratio 33.4%) and share buybacks ¥35.6B resulted in total returns of ¥75.5B (Total Return Ratio 87%), but Free CF was negative and returns depended on external funding (Short-term Borrowings +¥160.5B). Sharp rise in Short-term Borrowings increased short-term liabilities ratio to 52.1% and heightened refinancing risk. Continued dividend increases and share buybacks require normalization of working capital to improve Operating CF and a shift in funding composition toward longer-term borrowings.
This report was automatically generated by AI analyzing XBRL financial statement data and is a financial analysis document. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on publicly available financial statements. Investment decisions are your own responsibility; consult a professional advisor as necessary.