Quick View
| Metric | Current Period | Same Period Last Year | YoY |
|---|---|---|---|
| Revenue | ¥212.5B | ¥207.7B | +2.3% |
| Operating Income | ¥16.9B | ¥18.6B | −8.9% |
| Ordinary Income | ¥15.5B | ¥18.1B | −14.3% |
| Net Income | ¥11.9B | ¥14.1B | −14.9% |
| ROE | 11.3% | 14.0% | - |
Executive Summary
The 2026 Q3 results maintained revenue growth at ¥212.5B (YoY +¥4.8B +2.3%), while Operating Income was ¥16.9B (YoY -¥1.7B -8.9%), Ordinary Income was ¥15.5B (YoY -¥2.6B -14.3%), and Net Income attributable to owners of the parent was ¥11.9B (YoY -¥2.2B -14.9%), all declining. Despite higher revenue, Operating Income decreased, and the Operating Margin fell to 8.0% (down approx. 1.0pt from approx. 9.0% in the same period last year), indicating a deterioration in profitability.
Key Financial Metrics
[Profitability] ROE 11.3% (within the favorable industry range of 10-15%), Net Profit Margin 5.6%, Operating Margin 8.0% (down from approx. 9.0% in the same period last year), Return on Assets 6.0%. Operating Income decreased -8.9% YoY, indicating operating leverage did not function against a +2.3% increase in revenue. [Cash Quality] Cash and Deposits ¥14.8B (YoY +62.6%), Short-term Liabilities Coverage 0.90x, suggesting limited cash cushion against short-term liabilities. Interest Coverage 28.7x, indicating ample capacity to service interest. [Investment Efficiency] Total Asset Turnover 1.07x, Financial Leverage 1.89x, a conservative leverage level. [Financial Soundness] Equity Ratio 52.1% (slight increase from 51.7% in the same period last year), Current Ratio 140.1%, generally sound; Debt-to-Capital Ratio 0.22x. Short-term borrowings increased significantly to ¥16.4B (YoY +66.2%), and with a high Short-term Debt Ratio of 71.9%, attention is required to short-term refinancing risk.
Cash Flow Analysis
Cash and Deposits increased by +¥5.7B YoY to ¥14.8B, improving the cash holding level. Meanwhile, short-term borrowings surged by +¥6.5B YoY (+66.2%) to ¥16.4B, strongly suggesting cash was secured through borrowings. Long-term borrowings decreased by -¥3.9B YoY (-37.7%) to ¥6.4B, indicating a shift toward shorter debt tenors. Working capital remains positive at ¥32.6B, but accounts receivable stand at ¥44.0B (equivalent to approx. 20.7% of revenue), making receivables collection cycle management important. The simultaneous increase in short-term borrowings and cash implies external funding addressed rising working capital needs. Cash coverage of short-term liabilities is 0.90x, below 1x, leaving limited room for liquidity management.
Quality of Earnings
With Operating Income at ¥16.9B and Ordinary Income at ¥15.5B, non-operating income and expenses resulted in a net loss of approximately -¥1.4B. The margin declined from an Operating Margin of 8.0% to an Ordinary Income Margin of 7.3%, down 0.7pt, indicating non-operating expenses weighed on earnings. An Other Comprehensive Loss of -¥2.2B was recorded, likely driven by negative contributions from the foreign currency translation adjustment. The -8.9% YoY decline in Operating Income likely reflects a higher cost of goods sold ratio or increased SG&A expenses; the lack of operating leverage against a +2.3% revenue increase suggests rigidity in the earnings structure. Due to the absence of detailed cash flow disclosure, a comparison of Operating Cash Flow and Net Income is unclear; however, the concurrent increase in short-term borrowings and cash indicates operating cash flow alone may not have covered working capital needs.
Risk Factors
- Short-term refinancing risk: Short-term borrowings increased +66.2% YoY to ¥16.4B, and the Short-term Debt Ratio at 71.9% is high. With a cash/short-term liabilities ratio of 0.90x, flexibility is limited, making repayment and rollover planning critical.
- Concerns over sustained profitability decline: Operating Margin contracted by approx. 1.0pt YoY, with Operating Income decreasing despite higher revenue. If cost control and SG&A efficiency do not improve, margin erosion could become entrenched.
- Foreign exchange risk: The negative impact of translation adjustments is evident in Other Comprehensive Loss, indicating a structure in which exchange rate fluctuations affect both performance and capital.
Industry Benchmark (Reference; Our Research)
[Position within Industry] (Reference information; our research) Profitability: Operating Margin 8.0% (+0.7pt above the industry median of 7.3%), Net Profit Margin 5.6% (+0.2pt above the industry median of 5.4%), ROE 11.3% (+6.4pt above the industry median of 4.9%, high within the industry). Soundness: Equity Ratio 52.1% (11.8pt below the industry median of 63.9%), Current Ratio 140.1% (1.40x, below the industry median of 2.67x, with liquidity at a low level within the industry). Efficiency: Return on Assets 6.0% (+2.7pt above the industry median of 3.3%). Growth: Revenue growth rate +2.3% (in line with the industry median of +2.8%). The Company ranks high within the industry in terms of profitability (ROE, Operating Margin) and asset efficiency (Return on Assets), while financial soundness indicators (Equity Ratio, Current Ratio) are below the industry median, highlighting a relatively high dependence on short-term debt. Industry: Manufacturing (N=65 companies), Comparison: 2025 Q3, Source: Our compilation
Key Takeaways from the Results
- Focus on whether Operating Margin can improve: The decline in Operating Income despite higher revenue suggests challenges in cost control and SG&A efficiency. The full-year forecast projects Operating Income of ¥20.0B (YoY -22.4%), making the feasibility of an earnings recovery in Q4 a key checkpoint.
- Increase in short-term borrowings and cash management: With short-term borrowings up +66.2% YoY and a high Short-term Debt Ratio of 71.9%, attention should be paid to disclosures on repayment plans and refinancing strategies. As the cash/short-term liabilities ratio is 0.90x and flexibility is limited, the ability to generate Operating Cash Flow and improve working capital efficiency will be key to stabilizing liquidity.
- Sustainability of profitability advantage within the industry: With ROE at 11.3% and an Operating Margin of 8.0%, profitability remains above the industry median; however, determining whether the current margin compression trend is temporary or persistent is important for investment decisions. By segment, the core Printed Circuit Board Business accounts for revenue of ¥207.9B (composition ratio 97.8%) and Operating Income of ¥16.7B, indicating a highly concentrated business portfolio.
This report is an automatically generated earnings analysis produced by AI based on XBRL financial results summary data. It does not constitute a recommendation to invest in any specific security. The industry benchmark is reference information compiled by our company based on publicly available financial results data. Investment decisions are your own responsibility; consult a professional as needed before making any decisions.
---End of Report---
AI Financial Analysis
Executive Summary
FY2026 Q3 performance was resilient at the sales line but showed a clear deterioration in profitability, primarily from gross-margin pressure and weaker non-operating results. Cumulative revenue rose 2.3% year on year to ¥21.25bn. Operating income declined 8.9% to ¥1.694bn despite the increase in sales. Ordinary income fell 14.3% to ¥1.553bn, and profit attributable to owners declined 14.9% to ¥1.181bn. Gross profit decreased 3.0% to ¥4.134bn, indicating that cost of sales grew faster than revenue. The gross margin contracted by 111bp year on year to 19.5%, slightly below the 20% quality-alert threshold. Operating margin compressed by 99bp to 8.0%, though it remains within the stated 8-15% good profitability range. Net margin declined by 112bp to 5.6%, but remains above the 5% threshold generally associated with sound profitability. SG&A expense increased only 1.3% to ¥2.440bn, slower than revenue growth, so the principal earnings pressure was not SG&A inflation but weaker gross profitability. The decline from operating income to ordinary income was amplified by non-operating expenses of ¥170m, including ¥59m of interest expense and ¥35m of foreign-exchange losses. The tax burden remained normal, with an effective tax rate of 22.5% and a tax-burden factor of 0.769. Earnings were predominantly generated from operations, as extraordinary losses were limited to ¥21m, including ¥19m of fixed-asset disposal losses. Comprehensive income fell 39.0% to ¥936m, reflecting negative other comprehensive income of ¥252m, principally foreign-currency translation effects. Balance-sheet liquidity is adequate, with a 140.1% current ratio and ¥3.256bn of working capital, but the debt maturity profile has shifted toward short-term funding. The full-year sales forecast is effectively on track at a 75.9% Q3 progress rate, while operating income, ordinary income, and net income have already reached 84.7%, 86.3%, and 84.4% of full-year guidance, respectively. This indicates that the company has room to meet its stated full-year earnings targets even if Q4 margins remain softer, although sustaining that outcome depends on preventing further gross-margin erosion and containing foreign-exchange and funding costs.
Profitability Analysis
The reported annualized ROE is 15.0%, exactly reconciled by the DuPont structure of a 5.6% net profit margin, 1.426x annualized asset turnover, and 1.89x financial leverage. The main year-on-year change is the reduction in profit margin rather than an apparent deterioration in cost discipline below gross profit. Gross margin declined to 19.5% from 20.6% in the prior-year period, a 111bp compression, because cost of sales increased 3.1%, exceeding the 2.3% revenue increase. Operating margin fell to 8.0% from 9.0%, a 99bp decline, as the ¥135m reduction in gross profit outweighed a relatively modest ¥31m increase in SG&A. SG&A grew 1.3%, below sales growth, which suggests that operating leverage below gross profit remained broadly favorable. Net margin fell to 5.6% from 6.7%, a 112bp decline, reflecting both the operating-income decrease and a less favorable non-operating balance. The 0.906 interest-burden factor shows that interest and other non-operating costs reduced EBIT by roughly 9.4% before tax, although 28.71x interest coverage remains strong. The 0.769 tax-burden factor is normal and does not indicate an unusually heavy tax charge. Annualized ROA is approximately 8.0%, calculated from annualized nine-month net income and average total assets, indicating sound asset profitability for a capital-intensive manufacturer. Fixed assets account for 37.8% of total assets, so maintaining plant utilization, manufacturing yield, and selling prices is important to preserving returns. The 15.0% annualized ROE is at the excellent threshold, but the quality of that return should be monitored because financial leverage contributes meaningfully to the result. The low-gross-margin quality alert is material: at a 19.5% gross margin, modest changes in input costs, customer mix, pricing, or factory utilization can have a disproportionately large effect on operating income.
Growth Assessment
Revenue growth of 2.3% to ¥21.25bn demonstrates continued demand support, but the growth was not sufficiently profitable because operating income declined 8.9%. Cost of sales rose faster than sales, causing gross profit to decline 3.0% and limiting the quality of top-line expansion. Finished-goods inventory declined 4.5% year on year to ¥1.715bn, while work in process decreased 6.7% to ¥800m; this is more consistent with inventory discipline than a broad accumulation of unsold production. Raw-material inventory increased 18.0% to ¥578m, which increases exposure to input-cost movements but remains a smaller component of the ¥3.093bn disclosed manufacturing inventory balance. Finished goods represent approximately 55.5% of disclosed manufacturing inventory, work in process 25.9%, and raw materials 18.7%; the work-in-process proportion is below the 40% bottleneck-warning level. The full-year sales forecast of ¥28.0bn implies a Q3 progress rate of 75.9%, broadly in line with the standard 75% seasonal benchmark. Operating-income progress is 84.7% versus the ¥2.0bn full-year forecast, 9.7 percentage points ahead of the standard Q3 benchmark but not more than the 10-point flag threshold. Ordinary-income progress is 86.3% versus the ¥1.8bn forecast, 11.3 percentage points above the standard benchmark, indicating a favorable cushion despite the year-on-year decline. Profit attributable to owners has reached 84.4% of the ¥1.4bn forecast, also above a standard Q3 run rate. The implied Q4 requirement is ¥6.75bn of revenue, ¥306m of operating income, ¥247m of ordinary income, and ¥219m of profit attributable to owners. The implied Q4 operating margin requirement is approximately 4.5%, materially below the 8.0% nine-month margin, leaving considerable forecast headroom. The principal outlook issue is therefore not forecast attainability but whether gross-margin pressure becomes structural and constrains earnings recovery beyond the current fiscal year.
Financial Health
Liquidity is adequate, with current assets of ¥11.379bn exceeding current liabilities of ¥8.123bn and producing a current ratio of 140.1%. The quick ratio is also 140.1%, indicating that reported current liquidity is not dependent on inventory liquidation. Working capital is positive at ¥3.256bn. Total equity increased 4.3% year on year to ¥10.488bn, supported by retained earnings increasing ¥729m to ¥7.113bn. The equity ratio is 52.1%, providing a reasonable capital buffer for a manufacturing company with ¥7.512bn of property, plant and equipment. Interest-bearing debt totals ¥2.281bn, equal to 17.9% of capital, and the stated debt-to-equity ratio is 0.89x, below the 2.0x aggressive-leverage warning level. Interest coverage of 28.71x indicates that current EBIT comfortably covers ¥59m of interest expense. The key financial-health concern is refinancing risk: 71.9% of interest-bearing debt is short term, above the 40% quality-alert threshold. Short-term loans increased 66.2% year on year to ¥1.640bn, while long-term loans decreased 37.7% to ¥641m, indicating a material migration toward shorter-duration financing. Cash and deposits rose 62.6% to ¥1.475bn, partly offsetting this risk, and the reported cash-to-short-term-debt ratio is 0.90x. However, cash does not fully cover short-term borrowings under the reported credit metric, making access to bank funding and working-capital discipline important. Trade receivables of ¥4.825bn and electronically recorded monetary claims of ¥1.695bn represent substantial operating liquidity tied up in customer collections. Asset retirement obligations of ¥152m equal approximately 1.6% of total liabilities, below the 2% healthy benchmark and not a material environmental-liability burden. No current-ratio-below-1.0 or debt-to-equity-above-2.0 warning is indicated.
Notable B/S Changes
Short-term loans: +¥653m (+66.2%) to ¥1.640bn - funding has shifted toward shorter maturities, increasing refinancing sensitivity. Cash and deposits: +¥568m (+62.6%) to ¥1.475bn - liquidity improved and partly offsets higher short-term borrowings. Long-term loans: -¥388m (-37.7%) to ¥641m - lower long-term borrowing reinforces the shift toward short-term debt. Treasury stock: -¥51m to -¥65m (364.3% increase in carrying-value magnitude) - share repurchases remain small relative to equity but reduce outstanding equity modestly. Retained earnings: +¥729m (+11.4%) to ¥7.113bn - accumulated profitability strengthened the equity base and dividend capacity. Foreign-currency translation adjustment: ¥35m positive to ¥214m negative - currency translation reduced accumulated OCI and contributed to the weaker comprehensive-income outcome. Trade receivables plus electronically recorded monetary claims: +¥479m to ¥6.520bn - larger customer claims align with the 62-day DSO warning and require collection monitoring.
Cash Flow Quality
Reported earnings are operationally grounded: operating income was ¥1.694bn and extraordinary losses were limited to ¥21m, equivalent to about 1.8% of net income. The ¥19m loss on disposal of fixed assets and ¥2m gain on sale of assets have an immaterial effect on nine-month earnings. Cash and deposits increased by ¥568m year on year to ¥1.475bn, while retained earnings increased by ¥729m, consistent with continued balance-sheet accumulation. Cash conversion requires close monitoring because the high-receivable-days quality alert indicates annualized DSO of 62 days, above the 60-day warning threshold. This elevated DSO means a greater portion of sales is tied up in customer credit and can cause cash realization to lag accounting revenue. Trade receivables increased ¥289m and electronically recorded monetary claims increased ¥190m year on year, together increasing customer-related claims by ¥479m. Accounts payable increased ¥124m and electronically recorded payables increased ¥79m, providing some supplier-financing offset but not fully neutralizing the increase in customer claims. The working-capital pattern therefore places emphasis on collection discipline, particularly if sales growth accelerates. Finished goods and work in process both declined year on year, reducing the risk that profit is being supported by a build-up in production inventories. The increase in raw-material inventory warrants monitoring given potential exposure to input-price volatility. The ordinary-income-to-net-income conversion remains reasonable because the effective tax rate is 22.5% and non-recurring items are small. Foreign-exchange losses of ¥35m, equivalent to about 2.1% of operating income, are currently manageable but demonstrate that financial earnings can be affected by currency movements.
Dividend Sustainability
The full-year dividend forecast is ¥35 per share, while Q2 DPS was ¥0, indicating that shareholder distributions are expected to be concentrated in the year-end dividend. Based on forecast EPS of ¥93.49, the implied dividend-only payout ratio is approximately 37.4%. This is well below the 60% sustainability benchmark. Using issued shares net of treasury shares, the implied full-year cash dividend is approximately ¥525m. That amount is covered about 2.7x by the ¥1.4bn full-year profit-attributable-to-owners forecast. Retained earnings of ¥7.113bn provide an additional capital buffer for the planned distribution. The expected dividend appears compatible with the company’s reported earnings capacity, provided that current profitability and bank funding access are maintained. The principal factors to monitor are gross-margin recovery, customer-collection discipline, and the elevated share of short-term debt, because these affect distributable cash capacity and financial flexibility.
Risk Assessment
Business risks include Margin risk is the highest operating concern: gross margin fell 111bp to 19.5% as cost of sales grew 3.1% against 2.3% revenue growth. For a PCB/electronics manufacturer, input costs, customer pricing, product mix, yield, and plant utilization can quickly affect earnings., Customer-credit risk is elevated by annualized DSO of 62 days, above the 60-day quality-alert threshold. The ¥479m year-on-year increase in trade receivables plus electronically recorded claims raises the amount of capital committed to collections., Foreign-exchange exposure is evident in ¥35m of FX losses and ¥214m of negative foreign-currency translation adjustment within equity. Currency movements can affect both reported earnings and overseas asset values., Manufacturing asset utilization risk remains relevant because PPE represents 37.8% of total assets. Lower demand or production inefficiency could reduce fixed-cost absorption and further compress the operating margin., Raw-material inventory increased 18.0% year on year. This can increase exposure to price volatility and the risk of margin compression if procurement costs cannot be passed through promptly..
Financial risks include Refinancing risk is elevated: the short-term debt ratio is 71.9%, materially above the 40% alert threshold. The rise in short-term loans to ¥1.640bn alongside lower long-term loans indicates greater dependence on short-duration funding., Although the reported cash-to-short-term-debt ratio is 0.90x and interest coverage is strong at 28.71x, cash alone does not fully cover short-term debt, making committed banking relationships and working-capital liquidity important., The stated debt-to-equity ratio of 0.89x is not aggressive, but financial leverage of 1.89x is a meaningful contributor to the 15.0% annualized ROE. A weaker earnings environment would reduce coverage and return resilience., Comprehensive income declined 39.0% to ¥936m, more sharply than net income, due to negative OCI. Continued currency-related OCI losses could moderate growth in book equity..
Key concerns include The low-gross-margin quality alert is significant because the current 19.5% level is just below the 20% threshold and has already translated into an 8.9% operating-income decline., The high-receivable-days quality alert is significant because slow collection can weaken operating cash conversion even when reported sales and profit remain positive., The refinancing-risk quality alert is significant because 71.9% short-term debt concentration increases sensitivity to bank lending conditions and interest-rate changes., The forecast is well supported by nine-month progress, but the favorable Q4 hurdle should not obscure the year-on-year decline in core profitability..
Investment Implications
Key takeaways include Revenue growth remains positive, but earnings quality at the gross-profit level weakened: sales rose 2.3% while operating income fell 8.9%., The company maintains solid reported profitability, with an 8.0% operating margin, 5.6% net margin, approximately 8.0% annualized ROA, and 15.0% annualized ROE., Full-year guidance appears achievable based on Q3 progress, especially because the implied Q4 operating-margin requirement is only about 4.5%., Liquidity is adequate and interest coverage is strong, but the funding structure has become more short term., The forecast ¥35 DPS implies a moderate 37.4% dividend-only payout ratio and appears compatible with forecast earnings..
Metrics to watch include Gross margin and operating margin, particularly whether the 19.5% gross margin stabilizes or recovers, Annualized DSO and the balances of trade receivables plus electronically recorded monetary claims, Short-term debt ratio, cash-to-short-term-debt coverage, and the mix between short- and long-term borrowings, Raw-material inventory movement and the relationship between material costs and customer pricing, Foreign-exchange gains or losses and foreign-currency translation adjustments, Progress against full-year operating-income guidance after the favorable 84.7% Q3 progress rate.
Regarding relative positioning, The company combines good reported returns and strong interest coverage with a capital-intensive manufacturing balance sheet. Relative positioning is supported by a 52.1% equity ratio, 17.9% debt-to-capital, and a 37.4% implied dividend payout ratio, while constrained by gross-margin compression, slower customer collections, and an above-normal concentration of short-term debt.