NOHMI BOSAI (6744) FY2026 Q3 Earnings Report

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Executive Summary

For the cumulative Q3 period of the fiscal year ending March 2026, the Company recorded increases in both revenue and earnings, with improved profitability in fire extinguishing systems driving profit growth. Revenue was ¥925.8B (up +4.6% YoY), Operating Income was ¥79.8B (up +4.8%), Ordinary Income was ¥86.5B (up +8.1%), and Net Income attributable to owners of the parent was ¥59.5B (up +8.6%). Ordinary Income and Net Income grew faster than Operating Income due to an increase in non-operating income and the recognition of a ¥2.5B gain on the sale of investment securities.

Factors Affecting Results

【Revenue】Revenue was ¥925.8B, representing a +4.6% increase YoY. By segment, Fire Alarm Systems recorded the highest growth at ¥340.9B (up +8.2%), followed by Maintenance and Inspection Services, etc., at ¥239.9B (up +5.9%), while Fire Extinguishing Systems posted a modest increase to ¥308.6B (up +1.4%). By revenue recognition category, revenue transferred over time accounted for 65.6% of the total, indicating a revenue structure centered on percentage-of-completion construction projects and maintenance contracts.

【Profit and Loss】Operating Income was ¥79.8B (up +4.8%), and the Operating Income margin remained broadly unchanged from the previous year at 8.6%. The segment profit margin for Fire Extinguishing Systems improved by approximately 3.6pt from the previous year to 18.4%, making it the primary driver of profit growth, while Maintenance and Inspection Services, etc., declined by approximately 2.1pt to 17.4%. Company-wide expenses increased to ¥75.7B (up +14.8%), outpacing revenue growth and restraining expansion of the Operating Income margin. Ordinary Income was ¥86.5B (up +8.1%), and Net Income was ¥59.5B (up +8.6%), supported by non-operating and extraordinary factors, including a ¥2.5B gain on the sale of investment securities. Overall, the Company achieved increases in both revenue and earnings, although profitability trends differed across segments.

Segment Analysis

Fire Alarm Systems recorded Revenue of ¥340.9B (up +8.2% YoY), segment profit of ¥53.3B (up +8.1%), and a profit margin of 15.6%, maintaining a trend of higher revenue and earnings. Fire Extinguishing Systems recorded only a modest increase in Revenue to ¥308.6B (up +1.4%), while segment profit rose substantially to ¥56.8B (up +26.3%), with the profit margin improving by approximately 3.6pt from 14.8% to 18.4%. Maintenance and Inspection Services, etc., recorded higher Revenue of ¥239.9B (up +5.9%), but segment profit declined to ¥41.8B (down approximately ▲5.5%), and the profit margin decreased by approximately 2.1pt from 19.5% to 17.4%. The decline in profitability of Maintenance and Inspection Services, etc., which is a recurring-revenue business, warrants attention when assessing future earnings stability.

Key Financial Indicators

【Profitability】The Operating Income margin of 8.6%, Ordinary Income margin of 9.3%, and Net Income margin of 6.4% all improved slightly from the same period of the previous year. Although the Net Income margin of 6.4% is generally considered a favorable level, Net Income includes a ¥2.5B gain on the sale of investment securities (approximately 4.1% of Net Income), resulting in some divergence from recurring earnings power.【Cash Flow Quality】Accounts receivable were ¥430.3B, accounting for 27.3% of total assets and exceeding cash and deposits of ¥417.0B. Annualized DSO was 127 days and annualized CCC was 172 days, both exceeding general benchmarks, suggesting that working capital may be tying up funds and creating a time lag between earnings recognition and cash conversion.【Investment Efficiency】ROE was 4.5%, while capital efficiency was relatively low despite strong financial soundness reflected in an Equity Ratio of 83.0%. Total asset turnover remained at approximately 0.59x, with substantial cash, deposits, and investment securities being one factor restraining asset efficiency.【Financial Soundness】The Equity Ratio was 83.0%, and current assets of ¥1029.5B were approximately 5.1 times current liabilities of ¥200.8B, indicating extremely strong short-term payment capacity. The Company has virtually no interest-bearing debt and maintains a conservative, low-leverage financial structure.

Cash Flow Analysis

As the Company has not disclosed Operating Cash Flow (OCF), Investing Cash Flow, or Financing Cash Flow in the financial statements for this period, fund flows are analyzed based on changes in the balance sheet. Cash and deposits were ¥417.0B, down from ¥434.1B in the same period of the previous year, while accounts receivable declined substantially to ¥430.3B from ¥553.2B in the previous year, suggesting that collection of receivables may have progressed. Nevertheless, annualized DSO was 127 days and annualized CCC was 172 days, both indicating lengthy collection cycles, and working capital requirements during a period of revenue growth appear to have affected cash efficiency. Inventories were ¥48.6B, broadly unchanged from the previous year, with no significant expansion in funds tied up in inventory. Overall, although the Company has a strong financial base, its cash generation capacity is structurally influenced by working capital management, particularly accounts receivable.

Quality of Earnings

Temporary factors contributed to the increases in Ordinary Income and Net Income. The ¥2.5B extraordinary gain resulted from the sale of investment securities and represented approximately 4.1% of Net Income attributable to owners of the parent of ¥59.5B. Non-operating income was ¥7.3B, consisting primarily of ¥1.3B in dividends received and other non-operating income, while foreign exchange gains were limited to ¥0.2B. Non-operating expenses were small at ¥0.6B, and interest expense was limited to ¥0.2B, indicating that non-operating profit and loss was generally stable. However, the fact that the Net Income growth rate (+8.6%) exceeded the Operating Income growth rate (+4.8%) reflects the inclusion of non-recurring investment gains. A key focus in assessing earnings quality will be whether the Company can achieve its full-year plan through recurring operating business profits alone. Comprehensive Income was ¥70.1B, exceeding Net Income of ¥59.2B, primarily due to a ¥12.3B increase in valuation difference on other securities; this item is also susceptible to market fluctuations.

Earnings Forecast and Guidance

The full-year Company forecast is Revenue of ¥1406.0B (up +5.2% YoY), Operating Income of ¥165.0B (up +5.2%), and Ordinary Income of ¥169.0B (up +4.2%). The cumulative Q3 progress rates were 65.8% for Revenue, 48.4% for Operating Income, 51.2% for Ordinary Income, and 51.3% for Net Income, all below the simple 75% benchmark. In particular, the Operating Income progress rate was 26.6pt below the benchmark, making the concentration of project completions and acceptance inspections and cost management in Q4 the key factors for achieving the full-year plan. Forecast EPS is ¥197.08, and forecast annual dividends are ¥100.00.

Shareholder Returns

The Q2 dividend was ¥50.00 per share, and the forecast full-year dividend is ¥100.00, implying a year-end dividend of ¥50.00. Based on forecast full-year EPS of ¥197.08, the forecast Payout Ratio is approximately 50.7%, which is not excessively high when assessed solely on the basis of dividends. A strong financial base, including retained earnings of ¥1016.0B and cash and deposits of ¥417.0B, supports the Company’s dividend payment capacity. As no disclosure has been made regarding the amount of share repurchases, the Total Return Ratio has not been evaluated.

Risk Factors

1. Prolonged working capital cycle: Annualized DSO was 127 days and annualized CCC was 172 days, both exceeding the general benchmarks of 60 days and 120 days. Accounts receivable of ¥430.3B accounted for 27.3% of total assets, with the lead time for billing, acceptance inspections, and collections characteristic of construction-oriented businesses tying up funds.

2. Insufficient progress toward the full-year plan: Cumulative Q3 progress toward the full-year Operating Income forecast of ¥165.0B was only 48.4%, 26.6pt below the standard progress benchmark of 75%. Dependence on Q4 project progress and cost management is high.

3. Profitability disparity among segments: The segment profit margin of Maintenance and Inspection Services, etc., declined by approximately 2.1pt from 19.5% in the previous year to 17.4%. In addition, Company-wide expenses increased +14.8% YoY, outpacing revenue growth. Continued increases in research and development expenses and general and administrative expenses could constrain the potential for expansion of the consolidated profit margin.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Profitability, as measured by both the Operating Income margin and Net Income margin, is broadly in line with the industry median.

Growth and Capital Efficiency

The Revenue growth rate exceeded the industry median by +1.3pt, securing a relatively high rate of revenue growth.

※Source: Compiled by the Company

Key Points from the Financial Results

1. The segment profit margin of Fire Extinguishing Systems improved by approximately 3.6pt YoY to 18.4%, making it the largest driver of earnings growth for the current period. The sustainability of this improvement will determine future profitability trends.

2. The increase in Net Income includes the non-recurring factor of a ¥2.5B gain on the sale of investment securities, equivalent to approximately 4.1% of Net Income. Assessing the extent to which the full-year plan can be achieved through recurring operating business profits alone is important in evaluating earnings quality.

3. While the Company has high financial soundness, including an Equity Ratio of 83.0% and an equivalent current ratio of 512.7%, its ROE of 4.5% indicates relatively low capital efficiency. The potential to reduce working capital, particularly accounts receivable, is an area to monitor for improvements in capital efficiency.

Theoretical Share Price (Reference Value)

Sensitivity: ¥2,148–¥2,270 at ±1% for the cost of equity, and ¥2,207–¥2,208 at ±0.1 for ω.

Notes:

• As forecast ROE is below the cost of equity, the theoretical value will be below book value per share.
• Net assets as of the quarter-end are used (there is a timing difference from the full-year forecast).
• As net assets include non-controlling interests, the theoretical value may be calculated at a somewhat higher level.

(Calculation model: Residual Income Model (Ohlson-type; explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated solely from publicly available data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL financial summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed financial results. Investment decisions should be made at your own responsibility, after consulting with a professional as necessary.

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AI Financial Analysis

Executive Summary

FY2026 Q3 earnings were solid, with modest top-line growth translating into faster growth in profit attributable to owners. Revenue increased 4.6% year on year to ¥92.6bn. Operating income rose 4.8% to ¥8.0bn. Ordinary income increased 8.1% to ¥8.6bn. Profit attributable to owners increased 8.6% to ¥5.9bn. The gross margin expanded by 192bp year on year to 34.5%, from 32.6%. This gross-profit improvement was substantially absorbed by a 179bp rise in the SG&A-to-sales ratio to 25.9%. Consequently, the operating margin was essentially flat at 8.6%, up approximately 1bp year on year. Fire alarm equipment revenue grew 8.2% to ¥34.1bn, while segment profit rose 8.1% to ¥5.3bn. Fire-extinguishing equipment profit increased 26.3% to ¥5.7bn despite revenue growth of only 1.4%, producing a 362bp segment-margin expansion. Maintenance and inspection revenue increased 5.9% to ¥24.0bn, but segment profit declined 5.5% to ¥4.2bn and its margin contracted 210bp. Company-wide costs increased 14.8% to ¥7.6bn, faster than consolidated sales, limiting conversion of segment-level profit gains into consolidated operating-profit growth. Ordinary-income growth also benefited from higher non-operating income, including ¥0.4bn of equity-method earnings and ¥0.1bn of dividend income. Pretax income included a ¥2.5bn gain on sales of investment securities, partially offset by a ¥0.3bn loss on disposal of fixed assets, supporting net income but reducing its recurring purity. At Q3, progress against full-year guidance was 65.8% for sales, 48.4% for operating income, 51.2% for ordinary income, and 51.2% for profit attributable to owners, all below the standard 75% cumulative progress rate. Achievement of guidance therefore depends on a seasonally concentrated fourth quarter, particularly for sales and operating profit. The balance sheet remains exceptionally liquid and conservatively capitalized, although lengthy receivable collection and cash-conversion periods require monitoring.

Profitability Analysis

The reported annualized ROE is 6.1%, decomposed into a 6.4% net profit margin, 0.784x annualized asset turnover, and 1.21x financial leverage. The low-leverage balance sheet means ROE is driven principally by operating profitability and asset utilization rather than financial gearing. Financial leverage is conservative, with total assets only 1.21x equity. The gross-margin expansion to 34.5% was the most favorable operating development, but higher SG&A intensity constrained operating-margin expansion to approximately 1bp. The fire-extinguishing equipment segment generated the strongest incremental profitability: its margin rose to 18.4% from 14.8%. Fire alarm equipment remains the core business by segment profit contribution, generating ¥5.3bn of segment profit on ¥34.1bn of revenue, for a 15.6% margin. Maintenance and inspection remained profitable at a 17.4% margin, but the decline from 19.5% indicates cost pressure or an unfavorable project/revenue mix. Other businesses produced ¥0.4bn of profit on ¥3.7bn of revenue, for a 9.6% margin. Corporate costs increased to ¥7.6bn from ¥6.6bn, outpacing revenue growth and representing the key operating-leverage constraint. Interest coverage of 498.75x and an interest burden of 1.110 confirm that financing costs are immaterial. The tax burden was 0.671, equivalent to a 33.2% effective tax rate, which is moderately below the 0.70 benchmark but not unusually adverse for a Japanese consolidated tax profile. The ¥2.5bn securities-sale gain lifted pretax income and should not be treated as recurring operating profitability.

Growth Assessment

Revenue growth was broad-based across the three reported business segments. Revenue recognized at a point in time grew 8.6% to ¥31.8bn, materially faster than 2.6% growth in revenue recognized over time to ¥60.7bn. This mix shift supported total growth but makes fourth-quarter delivery and project completion timing important. Fire alarm equipment added ¥2.6bn of revenue year on year and retained a stable 15.6% segment margin. Fire-extinguishing equipment added ¥0.4bn of revenue but ¥1.2bn of segment profit, indicating a favorable margin mix or project execution improvement. Maintenance and inspection added ¥1.3bn of revenue, but its ¥0.2bn profit decline means management execution on labor, service costs, and project profitability is important. Full-year guidance calls for revenue of ¥140.6bn, implying ¥48.0bn of fourth-quarter revenue. It also calls for operating income of ¥16.5bn, implying ¥8.5bn in the fourth quarter. The implied fourth-quarter operating margin is approximately 17.7%, well above the Q3 cumulative 8.6% margin, consistent with substantial year-end seasonality and/or planned project completions. Full-year profit attributable to owners guidance of ¥11.6bn implies ¥5.7bn in fourth-quarter profit. The full-year operating-income forecast implies 5.2% year-on-year growth, broadly consistent with the 4.8% Q3 pace. The business outlook is thus underpinned by continued demand across fire safety equipment, construction-related installation, and recurring maintenance services, while the size and profitability of year-end project recognition are the principal near-term execution variables.

Financial Health

Financial health is strong. The current ratio is 512.7% and the quick ratio is 488.5%, well above conventional liquidity thresholds. Current assets of ¥103.0bn exceed current liabilities of ¥20.1bn by ¥82.9bn. Cash and deposits of ¥41.7bn alone exceed total liabilities of ¥26.8bn. The debt-to-equity ratio is only 0.21x, far below the 2.0x level that would indicate aggressive leverage. Total liabilities represent only 17.0% of total assets, while total equity represents 83.0%. There is no maturity mismatch risk evident from current assets of ¥103.0bn versus current liabilities of ¥20.1bn. Net defined benefit liabilities of ¥4.9bn are the largest identified non-current obligation and are manageable relative to ¥130.6bn of total equity. Provisions for loss on construction contracts total ¥1.2bn and should be monitored as an indicator of execution risk in contract-based activities. Accounts payable declined ¥1.3bn, or 26.4% year on year, to ¥3.6bn. This reduction, combined with the decline in current liabilities, lowers supplier-financing support and contributes to the extended cash-conversion cycle. Trade receivables declined ¥12.3bn, or 22.2% year on year, to ¥43.0bn, but remain 27.3% of total assets and continue to represent the largest operating asset after cash. Investment securities increased ¥2.3bn, or 24.1%, to ¥12.1bn, and generated a ¥2.5bn disposal gain during the period; this portfolio adds balance-sheet value but can introduce earnings variability through realizations and valuation movements. Intangible assets are 3.9% of total assets, indicating no material intangible-asset concentration.

Notable B/S Changes

Accounts receivable: -¥12.3bn (-22.2%) to ¥43.0bn - absolute reduction is favorable, but receivables remain 27.3% of total assets and annualized DSO remains elevated at 127 days. Accounts payable: -¥1.3bn (-26.4%) to ¥3.6bn - reduced supplier credit weakens the working-capital offset and contributes to the 172-day annualized cash conversion cycle. Total liabilities: -¥10.0bn (-27.2%) to ¥26.8bn - reinforces the already conservative capital structure and increases the equity funding share of assets. Current liabilities: -¥10.0bn (-33.1%) to ¥20.1bn - materially improves liquidity headroom, with current assets covering current liabilities by 5.1x.

Cash Flow Quality

Receivable days are 127 days on an annualized basis, exceeding the 60-day warning threshold. The root cause of this alert is a substantial trade-receivable balance of ¥43.0bn relative to annualized revenue, reflecting a long collection cycle associated with the company’s project and construction-related revenue profile. This may be partly characteristic of fire-safety installation contracts and period-end project billing schedules, but it remains high for a manufacturing and service company. The impact is that reported earnings require a substantial working-capital investment before conversion into cash. The annualized cash conversion cycle is 172 days, above the 120-day warning threshold. The long cycle is driven primarily by receivable duration rather than inventory, as inventories account for only 3.1% of total assets. Lower accounts payable also reduces the degree to which supplier credit offsets the collection cycle. The impact of the long cash conversion cycle is heightened sensitivity of operating cash generation to billing, collection timing, and project acceptance. Cash and deposits of ¥41.7bn provide a substantial liquidity buffer against this working-capital exposure. Inventory decreased 2.3% year on year to ¥4.9bn, which does not indicate broad inventory accumulation. The decline in trade receivables year on year is constructive in absolute terms, but the annualized DSO alert means collection efficiency remains a key operating metric.

Dividend Sustainability

The company paid an interim dividend of ¥50 per share and forecasts a full-year dividend of ¥100 per share. Based on forecast EPS of ¥197.08, the implied full-year dividend payout ratio is approximately 50.7%. This is within the sub-60% sustainability benchmark. The calculated payout ratio of 51.2% is also consistent with a balanced distribution policy. Retained earnings of ¥101.6bn provide substantial balance-sheet capacity to support the dividend. Cash and deposits of ¥41.7bn further support near-term dividend capacity. The low debt-to-equity ratio of 0.21x and very high liquidity ratios reduce financing-related constraints on shareholder distributions. Dividend sustainability is consequently supported by earnings, retained capital, and liquidity. The key determinant of whether the planned full-year distribution is covered by recurring earnings is execution of the fourth-quarter profit plan, as only 51.2% of full-year owner-attributable profit guidance had been achieved by Q3. The securities-sale gain of ¥2.5bn should not be regarded as a recurring source of dividend coverage.

Risk Assessment

Business risks include Project timing and completion risk: full-year guidance requires ¥48.0bn of Q4 revenue and an implied 17.7% Q4 operating margin, creating material sensitivity to construction progress, customer acceptance, and year-end revenue recognition., Maintenance and inspection profitability risk: segment revenue rose 5.9%, but segment profit fell 5.5% and margin contracted 210bp to 17.4%, indicating pressure from labor, service delivery, or contract mix., Fire-safety construction execution risk: ¥1.2bn of provisions for loss on construction contracts indicates exposure to cost overruns or unfavorable outcomes on individual projects., Working-capital risk: annualized DSO of 127 days and an annualized cash conversion cycle of 172 days expose cash conversion to customer billing and collection delays., Industry-specific risk: demand is linked to building construction, facility renewal, regulatory compliance, and installation activity; delays in construction schedules can shift equipment and installation revenue between periods..

Financial risks include Investment-portfolio earnings volatility: the ¥2.5bn gain on sales of investment securities supported pretax income, while investment securities increased to ¥12.1bn., Supplier-credit reduction: accounts payable declined 26.4% year on year, reducing the working-capital offset to receivables., Defined-benefit obligation exposure: net defined benefit liabilities are ¥4.9bn, though modest relative to equity and liquidity..

Key concerns include HIGH_RECEIVABLE_DAYS alert: DSO of 127 days is more than double the 60-day warning level. The likely context is project-based billing and acceptance timing, but the impact is delayed conversion of revenue and earnings into cash., LONG_CCC alert: the 172-day annualized cash conversion cycle exceeds the 120-day warning level. Long receivable duration and reduced accounts payable are the principal drivers, increasing reliance on the company’s cash reserve during periods of heavy project delivery., Consolidated operating-profit growth of 4.8% only marginally exceeded sales growth of 4.6%, because corporate costs rose 14.8% year on year., Pretax profit includes a material ¥2.5bn gain on sales of investment securities, equivalent to 28% of profit before tax, making net-income growth stronger than underlying operating-income growth alone would suggest..

Investment Implications

Key takeaways include Revenue, operating income, ordinary income, and owner-attributable profit all increased year on year through Q3., Gross-margin improvement was substantial, but higher corporate costs limited consolidated operating-margin expansion., Fire alarm equipment is the core profit contributor, while fire-extinguishing equipment delivered the strongest margin improvement., The balance sheet is highly liquid, with a 512.7% current ratio, 0.21x debt-to-equity ratio, and cash exceeding total liabilities., Full-year earnings delivery is heavily dependent on fourth-quarter seasonality and project execution., The dividend framework appears balanced, with an implied full-year payout ratio of approximately 50.7% based on guidance..

Metrics to watch include Fourth-quarter revenue and operating-profit conversion relative to the implied ¥48.0bn revenue and ¥8.5bn operating-income requirements, Maintenance and inspection segment margin, Corporate-cost growth relative to revenue growth, Annualized receivable days and cash conversion cycle, Provisions for loss on construction contracts, Magnitude and recurrence of gains or losses from investment securities, Fire-extinguishing equipment segment margin sustainability.

Regarding relative positioning, The company combines good operating profitability, an 8.6% operating margin and 6.4% net margin, with unusually strong liquidity and conservative leverage. Its annualized 6.1% ROE remains below the 8% benchmark because asset turnover is moderate and the company deliberately employs little financial leverage. Relative earnings quality is supported by broad segment revenue growth and margin improvement in fire-extinguishing equipment, but is tempered by securities-sale gains, rising corporate costs, and a lengthy working-capital cycle.