NOHMI BOSAI (6744) FY2027 Q1 Earnings Report

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Executive Summary

The Company returned to profitability from an operating loss in the same period of the previous year, resulting in a significant improvement in profitability. Revenue was ¥299.0B (+16.4% YoY), Operating Income was ¥10.1B (+566.8% from an operating loss of ¥2.2B in the same period of the previous year), Ordinary Income was ¥12.2B (+2608.9%), and Net Income was ¥4.5B (recovering from a loss of ¥1.4B in the same period of the previous year). Improved segment profitability, primarily in the Fire Protection Equipment Business, was the main driver of earnings growth, while operating leverage from higher revenue and fixed-cost absorption also contributed.

Factors Driving Earnings Changes

【Revenue】Revenue was ¥299.0B, up +16.4% YoY. By segment, Fire Protection Equipment was ¥103.4B (+19.5%), Fire Alarm Equipment was ¥102.1B (+5.9%), Maintenance and Inspection Services, etc. was ¥66.2B (+7.1%), and Other was ¥28.8B (+121.1%). Rapid expansion in the Fire Protection Equipment and Other businesses drove the increase in revenue. By timing of revenue recognition, revenue transferred over a period of time amounted to ¥193.1B, accounting for 64.6% of Revenue, and revenue recognition in line with construction progress supported the increase in revenue.

【Profit and Loss】Operating Income was ¥10.1B, representing a return to profitability from a loss of ¥2.2B in the same period of the previous year. The gross margin was 33.2%, the SG&A ratio was 29.8%, and the Operating Income margin improved to 3.4% from approximately -0.8% in the same period of the previous year. The Fire Protection Equipment Business had a profit margin of 19.5%, a significant increase from 8.9% in the previous year, and was the central contributor to the Company-wide improvement. Meanwhile, the profit margin of Maintenance and Inspection Services, etc. declined from 10.4% to 6.9%, resulting in a 29.3% decrease in profit. Ordinary Income was ¥12.2B, bolstered by non-operating income and expenses, which posted a net gain of ¥2.1B, including dividend income of ¥0.9B. Net Income remained at ¥4.5B, as the high effective tax rate of 63.2% prevented the improvement at the operating level from being fully reflected in bottom-line profit. Overall, the Company recorded higher revenue and higher profit.

Segment Analysis

The Fire Protection Equipment Business generated segment profit of ¥20.1B, accounting for 54.7% of total reported segment profit, and recorded the highest profitability among the four businesses with a profit margin of 19.5%. Fire Alarm Equipment posted Revenue of ¥102.1B (+5.9%), profit of ¥10.1B (+25.1%), and a profit margin of 9.9%, demonstrating steady improvement. Maintenance and Inspection Services, etc. recorded higher Revenue of ¥66.2B (+7.1%), but profit declined to ¥4.5B (▲29.3%), with its profit margin falling by approximately 3.5pt from the previous year. The deterioration in profitability of this recurring-revenue business warrants attention. Other expanded rapidly to ¥28.8B in Revenue (+121.1%) and turned profitable. Company-wide expenses were ¥26.6B, increasing +9.5% YoY, and constituted a reconciling factor between total segment profit and consolidated Operating Income.

Key Financial Metrics

【Profitability】The Operating Income margin improved to 3.4% from approximately ▲0.8% in the same period of the previous year, but remained below 5%. The Net Income margin was only 1.5%, due to the high effective tax rate of 63.2%. 【Cash Flow Quality】Accounts receivable were ¥445.4B, accounting for 25.9% of total assets, confirming an expansion in working capital accompanying the increase in Revenue. 【Investment Efficiency】ROE was 0.3% on a quarterly basis, indicating substantial room for improvement in capital efficiency. Profit-generating capacity remains low relative to total assets of ¥1718.4B. 【Financial Soundness】With an Equity Ratio of 78.9%, a current ratio of 372.7%, cash and deposits of ¥426.6B, and virtually no interest-bearing debt, the Company’s financial foundation is highly conservative.

Cash Flow Analysis

Although the Company does not disclose a cash flow statement, an examination of balance sheet movements indicates that cash and deposits increased to ¥426.6B from ¥354.4B in the same period of the previous year. Meanwhile, accounts receivable and notes receivable remained at ¥445.4B, exceeding cash and deposits, suggesting that the timing gap between revenue recognition under the percentage-of-completion method and cash collection may be expanding working capital. Interest-bearing debt was extremely limited, consisting only of short-term borrowings of ¥0.18B, resulting in a financial structure that does not depend on external financing. Inventories were ¥51.3B, maintaining a level comparable to the previous year, with no significant cash tied up in inventory.

Earnings Quality

Operating Income of ¥10.1B represented a substantive improvement, reflecting a return from an operating loss in the same period of the previous year. As a temporary factor, the Company recorded only an extraordinary loss of ¥0.1B, which was not material. The difference between Ordinary Income of ¥12.2B and Operating Income of ¥10.1B was attributable to a net gain of ¥2.1B in non-operating income and expenses. The main components were dividend income of ¥0.9B and equity in earnings of affiliates of ¥0.8B, both of which have the characteristics of recurring sources of income. However, Income Before Tax of ¥12.1B included ¥7.7B in income taxes and other taxes, resulting in an effective tax rate of 63.2%, substantially above the normal level. This high tax burden constrained the conversion of earnings into Net Income of ¥4.5B. In assessing earnings quality, attention should be paid to the fact that improvements at the operating and ordinary income levels were diluted by the tax burden. Comprehensive Income was ¥2.4B, below Net Income of ¥4.5B, primarily due to an adjustment of ▲¥3.5B related to retirement benefits.

Earnings Forecast and Guidance

The full-year Company plan calls for Revenue of ¥1576.0B (+12.8% YoY), Operating Income of ¥190.0B (+3.5%), and Ordinary Income of ¥198.4B (+2.5%), and remained unchanged during the current quarter. Q1 progress rates were 19.0% for Revenue, 5.3% for Operating Income, 6.1% for Ordinary Income, and 3.4% for Net Income, all below the simple progress benchmark of 25%. The delay in profit progress is particularly pronounced. In addition to profitability improvements centered on Fire Protection Equipment, recovery in the profit margin of Maintenance and Inspection Services, etc., and absorption of Company-wide expenses will be key to achieving the full-year plan from the second half onward.

Shareholder Returns

The dividend forecast is ¥116 annually, representing a planned increase from the previous year’s actual dividend payments, comprising the interim and year-end dividends. Based on the dividend forecast, the Payout Ratio is approximately 51.3% against forecast EPS of ¥226.12. No revisions have been made to the dividend forecast as of the current quarter.

Risk Factors

1. High tax burden risk: The effective tax rate was 63.2%, substantially above the normal level, with income taxes and other taxes of ¥7.7B recorded against Income Before Tax of ¥12.1B. If this condition persists, improvements at the operating and ordinary income levels may not be fully converted into Net Income or the capacity for shareholder returns.

2. Risk of prolonged working capital cycle: Accounts receivable and notes receivable amounted to ¥445.4B, accounting for 25.9% of total assets. The collection cycle tends to lengthen due to the impact of acceptance and billing timing under the percentage-of-completion method. Managing cash conversion during periods of revenue expansion will be important.

3. Variability in segment profitability: Despite a 7.1% increase in Revenue, Operating Income in Maintenance and Inspection Services, etc. declined 29.3%, resulting in a lower profit margin. Continued deterioration in the profitability of this recurring-revenue segment could affect the stability of Company-wide earnings.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Both the Operating Income margin and Net Income margin were below the industry median, indicating that profitability was relatively low within the industry.

Growth and Capital Efficiency

The Revenue growth rate was significantly above the industry median, representing a high pace of revenue growth within the industry.

※Source: Compiled by the Company

Key Points in the Earnings Results

1. The most notable feature of the earnings results was the return to an Operating Income profit of ¥10.1B from an operating loss in the same period of the previous year, with segment profitability improving significantly, particularly in Fire Protection Equipment.

2. Revenue increased +16.4% YoY, exceeding the industry average, but progress rates for Operating Income and Net Income against the full-year plan were 5.3% and 3.4%, respectively, both substantially below the simple progress benchmark of 25%, indicating a performance structure weighted toward the second half.

3. While the conservative nature of the financial foundation, including an Equity Ratio of 78.9%, a current ratio of 372.7%, and minimal interest-bearing debt, is particularly notable within the industry, the high effective tax rate of 63.2% and the prolonged working capital cycle warrant monitoring to determine whether operating improvements will translate into Net Income and cash generation.

Theoretical Share Price (Reference Value)

Sensitivity: ¥2,292–¥2,422 at ±1% for the cost of equity, and ¥2,355–¥2,357 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference from the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated solely from publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, nor does it predict or guarantee future share prices.)

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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 disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting with a professional as necessary.

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AI Financial Analysis

Executive Summary

FY2027 Q1 was a strong operational turnaround for Nohmi Bosai, with revenue growth and a return to operating profitability. Revenue rose 16.4% year on year to ¥29.90bn. Operating income improved to ¥1.01bn from a ¥0.22bn operating loss in the prior-year quarter. Ordinary income increased to ¥1.22bn from ¥0.05bn, supported by the operating recovery and ¥0.09bn of dividend income. Net income attributable to owners of the parent was ¥0.45bn, compared with a ¥0.10bn loss a year earlier. Gross profit increased 33.3% to ¥9.92bn, substantially outpacing revenue growth. The gross margin expanded by approximately 420bp to 33.2% from 29.0%, indicating improved project mix, execution, and/or cost absorption. The operating margin recovered to 3.4% from negative 0.8%, although it remains below the 5% level generally associated with solid operating efficiency. Segment profitability was led by fire extinguishing equipment, where segment profit rose 161.8% year on year. Fire alarm equipment also delivered a 25.1% increase in segment profit. In contrast, maintenance and inspection revenue grew but segment profit declined, moderating the consolidated margin recovery. The other businesses category grew sharply, helped by areas including parking guidance/control systems, weather/disaster prevention, and space/defense. The effective tax rate was elevated at 63.2%, limiting the translation of pre-tax profit into net income. Comprehensive income of ¥0.24bn trailed net income because of negative other comprehensive income, principally pension-related remeasurements. The balance sheet remains exceptionally liquid and lightly levered, with cash of ¥42.66bn against interest-bearing debt of only ¥0.18bn. Q1 progress versus full-year guidance is below the standard 25% seasonal benchmark, particularly for operating profit, but the company’s project-based business can produce material quarterly timing effects. The key issue for the remainder of FY2027 is whether improved gross profitability and fire-extinguishing project execution can sustain enough margin expansion to support the full-year operating-income target.

Profitability Analysis

The reported annualized DuPont ROE is 1.3%, composed of a 1.5% net profit margin, 0.696x annualized asset turnover, and 1.27x financial leverage. The principal driver of the year-on-year improvement was the recovery in operating margin, as the company moved from an operating loss to a 3.4% operating margin. Gross margin expanded approximately 416bp year on year to 33.2%, while SG&A increased 16.3% to ¥8.90bn, almost in line with revenue growth of 16.4%. This indicates that the earnings recovery was primarily driven by gross-profit improvement rather than a substantial reduction in fixed-cost intensity. The EBIT margin of 3.4% remains below the 5% operating-efficiency threshold and is a material quality alert: modest adverse project mix, procurement inflation, or execution costs could still have a disproportionate effect on earnings. Financial leverage is conservative rather than a source of ROE enhancement, reflecting the equity-heavy balance sheet. The tax burden factor was only 0.371, equivalent to a 63.2% effective tax rate, well below the normal-tax-burden benchmark of above 0.70; this was the main constraint between ¥1.21bn of pre-tax profit and ¥0.45bn of net income. Interest burden was favorable at 1.197 because non-operating income exceeded the modest interest cost, while interest coverage was very strong at 144.7x. The core business by segment operating-income contribution was fire extinguishing equipment: revenue rose 19.4% to ¥10.33bn and segment profit rose 161.8% to ¥2.01bn, lifting its segment margin to 19.5% from 8.9%. Fire alarm equipment revenue increased 5.5% to ¥10.12bn and segment profit rose 25.1% to ¥1.01bn, with margin improving to 9.9% from 8.4%. Maintenance and inspection revenue grew 7.1% to ¥6.62bn, but segment profit fell 29.3% to ¥0.45bn and margin compressed to 6.9% from 10.4%. Other businesses revenue rose 126.3% to ¥2.83bn and segment profit reached ¥0.20bn, compared with break-even in the prior-year period. Consolidated operating income was held below aggregate segment profit by ¥2.66bn of corporate expenses, principally general and administrative expenses and R&D, versus ¥2.43bn a year earlier. The sustainability of the Q1 profit recovery therefore depends on preserving the improved gross margin while containing the growth in corporate costs and restoring maintenance-and-inspection margin.

Growth Assessment

Revenue growth of 16.4% was broad based across the three reportable segments and other businesses. The largest contribution to incremental revenue came from fire extinguishing equipment, which added ¥1.68bn year on year, followed by other businesses, which added ¥1.58bn. Fire alarm equipment added ¥0.53bn and maintenance and inspection added ¥0.44bn. Revenue recognized over time increased 18.5% to ¥19.31bn, compared with a 12.9% increase in point-in-time revenue to ¥10.59bn, consistent with robust activity in project-based work. The margin-led recovery in fire extinguishing equipment is especially important because it is both the largest profit contributor and the major source of Q1 segment-profit growth. Maintenance and inspection remains strategically relevant as a recurring-service-oriented activity, but its Q1 margin decline warrants close monitoring. Management’s FY2027 full-year forecast calls for revenue of ¥157.60bn, up 12.8%, and operating income of ¥19.00bn, up 3.5%. Q1 revenue represents 19.0% of the full-year forecast, 6.0 percentage points below a simple 25% Q1 progress benchmark. Q1 operating income represents 5.3% of forecast, 19.7 percentage points below the benchmark. Ordinary income progress is 6.1%, while net income attributable to owners progress is 3.4%. These progress rates imply a heavily back-end-loaded earnings profile and require a significant acceleration in project completion, margin realization, or both during subsequent quarters. Full-year guidance implies an operating margin of 12.1%, well above the Q1 margin of 3.4%, making execution against higher-margin projects the principal earnings variable. The forecast has not been revised, indicating that management continues to view the full-year target as achievable.

Financial Health

Financial health is strong, underpinned by a 78.6% capital adequacy ratio and total equity of ¥135.54bn. Current assets of ¥105.64bn exceed current liabilities of ¥28.35bn by ¥77.30bn, producing a current ratio of 372.7% and a quick ratio of 354.6%. These liquidity ratios are comfortably above conventional safety thresholds and do not indicate a maturity mismatch. Cash and deposits of ¥42.66bn exceed short-term loans of ¥0.18bn by approximately 2,370x. Interest-bearing debt is immaterial relative to equity, and debt-to-capital is effectively 0.0%. The reported debt-to-equity ratio of 0.27x remains conservative and is far below the 2.0x level that would signal aggressive leverage. The refinancing-risk alert arises because 100% of the small ¥0.18bn debt balance is short term. In context, this does not represent material refinancing risk given the cash balance and very high interest coverage; it instead indicates that the company has negligible reliance on long-dated debt financing. Accounts receivable declined ¥17.82bn, or 28.6%, year on year to ¥44.54bn, while cash increased ¥7.22bn to ¥42.66bn. The receivables reduction strengthens liquidity and may reflect collections or project billing timing, though annualized DSO remains high at 136 days. Inventories were ¥5.13bn, equal to 3.0% of total assets, while raw materials and work in process were ¥8.22bn and ¥1.96bn, respectively, reflecting the procurement and production requirements of fire-protection equipment projects. Investment securities of ¥13.60bn account for 7.9% of assets and provide an additional financial-asset buffer. Goodwill of ¥3.73bn represents only 2.8% of equity and 2.2% of assets, so balance-sheet dependence on acquired business value is limited. Intangible assets total ¥10.02bn, or 5.8% of assets, also below concentration-risk thresholds. Defined-benefit liabilities of ¥6.07bn and provisions for bonuses of ¥6.01bn are meaningful operating obligations but are well supported by the group’s liquidity and capital base. Asset-retirement obligations are limited at ¥0.14bn, or well below 2% of liabilities.

Notable B/S Changes

Accounts receivable: -¥17.82bn (-28.6%) year on year to ¥44.54bn - supports liquidity and suggests improved collection or billing timing, although annualized DSO remains elevated at 136 days. Cash and deposits: +¥7.22bn (+20.4%) year on year to ¥42.66bn - materially reinforces the net-cash position and offsets the small concentration of debt in short-term borrowings. Current liabilities: -¥6.64bn (-19.0%) year on year to ¥28.35bn - further improves liquidity, alongside the reduction in accounts payable and other current obligations. Provision for bonuses: +¥10.80bn (+21.9%) year on year to ¥6.01bn - a meaningful accrued personnel-cost obligation that should be monitored against seasonal labor-cost recognition and profitability. Work in process: +¥5.50bn (+39.0%) year on year to ¥1.96bn - indicates increased production or project activity and should be assessed alongside project completion and cash-conversion trends.

Cash Flow Quality

The Q1 earnings profile should be assessed primarily through balance-sheet working-capital indicators. Accounts receivable declined ¥17.82bn year on year, which is constructive for cash realization and balance-sheet liquidity. However, the annualized DSO of 136 days exceeds the 60-day warning threshold, indicating a structurally long collection cycle associated with project-based customer billing and acceptance processes. The annualized cash conversion cycle of 184 days also exceeds the 120-day warning threshold. The root cause of the long cycle is the combination of extended receivable collection timing and the working-capital needs of equipment and construction-related projects. For a fire-protection systems manufacturer and installer, project milestones and customer acceptance can create longer billing and collection cycles than in simpler product-distribution models, but the absolute level remains a material efficiency constraint. The impact is that revenue and accounting profit can be more exposed to timing differences in collections and project completion, increasing the importance of receivables discipline. Inventory exposure appears manageable relative to total assets, but raw materials and work in process require continued monitoring alongside the long conversion cycle. Operating profit of ¥1.01bn is supported by an improved gross margin rather than by a large non-operating gain. Non-operating income was ¥0.23bn, only 0.8% of revenue, including ¥0.09bn of dividend income, and therefore does not dominate earnings. Extraordinary loss was limited to ¥0.01bn, so reported pre-tax profit is substantially recurring in composition. The elevated 63.2% effective tax rate materially reduced net-income conversion in Q1. The negative ¥0.21bn other comprehensive income charge also reduced comprehensive income below net income. Sustained cash conversion will depend on maintaining the receivables reduction, shortening DSO where contract terms permit, and avoiding accumulation of work in process as revenue scales.

Dividend Sustainability

The full-year dividend forecast is ¥116 per share, with no revision disclosed. Against forecast EPS of ¥226.12, the implied forecast dividend payout ratio is approximately 51.3%. This is below the 60% sustainability benchmark and leaves a reasonable earnings retention buffer. The current balance sheet provides substantial support for the dividend, with ¥42.66bn of cash and minimal interest-bearing debt. The Q1 EPS of ¥7.65 represents only 3.4% of forecast EPS, so quarterly EPS should not be extrapolated mechanically for dividend coverage in a seasonal project business. The main condition for dividend sustainability is delivery of the full-year profit forecast, particularly the implied margin improvement after Q1. The company’s low leverage reduces the risk that financing obligations would compete with shareholder distributions. No share-buyback data is provided, so assessment is limited to the dividend payout ratio rather than a total return ratio.

Risk Assessment

Business risks include Project execution and margin risk: the consolidated operating margin was only 3.4%, and achievement of the 12.1% full-year forecast margin requires a substantial improvement in subsequent quarters., Maintenance and inspection profitability risk: segment revenue increased 7.1%, but segment profit declined 29.3% and margin compressed 350bp to 6.9%., Fire-protection manufacturing and installation risk: procurement costs, labor availability, construction schedules, customer acceptance, and potential defects or warranty costs can affect project profitability., Working-capital risk: annualized DSO of 136 days and a 184-day annualized cash conversion cycle indicate slow conversion of revenue into cash., Demand timing risk: revenue and profit recognition from construction and facility-investment projects can be uneven across quarters..

Financial risks include High tax burden: the 63.2% effective tax rate reduced the tax-burden factor to 0.371 and materially constrained net-income conversion; persistence would depress ROE and EPS relative to operating performance., Low capital efficiency: the reported annualized ROE of 1.3% and quality-alert ROIC of 2.2% are below 5%, reflecting a large capital base relative to Q1 earnings., Short-term debt concentration: 100% of debt is short term, although the ¥0.18bn amount is immaterial relative to ¥42.66bn of cash and therefore has limited practical refinancing impact., Market-value risk in financial assets: investment securities total ¥13.60bn, and other comprehensive income was negative in Q1..

Key concerns include Highest priority: whether fire-extinguishing equipment can retain its Q1 19.5% segment margin and whether the consolidated operating margin can move materially toward the 12.1% implied by full-year guidance., High priority: improvement in maintenance and inspection margins, because this segment’s profit decline offset part of the gains elsewhere., High priority: collection-cycle management, as 136-day annualized DSO and 184-day annualized CCC can constrain cash efficiency despite strong headline liquidity., Moderate priority: normalization of the effective tax rate, which was unusually high relative to pre-tax income in Q1., Moderate priority: the gap between Q1 operating-profit progress of 5.3% and the standard 25% quarterly benchmark, requiring significant second-half execution..

Investment Implications

Key takeaways include Q1 delivered a clear turnaround from a prior-year operating loss to ¥1.01bn of operating income, driven by 16.4% revenue growth and a 420bp gross-margin expansion., Fire extinguishing equipment was the core profit engine, with segment profit of ¥2.01bn and a 19.5% margin., The balance sheet is a major strength: 372.7% current ratio, ¥42.66bn cash, and only ¥0.18bn of interest-bearing debt., Operating efficiency remains below preferred levels, with a 3.4% EBIT margin, 1.3% annualized ROE, and 2.2% ROIC., The full-year forecast requires a pronounced acceleration from Q1, especially in operating profit and net income., The implied 51.3% forecast dividend payout ratio appears balanced against forecast earnings and the net-cash financial position..

Metrics to watch include Consolidated operating margin versus the 12.1% margin implied by FY2027 guidance, Fire extinguishing equipment segment margin and revenue conversion, Maintenance and inspection segment-profit recovery, Annualized DSO of 136 days and annualized cash conversion cycle of 184 days, Effective tax rate and tax-burden factor, Progress against full-year operating-income guidance of ¥19.00bn, Gross margin sustainability following the Q1 expansion to 33.2%.

Regarding relative positioning, Nohmi Bosai combines a very conservative balance sheet and limited goodwill exposure with a low-Q1-return profile. Its financial resilience is stronger than that of a debt-funded industrial peer, but current operating efficiency and working-capital velocity are weaker than preferred benchmarks. The earnings profile is particularly dependent on project mix, construction execution, and the timing of revenue recognition in fire-protection systems.