| Metric | Current | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥241.6B | ¥224.6B | +7.5% |
| Operating Income | ¥29.4B | ¥32.9B | -10.5% |
| Ordinary Income | ¥31.5B | ¥35.4B | -11.0% |
| Net Income | ¥22.7B | ¥25.5B | -11.0% |
| ROE | 8.9% | 10.0% | - |
For the fiscal year ended March 2026, revenue was ¥241.6B (YoY +¥17.0B, +7.5%), achieving top-line growth, while Operating Income was ¥29.4B (YoY -¥3.5B, -10.5%), Ordinary Income was ¥31.5B (YoY -¥3.9B, -11.0%), and Net income attributable to owners of parent was ¥20.3B (YoY -¥2.1B, -9.4%), resulting in a revenue-up/profit-down outcome. The core WaterHealthCare business performed steadily with revenue of ¥211.4B (+8.0%), but SG&A rose to ¥134.5B (YoY +¥13.0B), outpacing the increase in gross profit (+¥9.6B) and directly causing the decline in operating profit. Operating margin declined by 240bp to 12.2% (prior 14.6%), and net margin tightened by 160bp to 9.4% (prior 10.0%), indicating a notable deterioration in profitability.
【Revenue】 Revenue rose to ¥241.6B (YoY +7.5%). By segment, the core WaterHealthCare Business recorded ¥211.4B (sales mix 87.5%, YoY +8.0%), driven by higher water purifier unit sales and expansion of the after-sales market, which lifted corporate top-line. The MedicalRelated Business posted ¥30.2B (sales mix 12.5%, +4.4%) with modest growth. Gross margin fell 80bp to 67.9% (prior 68.7%), as cost of goods sold increased at a slightly faster pace than revenue, with COGS rising by ¥77.7B.
【Profitability】 Gross profit increased to ¥163.9B (YoY +¥9.6B, +6.2%) alongside revenue growth, but SG&A rose to ¥134.5B (YoY +¥13.0B, +10.7%), a double-digit increase that more than offset gross profit gains. As a result, Operating Income declined to ¥29.4B (-10.5%), and Operating margin fell 240bp to 12.2% (prior 14.6%). SG&A ratio worsened to 55.7% (prior 54.1%), with advertising, personnel, and upfront R&D costs pressuring profits. By segment, WaterHealthCare’s operating margin fell 200bp to 12.8% (prior 14.8%), and MedicalRelated plunged 590bp to 7.6% (prior 13.5%), with the latter’s profitability deterioration particularly dragging on corporate margins. Non-operating income, including interest income of ¥1.1B, provided limited support, leaving Ordinary Income at ¥31.5B (-11.0%). Extraordinary gains included securities disposal gains of ¥1.5B and property disposal gains of ¥0.4B, which partially contributed to Net income of ¥20.3B (-9.4%), although these are of limited sustainability. After corporate taxes of ¥8.7B and non-controlling interests of ¥2.4B, Net income attributable to owners of parent was ¥20.3B (prior ¥22.4B), concluding the year with revenue up and profits down.
The WaterHealthCare Business recorded revenue of ¥211.4B (YoY +8.0%), Operating Income of ¥27.1B (YoY -6.4%), and an operating margin of 12.8% (prior 14.8%), showing revenue growth but profit contraction. Increased unit sales of water purifiers and aftermarket expansion supported top-line growth, while higher promotion expenses and personnel costs compressed margins. The MedicalRelated Business reported revenue of ¥30.2B (+4.4%), Operating Income of ¥2.3B (-41.3%), and an operating margin of 7.6% (prior 13.5%), a substantial profit decline driven by upfront investments and increased R&D associated with expansion in medical and preventive healthcare areas, significantly worsening profitability and contributing to the company-wide margin decline. Both segments maintained resilient revenues, but cost increases uniformly pressured margins, making margin recovery a key issue going forward.
【Profitability】Operating margin was 12.2% (prior 14.6%), down 240bp, and net margin was 9.4% (prior 10.0%), down 160bp, with acute SG&A growth and segment margin deterioration driving a material retreat in profitability. ROE was 8.9%, decomposed as Net margin 8.4% × Asset turnover 0.67 × Financial leverage 1.42, with the decline driven mainly by lower profitability. Gross margin remained high at 67.9% (prior 68.7%) but decreased by 80bp, affected by price competition and changes in cost mix. 【Cash Quality】Operating Cash Flow / Net Income was 1.40x (benchmark >1.0), indicating good cash backing of earnings, and the accrual ratio stood at -2.3%, within a healthy range. Conversely, Operating CF / EBITDA was 0.83x, below 0.9x, as accounts receivable collection delays (-¥7.8B) and increased inventories constrained cash conversion. DSO was 108 days and CCC was 160 days, revealing deterioration in working capital efficiency. 【Investment Efficiency】Capital expenditures were ¥5.2B, 1.02x depreciation of ¥5.1B, maintaining replacement investment. Marketable securities increased markedly to ¥28.6B (YoY +¥15.5B, +118.9%), raising exposure to market price volatility. 【Financial Soundness】Equity Ratio was 70.6%, very high, with current ratio 302% and quick ratio 302%, indicating minimal short-term liquidity risk. Debt/EBITDA was 0.29x and interest coverage >500x, reflecting conservative leverage and very high financial resilience.
Operating Cash Flow was ¥28.5B (YoY +6.6%), remaining solid, and the ratio of Operating CF to Net income before tax (taxable income) of ¥31.5B was 1.40x, indicating good cash backing of profits. Subtotal (before working capital changes) was ¥37.0B, adding non-cash charges such as depreciation ¥5.1B and goodwill amortization ¥0.4B. On working capital, increases in accounts receivable absorbed cash of -¥7.8B and inventories -¥0.1B, while increases in advance receipts contributed +¥3.7B. After corporate tax payments of ¥9.5B, Operating CF totaled ¥28.5B. Investing CF was -¥20.7B, mainly comprising capital expenditures -¥5.2B, acquisition of marketable securities -¥12.0B, and acquisition of subsidiary shares -¥3.7B, partially offset by securities redemptions +¥10.0B and sale proceeds +¥2.0B. Free Cash Flow was ¥7.8B (Operating CF + Investing CF), yielding an FCF coverage ratio of 0.69x against total returns (dividends ¥10.8B and capital expenditures ¥5.2B), indicating insufficiency and leading to the use of abundant cash deposits of ¥142.1B to fund returns and investments. Financing CF was -¥24.1B, primarily for share buybacks -¥11.6B, dividend payments -¥10.8B, and debt repayments -¥1.2B. Cash and cash equivalents at year-end were ¥137.1B (beginning ¥153.9B), slightly down but still maintaining strong liquidity.
Recurring earnings are centered on Operating Income of ¥29.4B from core operations; non-operating income totaled ¥2.6B including interest income of ¥1.1B, about 1.1% of sales, indicating that income sources primarily rely on business activities. Extraordinary items included disposal gains on securities ¥1.5B and property disposal gains ¥0.4B (total special gains ~¥0.96B) and special losses such as asset retirement losses ¥0.18B, with the net impact of special items on Net income of ¥20.3B being approximately 4%, thus limited. Equity-in-affiliates income was ¥0B, indicating almost no contribution from affiliates. On a consolidated basis, Operating CF ¥28.5B versus Net income ¥22.7B yields an Operating CF / Net income ratio of 1.26x and an accrual ratio of -2.3%, indicating accounting profits are backed by cash flow and the quality of earnings is good. The gap between Ordinary Income ¥31.5B and Net income ¥20.3B is mainly due to corporate taxes ¥8.7B and non-controlling interests ¥2.4B; distortions from temporary accounting adjustments or valuation gains/losses are small, supporting the characterization of a highly recurring earnings structure.
Full-year guidance forecasts Revenue ¥270.0B (YoY +11.8%), Operating Income ¥33.0B (YoY +12.2%), Ordinary Income ¥35.0B (YoY +11.2%), and Net Income ¥22.0B (YoY +8.5%). The company plans double-digit revenue growth and Operating Income increase of ¥3.6B year-over-year, aiming for a reversal from this year’s margin adjustments. The plan assumes maintaining Operating margin around 12.2% (current-year result), contingent on controlling SG&A and improving segment-level profitability. Recovery of MedicalRelated profitability and sustaining WaterHealthCare margins are key to achieving the plan. If the pace of increase in advance receipts (current-year +¥3.7B) continues, it would signal robust order prospects as a leading indicator; however, unless working capital efficiency (DSO, CCC) simultaneously improves, upside to cash generation will be limited. Achieving the plan requires SG&A control, price/mix improvements, and realizing scale economies through customer-base expansion.
Year-end dividend is ¥130 per share, with a payout ratio of 44.5% (based on Net income), a mid-level ratio. Total dividends were ¥10.8B, with good coverage relative to Operating CF of ¥28.5B. Share buybacks of ¥11.6B were executed, making total shareholder returns approximately ¥22.4B, and Total Return Ratio is about 110% [(Dividends ¥10.8B + Buybacks ¥11.6B) ÷ Net income ¥20.3B], a high level. With Total Return Ratio above the 80% benchmark, and abundant cash deposits of ¥142.1B and low leverage (Debt/EBITDA 0.29x), this is sustainable in the short term, but mid-term reassessment of the balance between FCF improvement and the pace of returns is desirable. If next-year profit growth is realized and working capital efficiency improves, sustaining return capacity will be feasible.
Segment concentration risk: The WaterHealthCare Business accounts for 87.5% of revenue, indicating high single-business dependency, leaving the company vulnerable to demand-supply shifts in the water purifier market, regulatory changes, and intensified competition. With MedicalRelated profitability having deteriorated sharply (operating margin 7.6%, prior 13.5%), insufficient portfolio diversification means a slowdown in the core business would directly impact consolidated performance.
Deterioration in working capital efficiency: DSO 108 days and CCC 160 days reflect delays in receivables collection and inventory turnover, and Operating CF / EBITDA of 0.83x remains low. Accounts receivable increased, creating a cash outflow of -¥7.8B and constraining FCF generation. Without strengthened credit controls and faster collection processes, cash generation will remain constrained, limiting investment capacity and return distribution.
Margin pressure and rising SG&A: SG&A grew 10.7% YoY, outpacing revenue growth (+7.5%), and Operating margin fell to 12.2% (prior 14.6%), a 240bp decline. MedicalRelated’s operating margin dropped sharply to 7.6% (prior 13.5%), with promotional spending, personnel, and R&D upfront investments pressuring profitability. Delays in cost optimization or revising pricing strategy could entrench margin deterioration and erode ROE and shareholder return capacity.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 12.2% | 7.8% (4.6%–12.3%) | +4.4pt |
| Net Margin | 9.4% | 5.2% (2.3%–8.2%) | +4.2pt |
The company’s Operating margin of 12.2% and Net margin of 9.4% exceed manufacturing sector medians (7.8%, 5.2%), placing it in the upper tier within the industry. However, Operating margin declined from 14.6% last year to 12.2% this year, somewhat reducing relative advantage within peers.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 7.5% | 3.7% (-0.4%–9.3%) | +3.8pt |
Revenue growth of 7.5% surpasses the manufacturing median of 3.7%, maintaining performance above industry average on top-line expansion.
※Source: Company aggregation
Feasibility of margin recovery: This year, rapid SG&A growth and deterioration in MedicalRelated profitability drove Operating margin down 240bp to 12.2% (prior 14.6%). Next-year guidance assumes Operating Income ¥33.0B (+12.2%), predicated on margin recovery; achieving this will require SG&A control, segment-level profitability improvement, and price/mix adjustments. Monitor quarterly segment margin trends and changes in cost structure to assess plan feasibility.
Working capital efficiency and cash generation: With DSO 108 days and CCC 160 days, working capital efficiency has worsened and Operating CF / EBITDA 0.83x indicates room for improvement in cash conversion. Correcting receivables collection and optimizing inventory management could generate FCF upside and support sustainability of the 110% Total Return Ratio. Going forward, the pace of CCC normalization and Operating CF growth will be key indicators for the sustainability of dividends and buybacks.
Marketable securities and market risk: Marketable securities were increased to ¥28.6B (YoY +118.9%), raising exposure to market price volatility. Fair value adjustments are slightly negative at -¥0.2B, but market movements could widen the divergence between comprehensive income and Net income. Assess the rationale for securities holdings (interest/dividend income expansion, efficient use of surplus cash) and monitor the adequacy of risk management policies.
This report was auto-generated by AI analyzing XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company from public financial statements. Investment decisions are your responsibility; please consult a professional adviser as appropriate.