TOA (6809) FY2026 Q3 Earnings Report

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Executive Summary

This was a strong earnings period in which Revenue increased and Operating Income grew substantially, clearly demonstrating improved profitability. Revenue was ¥386.4B (+7.7% YoY), Operating Income was ¥30.9B (+70.8%), Ordinary Income was ¥35.3B (+56.8%), and Net Income attributable to owners of the parent was ¥22.4B (+73.6%). While maintaining a gross margin of 45.5%, the Company restrained the growth of SG&A expenses, resulting in an Operating Income margin of 8.0%, an improvement of approximately 3pt from the previous year. The effect of operating leverage was the primary driver of this period’s earnings improvement.

Factors Affecting Earnings

【Revenue】Revenue was ¥386.4B, representing a 7.7% YoY increase. By region, Japan was the largest segment at ¥254.9B, accounting for 66.0% of total Revenue, followed by AsiaAndPacific (¥73.5B) and EuropeMiddleEastAndAfrica (¥56.2B). All regions secured profitability, resulting in a geographically diversified earnings structure.

【Profit and Loss】Operating Income was ¥30.9B (+70.8%), substantially exceeding the rate of Revenue growth. By region, AsiaAndPacific had the highest Operating Income margin at 17.3%, followed by Japan at 12.5%, EuropeMiddleEastAndAfrica at 10.3%, America at 9.9%, and ChinaAndEastAsia at 8.7%. Ordinary Income was ¥35.3B (+56.8%); non-operating income of ¥5.8B, including dividend income of ¥1.9B and foreign exchange gains of ¥1.8B, contributed to the increase, although these items are less likely to be as sustainable as the improvement in Operating Income. Net Income attributable to owners of the parent was ¥22.4B (+73.6%). In conclusion, the Company achieved higher Revenue and higher profits.

Segment Analysis

The Japan segment, with Revenue of ¥254.9B and Operating Income of ¥31.9B, is the core business driving more than half of total Company profit. AsiaAndPacific (Revenue of ¥73.5B, profit margin of 17.3%) demonstrated the highest profitability among all segments, making a significant contribution to profit relative to its Revenue scale. EuropeMiddleEastAndAfrica (Revenue of ¥56.2B, profit margin of 10.3%) secured stable profitability despite its mid-sized scale. America (Revenue of ¥22.1B, profit margin of 9.9%) and ChinaAndEastAsia (Revenue of ¥14.6B, profit margin of 8.7%) are relatively small in scale but remained profitable. The fact that all five regions are profitable indicates the stability of the business portfolio.

Key Financial Indicators

【Profitability】The Operating Income margin was 8.0%, while the Net Income margin (on an attributable-to-owners-of-the-parent basis) was 5.8%, representing a substantial improvement from the same period of the previous year (Operating Income margin of approximately 5.0%). The gross margin of 45.5% absorbed the SG&A expense ratio of 37.5%, allowing operating leverage to take effect.【Cash Quality】DSO was 76 days, inventory days were 201 days, and CCC was 232 days, indicating prolonged working capital retention and a structure in which cash conversion is prone to lag profit growth.【Investment Efficiency】ROE was 4.3% and total asset turnover was only 0.527x, indicating that capital efficiency remained low relative to the improvement in the profit margin. The holding of surplus assets, including cash and deposits of ¥244.7B and investment securities of ¥77.8B, is one factor suppressing ROE.【Financial Soundness】The Equity Ratio was 79.0%, while the current ratio was approximately 525%, calculated as current assets of ¥519.7B / current liabilities of ¥99.0B, an extremely high level. Interest-bearing debt was limited to short-term borrowings of ¥20.97B, resulting in a minimal debt burden.

Cash Flow Analysis

Although disclosure of the statement of cash flows could not be confirmed, the trends in the balance sheet provide insight into fund movements. Cash and deposits were ¥244.7B, an increase of +¥55.0B from ¥189.7B in the previous year, suggesting an expansion in financial capacity accompanying profit growth. Meanwhile, accounts receivable of ¥107.2B and inventories of ¥96.0B (up from ¥86.96B in the previous year) were both increasing, potentially indicating that the expansion of working capital partially offset cash generation. Accounts payable were ¥34.7B, down from ¥39.5B in the previous year, and the reduction in trade payables also acted to increase the working capital burden. Property, plant and equipment was ¥99.4B, down from ¥105.9B in the previous year, suggesting that large-scale capital investment was restrained. Overall, although the Company is in a phase of profit growth, the increase in inventories and accounts receivable is tying up funds in working capital, leaving room to improve the speed of cash conversion from profits.

Quality of Earnings

Of Ordinary Income of ¥35.3B, non-operating income of ¥5.8B consisted of dividend income of ¥1.9B, foreign exchange gains of ¥1.8B, and interest income of ¥0.9B, among other items. Although this represented only approximately 1.5% of Revenue, part of the +56.8% growth in Ordinary Income depended on these non-operating sources of income. Foreign exchange gains and dividend income are susceptible to market conditions and the value of held assets, and cannot be considered as recurring as the improvement in Operating Income. Comprehensive Income was ¥13.3B, below Net Income attributable to owners of the parent of ¥22.4B, with valuation differences on securities of -¥8.4B and foreign currency translation adjustments of -¥3.8B acting as downward factors. The divergence between Net Income and Comprehensive Income reflects fluctuations in the market value of the ¥77.8B investment securities held and the foreign currency translation effects of overseas subsidiaries, and should be assessed separately from the earnings power of the core business.

Earnings Forecasts and Guidance

Progress toward the Full-Year earnings forecast was 70.9% for Revenue (forecast: ¥545.0B) and 68.6% for Operating Income (forecast: ¥45.0B), both slightly below the standard progress rate of 75% as of Q3. Meanwhile, Ordinary Income reached 75.0% (forecast: ¥47.0B), in line with the plan, while Net Income reached 81.4% (forecast: ¥27.5B), indicating faster progress. The Full-Year plan assumes an Operating Income margin of 8.3%, meaning that a level slightly above the 8.0% achieved for the cumulative Q3 period will be required in Q4. Both the Revenue and profit plans are weighted toward Q4, making order intake and shipment trends toward the fiscal year-end key to achieving the plan.

Shareholder Returns

The Q2 dividend was ¥40.00 per share, while the Full-Year dividend forecast is ¥85.00. The approximate Payout Ratio against cumulative Net Income of ¥22.4B is in the 60% range, while the forecast Payout Ratio against forecast EPS of ¥87.89 is approximately 96.7%, a high level. The Company’s financial capacity, supported by an Equity Ratio of 79.0% and cash and deposits of ¥244.7B, supports its ability to pay dividends. However, given the high forecast Payout Ratio, the sustainability of dividends may be sensitive to future profit levels and the extent of working capital reduction, which requires monitoring.

Risk Factors

1. Working capital retention risk: DSO of 76 days, inventory days of 201 days, and CCC of 232 days all exceed typical manufacturing industry levels. Product inventories of ¥96.0B and accounts receivable of ¥107.2B tie up funds, making the Company susceptible to inventory valuation and collection delay impacts when demand fluctuates.

2. Low capital efficiency: ROE of 4.3% and total asset turnover of 0.527x remain low relative to the improvement in the Operating Income margin (8.0%). The presence of surplus assets, including cash and deposits of ¥244.7B and investment securities of ¥77.8B, constrains asset efficiency.

3. Non-recurring nature of non-operating income: Foreign exchange gains of ¥1.8B and dividend income of ¥1.9B, which contributed to the increase in Ordinary Income, have limited recurrence due to fluctuations in exchange rates and dividend policies. Caution is therefore required when extrapolating the Ordinary Income growth rate directly into the future.

Industry Benchmark (Reference; Company Analysis)

Industry Benchmark (manufacturing)

Profitability and Returns

The Operating Income margin is slightly below the industry median, while the Net Income margin is approximately in line with the median, placing profitability within the industry-average range.

Growth and Capital Efficiency

The Revenue growth rate substantially exceeds the industry median, placing the Company among the higher-growth companies in the industry.

※Source: Company analysis

Key Points from the Earnings Results

1. The Operating Income margin improved by approximately 3pt from the previous year, confirming operating leverage whereby gross profit expansion absorbed the growth in SG&A expenses. The Revenue growth rate (+7.7%) exceeded the industry median (+3.3%), indicating a phase of higher Revenue and higher profits.

2. The prolonged working capital cycle, characterized by DSO of 76 days, inventory days of 201 days, and CCC of 232 days, is observed as a structural issue contributing to delayed cash conversion relative to profit growth.

3. The Full-Year forecast Payout Ratio is high at approximately 96.7%. The achievement status of the Operating Income plan (progress rate of 68.6%) and the degree of working capital improvement will be important points of confirmation when evaluating future dividend policy.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,475–¥1,555 at ±1% for the cost of equity, and ¥1,509–¥1,518 at ω±0.1.

Notes:

• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end are used (there is a timing gap relative to 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 value based solely on publicly disclosed 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 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 advisor as necessary.

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