RION CO.,LTD. FY2026 FY Earnings Report

Financial Highlights

• Net Sales: ¥28.50B
• Operating Income: ¥4.36B
• Net Income: ¥3.24B
• EPS: ¥271.41

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

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AI Financial Analysis

Executive Summary

FY2026 results were solid with an earnings beat at the operating line versus last year but a modest shortfall versus the company’s full-year guidance. Revenue rose 2.2% YoY to 285.0bn JPY-equivalent (28.501bn JPY), while operating income increased 8.1% YoY to 4.36bn JPY, lifting the operating margin to 15.3%. Net income attributable to owners grew 17.0% YoY to 3.35bn JPY, expanding the net margin to 11.7%. Gross margin was 49.3%, modestly softer YoY, but disciplined SG&A (96.95) supported operating leverage and margin expansion of roughly 80 bps. DuPont decomposition shows ROE at 9.6%, driven primarily by a stronger net margin, while asset turnover eased to 0.682x and financial leverage remained conservative at 1.20x. Cash generation was healthy: operating cash flow of 4.17bn JPY exceeded net income by 1.25x and free cash flow reached 3.41bn JPY. The balance sheet remains exceptionally strong with a current ratio of 543%, quick ratio of 374%, and D/E of 0.20x, underpinned by cash and deposits of 8.56bn JPY. By segment, Particle Counters remained the core profit engine (OI 2.39bn JPY; margin 24.6%) despite a 14.0% YoY OI decline, while Medical Equipment improved profitability (OI up 13.4%, margin 9.7%) and Environmental Equipment rebounded sharply (OI up 348% YoY, margin 12.2%). Against guidance, the company achieved 96.0% of revenue, 92.8% of operating income, 93.5% of ordinary income, and 97.0% of net income, indicating a mild top- and bottom-line shortfall to plan. Earnings quality is solid: OCF/EBITDA was 0.73x due largely to working capital movements, but OCF/NI at 1.25x and a negative accruals ratio (-2.0%) indicate conservative recognition. Extraordinary losses (0.71) were small and non-operating income (1.38) immaterial to the top line. Dividend capacity is strong with a 31.4% payout and FCF coverage of 3.25x; DOE is a modest 2.8%. Inventory and receivables remain elevated in days (DIO 198, DSO 70), presenting a working capital efficiency opportunity. Capex was restrained at 6.03 (CapEx/Depreciation 0.45x, CapEx intensity ~2.1%), supporting near-term FCF but suggesting potential underinvestment risk if prolonged. Overall, margin resilience, robust liquidity, and disciplined SG&A position the company well, but execution on inventory normalization and calibrated reinvestment will be key to sustaining ROE toward double digits-plus.

Profitability Analysis

ROE (9.6%) = Net Profit Margin (11.7%) × Asset Turnover (0.682x) × Financial Leverage (1.20x). Versus the prior year, the net margin improved meaningfully (approx. +144 bps to 11.7%), asset turnover declined (from ~0.71x to 0.68x) as asset growth outpaced sales, and leverage edged down with higher equity. The net margin gain stemmed from tighter SG&A discipline (SG&A down to 96.95 from 100.29 despite higher sales), partially offsetting a softer gross margin. Operating margin expanded ~80 bps to 15.3% on this cost control, and a normal tax burden (23.5%) supported bottom-line conversion; interest burden was negligible, reflecting a near debt-free structure. The key driver of the improved ROE was the margin uplift, while lower turnover and leverage modestly diluted the overall increase. The SG&A efficiency looks structurally achievable given scale benefits and mix, though sustainability depends on preserving pricing and continuing cost control as Environmental Equipment normalizes. Watch for operating leverage asymmetry if sales growth slows while personnel and R&D costs catch up. No signs of expense growth outpacing revenue in the period; in fact, SG&A grew slower than revenue, supporting positive operating leverage.

Growth Assessment

• Revenue grew 2.2% YoY to 285.01, supported by Medical Equipment (+1.8%) and Environmental Equipment (+4.0%), with Particle Counters up +1.7%.
• Operating income rose 8.1% YoY to 43.61, with margin expansion to 15.3% on SG&A discipline.
• Net income attributable to owners increased 17.0% YoY to 33.45, aided by improved operating leverage and modest extraordinary losses.
• Segment growth mix was uneven: Particle Counters’ OI declined 14.0% YoY despite a still-high 24.6% margin; Medical Equipment OI grew 13.4% with a 9.7% margin; Environmental Equipment rebounded strongly with OI up 348% YoY to a 12.2% margin.
• Outlook implications: maintaining the high-margin Particle Counters franchise while scaling Medical and Environmental profitability is key to sustaining consolidated margins. Inventory normalization and receivables collection improvements could support incremental OCF and reduce cash conversion drag, cushioning any growth volatility.

Financial Health

• Liquidity: Current ratio 543% and quick ratio 374% indicate very strong short-term coverage. Working capital of 205.04 comfortably exceeds current liabilities of 46.28.
• Solvency: D/E of 0.20x and interest coverage of 1,863x (EBIT-based) reflect a conservative capital structure with minimal financial risk. Debt/Capital is far below typical covenant concern thresholds.
• Maturity profile: Cash (85.63) plus receivables (54.53) cover current liabilities more than 3x, indicating no maturity mismatch risk.
• Notable balance sheet movements: cash and deposits +42.4% YoY to 85.63; investment securities +28.0% YoY to 15.21; retained earnings +10.6% YoY to 249.46, all consistent with strong internal cash generation and disciplined payouts.
• Off-balance sheet obligations: none noted.

Notable B/S Changes

Cash & Deposits: +25.49 (+42.4%) - Strong internal cash generation and disciplined capex/payouts strengthened liquidity. Investment Securities: +3.33 (+28.0%) - Incremental portfolio buildup; modest impact on risk profile. Retained Earnings: +23.97 (+10.6%) - Profits retained after dividends, enhancing equity base and solvency.

Cash Flow Quality

• OCF of 41.65 vs net income of 33.45 yields OCF/NI of 1.25x, indicating solid earnings cash conversion.
• FCF was 34.12 after capex of 6.03 and intangible purchases of 1.46, comfortably funding dividends (FCF coverage 3.25x).
• Cash conversion (OCF/EBITDA) of 0.73x trails the >0.9x benchmark, largely reflecting working capital dynamics: inventories decreased (OCF +2.21), trade receivables were a modest use, and payables declined, dampening OCF.
• Accruals ratio at -2.0% supports high-quality earnings recognition; extraordinary items were minor and do not distort OCF.
• No indications of working capital manipulation; the reduction in payables despite moderate sales growth is conservative.

Dividend Sustainability

• DPS totaled 85 JPY (interim 35, year-end 50), equating to a payout ratio of 31.4% against EPS of 271.41 JPY.
• FCF coverage is strong at 3.25x, indicating substantial headroom for the current dividend under a range of scenarios.
• DOE is 2.8%, consistent with the conservative balance sheet and retained earnings accretion.
• With CapEx/Depreciation at 0.45x and net cash growth, the dividend is well supported; however, if reinvestment requirements rise to sustain growth, management may need to balance payout with elevated capex over time.

Risk Assessment

Business risks include Profit dependence on high-margin Particle Counters; a 14% YoY OI decline there shows sensitivity to demand cycles in cleanroom/semiconductor-related markets., Inventory and receivables elevated in days (DIO 198, DSO 70) could pressure cash conversion if demand slows., R&D intensity at ~3.0% may be low for sustained product differentiation in medical/precision instrumentation..

Financial risks include CapEx/Depreciation 0.45x indicates potential underinvestment if sustained, risking future capacity/competitiveness., Asset turnover drifted lower to 0.682x; if working capital remains elevated, ROE could stall despite margins..

Key concerns include Underinvestment signal (CapEx/Depreciation 0.45x) alongside elevated inventory days (198) suggests operational optimization is needed to sustain growth and margins., Guidance shortfall (92.8% of OP, 93.5% of OI, 96.0% of sales achieved) points to conservative execution needs in the next plan cycle., Customer and end-market cyclicality in Particle Counters tied to capex cycles in semiconductors and pharmaceuticals..

Investment Implications

Key takeaways include Margin resilience: operating margin expanded ~80 bps to 15.3% on SG&A discipline despite slightly lower gross margin., Quality cash generation: OCF/NI 1.25x and negative accruals ratio (-2.0%) underpin earnings quality., Exceptional balance sheet strength: current ratio 543%, D/E 0.20x, ample cash reserves., Mixed segment picture: Particle Counters remains core profit pool but saw OI decline; Medical and Environmental improved profitability., Working capital efficiency and calibrated reinvestment are the main levers to lift ROE above 10% sustainably..

Metrics to watch include Inventory days (target <120 initially from 198) and DSO (target <60 from 70), CapEx/Depreciation (target ≥1.0 over the medium term) and CapEx intensity (target 3–5%), Particle Counters order trends and margin mix, OCF/EBITDA (target ≥0.9) and FCF after dividends, Operating margin trajectory vs SG&A discipline.

Regarding relative positioning, Within precision instruments/medical devices peers, the company exhibits superior liquidity, conservative leverage, and strong operating margins, but lags best-in-class on working capital efficiency and medium-term reinvestment tempo.