| Indicator | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥700.3B | ¥672.9B | +4.1% |
| Operating Income / Operating Profit | ¥70.8B | ¥75.3B | -5.9% |
| Ordinary Income | ¥74.7B | ¥77.9B | -4.1% |
| Net Income / Net Profit | ¥52.8B | ¥44.1B | +19.7% |
| ROE | 8.6% | 7.8% | - |
For the fiscal year ended March 2026, Revenue was ¥700.3B (YoY +¥27.5B +4.1%), Operating Income was ¥70.8B (YoY -¥4.4B -5.9%), Ordinary Income was ¥74.7B (YoY -¥3.2B -4.1%), and Net Income attributable to owners of the parent was ¥52.8B (YoY +¥8.7B +19.7%). The company experienced revenue growth but profit decline: revenues were supported by steady demand for environmental test equipment domestically and internationally, but gross margin in the operating stage declined to 34.7% (from 35.7% prior year, -1.0pt) and SG&A increased to ¥172.1B (from ¥164.6B prior year, +¥7.5B), compressing the operating margin to 10.1% (from 11.2% prior year, -1.1pt). At the ordinary income level, non-operating income of ¥4.5B (including dividend income ¥1.9B and interest income ¥0.6B) contributed, while foreign exchange losses of ¥1.0B occurred, resulting in a YoY decline in Ordinary Income. At the net income level, a special gain on sale of investment securities of ¥8.7B secured Pre-tax Income of ¥80.8B; after recording corporate taxes of ¥22.0B, Net Income increased substantially YoY by +19.7%.
[Revenue] External sales were ¥700.3B (+4.1%), reflecting revenue growth. The core Environmental Test equipment business (EnvironmentalTest) was steady with revenue of ¥594.7B (+3.4%), accounting for 84.9% of total revenue and forming the main revenue base. The Electronic Device & Service business (ElectronicDeviceBusinessService) was ¥83.3B (-1.2%), slightly down, while Other businesses expanded to ¥27.5B (+56.3%). By region, Japan ¥343.6B, U.S. ¥116.2B, China ¥120.3B, and Other Asia ¥86.4B all exceeded prior year levels, indicating broad demand capture. Cost of sales was ¥457.4B (cost ratio 65.3%), increasing by ¥14.4B YoY; higher costs or product mix shifts pressured the gross margin.
[Profitability] Gross profit of ¥242.9B (gross margin 34.7%) increased by ¥13.1B YoY, but gross margin declined by -1.0pt from 35.7% prior year. SG&A was ¥172.1B (SG&A ratio 24.6%), up ¥7.5B YoY; increases in fixed costs including salaries and allowances ¥53.9B and R&D ¥15.2B pressured profits. As a result, Operating Income was ¥70.8B (operating margin 10.1%), a decrease of ¥4.4B YoY. Non-operating items produced net +¥3.9B (non-operating income ¥4.5B less non-operating expenses ¥0.6B), securing Ordinary Income of ¥74.7B (YoY -4.1%). In extraordinary items, special gains totaled ¥8.8B (principally ¥8.7B gain on sale of investment securities) and special losses totaled ¥2.7B (including impairment losses ¥2.2B), yielding a net uplift of +¥6.1B. From Pre-tax Income ¥80.8B, corporate taxes ¥22.0B were deducted to deliver Net Income ¥52.8B (YoY +19.7%). In summary, revenue increased while operating and ordinary profits decreased, but one-time asset sale gains resulted in final net income growth.
Environmental Test equipment business (EnvironmentalTest): Revenue ¥594.7B (+3.4%), Operating Income ¥66.1B (-0.1%), Operating Margin 11.1%. This core segment accounted for 93.3% of consolidated Operating Income and maintained margins above the company average, though Operating Income was essentially flat. Electronic Device & Service business (ElectronicDeviceBusinessService): Revenue ¥83.3B (-1.2%), Operating Income ¥2.3B (-71.2%), Operating Margin 2.7%. While revenue was slightly down, profit declined sharply and profitability deteriorated rapidly. A segment impairment loss of ¥2.2B was recorded in the service business; business restructuring or profitability improvement is required. Other businesses: Revenue ¥27.5B (+56.3%), Operating Income ¥2.4B (+89.7%), Operating Margin 8.7%. Although small, this segment showed high growth and high profitability, supported by expansion in environmental conservation and plant growth equipment. The decline in consolidated margins was mainly due to deteriorating profitability in the service business and slowing margin gains in the core equipment business; recovery will hinge on turnaround in the Electronic Device & Service area and improvement in gross margins for the core equipment.
[Profitability] Operating margin 10.1% (from 11.2% prior year, -1.1pt), Net margin 7.5% (from 6.6% prior year, +1.0pt). Operating-level margins contracted due to gross margin -1.0pt and SG&A ratio +0.1pt, but Net margin exceeded prior year driven by special gains. ROE 8.6% (from 9.5% prior year, -0.9pt) declined from last year but remains within the industry median range (approximately 8–10%). ROIC 12.9% (= NOPAT ¥53.3B / Invested Capital ¥414.8B; Invested Capital = Net Assets ¥614.0B - Cash ¥147.0B + Interest-bearing Debt ¥6.1B) remained in double digits, indicating good capital efficiency. [Cash Quality] Operating Cash Flow (OCF) ¥50.5B vs. Net Income ¥52.8B gives OCF/Net Income ratio of 0.96x, roughly aligned, indicating earnings convert to cash at a baseline level. EBITDA ¥90.4B (= Operating Income ¥70.8B + Depreciation & Amortization ¥19.6B) and OCF/EBITDA ratio 0.56x is somewhat low, impacted by working capital absorption. Free Cash Flow was ¥47.8B (= OCF ¥50.5B + Investing CF -¥2.7B), and total shareholder returns (dividends ¥23.2B + buybacks ¥27.5B = ¥50.7B) had a coverage of 0.94x against FCF, indicating returns roughly matched FCF. [Investment Efficiency] Total asset turnover 0.84x, Inventory turnover 5.7x (= COGS ¥457.4B / Average Inventory ¥79.9B). Days Sales Outstanding (DSO) 99 days (= Accounts receivable ¥189.5B / Daily sales ¥1.92B), Days Inventory Outstanding (DIO) 64 days (= Inventory ¥122.3B / Daily COGS ¥1.25B; inventory breakdown: finished goods ¥27.2B + work-in-progress ¥38.6B + raw materials ¥56.5B), Days Payable Outstanding (DPO) 33 days (= Accounts payable ¥41.9B / Daily COGS ¥1.25B), producing a Cash Conversion Cycle (CCC) of 130 days (= DSO + DIO - DPO). DSO and DIO both lengthened YoY, indicating deteriorated working capital efficiency and suggesting extended time from order to revenue recognition or inventory stagnation. [Financial Soundness] Equity Ratio 74.0%, Interest-bearing debt ¥6.1B (short-term borrowings ¥0.3B + short-term borrowings ¥0.3B + long-term borrowings ¥3.3B) with Net Debt/EBITDA 0.01x—negligible leverage. Current ratio 331% (= Current assets ¥564.4B / Current liabilities ¥170.4B), Quick ratio 315%—ample liquidity—with Cash & Deposits ¥147.0B covering short-term obligations. Interest coverage 244x (= EBIT ¥70.8B / Interest expense ¥0.3B) shows minimal debt burden. Contract liabilities (advances received) ¥41.4B recorded as a manufacturing metric; backlog-to-sales ratio 0.06 (= ¥41.4B / ¥700.3B) equals approximately 22 days of annual sales, indicating short-term order visibility.
OCF was ¥50.5B (YoY +¥6.1B +13.7%), solid. Starting from Pre-tax Income ¥80.8B, non-cash charges including Depreciation & Amortization ¥19.6B and goodwill amortization ¥2.5B were added, resulting in an operating cash subtotal (before working capital changes) of ¥69.1B. In working capital, Accounts receivable increased by -¥26.3B (cash outflow), Inventory decreased by +¥2.2B (cash generation), and Accounts payable decreased by -¥3.2B (cash outflow), for a net working capital absorption of -¥27.3B. Additionally, corporate tax payments of -¥20.8B were deducted, leaving final OCF of ¥50.5B. Investing CF was -¥2.7B, principally purchases of tangible and intangible assets -¥14.1B and proceeds from sale of securities ¥10.7B. Free Cash Flow was ¥47.8B (= OCF ¥50.5B - absolute investing CF ¥2.7B), indicating surplus cash generation after capex. Financing CF was -¥38.8B, driven by dividend payments -¥23.2B and share buybacks -¥27.5B, partially offset by net long-term borrowings +¥0.2B and proceeds from disposal of treasury stock ¥1.0B. Cash increased by +¥19.3B during the period to an ending balance of ¥147.0B, maintaining ample liquidity. Total shareholder returns ¥50.7B were nearly matched by FCF ¥47.8B, with the remainder supplemented by cash holdings and proceeds from asset sales.
Operating Income ¥70.8B forms the core of recurring earnings, adjusted by non-operating income ¥4.5B (dividend income ¥1.9B, interest income ¥0.6B, foreign exchange gains ¥0.5B, etc.) and non-operating expenses ¥0.6B (interest expense ¥0.3B, foreign exchange losses ¥1.0B, etc.) to form Ordinary Income ¥74.7B. Net non-operating items of +¥3.9B represent about 5.2% of consolidated profits—non-negligible but not an excessive dependency—while FX gains/losses contribute to earnings volatility. One-off items included Special Gains ¥8.8B (of which gain on sale of investment securities ¥8.7B) and Special Losses ¥2.7B (of which impairment losses ¥2.2B and loss on disposal of fixed assets ¥0.5B), netting +¥6.1B uplift—approximately 11.6% of Net Income ¥52.8B—indicating a material but limited one-time contribution. Pre-tax Income ¥80.8B vs. recurring profit (Operating + ordinary non-operating) ¥74.7B implies about 7.5% of Pre-tax was influenced by special items. Accrual ratio is approximately 0.4% (= (Net Income ¥52.8B - OCF ¥50.5B) / Total assets ¥829.2B), very low, suggesting limited divergence between earnings and cash conversion and no major concern over earnings quality. Comprehensive Income ¥87.2B vs. Net Income ¥52.8B leaves a difference of ¥34.4B attributable to OCI items such as foreign currency translation adjustments ¥19.1B, valuation difference on available-for-sale securities ¥8.0B, and adjustments for retirement benefits ¥1.3B, indicating recognition of balance-sheet valuation gains.
Full-year guidance projects Revenue ¥730.0B (YoY +4.2%), Operating Income ¥80.0B (YoY +12.9%), Ordinary Income ¥81.0B (YoY +8.4%), Net Income attributable to owners of the parent ¥58.8B, EPS 275.17円, and annual dividend 45円. Progress against guidance based on this period is: Revenue 95.9%, Operating Income 88.5%, Ordinary Income 92.3%, Net Income 89.8%, indicating underperformance at the operating and ordinary levels. The actual operating margin of 10.1% is 0.9pt below the forecasted 10.96%, driven by gross margin deterioration and higher SG&A. Special gains helped align the Net Income level roughly with guidance. For next fiscal year, key execution items are maintaining order environment for the core environmental test equipment, restoring profitability in the Electronic Device & Service business, and improving working capital efficiency (shortening DSO and DIO). Achieving double-digit operating income growth will depend on gross margin improvement and SG&A control.
Annual dividend is 115円 (interim 45円, year-end 70円), implying a payout ratio of 42.5% (= Dividend 115円 / Basic EPS 270.39円). Against Free Cash Flow ¥47.8B, total dividends equate to approximately ¥23.2B, giving dividend coverage of 2.1x and indicating sustainability. Additionally, share buybacks of ¥27.5B were executed, bringing total shareholder returns to ¥50.7B and total return ratio to 60.9% (= (Dividends ¥23.2B + Share buybacks ¥27.5B) / Net Income ¥52.8B × 100). FCF coverage of total returns was 0.94x, roughly balanced, with shortfall supplemented by cash and proceeds from asset sales this period. Treasury stock decreased by ¥2.1B during the period, increasing treasury shares to 2.413 million shares to be deducted from issued shares; weighted average shares outstanding were 21,744,000 shares. The dividend policy is to maintain a payout ratio around 40% while conducting flexible buybacks, signaling a commitment to strengthened shareholder returns. Sustainability going forward depends on stable FCF generation—specifically strengthening OCF and improving working capital efficiency.
Gross Margin Decline Risk: Gross margin narrowed from 35.7% to 34.7% (-1.0pt), pressuring operating margin which declined to 10.1% (from 11.2%). Drivers include rising costs, product mix shifts, and intensified price competition. If gross margin does not improve, operating margin risks falling into single digits. Although the core equipment business maintains an 11.1% margin, the Electronic Device & Service business plunged to 2.7% (from 7.9% prior year), worsening consolidated mix; rapid improvement in lower-tier segments is urgently needed.
Working Capital Efficiency Risk: DSO 99 days and DIO 64 days lengthened YoY, extending CCC to 130 days. Accounts receivable increased by -¥26.3B and accounts payable decreased by -¥3.2B, constraining OCF and resulting in OCF/Net Income 0.96x and OCF/EBITDA 0.56x, suppressing cash generation. If extended time from order to revenue recognition or inventory stagnation becomes persistent, FCF generation may decline and resources for total shareholder returns may be insufficient.
Concentration Risk and Impairment Risk: The Environmental Test equipment business accounts for 84.9% of revenue and 93.3% of Operating Income, making the company highly dependent on investment cycles and demand trends in customer industries (electronics, electrical, automotive, etc.). The Electronic Device & Service business recorded impairment losses of ¥2.2B this period; further impairment or restructuring costs may arise if conditions deteriorate. Goodwill balance ¥11.2B represents 1.8% of consolidated net assets—small—but a sharp demand drop in the core equipment business or significant FX volatility (overseas sales 50.9%) could impair the revenue base.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 10.1% | 7.8% (4.6%–12.3%) | +2.4pt |
| Net Margin | 7.5% | 5.2% (2.3%–8.2%) | +2.4pt |
Operating and Net margins each exceed the industry median by 2.4pt, maintaining above-average profitability within manufacturing.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 4.1% | 3.7% (-0.4%–9.3%) | +0.4pt |
Revenue growth slightly outperformed the industry median by 0.4pt, indicating stable growth.
※ Source: Company compilation based on public financial statements
Revenue growth with profit contraction and progress on gross margin improvement: Revenue rose +4.1% but Operating Income fell -5.9%, with operating margin down to 10.1% (from 11.2%, -1.1pt). The primary causes are gross margin contraction (-1.0pt) and SG&A increase of ¥7.5B. Key items to monitor are cost reduction measures, product mix correction, and SG&A control to restore operating margins. While core Environmental Test equipment maintains an 11.1% margin, the Electronic Device & Service margin plunged to 2.7% (from 7.9%), and impairment charges ¥2.2B pressured consolidated profitability; implementation and effectiveness of turnarounds in lower-tier segments are critical.
Cash conversion efficiency and room for working capital management improvement: OCF ¥50.5B roughly matched Net Income ¥52.8B, but OCF/EBITDA 0.56x is low, with DSO 99 days, DIO 64 days, and CCC 130 days showing working capital deterioration. Accounts receivable absorption of -¥26.3B and accounts payable outflow -¥3.2B compressed OCF, leaving FCF ¥47.8B nearly equal to total returns ¥50.7B. Short-term measures to strengthen collections and reduce inventory are key to expanding FCF; medium- to long-term measures include shortening lead times from order to revenue recognition and improving inventory turnover to secure sustainable shareholder return capacity.
Strong balance sheet and sustainability of total returns: Equity Ratio 74.0%, Interest-bearing debt ¥6.1B (Net Debt/EBITDA 0.01x), and Cash ¥147.0B create an extremely healthy balance sheet and high downside resilience. Payout ratio 42.5% and total return ratio 60.9% were supported by asset sale gains this period, with FCF coverage 0.94x. Dividends alone are sustainable, but continuation of buybacks requires stable FCF generation through stronger OCF and improved working capital. Key near-term focus: achievement of full-year guidance (Operating Income ¥80.0B, YoY +12.9%) and whether improvements in gross margin and working capital efficiency will autonomously expand total return resources.
This report is an AI-generated earnings analysis document created by 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; consult advisors as necessary before making investment decisions.