| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥11692.9B | ¥10591.5B | +10.4% |
| Operating Income | ¥5957.6B | ¥5497.8B | +8.4% |
| Ordinary Income | ¥6357.6B | ¥5610.1B | +13.3% |
| Net Income | ¥4451.9B | ¥3986.6B | +11.7% |
| ROE | 12.8% | 12.8% | - |
For the cumulative Q2 of the fiscal year ending March 2026, Revenue was ¥11,692.9B (YoY +¥1,101.4B, +10.4%), Operating Income was ¥5,957.6B (YoY +¥459.8B, +8.4%), Ordinary Income was ¥6,357.6B (YoY +¥747.5B, +13.3%), and Net Income was ¥4,451.9B (YoY +¥465.3B, +11.7%), resulting in year-over-year growth in both sales and profits. Operating margin declined by 0.9pt to 51.0% (prior 51.9%), but expansion of non-operating income to ¥404.9B (prior ¥163.2B), including interest income of ¥162.5B and foreign exchange gains of ¥162.7B, drove profit growth at the ordinary income level above the operating-stage performance. Net profit margin improved 0.5pt to 38.1% (prior 37.6%), and ROE remained at a high level of 12.8%, indicating continued capital efficiency. Revenue by region was ¥3,900.7B domestic and ¥7,792.2B overseas, raising the overseas ratio to 66.6%, supported by expanding external demand and currency effects.
[Revenue] Revenue reached ¥11,692.9B (YoY +¥1,101.4B, +10.4%), achieving double-digit growth. By region, domestic sales were ¥3,900.7B (prior ¥3,727.5B), while overseas sales were ¥7,792.2B (prior ¥6,863.9B, +13.5%), led by expansion in overseas markets. The overseas ratio rose 1.8pt from 64.8% to 66.6%, confirming progress in global expansion. Gross profit was ¥9,707.4B with a gross margin of 83.0% (down 0.8pt from 83.8% prior), remaining at a high level, but Cost of Goods Sold increased to ¥1,985.5B (prior ¥1,714.4B, +15.8%), outpacing sales growth and causing the gross margin contraction.
[Profitability] Operating Income was ¥5,957.6B (+8.4%), growing at a slower pace than revenue. SG&A was ¥3,749.8B (prior ¥3,379.3B, +11.0%), increasing faster than sales growth of +10.4%, and SG&A ratio rose 0.2pt to 32.1% (prior 31.9%). As a result, Operating margin declined 0.9pt to 51.0% (prior 51.9%), creating a mild headwind to operating leverage. On the other hand, non-operating income expanded to ¥404.9B (prior ¥163.2B, +2.48x) due to interest income of ¥162.5B (prior ¥89.7B, +81.2%) and foreign exchange gains of ¥162.7B; together with a decrease in non-operating expenses to ¥4.9B (prior ¥50.9B), Ordinary Income rose to ¥6,357.6B (+13.3%), exceeding operating-stage growth. Pre-tax income of ¥6,357.6B incurred income taxes of ¥1,905.7B (effective tax rate 30.0%), resulting in Net Income of ¥4,451.9B (+11.7%) and Net profit margin of 38.1% (prior 37.6%, +0.5pt). In conclusion, expansion in overseas demand and favorable non-operating factors drove revenue and profit growth, though SG&A growth slightly compressed operating-stage profitability.
[Profitability] Operating margin was 51.0% and Net profit margin 38.1%, maintaining an exceptionally high-profit structure for a manufacturer. Gross margin of 83.0% declined 0.8pt from the prior period but remains high, reflecting a light-asset, high-value-added model. ROE of 12.8% indicates strong capital efficiency and sustained ability to generate returns on equity. [Cash Quality] Operating Cash Flow (OCF) was ¥4,306.8B, representing a high cash conversion ratio of 0.97x versus Net Income of ¥4,451.9B; however, from the pre-working-capital subtotal of operating cash flow of ¥5,999.2B, payments of income taxes and other items of ¥1,816.4B, increases in trade receivables of ¥368.6B, inventory increases of ¥55.4B, and decreases in accounts payable of ¥44.0B reduced OCF. Free Cash Flow was ¥1,182.9B (OCF ¥4,306.8B – Investing Cash Flow ¥3,123.9B), and coverage against dividend payments of ¥1,091.4B plus capital expenditures of ¥283.7B (total ¥1,375.1B) was 0.86x, somewhat short but sustainability is secured by ample liquidity on hand. [Investment Efficiency] Capital expenditures of ¥283.7B were 1.65x depreciation expense of ¥172.3B, indicating a proactive stance on renewal and expansion. Intangible fixed assets increased significantly to ¥291.8B (prior ¥63.4B, +360.4%), confirming accumulation of investments in software and the like. Investment securities were held at ¥15,143.0B, providing a source of interest income. [Financial Soundness] Equity Ratio was 94.6% (prior 94.5%), Current Ratio 1,053.9%, and Quick Ratio 1,008.5%, maintaining an extremely strong balance sheet. Cash and deposits were ¥5,969.8B and short-term securities ¥8,969.1B, providing ample liquidity; interest-bearing debt is effectively zero, resulting in a net cash position.
Operating Cash Flow was ¥4,306.8B (YoY +¥211.6B, +5.2%), maintaining a high conversion ratio of 0.97x versus Net Income of ¥4,451.9B. The pre-working-capital subtotal of operating cash flow reached ¥5,999.2B, but increased payments of income taxes and other items of ¥1,816.4B (prior ¥1,486.4B, +22.2%), increases in trade receivables of ¥368.6B (prior increase ¥185.7B), inventory increases of ¥55.4B (prior ¥7.6B), and reductions in accounts payable of ¥44.0B (reversing from a prior increase of ¥11.6B) — i.e., buildup of working capital — constrained cash inflows. Investing Cash Flow was -¥3,123.9B (prior -¥2,806.1B), mainly due to increased capital expenditures of ¥283.7B (1.98x prior ¥143.4B) and an increase in time deposits and similar items of ¥87.8B. Free Cash Flow amounted to ¥1,182.9B (prior ¥1,289.1B, -8.2%), and coverage for dividend payments and capital expenditures was 0.86x, somewhat insufficient. Financing Cash Flow was -¥1,137.2B (primarily dividend payments of -¥1,091.4B), and year-end cash and deposits totaled ¥5,969.8B (prior ¥5,790.5B), showing only a slight increase. The OCF/Net Income ratio of 0.97x indicates good earnings quality, but slowing cash conversion due to working capital increases is a monitoring point for future capital efficiency.
Operating Income of ¥5,957.6B versus Ordinary Income of ¥6,357.6B shows an uplift of ¥400.0B (+6.7%), primarily due to expansion of non-operating income to ¥404.9B. The breakdown includes interest income of ¥162.5B (prior ¥89.7B, +81.2%) and foreign exchange gains of ¥162.7B; both depend on financial market conditions and exchange rates. Equity-method investment income of ¥64.6B (prior ¥53.1B) also contributed, expanding non-operating income from ¥163.2B in the prior period to +2.48x. Non-operating expenses decreased significantly to ¥4.9B (prior ¥50.9B); although foreign exchange losses of ¥42.2B were recorded, overall these items boosted earnings. There were no special gains or losses; the movement from Ordinary Income to Pre-tax Income was nil, indicating limited one-off items. Income taxes of ¥1,905.7B (effective tax rate 30.0%) increased from ¥1,623.5B (28.9%) in the prior period, showing a normalization of tax burden. Comprehensive income was ¥4,720.7B, ¥268.8B higher than Net Income of ¥4,451.9B, reflecting other comprehensive income of foreign currency translation adjustments of ¥306.1B and valuation differences on available-for-sale securities of -¥37.4B. Operating-stage earnings are supported by a persistent high gross-margin core business, while the increase at the ordinary income stage is significantly influenced by interest and FX factors, heightening sensitivity to market environment changes in subsequent periods.
Annual dividend forecast is ¥275 per share (interim ¥275, year-end ¥275), a significant increase from the prior total of ¥175 (interim and year-end equivalent ¥87.5 each). With Basic EPS of ¥1,835.63, the Payout Ratio is 21.3% (as reported), remaining at a conservative level and consistent with profit growth. Total dividends are estimated at approximately ¥1,090B based on the weighted average shares outstanding of 242,525 thousand shares during the period, giving coverage of Free Cash Flow ¥1,182.9B at 1.09x, generally sufficient. Retained earnings increased to ¥33,565.8B (prior ¥30,205.4B, +11.1%), supporting adequate dividend-paying capacity. Cash and deposits of ¥5,969.8B and short-term securities of ¥8,969.1B indicate extremely high liquidity, and the effectively debt-free balance sheet supports dividend sustainability. Share repurchases were minor (treasury stock purchases -¥0.2B, disposal +¥0.03B in Financing CF), and the Total Return Ratio is nearly aligned with the Payout Ratio. A payout ratio in the 20% range shows a growth-oriented approach that channels room for profit growth into retained earnings, suggesting significant scope for future dividend increases over the medium term.
Currency fluctuation risk: Foreign exchange gains of ¥162.7B lifted Ordinary Income by 6.7%; a reversal to yen appreciation could reduce non-operating income and slow the ordinary income growth trend. With an overseas sales ratio of 66.6%, exposure to foreign-currency-denominated transactions is substantial. The foreign currency translation adjustment of ¥306.1B in comprehensive income could affect capital efficiency through changes in net assets if exchange rates reverse.
Margin pressure risk from rising SG&A: SG&A of ¥3,749.8B increased +11.0% YoY, outpacing sales growth of +10.4%, and Operating margin declined 0.9pt to 51.0%. Increases in personnel expenses, promotional expenses, and R&D-type upfront costs are on an upward trend; if sales growth slows, operating leverage could turn into a headwind and further compress margins.
Cash conversion risk from working capital buildup: Increases in trade receivables of ¥368.6B, inventory increases of ¥55.4B, and decreases in accounts payable of ¥44.0B indicate a working capital buildup, reducing the conversion from an operating cash flow subtotal of ¥5,999.2B to OCF of ¥4,306.8B. In the event of demand volatility, inventory adjustments or delays in receivables collection could reduce Free Cash Flow flexibility and impact dividend capacity.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 51.0% | 7.8% (4.6%–12.3%) | +43.2pt |
| Net Profit Margin | 38.1% | 5.2% (2.3%–8.2%) | +32.9pt |
Operating margin of 51.0% and Net profit margin of 38.1% both exceed the manufacturing median by over 40pp, ranking the company at the top of the industry for profitability.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 10.4% | 3.7% (-0.4%–9.3%) | +6.7pt |
Revenue growth of 10.4% substantially exceeds the industry median of 3.7%, placing the company among the industry leaders in growth.
※ Source: Company compilation
Ordinary Income grew strongly by +13.3% YoY due to expansion of non-operating income, but this was largely dependent on market factors such as interest income (+81.2%) and foreign exchange gains of ¥162.7B. While Operating margin remains high at 51.0%, it declined 0.9pt from the prior period as SG&A growth compressed operating leverage. Going forward, focus will be on maintaining/improving core operating margins and managing sensitivity to changes in interest rate and FX environments.
Working capital buildup (trade receivables +¥368.6B, inventory +¥55.4B, accounts payable -¥44.0B) reduced conversion from an operating cash flow subtotal of ¥5,999.2B to OCF of ¥4,306.8B. Free Cash Flow of ¥1,182.9B provided coverage of 0.86x against dividends and capital expenditures, somewhat insufficient, but dividend sustainability is supported by cash and deposits of ¥5,969.8B and an effectively debt-free balance sheet. Improving working capital efficiency is key to strengthening cash generation over the medium term.
This report is an earnings analysis document automatically generated by AI analyzing XBRL earnings flash report data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on public financial statements. Investment decisions are your responsibility; please consult a professional advisor as necessary.