| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥431.0B | ¥407.4B | +5.8% |
| Operating Income / Operating Profit | ¥58.6B | ¥53.9B | +8.8% |
| Ordinary Income | ¥71.3B | ¥59.4B | +20.2% |
| Net Income | ¥40.5B | ¥38.6B | +5.0% |
| ROE | 9.8% | 9.7% | - |
For the fiscal year ended March 2026, Revenue was ¥431.0B (YoY +¥23.7B, +5.8%), Operating Income was ¥58.6B (YoY +¥4.7B, +8.8%), Ordinary Income was ¥71.3B (YoY +¥11.9B, +20.2%), and Net Income attributable to owners of the parent was ¥40.5B (YoY +¥1.9B, +5.0%), achieving both revenue and profit growth. Revenue increased for the third consecutive year, Operating margin improved by 1.8pt to 13.6%, and Ordinary Income recorded a significant increase of +20.2% YoY largely due to Equity-method investment gains of ¥9.0B. Net Income growth was subdued by the absence of the prior-year one-off gain (gain on sale of investment securities ¥149.65B recorded in the prior year), but earnings power at the ordinary level improved markedly. ROE remained high at 9.8%, supported by a domestically led high gross margin structure (68.6%) and improved SG&A efficiency (SG&A ratio improved 1.0pt to 55.0%), which strengthened operating leverage. Operating Cash Flow (OCF) of ¥61.3B (YoY +26.1%) translated into Free Cash Flow of ¥53.7B, demonstrating a solid cash-generating base that broadly covers total shareholder returns of dividends ¥21.5B and share repurchases ¥30.0B.
[Revenue] Revenue of ¥431.0B (YoY +5.8%) was led by growth in both Solutions at ¥246.2B and Client Services at ¥184.8B, achieving increases domestically and internationally. By region, Japan external sales were ¥296.6B (approximately 69% of the total), driving 4.8% growth as the core market. Europe was ¥81.5B (+8.3%), the U.S. ¥31.5B (+6.8%), and Asia ¥21.4B (+9.4%), with overseas regions also expanding steadily. Internal sales including inter-segment transactions increased to ¥36.1B (prior year ¥32.4B), reflecting deeper collaboration across global bases. The rising share of Solutions revenue reflects customer demand for digitalization and design efficiency, while Client Services saw stable growth through accumulation of maintenance contracts. Gross margin was flat at 68.6% (prior year 68.6%), maintaining cost control while growing the top line.
[Profitability] Cost of sales was ¥135.4B (prior year ¥128.1B), securing gross profit of ¥295.6B. SG&A was ¥236.9B (prior year ¥225.3B, +5.2%), restrained below the revenue growth rate of +5.8%, improving the SG&A ratio by 1.0pt to 55.0%. Major cost items were personnel expenses ¥87.8B and R&D ¥54.5B (12.6% of sales), but expense increases relative to revenue were contained, allowing operating leverage to work. Operating Income was ¥58.6B (Operating margin 13.6%, a 0.4pt improvement from 13.2% prior year). Non-operating income of ¥12.8B (Equity-method investment gains ¥9.0B, interest income ¥1.1B, foreign exchange gains ¥0.7B, etc.) materially lifted Ordinary Income. Expansion of equity-method gains from ¥4.9B to about ¥9.0B was the main reason for Ordinary Income’s +20.2% increase. Non-operating expenses were minimal at ¥0.1B, including commission payments ¥1.6B and foreign exchange losses ¥1.0B, with interest burden effectively near zero. Income before income taxes was ¥71.2B, from which income taxes and others of ¥17.2B (effective tax rate 24.2%) were deducted, and after non-controlling interests of ¥0.2B the Net Income attributable to owners of the parent was ¥40.5B. Net Income increased +5.0% from ¥38.6B prior year; the slower Net Income growth relative to Ordinary Income is attributable to the prior-year one-off special gains (total special income ¥150.2B including gain on sale of investment securities ¥149.65B) that did not recur. This period’s special items were effectively zero (special income ¥0.04B, special losses ¥0.14B), returning to an ordinary earnings structure. In conclusion, the company achieved revenue and profit growth, with improvements at the operating stage and increased equity-method gains materially boosting ordinary-level profits, while Net Income growth was modest due to the lapse of one-off items.
The Japan segment recorded external sales of ¥296.6B (prior ¥282.3B, +5.1%) and Operating Income ¥48.1B (Operating margin 16.2%), maintaining high profitability as the core market and contributing the largest profit by amount. Europe posted external sales ¥81.5B (prior ¥75.3B, +8.3%) and Operating Income ¥7.6B (margin 9.3%); while sales grew, Operating Income decreased by 8.6% from prior year ¥8.3B, suggesting price and cost pressures. The U.S. segment had external sales ¥31.5B (prior ¥29.5B, +6.8%) and Operating Loss ¥3.9B (prior operating loss ¥7.9B); the deficit narrowed but has not reached profitability. Asia recorded external sales ¥21.4B (prior ¥19.6B, +9.4%) and Operating Income ¥6.2B (Operating margin 29.2%, up from ¥5.3B prior year, +17.0%), demonstrating exceptionally high profitability. By contribution to segment Operating Income, Japan accounts for about 82%, Asia about 11%, Europe about 13%, and the U.S. is in loss, highlighting a domestically centered earnings structure. Regional margin disparities (Japan 16.2%, Asia 29.2%, Europe 9.3%, U.S. ▲12.4%) reflect differences in market maturity, pricing strategy, and cost structure; improving U.S. profitability and maintaining European margins will be key to expanding company-wide margins.
[Profitability] Operating margin of 13.6% improved 0.4pt from 13.2%, maintaining a high gross margin of 68.6% while compressing the SG&A ratio to 55.0% (−1.0pt). ROE of 9.8% (near prior year 9.7%) decomposes to Net Profit Margin 9.4% (slightly down from 9.5%) × Total Asset Turnover 0.637 × Financial Leverage 1.64x; Total Asset Turnover slightly declined from 0.644, but a small rise in leverage supported ROE. R&D of ¥54.5B (12.6% of sales) increased from ¥51.3B (12.6%) prior year, indicating continued investment in development. [Cash Quality] Operating Cash Flow ¥61.3B is 1.51x Net Income ¥40.5B, indicating good cash conversion. Starting from OCF subtotal ¥79.3B, after working capital changes and tax payments of ▲¥22.9B, OCF was generated; Free Cash Flow ¥53.7B (OCF ¥61.3B − Investing CF ¥7.6B) broadly covers dividends ¥21.5B and share repurchases ¥30.0B. Accrual quality, (Net Income − OCF)/Total Assets = ▲0.031 (Net Income ¥40.5B − OCF ¥61.3B = ▲¥20.8B; divided by Total Assets ¥676.2B = ▲3.1%) is good, showing strong cash backing of earnings. [Investment Efficiency] Capital expenditures ¥4.2B / Depreciation ¥8.4B = 0.50x, indicating restrained replacement investment. [Financial Soundness] Equity Ratio 61.0% (down 2.1pt from 63.1% prior year) remains high, Current Ratio 228% (Current Assets ¥521.2B / Current Liabilities ¥228.3B) and Quick Ratio 226% (Cash and deposits ¥293.8B + Marketable securities ¥67.0B + Accounts receivable ¥77.2B = ¥438.0B / Current Liabilities ¥228.3B) indicate very strong short-term payment capacity. D/E ratio (interest-bearing debt effectively zero / Net assets ¥412.8B) is near 0.0x, and Interest Coverage (Operating Income ¥58.6B / Interest expense ¥0.0B) is 2,630x (based on interest payments of ¥2.23M). Cash and deposits ¥293.8B account for 43% of total assets, ensuring ample liquidity.
OCF was ¥61.3B (prior year ¥48.6B, +26.1%). Starting from OCF subtotal ¥79.3B, working capital changes included an increase in trade receivables ▲¥6.7B, increase in inventories ▲¥2.1B, increase in accounts payable ¥7.7B, and increase in advances received ¥26.7B, resulting in generated OCF. The large increase in advances received suggests order or contract prepayments or accumulation of maintenance contracts, which boosted OCF; conversely, the increase in trade receivables suggests lengthening of DSO (days sales outstanding), raising concerns about extended collection cycles. Income taxes paid ¥22.9B represent roughly 32% of income before taxes ¥71.2B, with tax cash outflow broadly within expected range. Investing CF was ▲¥7.6B, mainly tangible fixed assets acquisitions ¥4.2B and intangible fixed assets acquisitions ¥3.0B, securing Free Cash Flow ¥53.7B. Financing CF was ▲¥52.1B, primarily dividend payments ▲¥21.5B and share repurchases ▲¥30.0B. Total shareholder returns (dividends ¥21.5B + share repurchases ¥30.0B = ¥51.5B) were almost balanced with Free Cash Flow ¥53.7B, allowing shareholder returns while slightly increasing cash on hand. Cash and cash equivalents at period end increased to ¥282.9B (from ¥272.2B at period start, +¥10.6B), further bolstering liquidity. The robustness of OCF and Free Cash Flow supports the advances-received model and good cash conversion, but lengthening accounts receivable collection and restrained capital expenditures (CapEx/Depreciation 0.50x) are monitoring points for future working capital efficiency and supply capacity sustainability.
Ordinary Income of ¥71.3B comprised Operating Income ¥58.6B and Non-operating income ¥12.8B (Equity-method investment gains ¥9.0B, interest income ¥1.1B, foreign exchange gains ¥0.7B, etc.), with a large contribution from equity-method gains. Equity-method gains expanded from ¥4.9B prior year to ¥9.0B, driving the substantial Ordinary Income increase. One-off items were minimal this period: special income ¥0.04B (e.g., gain on sale of fixed assets) and special losses ¥0.14B (e.g., valuation loss on investment securities ¥0.05B), effectively zero compared with prior-year special income of ¥150.2B (including gain on sale of investment securities ¥149.65B), whose absence dampened Net Income growth. Non-operating income to revenue ratio is about 3.0% (¥12.8B / ¥431.0B), indicating no excessive reliance, but equity-method gains are sensitive to partner performance, introducing some volatility to Ordinary Income stability. Accrual quality (Net Income ¥40.5B − OCF ¥61.3B)/Total Assets ¥676.2B = −3.1% is good; OCF/Net Income ratio 1.51x and OCF/EBITDA (OCF ¥61.3B / EBITDA ¥67.0B = Operating Income ¥58.6B + Depreciation ¥8.4B) = 0.91x, indicate strong cash backing of earnings. The gap between Ordinary Income and Net Income is explainable by income taxes and others ¥17.2B (effective tax rate 24.2%), and there are no major concerns regarding earnings quality.
The company’s plan for the fiscal year ending March 2027 forecasts Revenue ¥460.0B (YoY +6.7%), Operating Income ¥67.0B (YoY +14.2%), Ordinary Income ¥78.0B (YoY +9.3%), Net Income attributable to owners of the parent ¥57.0B (YoY +40.7%, reflecting the prior-year one-off lapse), and EPS ¥270.45. The plan projects revenue and profit growth from the current period results (Revenue ¥431.0B, Operating Income ¥58.6B, Ordinary Income ¥71.3B, Net Income ¥40.5B), incorporating an improvement in Operating margin to 14.6% (+1.0pt). The plan appears to assume accelerated narrowing of losses in the U.S., improved profitability in Europe, and sustained high profitability in Asia. Sales progress rate is ¥431.0B/¥460.0B = 93.7%, and Operating Income progress rate is ¥58.6B/¥67.0B = 87.5%, indicating a somewhat conservative plan at the operating level; Net Income will appear to increase materially due to the prior-year one-off lapse. Dividend forecast is ¥75 per share annually (ordinary dividend only; the current period’s commemorative dividend of ¥100 will not recur), reducing the payout ratio to 27.7% (¥75 / EPS ¥270.45) and improving sustainability. Achievement of guidance depends on continued revenue growth, maintenance of SG&A efficiency, and profitability improvements in overseas segments.
Annual dividend for the period was ¥200 (ordinary dividend ¥100 + commemorative dividend ¥100). Based on approximately 22.25 million shares outstanding, total dividend payments were about ¥44.5B, and the payout ratio was 109.9% (¥200 / EPS ¥181.8), elevated due to the commemorative dividend. The prior year’s annual dividend was ¥50 with total dividends about ¥17.8B and payout ratio 21.1%; thus, the commemorative dividend markedly increased payouts this period. Share repurchases of ¥30.0B were executed, and total shareholder returns (dividends ¥44.5B + share repurchases ¥30.0B = ¥74.5B) exceeded Net Income ¥40.5B but were within Free Cash Flow ¥53.7B. Total return ratio was 184% (¥74.5B / Net Income ¥40.5B), indicating front-loaded shareholder returns this period. Forecasted dividend for FY2027 is ¥75 annually (ordinary dividend only), so total dividends are expected to decline to about ¥16.7B with payout ratio down to 27.7% after the commemorative dividend lapse. Free Cash Flow of ¥53.7B covers dividends ¥44.5B and capital expenditures ¥4.2B (total ¥48.7B), supporting dividend sustainability; continuation of total return including share repurchases will depend on future FCF generation. Cash and deposits ¥293.8B and ample cash on hand support flexible returns.
Risk of continued U.S. segment losses: Although the operating loss narrowed to ¥3.9B (improved from ▲¥7.9B prior year), the U.S. has not yet reached profitability. Market development costs and price competition may delay breakeven, which would weigh on consolidated operating margin.
Risk of asset aging and supply constraints due to restrained investment: CapEx ¥4.2B / Depreciation ¥8.4B = 0.50x indicates limited replacement investment, raising concerns about aging production equipment and infrastructure. Over the medium to long term, risks to quality maintenance and supply capacity could emerge, potentially reducing customer satisfaction and causing loss of order opportunities.
Risk of lengthening accounts receivable collection and deterioration in working capital efficiency: Trade receivables increased from ¥69.6B to ¥77.2B (+10.9%), expanding faster than revenue growth of +5.8%. Extension of DSO (days sales outstanding) can lock up working capital and increase cash flow volatility, threatening OCF stability.
Profitability & Returns
| Metric | Our Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 13.6% | 7.8% (4.6%–12.3%) | +5.9pt |
| Net Profit Margin | 9.4% | 5.2% (2.3%–8.2%) | +4.2pt |
Our Operating Margin 13.6% and Net Profit Margin 9.4% substantially exceed the manufacturing industry median, indicating top-tier profitability within the sector.
Growth & Capital Efficiency
| Metric | Our Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 5.8% | 3.7% (-0.4%–9.3%) | +2.1pt |
Our Revenue growth of 5.8% is above the median, maintaining a mid-to-upper growth pace within the industry.
※ Source: Company compilation
Improvement to Operating margin of 13.6% due to a high gross margin structure and SG&A efficiency is commendable, maintaining top-tier profitability in the industry. A domestically led stable revenue base and increased equity-method investment gains (¥9.0B, up +83.7% from ¥4.9B) materially boosted Ordinary Income and supported a high ROE of 9.8%.
Cash generation is solid: OCF ¥61.3B led to Free Cash Flow ¥53.7B, broadly covering dividends and capital expenditures. The increase in advances received (¥127.7B → ¥158.9B, +24.4%) is positive for cash flow, but the lengthening of accounts receivable collection (trade receivables up +10.9%) is a monitoring point for working capital efficiency. Restrained capital expenditures (CapEx/Depreciation 0.50x) pose potential mid-to-long-term risks to supply capacity and quality maintenance.
Next fiscal year guidance (Revenue ¥460.0B, Operating Income ¥67.0B, Net Income ¥57.0B) projects revenue and profit growth, with U.S. loss narrowing and Europe profitability improvements as keys. Dividend normalizes to ¥75 after the lapse of the commemorative dividend, improving payout ratio to 27.7% and sustainability, but the capacity to continue high total returns depends on future FCF generation. Reducing segment margin disparities (Japan 16.2%, Asia 29.2%, Europe 9.3%, U.S. ▲12.4%) and stability of equity-method gains are conditions for medium-term earnings expansion.
This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not constitute a recommendation to invest in any particular 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 needed before making investment decisions.