| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥1002.0B | ¥954.9B | +4.9% |
| Operating Income | ¥27.9B | ¥38.1B | -26.8% |
| Ordinary Income | ¥41.4B | ¥55.3B | -25.3% |
| Net Income | ¥42.0B | ¥32.1B | +30.8% |
| ROE | 4.9% | 3.9% | - |
For the fiscal year ended March 2026, revenue was ¥1,002.0B (YoY +¥47.2B +4.9%), operating income was ¥27.9B (YoY -¥10.2B -26.8%), ordinary income was ¥41.4B (YoY -¥13.9B -25.3%), and net income was ¥42.0B (YoY +¥9.9B +30.8%). While revenue increased, operating profit declined; foreign exchange gains of ¥15.2B and special gains of ¥18.9B (gain on sale of investment securities) boosted net income. Revenue was driven by Japan +8.7% and China +5.2%, while Southeast Asia turned from a prior-period profit to a loss of -¥14.8B, pressuring operating margin. Gross margin fell to 14.9% from an estimated 16.3% (-1.4pp), SG&A ratio rose to 12.1% (+0.8pp), and operating margin deteriorated by -1.2pp to 2.8%. Net margin rose slightly to 4.2% thanks to FX gains and sale gains, but core profitability weakened. Operating Cash Flow (OCF) was ¥78.2B (-13.7%) and 1.86x net income, indicating solid cash backing, but capital expenditures of ¥86.4B were high, leaving free cash flow at ¥9.4B; dividends of ¥14.25B were funded using external financing. Despite revenue growth and higher final profit, reliance on one-off gains and deteriorating Southeast Asia profitability emerged as key issues.
[Revenue] Revenue was ¥1,002.0B, up 4.9% YoY. By segment, Japan ¥632.8B (YoY +8.7%) showed the largest increase, with sales to major customer DENSO Corporation amounting to ¥351.6B (~35% of revenue). China ¥362.1B (+5.2%) was solid; Southeast Asia ¥356.4B (+2.6%) showed only slight growth; Americas ¥40.4B (-6.5%) declined. By region, sales were Japan ¥605.1B (+8.8%), China ¥175.1B (+0.6%), Thailand ¥62.5B (+5.8%), Southeast Asia ¥69.2B (+17.4%), Americas ¥90.2B (-15.4%); domestic Japan and Southeast Asia contributed to revenue growth while the Americas slowdown was notable. Revenue composition: Japan 60.4%, China 17.5%, Southeast Asia 13.0%, Americas 9.0% — a Japan-centric mix. The main drivers of growth were expanded shipments to major customers, resilient domestic demand, and increased sales into Southeast Asia, offsetting the contraction in the Americas.
[Profitability] Cost of sales was ¥852.7B, yielding gross profit of ¥149.3B and gross margin of 14.9%, down -1.4pp from an estimated 16.3% last year, likely due to higher raw material and energy costs and lower utilization in Southeast Asia. SG&A was ¥121.5B (12.1% of sales), up 3.9% YoY; although cost control outpaced revenue growth (+4.9%), SG&A ratio rose from an estimated 12.3% by +0.8pp. Operating income was ¥27.9B (-26.8%), with operating margin of 2.8% deteriorating -1.2pp from an estimated 4.0%; Southeast Asia operating loss of -¥14.8B (prior year +¥8.67B) significantly depressed consolidated margins. Non-operating income totaled ¥22.9B, comprised of FX gains ¥15.2B and interest/dividend income ¥2.98B; non-operating expenses were ¥9.4B (interest expense ¥6.3B, other ¥3.1B), resulting in ordinary income of ¥41.4B (-25.3%). Extraordinary gains included gain on sale of investment securities ¥18.9B; extraordinary losses were environmental-related costs ¥4.99B, loss on disposal of fixed assets ¥1.87B, impairment ¥0.37B, netting to +¥11.5B. Pre-tax income of ¥52.9B less income taxes ¥10.7B and non-controlling interests ¥1.9B resulted in net income attributable to owners of the parent of ¥42.0B (+30.8%). In summary, revenue rose while operating profit declined, but non-operating and extraordinary items led to higher net income.
Japan: revenue ¥632.8B (YoY +8.7%), operating income ¥25.9B (+17.2%), margin 4.1% — revenue and profit growth as the core market. China: revenue ¥362.1B (+5.2%), operating income ¥27.9B (+77.4%), margin 7.7% — substantial profit increase and a major contributor to consolidated operating income. Southeast Asia: revenue ¥356.4B (+2.6%) but operating loss -¥14.8B, turning from prior operating profit ¥8.67B to a loss, margin -4.1% — profitability materially deteriorated. Americas: revenue ¥40.4B (-6.5%), operating income ¥3.0B (+25.7%), margin 7.4% — small scale but improved efficiency. Consolidated operating income after intersegment adjustments was ¥27.9B. Japan and China drove profit growth, while Southeast Asia’s loss weighed on overall margins, and the deteriorating regional mix was a key factor in the operating margin decline.
[Profitability] Operating margin was 2.8%, down -1.2pp from an estimated 4.0%; ROE was 4.9%, slightly down from 5.1% last year; net margin was 4.2%, up +0.8pp from an estimated 3.4%, largely due to non-operating and one-off gains. Gross margin of 14.9% fell from an estimated 16.3%, indicating cost-structure challenges. ROIC is estimated at about 2.2%, below the cost of capital. [Cash Quality] Operating Cash Flow was ¥78.2B, 1.86x net income ¥42.0B, with an accrual ratio of -2.5%, indicating strong cash backing and high earnings quality. OCF/EBITDA ratio was 0.84x, slightly below the 0.9x benchmark due to working capital effects. [Investment Efficiency] Total asset turnover was 0.66x (prior 0.64x), a slight improvement; inventory turnover estimated at 10.4x is efficient, but accounts receivable turnover estimated at 4.0x is somewhat low, with DSO around 72 days indicating long collection. Fixed asset turnover was 1.25x, reflecting capital intensity. Capital expenditures were ¥86.4B (8.6% of sales), 1.32x depreciation of ¥65.4B — a high level as the company continues mid-term capacity, quality, and automation investments. [Financial Health] Equity ratio 56.8%, current ratio 162.2%, quick ratio 139.3% — healthy. Debt/Equity 0.76x, interest-bearing debt ¥325.1B, Debt/EBITDA 3.49x is somewhat elevated, but cash/short-term debt ratio 1.91x and interest coverage 4.45x are within acceptable ranges. Short-term borrowings rose from ¥60B to ¥102.5B (+70.8%), indicating bridging needs for working capital and investments, but liquidity buffers remain.
Operating Cash Flow was ¥78.2B, down -13.7% YoY but 1.86x net income ¥42.0B, showing strong cash generation. Net operating cash subtotal of ¥92.5B reflected working capital changes: accounts receivable increase -¥13.5B, inventory reduction +¥5.4B, trade payables increase +¥2.6B; corporate tax payments -¥10.4B, interest/dividend received ¥2.9B, interest paid -¥6.8B were reflected. Non-cash charges added back included depreciation ¥65.4B, goodwill amortization ¥0.1B, impairment ¥0.4B, etc., resulting in an accrual ratio of -2.5% (OCF ¥78.2B − net income ¥42.0B = ¥36.2B difference) and strong cash backing. Investing cash flow was -¥68.8B, including capital expenditures -¥86.4B, intangible assets -¥5.8B, proceeds from sale of investment securities +¥23.8B, and proceeds from sale of fixed assets +¥0.8B. Free cash flow was ¥9.4B (OCF ¥78.2B + investing CF -¥68.8B), positive but the dividend of ¥14.25B gave a coverage ratio of 0.66x — dividends could not be fully covered by current cash generation alone, so a mix of internal funds and external financing was used. Financing cash flow was -¥41.0B, including new long-term borrowings +¥86.4B, new short-term borrowings +¥232.5B, repayments long-term -¥60.3B, short-term repayments -¥190B, redemption of bonds -¥7.7B, dividends -¥14.23B, dividends to non-controlling interests -¥0.4B, and lease repayments -¥0.8B. Year-end cash was ¥195.5B, down -¥27.8B from ¥221.9B, including FX effects +¥3.8B. Working capital movements: accounts receivable increased 177.8 → ¥198.9B (DSO ~72 days), inventories compressed 101.4 → ¥87.2B (DIO ~37 days), trade payables increased 115.4 → ¥125.2B (DPO ~54 days), resulting in CCC ~55 days — generally healthy, though prolonged DSO is a cash-efficiency challenge.
Ordinary income ¥41.4B vs. net income ¥42.0B shows a small divergence of +1.4%. Net extraordinary gains were +¥11.5B (gain on sale of investment securities ¥18.9B less extraordinary losses ¥7.4B composed of environmental costs ¥4.99B, disposal losses ¥1.87B, impairment ¥0.37B), which boosted pre-tax income. Operating income ¥27.9B is the basis of recurring earnings, but non-operating income ¥22.9B included FX gains ¥15.2B (approx. 54.6% of operating income), indicating high FX sensitivity and limited repeatability. Interest/dividend income ¥2.98B is stable, but the scale of FX gains raises concerns about profit volatility if FX reverses. The one-off gain on sale of investment securities ¥18.9B is non-recurring and likely to diminish in future periods. With OCF exceeding net income by 1.86x, accrual quality is high and there are no signs of accounting manipulation. Comprehensive income ¥60.7B vs. net income ¥42.0B — the difference ¥18.7B is composed of FX translation gains ¥18.3B, valuation difference on available-for-sale securities -¥4.6B, and retirement benefit adjustments ¥4.8B, indicating overall shareholder value increase exceeding net income. The divergence between ordinary income and net income is mainly due to extraordinary gains; core earning power remains somewhat fragile with operating margin at 2.8%. This fiscal year was supported by one-offs and FX; improving core earnings quality will be a focus going forward.
The company plan for the fiscal year ending March 2027 (Full Year) forecasts revenue ¥1,040.0B (YoY +3.8%), operating income ¥32.0B (+14.8%), ordinary income ¥38.0B (-8.1%), net income ¥20.0B (-52.4%), and dividend ¥0. The company expects operating income growth from improved Southeast Asia profitability and cost reductions, while ordinary income is expected to decline due to reduced FX gains; net income is projected to fall sharply due to absence of this year’s gain on sale of investment securities ¥18.9B. No dividend is planned to prioritize financial flexibility and redirect funds to capital expenditures and rebuilding the earnings base. Compared with current-year results, operating margin is expected to improve from 2.8% to 3.1%, while net margin is expected to decline from 4.2% to 1.9% as the company shifts from one-off-driven earnings toward core profitability. Progress evaluation will be possible after full-year results, but key to achieving the plan are Southeast Asia profitability turnaround, recovery in gross margin, and realization of CapEx benefits. The conservative guidance appears to factor in FX/one-off reversals and Southeast Asia uncertainty.
Only a year-end dividend of ¥20 per share (no interim dividend) totaling ¥14.25B, representing a payout ratio of 37.6% — a reasonable level. However, free cash flow ¥9.4B coverage of the dividend was 0.66x, i.e., dividends exceeded cash generated this period, so internal reserves and borrowings were used. No share buybacks were disclosed; total shareholder return consisted solely of dividends. The company plan for next year assumes no dividend, prioritizing financial flexibility in light of fading one-off/FX contributions and ongoing investment. Dividend sustainability depends on strengthening core operating cash generation (gross margin recovery and DSO reduction) and realizing returns on investments. Payout ratio 37.6% is within a reasonable range, but free cash flow-based capacity is limited; medium-term resumption of dividend depends on expanding OCF and stabilizing investments.
Regional-mix deterioration risk: Southeast Asia segment reported operating loss -¥14.8B (margin -4.1%), a sharp deterioration from prior operating income ¥8.67B. Southeast Asia sales ¥356.4B represent 35.6% of total; continued losses, additional impairments, or restructuring costs could further depress consolidated operating margin. Improvements in utilization, fixed-cost absorption, and quality/yield in the region will be decisive for future profitability.
Customer concentration & pricing power risk: Sales to largest customer DENSO Corporation were ¥351.6B (~35% of total), exposing the company to order volatility, price negotiations, and specification changes. Automotive supply-chain shifts (EV adoption, inventory adjustments) may affect orders and pricing; customer diversification and higher value-added offerings are required. Delay in passing through raw material and energy cost increases is reflected in low gross margin 14.9%, underscoring the need to improve pricing power.
FX sensitivity & one-off dependence risk: FX gains ¥15.2B equated to ~54.6% of operating income, increasing profit volatility from currency moves. Net income this year depended on gain on sale of investment securities ¥18.9B (~45% of net income), which is non-repeatable. Next year’s forecast assumes FX and one-off reductions, cutting net income to ¥20.0B (-52.4%), revealing vulnerability of core earnings. Strengthening FX hedging policy and raising operating margins are key to stabilizing earnings.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 2.8% | 7.8% (4.6%–12.3%) | -5.0pp |
| Net Margin | 4.2% | 5.2% (2.3%–8.2%) | -1.0pp |
Profitability is well below industry medians, with gaps of -5.0pp in operating margin and -1.0pp in net margin, attributable to Southeast Asia losses and low gross margin, indicating competitive challenges within manufacturing.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 4.9% | 3.7% (-0.4%–9.3%) | +1.2pp |
Revenue growth exceeds the industry median by +1.2pp, supported by expansion in Japan and China, but qualitative improvement in the growth (i.e., margins) remains a challenge.
※Source: Company compilation
Profit recovery in Southeast Asia is the top priority for improving consolidated margins. The magnitude and timing of improvement from operating loss -¥14.8B (margin -4.1%) will determine the pace of recovery from the current 2.8% operating margin toward the industry median of 7.8%. Monitor utilization, fixed-cost absorption, yield improvement metrics, any additional impairment charges, and the scale of restructuring costs.
Potential for gross margin recovery from 14.9% and cost-structure improvement. Efforts in material procurement, energy management, manufacturing yield efficiencies, and stronger price pass-through could lift gross margin into the mid-16% range and restore operating margins to the 4% range. The ongoing CapEx of ¥86.4B (8.6% of sales) targets capacity, quality, and automation and is assumed to contribute to earnings within about 24 months.
Reducing reliance on FX and one-offs and ensuring dividend sustainability. FX gains ¥15.2B (~54.6% of operating income) and gain on sale of investment securities ¥18.9B (~45% of net income) underpin the projected net income decline to ¥20.0B (-52.4%) next year. Strengthening core OCF (DSO reduction, gross margin improvement) is a prerequisite for resuming dividends. Although OCF/net income is 1.86x, free cash flow ¥9.4B versus dividend ¥14.25B indicates that investment results and CCC shortening (DSO 72 days → below 60 days) will determine medium-term shareholder return capacity.
This report is an earnings analysis document automatically generated by AI 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 professionals as needed before making investment decisions.