| Metric | Current | Prior | YoY |
|---|---|---|---|
| Revenue | ¥3695.2B | ¥3446.4B | +7.2% |
| Operating Income | ¥97.0B | ¥-110.8B | +18760.0% |
| Ordinary Income | ¥150.6B | ¥3.2B | -99.5% |
| Net Income | ¥148.5B | ¥2.4B | +621740.0% |
| ROE | 1.6% | 0.0% | - |
FY2026 Q3 results show ROHM achieving revenue of 369.5B yen (YoY +7.2%), operating income of 9.7B yen (prior year loss of 11.1B yen, representing a turnaround to profitability), ordinary income of 15.1B yen (YoY -99.5%, noting prior year figure of 0.3B yen was exceptionally low), and net income of 14.8B yen (prior year 0.2B yen, up substantially). The company successfully returned to operating profitability with a 23.1% gross margin, though operating margin of 2.6% remains constrained by elevated selling, general and administrative expenses of 75.7B yen. Non-operating income contributed significantly at 8.2B yen, including interest income of 4.0B yen and dividend income of 2.8B yen. Special items resulted in net additions of 7.4B yen (gains 16.8B yen, losses 9.4B yen). Operating cash flow of 71.3B yen substantially exceeded net income at 4.81x coverage, demonstrating robust cash generation capability. The quarter reflects operational recovery with persistent structural profitability challenges requiring attention.
[Profitability] ROE of 1.6% remains substantially below the industry median of 5.0%, reflecting low capital efficiency. Operating margin of 2.6% significantly underperforms the industry median of 8.3%, indicating structural profitability constraints. Net profit margin of 4.0% falls below the industry median of 6.3%. ROIC of 0.8% is notably weak compared to the industry median of 5.0%, suggesting capital allocation challenges. The DuPont three-way decomposition reveals ROE driven by net profit margin of 4.0%, asset turnover of 0.255, and financial leverage of 1.57x. EBIT margin of 2.6% represents the primary constraint on profitability, with interest burden of 2.313 (EBT/EBIT exceeding 1.0 due to substantial non-operating income) and tax burden of 0.660. [Cash Quality] Cash and deposits of 307.5B yen provide strong liquidity, covering short-term debt of 100.0B yen by 3.07x. Operating cash flow of 71.3B yen represents 4.81x net income, confirming strong cash-backed earnings quality. Free cash flow of 72.3B yen demonstrates robust cash generation after capital expenditure of 100.2B yen. [Investment Efficiency] Total asset turnover of 0.255 falls significantly below the industry median of 0.58, indicating inefficient asset utilization. Receivables turnover averages 88 days (DSO), slightly above the industry median of 82.87 days. Inventory turnover extends to 253 days (DIO), substantially exceeding the industry median of 108.81 days and highlighting inventory management issues. Operating working capital cycle of 313 days (CCC) far exceeds the industry median of 108.10 days, representing a critical efficiency concern. Payables turnover of 28 days (DPO) is notably shorter than the industry median of 55.82 days. Capital expenditure to depreciation ratio of 2.41x exceeds the industry median of 1.44x, indicating aggressive growth investment. [Financial Health] Equity ratio of 63.9% aligns closely with the industry median of 63.8%, representing stable capital structure. Current ratio of 334.3% significantly exceeds the industry median of 2.84x, demonstrating exceptional liquidity. Debt-to-equity ratio of 0.22 reflects conservative leverage. Total debt of 200.0B yen (short-term 100.0B yen, long-term 100.0B yen) against EBITDA results in debt-to-EBITDA of 3.90x, moderately elevated but manageable given the cash position. Interest coverage of 8.85x indicates adequate debt servicing capability.
Operating cash flow of 71.3B yen substantially exceeded net income of 14.8B yen, yielding a cash conversion ratio of 4.81x that significantly surpasses the industry median of 1.24x, demonstrating strong cash-backed earnings quality. The primary drivers of operating cash flow included net income contributions supplemented by depreciation and amortization of 41.6B yen, alongside working capital adjustments. Investing cash flow reflects capital expenditure of 100.2B yen, representing 2.41x depreciation, which exceeds the industry median CapEx-to-depreciation ratio of 1.44x and signals continued growth-oriented investment despite current profitability constraints. Additional investing activities included movements in investment securities, with the securities portfolio decreasing by approximately 85.1B yen year-over-year to 266.4B yen, suggesting portfolio rebalancing or partial liquidation that contributed to cash generation. Free cash flow of 72.3B yen (operating CF less CapEx plus reported adjustments) provides substantial coverage for dividends and demonstrates the company's ability to simultaneously fund growth investments and shareholder returns. Cash and deposits increased by 107.9B yen year-over-year (+56.4%) to 307.5B yen, reflecting the combined effects of strong operating cash generation, investment portfolio adjustments, and financing activities. The substantial cash accumulation strengthens liquidity positioning with cash-to-short-term liabilities coverage of 3.07x, though the deployment efficiency of this enlarged cash balance warrants monitoring given the low ROIC of 0.8%.
Ordinary income of 15.1B yen compared to operating income of 9.7B yen reveals non-operating net contribution of approximately 5.4B yen, representing meaningful enhancement beyond core operations. Non-operating income totaled 8.2B yen, comprising primarily interest income of 4.0B yen and dividend income of 2.8B yen, which collectively represent 2.2% of revenue and reflect returns on the company's substantial cash and investment securities holdings of 573.5B yen combined. This non-operating income structure demonstrates recurring characteristics tied to financial asset holdings, though investment income sustainability depends on market conditions and portfolio management. Special items included gains of 16.8B yen and losses of 9.4B yen, yielding net extraordinary gains of 7.4B yen that contributed approximately one-third of pre-tax income, raising questions about core earnings sustainability. The composition suggests a portion of reported profitability derives from one-time or non-operational sources. Operating cash flow of 71.3B yen substantially exceeding net income of 14.8B yen by 4.81x indicates healthy earnings quality from a cash perspective, with operating activities generating significantly more cash than reported accrual earnings. However, the divergence also reflects working capital dynamics and non-cash charges. The receivables-to-revenue ratio and extended inventory turnover (253 days DIO) suggest potential accrual risks, though current cash generation mitigates immediate quality concerns. Overall earnings quality reflects a mixed profile: strong operating cash conversion supports underlying cash generation capability, but operating profitability remains weak at 2.6% margin, with meaningful dependence on non-operating income and special items to achieve reported net income levels.
Operating margin compression risk remains elevated with EBIT margin of 2.6% significantly underperforming the industry median of 8.3%, driven by high fixed cost burden as SG&A expenses of 75.7B yen represent 20.5% of revenue. Any revenue softness or inability to leverage fixed costs would rapidly erode the thin operating profit buffer. The company's operating leverage position leaves limited margin for error, and sustained profitability improvement requires either revenue scale expansion or structural cost reduction.
Working capital efficiency deterioration poses substantial cash flow and profitability risks, with inventory turnover extending to 253 days (2.3x industry median of 108.81 days) and work-in-process inventory representing 44.5% of total inventory at 222.7B yen. The cash conversion cycle of 313 days (2.9x industry median of 108.10 days) ties up significant capital and generates opportunity costs. Specific inventory composition shows finished goods of 106.2B yen, work-in-process of 222.7B yen, and raw materials of 171.7B yen, with the elevated WIP suggesting production cycle inefficiencies or demand-supply mismatches. Without meaningful improvement in working capital management, the company faces continued pressure on cash efficiency and return on invested capital.
Capital allocation effectiveness uncertainty stems from aggressive capital expenditure of 100.2B yen (2.41x depreciation vs. industry median of 1.44x) that has not yet translated to improved returns, as evidenced by ROIC of 0.8% substantially below the industry median of 5.0%. The company maintains investment securities of 266.4B yen alongside high cash balances totaling 307.5B yen, representing 39.6% of total assets in financial assets, yet overall asset turnover of 0.255 significantly lags the industry median of 0.58. Without clear demonstration that growth investments will enhance returns, the risk exists that continued heavy CapEx and low-return financial asset holdings perpetuate suboptimal capital efficiency.
[Industry Position] (Reference - Proprietary Analysis)
ROHM's profitability metrics significantly underperform manufacturing industry benchmarks. Operating margin of 2.6% falls well below the industry median of 8.3% (25th-75th percentile range: 4.8%-12.6%), placing the company in the lower quartile of operational efficiency. Net profit margin of 4.0% similarly trails the industry median of 6.3% (IQR: 3.2%-9.0%). Most critically, ROE of 1.6% substantially lags the industry median of 5.0% (IQR: 2.9%-8.1%), and ROIC of 0.8% dramatically underperforms the industry median of 5.0% (IQR: 3.0%-10.0%), indicating severe capital efficiency challenges that place the company among the weakest performers in return generation.
Financial health metrics present a more favorable picture. Equity ratio of 63.9% aligns closely with the industry median of 63.8% (IQR: 49.5%-74.7%), reflecting appropriate capital structure. Current ratio of 334.3% significantly exceeds the industry median of 2.84x (IQR: 2.10x-3.81x), demonstrating exceptional liquidity positioning that places the company in the top tier for short-term financial strength. Net debt-to-EBITDA positioning shows the company holding substantial net cash given negative net debt position, comparing favorably to the industry median of -1.11x (IQR: -3.48x to 1.27x).
Operational efficiency reveals mixed results with notable weaknesses. Asset turnover of 0.255 significantly underperforms the industry median of 0.58 (IQR: 0.42-0.66), indicating substantially lower revenue generation per asset unit. Working capital metrics highlight critical inefficiencies: inventory turnover of 253 days far exceeds the industry median of 108.81 days (IQR: 49.60-154.77 days), ranking among the worst performers. Operating working capital cycle of 313 days dramatically exceeds the industry median of 108.10 days (IQR: 71.95-142.72 days), representing approximately 2.9x the median and signaling severe working capital management challenges. Receivables turnover of 88 days slightly exceeds the industry median of 82.87 days (IQR: 68.43-115.00 days), while payables turnover of 28 days falls well below the industry median of 55.82 days (IQR: 41.74-89.89 days), suggesting limited utilization of supplier financing. Cash conversion ratio of 4.81x significantly exceeds the industry median of 1.24x (IQR: 0.62-2.47x), reflecting strong operating cash generation relative to net income despite operational inefficiencies.
Growth and investment metrics show revenue growth of 7.2% outpacing the industry median of 2.7% (IQR: -1.9% to 7.9%), positioning the company in the upper half for top-line expansion. However, the CapEx-to-depreciation ratio of 2.41x substantially exceeds the industry median of 1.44x (IQR: 1.19-1.76x), indicating more aggressive capital intensity that has not yet yielded commensurate return improvements.
(Industry: Manufacturing sector, N=98 companies for most metrics, Comparison period: FY2025-Q3, Source: Proprietary analysis)
The company demonstrates robust liquidity and financial stability with cash and deposits of 307.5B yen (3.07x coverage of short-term debt), combined with operating cash flow generation of 71.3B yen that yields 4.81x coverage of net income, positioning it in the top tier of the manufacturing sector for cash conversion at well above the industry median of 1.24x. The strong cash generation capability and conservative balance sheet with 63.9% equity ratio provide substantial financial flexibility for sustained operations, shareholder returns, and strategic investments. However, this financial strength contrasts sharply with operational performance, as the company simultaneously maintains one of the sector's strongest liquidity positions while generating some of its weakest returns on capital.
Critical structural challenges in operational efficiency and capital productivity require urgent attention, as evidenced by operating margin of 2.6% (vs. industry median 8.3%), ROIC of 0.8% (vs. industry median 5.0%), and ROE of 1.6% (vs. industry median 5.0%) that place the company among bottom-quartile performers in profitability metrics. The working capital cycle of 313 days (2.9x industry median of 108 days) and inventory turnover of 253 days (2.3x industry median of 109 days) represent severe inefficiencies that fundamentally constrain return on invested capital. Notably, work-in-process inventory of 222.7B yen comprising 44.5% of total inventory suggests production cycle or demand forecasting issues. The aggressive capital expenditure program at 2.41x depreciation (vs. industry median 1.44x) totaling 100.2B yen has not translated to improved returns, raising questions about investment effectiveness. The divergence between strong cash generation and weak profitability metrics indicates the company is successfully collecting cash from operations but deploying capital inefficiently, with substantial room for improvement in converting revenue to profit and assets to returns.
The sustainability of current dividend policy at 50 yen annual (25 yen interim, 25 yen year-end planned) faces medium-term questions despite near-term coverage, as the calculated payout ratio of 136.2% based on quarterly net income run-rate exceeds earnings substantially, though free cash flow of 72.3B yen currently provides adequate coverage at 3.58x estimated annual dividends. The elevated payout ratio reflects weak net income generation rather than aggressive distribution policy, highlighting that dividend sustainability ultimately depends on operational improvement to enhance earnings quality. Full-year guidance projects net income of 10.0B yen on revenue of 480.0B yen, implying significant improvement required in Q4 to achieve targets, with operating income guidance of 6.0B yen suggesting continued margin pressure. The forward P/E based on guided EPS of 25.91 yen and current quarterly trajectory indicates management expects material earnings recovery, making execution against guidance a critical monitoring point for assessing operational turnaround progress and dividend sustainability on an earnings basis rather than cash flow reliance alone.
This report was automatically generated by AI analyzing XBRL earnings data as an earnings analysis tool. This is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled from publicly available earnings data. Please make investment decisions at your own responsibility and consult professionals as needed.