| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥23112.7B | ¥21293.2B | +8.5% |
| Operating Income | ¥608.4B | ¥468.9B | +29.8% |
| Profit Before Tax | ¥1455.3B | ¥1075.2B | +35.4% |
| Net Income | ¥1149.3B | ¥903.3B | +27.2% |
| ROE | 12.1% | 12.5% | - |
For the fiscal year ended March 2026, results were solid with Revenue ¥23112.7B (YoY +¥1819.5B +8.5%), Operating Income ¥608.4B (YoY +¥139.5B +29.8%), Ordinary Income ¥786.3B (YoY +¥192.1B +32.3%), and Net Income Attributable to Owners of the Parent ¥1081.6B (YoY +¥201.6B +22.9%), achieving year-over-year revenue and profit growth. Operating margin improved to 2.6% (up 0.4pt from 2.2%), reflecting realized operating leverage. Gross margin declined to 19.7% (from 20.3%, -0.6pt), but SG&A ratio improved to 14.2% (from 14.4%, -0.2pt), offsetting pressure on gross profit through cost efficiency. At the pre-tax level, significant normalization of finance costs from ¥390.3B to ¥212.7B and equity-method investment gains of ¥241.4B supported Profit Before Tax. ROE remained high at 13.7%, well above the industry median of 6.3%.
Revenue: Consolidated Revenue grew robustly to ¥23112.7B (+8.5%). By segment, Power Products & Engines contributed most at ¥6828.1B (+12.1%), followed by Aerospace Systems ¥6136.9B (+8.1%) and Energy Solutions & Marine ¥4335.7B (+8.9%). Precision Machinery & Robots ¥2591.5B (+7.3%) and Rolling Stock ¥2362.0B (+6.3%) also performed steadily, with all segments recording revenue increases. Contract liabilities increased to ¥3868.9B (from ¥3635.3B, +¥233.6B), indicating accumulation of advance-payment style orders that will support next fiscal year’s revenue recognition.
Profitability: Cost of sales was ¥18563.5B (cost of sales ratio 80.3%), yielding gross profit ¥4549.2B (gross margin 19.7%, down 0.6pt from 20.3%). SG&A was ¥3287.6B (SG&A ratio 14.2%, improved 0.2pt from 14.4%), aided by revenue growth and cost efficiencies. Operating Income was ¥608.4B (operating margin 2.6%), a significant increase of ¥139.5B (+29.8%) YoY, demonstrating operating leverage. Equity-method investment income was ¥241.4B (prior year ¥231.7B). Financial income ¥217.0B and financial expense ¥212.7B were nearly offsetting, and normalization of financial expense from the prior year’s high ¥390.3B lifted Ordinary Income. After other income ¥64.3B and other expenses ¥116.3B, Profit Before Tax was ¥1455.3B (up 35.4% from ¥1075.2B). After income taxes ¥306.0B (effective tax rate 21.0%), Net Income Attributable to Owners of the Parent was ¥1081.6B (+22.9%). There were one-off charges including impairment losses ¥12.5B and loss on sales of fixed assets ¥32.1B, but the normalization of finance costs and contributions from equity-method gains drove profit expansion, resulting in overall revenue and profit growth.
On a segment operating profit (business profit) basis, Aerospace Systems recorded ¥624.8B (prior year ¥558.3B, +11.9%) with a high operating margin of 10.2%, making it the largest contributor to consolidated profit. Energy Solutions & Marine posted ¥550.2B (prior year ¥442.9B, +24.2%) with the highest operating margin at 12.7%. Precision Machinery & Robots delivered a large increase to ¥143.9B (prior year ¥70.5B, +104.3%), improving operating margin to 5.6%. Rolling Stock earned ¥86.8B (prior year ¥84.1B, +3.3%) with an operating margin of 3.7%, remaining low and flat. Power Products & Engines saw a significant decline to ¥227.5B (prior year ¥478.8B, -52.5%) and operating margin fell to 3.3%. Other segments produced ¥70.8B (prior year ¥52.8B, +34.1%) with an operating margin of 8.3%. Consolidated Operating Income after eliminations was ¥608.4B, supported by high margins in Aerospace and Energy Solutions, while the deterioration in Power Products profitability is a concern.
Profitability: Operating margin improved to 2.6% (up 0.4pt from 2.2%), and net margin improved to 5.0% (up 0.9pt from 4.1%). ROE remains high at 13.7%, achieved through the structure: Net Margin 4.7% × Total Asset Turnover 0.695× × Financial Leverage 3.51×. Gross margin declined to 19.7% (down 0.6pt from 20.3%) but was offset by SG&A ratio improvement to 14.2% (down 0.2pt). Cash Quality: Operating Cash Flow (OCF) ¥1400.7B is 1.22× Net Income ¥1149.3B, indicating generally good cash realization of profits, but buildup in trade receivables +¥880.4B and inventories +¥822.2B is pressuring working capital and OCF/EBITDA (Operating Income + Depreciation) is 0.85×, below the benchmark (>0.9). Days sales outstanding is about 139 days, inventory days about 162 days, and the cash conversion cycle (CCC) is approximately 170 days, indicating elongation. Investment Efficiency: Total asset turnover 0.695x, capital expenditures ¥959.8B with a ratio to depreciation ¥1038.2B of 0.92×, indicating maintenance-level capex. Free Cash Flow was positive ¥120.2B but coverage of dividends ¥259.5B by FCF is 0.46×, insufficient, implying dividends rely on OCF and financing. Financial Soundness: Equity Ratio improved to 26.4% (up 2.4pt from 24.0%), current ratio about 1.16×, maintaining a minimum safety buffer. Interest-bearing debt (bonds & borrowings etc.) totaled ¥8611.9B against shareholders’ equity ¥9484.9B, giving D/E 0.91× and gross leverage (total liabilities / shareholders’ equity) 2.51×, somewhat elevated. Interest coverage (EBIT / finance costs) is about 2.9×, indicating limited interest-rate resilience.
OCF was ¥1400.7B (prior year ¥1489.4B, -6.0%), 1.22× of profit ¥1149.3B, so cash conversion of earnings is generally healthy but working capital movements weighed on cash. On a subtotal basis (before working capital changes), cash was robust at ¥1715.2B, aided by depreciation ¥1038.2B, subtraction of equity-method gains ¥241.4B, increase in retirement benefit liabilities ¥44.4B, etc. Conversely, increases in trade receivables △¥864.6B and inventories △¥238.9B tied up cash, partially offset by increases in trade payables +¥668.0B and contract liabilities +¥193.9B. Contract assets increased ¥295.8B, suggesting delayed cash inflows tied to project progress. Income taxes paid △¥367.2B, interest paid △¥138.8B, and lease payments △¥183.1B compressed OCF. Investing cash flow was △¥1280.5B (prior year △¥1112.0B), centered on capex △¥959.8B and intangible asset acquisitions △¥218.0B, plus acquisitions of equity-method investments etc. △¥119.9B. Free Cash Flow (OCF + Investing CF) was positive ¥120.2B but materially reduced from prior year ¥377.4B. Financing cash flow was △¥332.3B, including net decrease in short-term borrowings △¥803.3B, bond redemptions △¥400.0B, long-term borrowings +¥380.0B, net increase from receivables securitization +¥488.9B, and dividend payments △¥259.5B. Cash and cash equivalents decreased by △¥172.9B from ¥1327.8B at the beginning of the period to ¥1154.1B at period-end, with foreign exchange impact +¥39.2B, resulting in a net cash decrease of △¥172.9B.
Earnings quality is broadly good, with OCF exceeding Net Income indicating recurring cash generation. One-off items were limited (impairment losses ¥12.5B, loss on disposal of fixed assets ¥32.1B). Non-operating items saw financial income ¥217.0B and financial expense ¥212.7B nearly offsetting, and normalization of prior-year high financial expense (¥390.3B) boosted Ordinary Income. Equity-method investment gains ¥241.4B accounted for 16.6% of Profit Before Tax, and contributions from affiliates appear stable. OCF/Net Income is 1.22×, confirming cash realization of earnings, but OCF/EBITDA at 0.85× is below the benchmark (>0.9), indicating slowing cash conversion due to working capital buildup. Accrual quality is influenced by movements in contract assets and contract liabilities, with timing differences between order progress and cash inflows; overall there is no major concern with the recurring profit-generating structure.
The company’s plan targets Full Year Revenue ¥25600B (vs. this period +10.8%), Net Income Attributable to Owners of the Parent ¥1100B (vs. this period +1.7%), EPS forecast ¥131.61, and dividend forecast ¥20 (annualized). Current progress rates are high at 90.3% for Revenue and 98.3% for Net Income Attributable to Owners of the Parent, supporting a high probability of plan achievement. However, because the full-year plan assumes only modest profit growth, significant incremental profit accumulation over the remaining period is not anticipated. The accumulation of contract liabilities ¥3868.9B will support next year’s revenue recognition, while recovery in profitability of Power Products & Engines and cash generation improvement via inventory and receivables reduction are key to achieving the plan.
Total dividends this period were ¥171 (Q2-end ¥75 + Year-end ¥96). Total dividend amount relative to Net Income Attributable to Owners of the Parent ¥1081.6B is approximately ¥143.0B, implying a payout ratio of about 13.2%, a conservative level. Dividend guidance is annual ¥20 (after share-split adjustment), while this period’s payout ratio 28.5% is calculated as dividends ¥171 over basic EPS ¥129.41. Share buybacks were small at ¥0.3B, so dividends remain the primary shareholder return. Dividend sustainability appears sufficient on a Net Income Attributable to Owners of the Parent basis, but FCF coverage of dividends is only 0.46× (FCF ¥120.2B vs. dividends ¥259.5B), indicating dependency on OCF and financing for dividend funding. Improving FCF via reduction of inventories and receivables is a prerequisite for securing stable dividend capacity.
Working Capital Expansion Risk: Trade receivables ¥8804B (DSO about 139 days), inventories ¥8222B (inventory days about 162 days), and CCC about 170 days indicate working capital efficiency is in a cautionary zone. Cash tied up by revenue growth and order backlog accumulation is pressuring OCF. If inventory and receivables compression does not progress, prolonged FCF shortfall may constrain dividend funding and investment capacity.
Leverage & Interest Rate Risk: With D/E 0.91× and total liabilities / shareholders’ equity 2.51×, leverage is somewhat elevated. Interest coverage (EBIT / finance costs) of about 2.9× against finance costs ¥212.7B is limited. In a rising rate environment, interest burden could increase and pressure profitability. Monitoring the maturity profile of interest-bearing debt and refinancing costs is necessary.
Polarization of Segment Profitability Risk: While Aerospace Systems (operating margin 10.2%) and Energy Solutions & Marine (12.7%) maintain high profitability, Power Products & Engines’ operating margin fell to 3.3% (down 4.5pt from 7.8%), with business profit halved to ¥227.5B from ¥478.8B. As this major segment represents 29.5% of consolidated Revenue, deterioration in its profitability poses a structural risk to improving consolidated margins.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| ROE | 13.7% | 6.3% (3.2%–9.9%) | +7.4pt |
| Operating Margin | 2.6% | 7.8% (4.6%–12.3%) | -5.1pt |
| Net Margin | 5.0% | 5.2% (2.3%–8.2%) | -0.2pt |
ROE substantially exceeds the industry median, reflecting high capital efficiency driven by leverage, while operating margin lags the median by 5.1pt, indicating room for profitability improvement.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 8.5% | 3.7% (-0.4%–9.3%) | +4.8pt |
Revenue growth rate exceeds the industry median, indicating healthy top-line expansion.
※ Source: Company aggregation
Emergence of operating leverage and margin improvement trend: With Revenue +8.5% and Operating Income +29.8%, operating leverage manifested and operating margin improved to 2.6% (from 2.2%, +0.4pt). Gross margin fell to 19.7% (from 20.3%), but improvement in SG&A ratio to 14.2% (from 14.4%, -0.2pt) offset this, and cost efficiency and scale benefits drove profit growth. Normalization of finance costs (¥390.3B → ¥212.7B) and contributions from equity-method investment gains ¥241.4B boosted Profit Before Tax, sustaining ROE at 13.7%, well above the industry median 6.3%. Going forward, expansion of high-margin segments (Aerospace, Energy Solutions) and recovery of Power Products profitability are keys to sustaining consolidated margin improvement.
Working capital efficiency and cash generation are bottlenecks: OCF ¥1400.7B is 1.22× Net Income ¥1149.3B and cash conversion is broadly sound, but increases in trade receivables +¥8804B and inventories +¥8222B are pressuring working capital and OCF/EBITDA at 0.85× is below standard. CCC about 170 days is extended, and FCF ¥120.2B is insufficient vs. dividends ¥259.5B (FCF coverage 0.46×). While contract liabilities ¥3868.9B accumulation supports next-year revenue recognition, compressing inventories and receivables is directly linked to cash generation and dividend capacity. Progress on working capital management will be an important monitoring point into the next period.
Monitoring leverage and interest-rate resilience: Despite improvement in Equity Ratio to 26.4%, leverage remains somewhat elevated with D/E 0.91× and total liabilities / shareholders’ equity 2.51×, and interest coverage about 2.9× indicates limited resilience to rising rates. Although finance costs normalized from the prior year, interest expense could increase again depending on the rate environment. Future refinancing costs, maturity profile of interest-bearing debt, and progress on net-debt reduction via working capital compression will determine sustainability of financial soundness.
This report was 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 firm based on public financial statements. Investment decisions are your responsibility; consult a professional if necessary.