| Indicator | Current Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue | ¥1811.8B | ¥1831.3B | -1.1% |
| Operating Income | ¥60.8B | ¥79.1B | -23.2% |
| Equity-Method Investment Income (Loss) | ¥0.1B | ¥0.1B | +15.4% |
| Ordinary Income | ¥55.8B | ¥73.2B | -23.8% |
| Net Income | ¥50.1B | ¥51.3B | -2.4% |
| ROE | 7.2% | 7.8% | - |
For the fiscal year ended March 2026, Revenue was ¥1,811.8B (YoY -¥19.5B, -1.1%), Operating Income was ¥60.8B (YoY -¥18.3B, -23.2%), Ordinary Income was ¥55.8B (YoY -¥17.4B, -23.8%), and Net Income was ¥50.1B (YoY -¥1.2B, -2.4%), representing declines in both top and bottom lines. Gross margin improved to 15.5% (YoY +0.3pp), but SG&A increased to ¥220.0B (+10.2%), driving Operating Income margin down to 3.4% (-0.9pp). A special gain on sale of investment securities of ¥21.9B limited the decline in Net Income. Goodwill rose to ¥160.6B (YoY +¥130.4B, +430.5%) and intangible assets to ¥176.2B (YoY +¥130.0B, +280.9%) from M&A activity, expanding Total Assets to ¥1,644.8B (YoY +¥341.1B, +26.2%). Interest-bearing debt increased to ¥573.8B (YoY +¥225.7B, +64.8%), and Equity Ratio fell to 42.5% (YoY -7.8pp). Operating Cash Flow (OCF) generated ¥102.7B, or 2.05x Net Income, but M&A-related investing drove Investing CF to -¥175.3B, leaving Free Cash Flow (FCF) at -¥72.6B.
[Revenue] Revenue of ¥1,811.8B (-1.1%) edged down. By segment, the core ElectronicParts (Electronic Parts business) recorded ¥1,402.7B (-1.9%, 77.3% of total), Electric and Electrical Equipment (Electronic & Electrical Equipment business) fell to ¥253.0B (-7.1%, 14.0%), while IndustrialChemical (Industrial Chemical business) rose to ¥111.6B (+3.4%, 6.2%) and Others increased sharply to ¥48.5B (+89.6%, 2.7%) due to contributions from newly consolidated subsidiaries via M&A. By region, Japan was broadly flat at ¥1,113.9B (YoY -¥4.7B), China declined to ¥319.8B (YoY -¥13.9B), and Other Asia was ¥316.8B (YoY -¥0.9B), reflecting demand-supply adjustments in Asian markets. Sales to major customer Denso were ¥191.4B (from ¥211.3B prior year, -9.4%), and customer concentration was a driver of performance volatility.
[Profitability] Gross margin improved to 15.5% (YoY +0.3pp), but SG&A increased to ¥220.0B (+10.2%), raising SG&A ratio to 12.1% (+1.2pp). The rise in SG&A was driven by higher personnel costs—salaries and allowances ¥69.0B (+8.0%) and retirement benefit expense ¥6.5B (+9.4%)—reflecting integration costs and headcount increases after M&A. Consequently, Operating Income fell to ¥60.8B (-23.2%) and Operating Income margin declined to 3.4% (-0.9pp). Non-operating items showed stable financial income (dividends received ¥3.1B, -6.1%; interest income ¥0.5B, +25.0%), but foreign exchange losses of ¥6.1B (prior year ¥8.9B) and interest expense of ¥4.3B (prior year ¥3.2B, +35.9%) weighed on results, yielding Ordinary Income of ¥55.8B (-23.8%). A substantial special gain on sale of investment securities of ¥21.9B (prior year ¥2.9B) lifted Profit Before Tax to ¥77.8B (prior year ¥75.6B, +2.8%). After income taxes of ¥27.6B (effective tax rate 35.6%), Net Income was ¥50.1B (-2.4%), with the decline limited by the special gain. By segment Operating Income: ElectronicParts ¥39.3B (-24.9%, margin 2.8%), showing deterioration in the core business; Electric and Electrical Equipment ¥20.8B (-16.6%, margin 8.2%), maintaining relatively high margins; IndustrialChemical ¥6.2B (from -¥0.1B, margin 5.6%), turning profitable; Others posted a loss of -¥7.0B (prior year ¥1.3B profit) as integration costs weighed. In sum, although the company aimed for revenue and profit growth, higher SG&A and a worse segment mix produced declines in both.
ElectronicParts (Electronic Parts business) recorded Revenue ¥1,402.7B (-1.9%) and Operating Income ¥39.3B (-24.9%, margin 2.8%), marking declines in both revenue and profit. As the core business accounting for 77.3% of sales, it faced volume declines and price pressure amid semiconductor device and general electronic parts demand-supply adjustments, lowering Operating Income margin from 3.7% to 2.8% (-0.9pp). Electric and Electrical Equipment (Electronic & Electrical Equipment business) had Revenue ¥253.0B (-7.1%) and Operating Income ¥20.8B (-16.6%, margin 8.2%); despite revenue declines, high-value products for PCB-related equipment and semiconductor manufacturing equipment sustained relatively high margins and supported group profits. IndustrialChemical (Industrial Chemical business) reported Revenue ¥111.6B (+3.4%) and Operating Income ¥6.2B (from -¥0.1B, margin 5.6%), benefitting from expanded demand for industrial chemicals and cosmetics and cost efficiencies, emerging as a diversified earnings source. Others registered Revenue ¥48.5B (+89.6%) and Operating Income loss of -¥7.0B (prior year ¥1.3B profit); sales jumped from newly consolidated entities (e.g., Clearize Co., Ltd.), but integration costs and low-margin logistics/insurance agency operations limited profit contribution. Overall, declining profitability in core ElectronicParts is partially offset by the high margins in the equipment business and recovery in chemicals, but the wide margin dispersion across segments (2.8%–8.2%) and integration costs remain challenges.
[Profitability] ROE was 7.2% (prior year 7.8%, -0.6pp). DuPont decomposition shows Net Profit Margin 2.8% × Total Asset Turnover 1.101x × Financial Leverage 2.36x; the decline in Total Asset Turnover (from 1.406x, -0.305x) was the main deterioration driver. ROA (on Ordinary Income basis) fell to 3.8% (prior year 5.5%, -1.7pp), indicating asset efficiency deterioration pressuring profit generation. Operating Income margin was 3.4% (prior year 4.3%, -0.9pp), in line with the industry median of 3.4%, but the rise in SG&A ratio (12.1%, prior year 10.9%, +1.2pp) constrained margin improvement. Gross margin improved to 15.5% (prior year 15.2%, +0.3pp), but SG&A increases offset gross margin gains. Net Profit Margin remained 2.8% (unchanged), supported materially by the special gain.
[Cash Quality] OCF/Net Income was 2.05x, and OCF/EBITDA was 1.38x, indicating high cash generation quality. The accrual ratio was -3.2% ((OCF ¥102.7B - Net Income ¥50.1B) / Total Assets ¥1,644.8B), negative, implying good conversion of profit to cash. Working capital metrics: DSO 104 days, DIO 110 days, DPO 52 days, resulting in CCC 163 days, indicating elongation and that inventory and receivables are tying up cash.
[Investment Efficiency] Total Asset Turnover declined to 1.101x (prior year 1.406x, -0.305x) as asset growth from M&A (Goodwill +¥130.4B, Intangibles +¥130.0B) outpaced revenue. ROIC is estimated at 3.6% (NOPAT approx. ¥44.5B / Invested Capital approx. ¥1,242B), a low level suggesting need for capital efficiency improvement. Capex/Depreciation was 0.79x, indicating maintenance-focused investment, with growth investment concentrated in M&A.
[Financial Soundness] Equity Ratio fell to 42.5% (prior year 50.3%, -7.8pp), and interest-bearing debt rose to ¥573.8B (prior year ¥348.2B, +64.8%). D/E ratio is 1.36x; Debt/Capital (interest-bearing debt / total capital) is 45.1%, indicating increased leverage. Debt/EBITDA, calculated using pre-interest, pre-depreciation profit ¥74.6B (Operating Income ¥60.8B + Depreciation ¥13.8B), is 7.70x—high—while Interest Coverage is Operating Income ¥60.8B / Interest Paid ¥4.3B = 14.2x, indicating current interest serviceability but limited resilience to profit shocks. Current Ratio is 188.6%, Quick Ratio is 122.6%, suggesting short-term liquidity appears adequate, but short-term borrowings of ¥332.3B vs. cash & deposits ¥189.6B (Cash/Short-term borrowings = 0.57x) show heavy refinancing dependence. Short-term debt ratio is 58% (short-term borrowings ¥332.3B / total interest-bearing debt ¥573.8B), indicating high maturity mismatch and refinancing risk monitoring is required. Goodwill of ¥160.6B represents 23.0% of Equity ¥698.3B; impairment risk and synergy realization progress are focal points.
OCF was ¥102.7B (YoY -3.0%), equating to 2.05x Net Income ¥50.1B and showing high cash quality. In working capital, inventory reduction contributed +¥31.2B and accounts payable increase +¥5.3B to cash inflows, while accounts receivable rose slightly by -¥3.0B outflow. Subtotal including corporate tax payments -¥23.8B, interest and dividend receipts ¥3.7B, and interest payments -¥4.3B amounted to ¥127.2B, with inventory compression and higher payables supporting OCF. Investing CF was -¥175.3B, mainly due to acquisition of subsidiary shares -¥178.2B (M&A execution); capex was -¥10.9B (prior year -¥8.1B). Proceeds from sale of tangible fixed assets ¥0.3B and sale of investment securities ¥23.6B (corresponding to gain ¥21.9B) were recorded, but M&A funding heavily pressured Investing CF. As a result, FCF was a deficit of -¥72.6B (OCF ¥102.7B + Investing CF -¥175.3B), indicating the business alone could not cover dividends and growth investment. Financing CF was +¥100.2B, with net increase in short-term borrowings +¥70.5B (increase ¥2,694.5B - decrease ¥2,624.0B), long-term borrowings procured ¥160.0B and repayments -¥82.1B, net financing +¥77.9B; after dividends paid -¥43.3B and lease liability repayments -¥5.1B, external funds covered the FCF deficit and dividends. Cash and cash equivalents rose from ¥149.3B at the beginning of the period to ¥187.5B (+¥38.2B), with foreign exchange effects +¥10.6B contributing. While OCF is healthy due to inventory normalization, reliance on borrowings to fund M&A and dividends is evident; revenue recovery and leverage reduction are key to stable liquidity.
Operating Income of ¥60.8B generated OCF of ¥102.7B, or 1.69x the profit, indicating strong recurring cash generation quality. The difference between Operating Income ¥60.8B and Ordinary Income ¥55.8B is -¥5.0B, reflecting non-operating expenses (interest paid ¥4.3B, foreign exchange losses ¥6.1B) partially offset by non-operating income (dividends received ¥3.1B, equity-method gains ¥0.2B). The decline from Ordinary Income ¥55.8B to Net Income ¥50.1B is -¥5.7B, limited because a special gain of ¥22.0B (primarily investment securities sale gain ¥21.9B) boosted Profit Before Tax to ¥77.8B. Excluding one-offs, underlying Profit Before Tax is about ¥55.8B (Ordinary Income basis); after income taxes ¥27.6B (effective tax rate 35.6%), underlying Net Income would be approx. ¥36B, implying special gains increased Net Income by about ¥14B. Comprehensive income was ¥71.3B, ¥21.2B above Net Income ¥50.1B; other comprehensive income comprised foreign currency translation adjustments ¥19.6B, valuation differences on securities ¥1.4B, and deferred hedge gains/losses ¥0.3B, mainly from M&A subsidiary FX effects. In working capital, inventory decline +¥31.2B supported OCF, but accounts receivable increased by +¥119.6B (DSO 104 days), signaling collection elongation and potential credit risk. Goodwill amortization was ¥3.2B, a minor profit impact, but the large goodwill balance ¥160.6B means future synergy realization and impairment risk will determine earnings permanence. Overall, earnings on an ordinary basis are stable, but final profit is dependent on special gains; foreign exchange volatility and working capital management will be key to future earnings quality.
Full-year guidance foresees Revenue ¥2,250.0B (YoY +24.2%), Operating Income ¥88.0B (YoY +44.7%), Ordinary Income ¥75.0B (YoY +34.4%), and Net Income ¥57.0B (YoY +13.8%), implying a V-shaped recovery. Progress rates are Revenue 80.5%, Operating Income 69.1%, Ordinary Income 74.4%, Net Income 87.9%, with an assumed second-half incremental Revenue of ¥438.2B and Operating Income increase of ¥27.2B—an optimistic plan. Revenue assumptions rely on semiconductor/electronic parts market recovery and full-year contribution from M&A subsidiaries (current period had partial contribution due to mid-period acquisition). Operating improvement assumptions include SG&A ratio improvement (integration synergies and cost efficiencies) and maintained gross margin. EPS forecast is ¥302.77 (from actual ¥266.14, +13.8%). Dividend forecast is annual ¥110 (from actual ¥200, indicating a cut). Forecast payout ratio is 36.3% (¥110/¥302.77), down sharply from 84.4%, implying prioritization of growth investment and leverage reduction. Achieving guidance requires significant second-half operating gains (incremental Operating Income ¥27.2B); SG&A restraint (keeping H2 SG&A at current-period level would enable this) and recovery in ElectronicParts profitability (target margin >3.5%) are critical. Realization of M&A synergies and demand recovery from major customers like Denso are prerequisites; the relatively low progress (Operating Income 69%) signals second-half uncertainty and necessitates quarterly monitoring.
Annual dividend in the period was ¥200 (interim ¥100, year-end ¥100), giving a payout ratio of 84.4% against EPS ¥266.14—high. Prior-year dividend was ¥130 (payout ratio 47.7%); the ¥70 increase this period reflected recognition of special gain ¥21.9B and a revised dividend policy. FCF was a deficit of -¥72.6B, so total dividends ¥43.3B were not covered by OCF alone and relied on borrowings (Financing CF +¥100.2B). DOE (dividend on equity) was about 7.4% (dividends ¥43.3B / beginning shareholders’ equity ¥552.6B), demonstrating an aggressive return stance, but with Debt/EBITDA 7.7x the sustainability is a concern. Full-year dividend forecast is ¥110, a ¥90 cut vs. the period, lowering forecast payout ratio to 36.3% (¥110 / EPS forecast ¥302.77), signaling normalization of dividend aligned with profit levels and prioritization of growth investment and financial stabilization. No share buybacks were executed; Total Return Ratio equals the payout ratio of 84.4% this period, focusing cash returns on dividends only.
Semiconductor cycle and customer concentration risk: The ElectronicParts segment accounts for 77.3% of sales and operates at a thin margin (2.8%), making it sensitive to semiconductor demand-supply swings. Sales to major customer Denso were ¥191.4B (YoY -9.4%), highlighting high customer dependence; capex cuts or procurement policy changes at major customers could significantly affect results. DSO of 104 days and lengthening receivable collection raise customer credit and bad-debt risk.
Leverage and refinancing risk: Interest-bearing debt ¥573.8B (D/E 1.36x, Debt/EBITDA 7.7x) implies high leverage, and short-term borrowings ¥332.3B (short-term debt ratio 58%) create refinancing dependency. Cash/short-term borrowings is 0.57x; deterioration in financial markets or rising interest rates (interest +1pp → profit compression about ¥5.7B) could threaten earnings and financial stability. Although Interest Coverage at 14.2x is currently robust, if Operating Income falls short (Operating Income -20% → Interest Coverage falls to approx. 11x), financial constraints could emerge.
M&A integration and goodwill impairment risk: Goodwill ¥160.6B (23.0% of equity) and intangible assets ¥176.2B total ¥336.8B in M&A-related assets. Delays in integration or unmet synergies could trigger goodwill impairment (impairment indicators include ROIC < WACC or missed profit targets). The Others segment loss of -¥7.0B reflects heavy integration costs; failure to realize expected earnings contributions could necessitate asset write-downs and one-off losses affecting financials.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Income Margin | 3.4% | 3.4% (1.4%–5.0%) | +0.0pp |
| Net Profit Margin | 2.8% | 2.3% (1.0%–4.6%) | +0.5pp |
Operating Income margin is in line with the industry median, indicating average profitability; Net Profit margin is +0.5pp above the median but materially supported by special gains, so on an ordinary basis performance is industry-comparable.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -1.1% | 5.9% (0.4%–10.7%) | -7.0pp |
Revenue growth lags the industry median by -7.0pp, reflecting slowdown during the semiconductor demand-supply adjustment. The company ranks near the bottom within the industry, and achieving next-year V-shaped recovery (+24.2%) is key to catching up.
※ Source: Company compilation
Decline in operating profitability and dependence on special gains: Operating Income margin fell to 3.4% (-0.9pp), with SG&A ratio up to 12.1% (+1.2pp) as the main profit headwind. Net Income ¥50.1B was supported by special gains ¥21.9B, and underlying ordinary performance is estimated at about ¥36B. Gross margin improved to 15.5% (+0.3pp), but M&A integration costs and higher personnel costs (salaries +8.0%) reversed operating leverage. Sustainable profit growth requires SG&A efficiency (target SG&A ratio below 11%) and recovery of ElectronicParts margin to above 3.5%. Key monitoring items are timing of integration synergy realization (H2–next fiscal year) and progress on structural SG&A reforms; quarterly trends in Operating Income margin and SG&A execution are critical.
High leverage and prolonged working capital as financial risks: Interest-bearing debt ¥573.8B (Debt/EBITDA 7.7x, short-term debt ratio 58%) and short-term borrowings ¥332.3B vs. cash ¥189.6B (coverage 0.57x) imply high refinancing dependence. Working capital CCC 163 days (DSO 104, DIO 110) is elongated; inventory and receivables are tying up cash. Financing FCF deficit -¥72.6B with borrowings is sustainable short-term but refinancing risk and goodwill impairment risk (goodwill ¥160.6B) could threaten financial stability in adverse conditions. Monitoring targets include Debt/EBITDA reduction pace (target <4.0x), CCC shortening (target <120 days), timing of FCF breakeven, recovery of Equity Ratio >45%, and sustaining Interest Coverage >15x.
Feasibility of next-year guidance and segment mix improvement: Full-year guidance is aggressive (Revenue +24.2%, Operating Income +44.7%), assuming significant H2 recovery (Operating Income +¥27.2B). Assumptions include semiconductor demand recovery, full-year M&A contributions, and SG&A efficiencies (assume H2 SG&A flat). Progress at 69% raises uncertainty. Segment targets include ElectronicParts margin recovery (2.8% → target 3.5%), sustaining Electric and Electrical Equipment margin (8.2%), stabilizing IndustrialChemical profitability (5.6%), and narrowing Others’ loss. Dividend forecast ¥110 (-¥90 cut, payout 36.3%) indicates prioritization of profit normalization and growth investment; FCF breakeven and leverage reduction are prerequisites for continued shareholder returns. Monitoring items are quarterly Operating Income progress (Q3 cumulative >75% as a benchmark), recovery in orders from major customer Denso, and pace of inventory turnover reduction; H2 SG&A control and segment margin improvements are the fulcrum for achieving guidance.
This report is an AI-generated financial analysis document based on XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are compiled by the firm from public financial data as reference information. Investment decisions are your responsibility; please consult professional advisors as appropriate before acting.