SPK (7466) FY2026 FY Earnings Report

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Executive Summary

For the fiscal year ended March 2026, the Company maintained increases in both revenue and profit, while the increase in SG&A expenses limited the expansion of profit margins. Revenue was ¥752.5B (+9.5% YoY), operating income was ¥35.9B (+8.4%), ordinary income was ¥38.9B (+9.0%), and net income attributable to owners of the parent was ¥26.9B (+7.8%). As the revenue growth rate exceeded the operating income growth rate, the improvement in gross margin (19.2%, compared with 18.7% in the previous year) was offset by the rise in the SG&A ratio (14.4%, compared with 13.9% in the previous year), resulting in an operating margin of 4.8%, essentially unchanged.

Factors Affecting Business Performance

【Revenue】Revenue of ¥752.5B represented a 9.5% increase YoY. By segment, the Domestic Sales Headquarters had the largest composition at ¥320.8B (+4.6%), while the CUSPA Sales Headquarters drove revenue growth with ¥72.0B (+54.4%). International trade (Overseas Sales Headquarters) grew to ¥279.8B (+10.4%), while the Machinery and Equipment Division was essentially flat at ¥79.9B (-0.7%). By region, Japan accounted for ¥459.6B (+10.0%), approximately 64% of the total increase in revenue, indicating that domestic demand was the center of growth.

【Profit and Loss】Operating income of ¥35.9B increased 8.4% YoY. Although the gross margin improved to 19.2%, SG&A expenses increased 13.5% YoY, exceeding the revenue growth rate and offsetting the positive impact on the operating margin. On a segment profit basis (ordinary income basis), CUSPA expanded sharply to ¥4.2B (+319.2%), while International Trade declined to ¥9.8B (-11.5%) despite higher revenue, indicating that deteriorating profitability in the overseas division constrained the improvement in the overall profit margin. Special gains and losses were immaterial, consisting solely of a ¥0.1B gain on the sale of non-current assets. The gap between ordinary income and net income was attributable to the income tax burden (effective tax rate of approximately 30.6%), with no temporary factors identified. In conclusion, the Company achieved increases in both revenue and profit.

Segment Analysis

On a segment profit basis (ordinary income basis), the Domestic Sales Headquarters generated revenue of ¥320.8B (42.7% composition, +4.6%) and profit of ¥15.2B (+2.6%), with a profit margin of 4.7%, making it a stable source of earnings. International Trade increased revenue to ¥279.8B (37.2% composition, +10.4%), but profit declined to ¥9.8B (-11.5%), with a profit margin of 3.5%, the lowest among the four divisions, indicating a notable deterioration in profitability. The Machinery and Equipment Division maintained the highest level among the divisions, with revenue of ¥79.9B (-0.7%), profit of ¥5.7B (-2.7%), and a profit margin of 7.1%. The CUSPA Division grew rapidly, with revenue of ¥72.0B (9.6% composition, +54.4%), profit of ¥4.2B (+319.2%), and a profit margin of 5.8%, making it the primary driver of profit growth. Regional revenue increased across all regions: Japan ¥459.6B (+10.0%), Asia and Oceania ¥124.1B (+9.2%), Latin America ¥59.1B (+5.5%), and Other ¥109.7B (+9.8%), indicating geographically diversified growth.

Key Financial Indicators

【Profitability】The operating margin of 4.8% was essentially flat from the previous year, while the net profit margin also remained at a similar level at 3.6%, as the improvement in gross margin (19.2%) was offset by the rise in the SG&A ratio (14.4%). ROE was 9.2%, with capital efficiency maintained through the combination of net profit margin and leverage.【Cash Quality】Operating cash flow (OCF) was ¥25.6B, equivalent to 0.95x net income of ¥27.1B. While there was no significant divergence from accounting profit, cash conversion efficiency was somewhat low relative to EBITDA.【Investment Efficiency】Capital expenditures of ¥2.3B were below depreciation and amortization of ¥6.8B, indicating restrained investment in tangible assets.【Financial Soundness】The equity ratio was 61.4%, and cash and deposits of ¥95.9B exceeded interest-bearing debt, resulting in a net cash position and a stable financial foundation.

Cash Flow Analysis

OCF was ¥25.6B, a significant increase from ¥11.9B in the previous year, and the ratio to net income was 0.95x, indicating cash generation commensurate with accounting profit. However, the increase in inventories was a ¥13.9B use of cash, and inventory expansion constrained the growth in OCF. Investing cash flow represented an outflow of ¥7.8B, primarily consisting of capital expenditures of ¥2.3B and the acquisition of intangible assets, with no large-scale investments observed. Financing cash flow was limited to an outflow of ¥0.9B, as the increase in short-term borrowings partly offset the repayment of ¥24.5B in long-term borrowings. Free cash flow was a surplus of ¥17.8B, calculated as OCF of ¥25.6B plus investing cash flow of -¥7.8B, providing funds for dividends and financing activities.

Earnings Quality

Current-period profit arose from recurring business activities, and special gains and losses consisted solely of a ¥0.1B gain on the sale of non-current assets. As this was immaterial in scale, there was no significant boost to profit from temporary factors. Of ¥4.0B in non-operating income, the main components were ¥1.4B in dividend income and ¥0.6B in foreign exchange gains. These amounted to only 0.5% of revenue, indicating low dependence on non-operating income and expenses. Comprehensive income was ¥29.1B, slightly above net income of ¥27.1B, with the difference primarily attributable to foreign currency translation adjustments of ¥1.5B and valuation differences on securities of ¥0.7B. Accounting fluctuations that diverged from the underlying business were limited. From a working capital perspective, the increase in inventories pressured OCF, making the sustainability of inventory growth a key point to monitor when assessing earnings quality.

Earnings Forecast and Guidance

Progress against the full-year forecast was ¥752.5B/¥800.0B for revenue, or 94.1%; ¥35.9B/¥37.0B for operating income, or 96.9%; and ¥38.9B/¥39.0B for ordinary income, or 99.7%. Profit performance therefore finished close to plan. The forecast for the next fiscal year assumes revenue of ¥800.0B (+6.3% YoY), operating income of ¥37.0B (+3.1%), and ordinary income of ¥39.0B (+0.3%), representing conservative assumptions under which profit growth is expected to remain below revenue growth. Forecast EPS is ¥135.22, and forecast dividends are ¥41.00 (on a post-split basis), indicating a more moderate growth scenario than the current period’s performance.

Shareholder Returns

Dividends for the current period totaled ¥73.00, comprising an interim dividend of ¥33.00 and a year-end dividend of ¥40.00 (on a pre-stock-split basis), resulting in a payout ratio of 27.4%. This is calculated consistently using net income attributable to owners of the parent of ¥26.9B as the numerator and total dividends of ¥7.4B as the denominator. The Company conducted a 1-for-2 stock split effective April 1, 2026; because the forecast dividend of ¥41.00 for the next fiscal year is on a post-split basis, an effective dividend increase is planned. A payout ratio of 27.4% provides ample capacity relative to the profit level, while the ¥17.8B surplus in free cash flow also supports the availability of funds for dividends. No significant cash outflow from share repurchases was identified; accordingly, this section evaluates the Company solely on the basis of its payout ratio.

Risk Factors

1. Declining profitability in overseas operations: International Trade (Overseas Sales Headquarters) increased revenue to ¥279.8B (+10.4%), but segment profit declined to ¥9.8B (-11.5%), with a profit margin of 3.5%, the lowest among the four divisions, indicating that revenue growth is not translating into profit.

2. Expansion of working capital due to inventory growth: Inventories increased to ¥126.4B (+13.7% YoY), resulting in a ¥13.9B use of cash in OCF. If a mismatch with demand trends emerges, this could create risks of inventory write-downs and pressure on cash management.

3. Shift toward short-term borrowing: Short-term borrowings increased significantly YoY to ¥38.6B, while long-term borrowings declined to ¥22.5B, shortening the maturity structure of liabilities. Cash and current assets are substantial and immediate risk is limited, but refinancing conditions should be monitored.

Industry Benchmark (Reference; Based on Our Analysis)

Industry Benchmark (trading)

Profitability and Returns

The Company’s profitability exceeds the industry median and is positioned near the upper end of the range.

Growth and Capital Efficiency

The revenue growth rate also exceeds the industry median, showing growth close to the upper end of the IQR.

※Source: Based on our analysis

Key Points from the Financial Results

1. The Company maintained increases in both revenue and profit, preserving a balance between capital efficiency and stability against a backdrop of ROE of 9.2%, an equity ratio of 61.4%, and a net cash financial position. Despite the improvement in gross margin, the increase in SG&A expenses exceeded it, leaving the operating margin flat; this is a point to monitor in terms of cost discipline.

2. The rapid growth of the CUSPA Sales Headquarters (revenue +54.4%, profit +319.2%) drove overall profit growth, while the Overseas Sales Headquarters experienced higher revenue but lower profit (profit -11.5%), indicating increasing polarization in profitability within the business portfolio.

3. The increase in inventories (+13.7%) pressured OCF, making trends in inventory levels and cash generation efficiency key points to confirm in future financial results. The payout ratio of 27.4% and positive free cash flow indicate continued capacity for shareholder returns.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,435–¥1,520 at ±1% in the cost of equity, and ¥1,476–¥1,478 at ±0.1 in ω.

Note:

• Goodwill amortization of ¥12.1/share is added back to profit (to account for non-cash expenses and comparability with IFRS companies).

(Calculation model: Residual income model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated values based solely on publicly disclosed data; these are not forecasts of market share prices or recommendations for specific investment actions, and do not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by our company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting professionals as necessary.

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