| Indicator | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥2134.2B | ¥2108.4B | +1.2% |
| Operating Income | ¥77.6B | ¥91.5B | -15.2% |
| Equity-method Investment Income (Loss) | ¥-0.8B | ¥-1.6B | +49.0% |
| Ordinary Income | ¥42.2B | ¥65.4B | -35.5% |
| Net Income | ¥35.3B | ¥47.8B | -26.1% |
| ROE | 5.6% | 7.9% | - |
For the fiscal year ended March 2026, Revenue was ¥2,134.2B (YoY +¥25.9B +1.2%), Operating Income was ¥77.6B (YoY -¥13.9B -15.2%), Ordinary Income was ¥42.2B (YoY -¥23.2B -35.5%), and Net Income was ¥35.3B (YoY -¥12.5B -26.1%). The company recorded revenue growth but profit decline; deterioration at non-operating items further amplified the operating-stage profit decline. Although Revenue edged up, gross margin contracted to 11.6% (down 0.8pt from 12.4% a year earlier), and operating margin fell to 3.6% (down 0.7pt from 4.3%). At the ordinary income level, interest expense of ¥21.1B and foreign exchange losses of ¥18.7B were heavy headwinds, while a one-off gain on sale of investment securities of ¥8.9B supported profit before tax. Net income margin was low at 1.6%, and ROE declined to 5.6%. The Device business saw a large decline in Ordinary Income due to gross margin pressure and non-operating losses, while the System business supported the company with Ordinary Income of ¥36.7B. In working capital, inventory was reduced by ¥60.7B, securing Operating Cash Flow (OCF) of ¥63.8B, but advances paid increased by ¥33.8B and interest and FX losses pressured profits. The full-year plan assumes normalization of non-operating items with Operating Income of ¥78.0B (+0.5%) and Ordinary Income of ¥60.0B (+42.2%).
[Revenue] Revenue was ¥2,134.2B (YoY +¥25.9B +1.2%) — a slight increase. By segment, ElectronicDevices (Device Business) recorded ¥1,523.3B (+1.2%), representing 71.3% of revenue; ElectronicSystems (System Business) was ¥593.2B (+1.7%, 27.8% share); Entrepreneur (Entrepreneur Business) was ¥25.8B (-13.5%, 1.2% share). By region, Japan was ¥1,500.1B (70.3% of revenue, YoY -¥4.7B), China was ¥244.1B (+36.4%), Asia was ¥376.3B (+0.4%), and Other was ¥13.7B. Sales to major customer Nintendo were ¥324.9B and form the core of the Device business. The Device business operates at low margins (Operating Income margin around 0.4%), with price competition and adverse FX pressure compressing gross profit. The System business showed stable growth in revenue and profit due to robust demand. The Entrepreneur business declined significantly due to fewer projects.
[Profit & Loss] Gross profit was ¥247.0B (gross margin 11.6%), down ¥15.2B from ¥262.2B (12.4%) in the prior year, a 0.8pt deterioration. Cost of goods sold ratio rose to 88.4% (prior year 87.5%), reflecting price competition in the Device business and the impact of a change in inventory valuation method (moving average → FIFO). SG&A was ¥169.4B (SG&A ratio 7.9%), reduced by ¥1.3B from ¥170.7B a year earlier, but the contraction in gross profit could not be absorbed and Operating Income fell to ¥77.6B (Operating margin 3.6%). Non-operating items widened to a net loss of ¥-35.4B (prior year -¥25.6B). Although interest income of ¥1.6B and FX gains of ¥8.0B were recorded, large interest expense of ¥21.1B and FX losses of ¥18.7B drove Ordinary Income down ¥42.2B (-35.5%). Extraordinary items were +¥9.7B, mainly due to gain on sale of investment securities of ¥8.9B, resulting in profit before tax of ¥51.9B. After corporate taxes of ¥15.1B and net income attributable to non-controlling interests of ¥3.8B, net income attributable to owners of the parent was ¥33.0B (net margin 1.5%). Comprehensive income was ¥41.5B, with foreign currency translation adjustments of ¥1.1B, valuation differences on securities of ¥3.1B, and deferred hedge gains/losses of ¥1.4B complementing net income. In conclusion, revenue increased but profit decreased, largely due to worsening non-operating items.
The Device business posted Revenue of ¥1,523.3B (+1.2%) and Ordinary Income of ¥5.6B, an 81.1% decline from ¥29.7B a year earlier. While the segment maintained a small operating profit, interest burdens from foreign-currency transactions and FX losses hit the ordinary income level. Segment assets were ¥1,040.5B (down 5.1% from ¥1,096.3B) as inventory compression progressed. The System business recorded Revenue of ¥593.2B (+1.7%) and Ordinary Income of ¥36.7B (up 9.9% from ¥33.4B), remaining robust. Stable demand in aerospace equipment, industrial equipment, medical equipment, and margin improvements contributed, keeping operating and ordinary margins in the 6% range. Segment assets were ¥387.1B (up 16.1% from ¥333.4B) as inventory and receivables increased to support accumulated projects. The Entrepreneur business saw Revenue of ¥25.8B (-13.5%) and Ordinary Income of ¥-0.1B (from +¥2.3B prior year), turning to a loss due to fewer ICT solution and AI robot projects and fixed cost burdens. Segment assets contracted to ¥21.7B (from ¥23.2B). The System business contributed the majority of corporate profits, while the Device business’s buffer against non-operating losses is thin, exposing vulnerability to interest and FX conditions.
[Profitability] Operating margin was 3.6% (down 0.7pt from 4.3%), with gross margin 11.6% (down 0.8pt from 12.4%) and SG&A ratio 7.9% (improved 0.2pt from 8.1%). ROE was 5.6% (down 2.8pt from 8.4%), driven by net margin 1.5% × total asset turnover 1.47x × financial leverage 2.31x. The decline in net margin is the primary driver, with operating profit decline compounded by worse non-operating items. EBIT margin was 3.6%; EBITDA margin was 4.0% (depreciation ¥7.2B), both at low levels. ROA on an ordinary income basis was 2.9% (down from 4.5%). By segment, the System business’s ordinary profit margin of 6.2% led the company while the Device business margin was extremely thin at 0.4%.
[Cash Quality] Operating Cash Flow (OCF) was ¥63.8B, 1.93x net income of ¥33.0B; accrual (net income - OCF) was -¥30.8B, indicating good earnings quality. OCF/EBITDA was 0.75x, slightly below the benchmark (≥0.9x), with advances paid up ¥33.8B and pension asset increases of ¥4.2B pressuring working capital. FCF was ¥71.1B (OCF ¥63.8B + Investing CF ¥7.3B), comfortably exceeding capital expenditures of ¥10.3B and intangible investments of ¥3.9B.
[Investment Efficiency] Total asset turnover was 1.47x (slightly up from 1.45x). DSO (days sales outstanding) was 85 days ((¥496.2B + ¥43.4B) ÷ (¥2,134.2B ÷ 365)), and inventory days were 84 days (¥434.4B ÷ (¥1,887.2B ÷ 365)); inventory was compressed YoY but receivables collection remained flat. CCC (cash conversion cycle) was long at 124 days (DSO 85 + inventory 84 - accounts payable 45), indicating substantial room to improve working capital efficiency.
[Financial Soundness] Equity Ratio was 43.3% (up 1.4pt from 41.9%), a mid-level standing. Interest-bearing debt was ¥487.7B (short-term borrowings ¥447.7B + long-term borrowings ¥40.0B), Debt/Equity was 1.31x, and Debt/Capital was 43.7%. Debt/EBITDA was high at 5.75x, and interest coverage was limited at 3.69x (EBIT ¥77.6B ÷ interest expense ¥21.1B). Current ratio was 169.8% and quick ratio 112.8%, meeting short-term liquidity standards. Cash and deposits were ¥247.4B versus short-term borrowings of ¥447.7B, yielding a cash/short-term debt ratio of 0.55x, indicating a thin cushion. Short-term debt ratio was 91.8% (short-term borrowings ¥447.7B ÷ interest-bearing debt ¥487.7B), reflecting heavy reliance on short-term funding and requiring attention to refinancing risk.
OCF was ¥63.8B: profit before tax ¥51.9B plus depreciation ¥7.2B and equity-method loss ¥0.8B. Working capital movements included inventory decrease of ¥60.7B (positive), while receivables increased ¥16.6B, advances paid increased ¥33.8B, and pension assets increased ¥5.5B (negative). After corporate tax payments of ¥24.8B and interest paid of ¥21.2B, the net amount remained. Investing CF was an inflow of ¥7.3B, with proceeds from sale of investment securities ¥11.2B and sale of tangible fixed assets ¥1.6B exceeding capital expenditures ¥10.3B, intangible asset investments ¥3.9B, and purchases of investment securities ¥1.3B. FCF was ample at ¥71.1B. Financing CF was -¥66.5B, driven by net decrease in short-term borrowings of ¥43.6B (drawdowns - repayments), net decrease in long-term borrowings of ¥10.0B (new borrowings ¥40.0B - repayments ¥50.0B), and dividend payments of ¥17.3B (to parent company ¥17.3B + non-controlling interests ¥4.9B). Cash and deposits increased from ¥243.2B at the beginning of the period to ¥247.4B at the end, an increase of ¥4.1B (including FX impact +¥3.0B). Strategic inventory compression contributed significantly to cash generation, but the sharp increase in advances paid is a temporary upfront outflow, and timing of recovery will be a focus for next period’s CF. OCF/Net Income ratio of 1.93x is healthy, but OCF/EBITDA of 0.75x suggests further room to improve cash conversion efficiency.
Net income attributable to owners of the parent was ¥33.0B, while comprehensive income was ¥41.5B; the ¥8.5B difference was due to OCI positives such as foreign currency translation adjustments ¥1.1B, valuation differences on securities ¥3.1B, and deferred hedge gains/losses ¥1.4B. The gap between Ordinary Income ¥42.2B and Net Income ¥33.0B reflects extraordinary gains of ¥9.8B (mainly gain on sale of investment securities ¥8.9B) and taxes/non-controlling interests totaling ¥19.0B. Extraordinary gains are one-off, so core earning power should be assessed at the ordinary income level of ¥42.2B. Non-operating items were a net loss of ¥-35.4B, primarily interest expense ¥21.1B and FX losses ¥18.7B. FX losses were partly offset by FX gains of ¥8.0B, but the net FX burden for the full year was ¥10.7B. Dividend income received was minor at ¥1.1B. The accrual (OCF ¥63.8B - Net Income ¥33.0B = -¥30.8B) is negative, indicating good earnings quality. The change in inventory valuation method (moving average → FIFO) aims to improve period profit appropriateness; retrospective application has been made and impacts are reflected in year-on-year comparisons. Sustainable earning power is around the low ¥40Bs on an ordinary income basis; excluding extraordinary items, Operating Income ¥77.6B less net non-operating expense ¥35.4B = ¥42.2B represents underlying performance. Improvement in non-operating items is key to profit recovery.
Full-year plan: Revenue ¥2,250.0B (YoY +5.4%), Operating Income ¥78.0B (+0.5%), Ordinary Income ¥60.0B (+42.2%), Net Income ¥40.0B (+21.1%), EPS ¥152.42. The plan is unchanged from the initial forecast; progress rates are Revenue 94.9%, Operating Income 99.5%, Ordinary Income 70.3%. The shortfall in Ordinary Income progress is mainly due to worse-than-expected non-operating items; the plan assumes normalization of FX and interest conditions in H2. Dividend is planned at ¥38.0 annual (Payout Ratio 24.9%), a cut from prior year ¥50, but given conservatism in outlook there is upside potential. Operating Income is nearly achieved; the key to meeting the full-year Ordinary Income target is reduction in interest expense and FX losses. No segment-level guidance disclosed, but assumptions include continued strength in the System business and gross margin recovery in the Device business (inventory compression effects and mix improvement). Stable FX and interest rate levels are important assumptions; if interest expense remains elevated there is risk of missing the Ordinary Income target.
Annual dividend is ¥50.0 (interim ¥25.0 + year-end ¥25.0), unchanged from prior year. Payout Ratio is 40.4% (total dividends ¥17.3B ÷ Net Income ¥42.8B). With FCF of ¥71.1B and total dividends ¥17.3B, FCF coverage is 4.11x, indicating ample headroom. The full-year plan projects dividends of ¥38.0 (Payout Ratio 24.9%) — a cut — but the company maintained ¥50 in practice, within the conservative outlook. There were no share buybacks; shareholder return is primarily via dividends. Total Return Ratio is 40.4%, comprised solely of dividends. With cash of ¥247.4B and abundant FCF, dividend sustainability is high. However, management prioritizes securing repayment resources for interest-bearing debt ¥487.7B and short-term borrowings ¥447.7B, which limits room for dividend increases. Going forward, reducing interest burden (deleveraging) and stabilizing OCF while targeting a payout ratio range of 30–40% for steady dividends is a reasonable policy.
Dependence on the Device business and low-margin structure: The Device business accounts for 71.3% of revenue but posts a very thin Ordinary Income margin of 0.4%. High dependence on major customers (Nintendo sales ¥324.9B) exposes the company to order volatility and price declines that can directly hit profits. Gross margin of 11.6% is low in the industry; continued price competition or adverse FX could push the company into an operating loss.
High sensitivity to interest rates and FX: Interest expense of ¥21.1B (1.0% of Revenue) and FX losses of ¥18.7B significantly compressed Ordinary Income of ¥42.2B. Of interest-bearing debt ¥487.7B, 91.8% is short-term, so in a rising-rate environment the interest coverage of 3.69x could deteriorate rapidly. Recurrence of FX losses or increased interest burden could push ordinary income into loss.
Working capital efficiency and short-term liquidity: CCC of 124 days (DSO 85 + inventory 84 - AP 45) is prolonged. If temporary cash lock-up such as advances paid up ¥33.8B continues, OCF could be squeezed. Cash/short-term debt ratio of 0.55x is thin, and refinancing risk for short-term borrowings ¥447.7B could materialize under rising rates or credit tightening. Seasonality of working capital and timing of large receivables/payables could cause temporary cash flow shortages.
Profitability & Returns
| Indicator | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 3.6% | 3.4% (1.4%–5.0%) | +0.3pt |
| Net Margin | 1.7% | 2.3% (1.0%–4.6%) | -0.6pt |
Operating margin is 0.3pt above the median, but net margin is 0.6pt below the median, indicating a relatively large burden from non-operating items within the industry.
Growth & Capital Efficiency
| Indicator | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 1.2% | 5.9% (0.4%–10.7%) | -4.7pt |
Revenue growth lags the industry median of 5.9% by 4.7pt, reflecting low growth positioning. Price competition in the Device business and dependence on major customers suppress growth.
※ Source: Company aggregation
Expansion of System business profit contribution and normalization of non-operating items are keys to improvement next fiscal year: The System business produced Ordinary Income of ¥36.7B and is the primary driver of company profits, contributing 87% of profits despite 27.8% revenue share. The Device business is directly exposed to interest and FX impacts and produced Ordinary Income of only ¥5.6B. Achieving the full-year Ordinary Income target of ¥60.0B requires reduction in interest expense and FX losses (each on the order of ¥1B0s), so a stable interest and FX environment is essential. Reducing short-term borrowings and shifting to longer-term funding to lower interest burden and expanding FX hedging are challenges for profit stabilization.
Room to improve working capital efficiency and sustainability of inventory compression: Inventory was reduced by ¥60.7B, supporting OCF, but CCC remains long at 124 days with substantial room to shorten DSO 85 and inventory 84 days. The increase in advances paid of ¥33.8B appears temporary and, if resolved next fiscal year, could further improve OCF. The inventory valuation method change enhances accuracy of inventory measurement, and achieving further inventory compression and turnover improvement (targeting the 70-day range) would help monetize working capital and improve ROE. However, excessive inventory compression risks stockouts, so the impact on order backlog should be monitored.
Dividend sustainability and priority of improving financial structure: Dividend of ¥50 is fully covered by FCF of ¥71.1B and the payout ratio of 40.4% is sustainable. The full-year plan’s dividend of ¥38 is conservative; depending on Ordinary Income recovery it could be maintained at ¥50 or revised upward. However, of interest-bearing debt ¥487.7B, short-term borrowings ¥447.7B (91.8%) indicate high short-term funding dependence and Debt/EBITDA of 5.75x is elevated. Prioritizing debt reduction to lower interest burden and leverage is likely to enhance shareholder value more than further dividend increases. A stable dividend policy (payout ratio 30–40%) while avoiding excessive increases and focusing on financial soundness is reasonable.
This report was auto-generated by AI analyzing XBRL financial statements. It does not constitute an investment recommendation for any specific security. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your responsibility; please consult advisors as needed.