| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥681.1B | ¥664.1B | +2.6% |
| Operating Income | ¥28.7B | ¥29.8B | -3.7% |
| Equity-method Investment Income (Loss) | - | - | - |
| Ordinary Income | ¥31.9B | ¥32.1B | -0.8% |
| Net Income | ¥20.7B | ¥22.5B | -8.1% |
| ROE | 8.1% | 9.5% | - |
For the fiscal year ending March 2026 (current period), Hakudo reported Revenue of ¥681.1B (YoY +¥17.0B +2.6%), Operating Income of ¥28.7B (YoY -¥1.1B -3.7%), Ordinary Income of ¥31.9B (YoY -¥0.2B -0.8%), and Net Income of ¥20.7B (YoY -¥1.8B -8.1%). While revenue saw modest growth, gross margin declined to 15.6% (approx. -0.4pt YoY), compressing operating margin to 4.2% (prior 4.5%) and resulting in lower operating profit. Non-operating results were supported by an increase in dividend income of ¥1.4B, limiting the decline in ordinary income, but Net Income fell 8.1% partly due to a higher effective tax rate. Cash flow performance improved materially: Operating Cash Flow (OCF) was ¥44.9B (YoY +152.1%), driven by working capital normalization in inventories and receivables, producing Free Cash Flow of ¥31.2B and pushing ending cash to ¥76.7B (+40%).
[Revenue] Revenue was ¥681.1B (YoY +2.6%), achieving modest top-line growth. By region, Japan accounted for ¥605.0B (+2.7%), representing 88.8% of the total; China grew double digits to ¥19.7B (+11.4%); Other regions were ¥17.2B (+3.5%); meanwhile North America declined to ¥51.1B (-4.1%). Strong domestic demand in Japan and expansion in China drove overall performance, while North American slowdown constrained growth. Cost of sales totaled ¥575.0B (84.4% of sales), leaving a gross margin of 15.6% (approx. -0.4pt YoY), pressured by pricing competition and product-mix shifts.
[Profitability] Gross profit was ¥106.1B (gross margin 15.6%), a slight YoY increase in absolute terms, while SG&A was ¥77.4B (11.4% of sales) with wages up ¥1.7B and freight roughly flat, resulting in an ~0.1pt improvement in SG&A ratio. However, the decline in gross margin was not fully offset, producing Operating Income of ¥28.7B (-3.7%) and shrinking operating margin to 4.2%. Non-operating income was ¥3.4B, supported by dividend income of ¥1.4B (vs ¥0.5B prior) and interest income received of ¥0.3B (vs ¥0.2B prior), resulting in Ordinary Income of ¥31.9B (-0.8%) with a limited decline. After deducting corporate taxes of ¥10.4B (effective tax rate 32.7%), Net Income was ¥20.7B (-8.1%), and net margin fell to 3.0% (≈ -0.3pt). In summary: higher revenue but lower profits.
Reportable segments are Japan, North America, and China; operating results are presented on an Ordinary Income basis. Japan reported Revenue of ¥605.0B (external customers ¥593.7B, intersegment ¥11.3B) and segment profit of ¥30.8B (prior ¥32.4B, -4.8%), yielding a margin of ~5.2% and remaining the core contributor despite profit decline. North America had Revenue of ¥51.1B and a segment loss of -¥0.8B (prior -¥1.8B), narrowing the deficit but remaining negative. China posted Revenue of ¥19.7B and segment profit of ¥0.3B (prior ¥0.1B), expanding profitability. Other (e.g., Thailand) delivered Revenue of ¥17.2B and segment profit of ¥1.6B (margin ~9.2%), sustaining high profitability. Japan accounts for roughly 96% of Ordinary Income, while North American losses dilute group margins.
[Profitability] Operating margin was 4.2% (prior 4.5%, -0.3pt); gross margin 15.6% (prior 15.9%, -0.4pt) contracted due to pricing competition and mix effects. Net margin was 3.0% (prior 3.4%, -0.4pt); ROE declined to 8.1% (prior 9.7%). An EBIT margin of 4.2% is within industry standard, but the low gross margin caps upside.
[Cash Quality] Operating CF to Net Income ratio was 2.09x, OCF/EBITDA 1.13x, and accrual ratio -4.9%, indicating cash generation outpacing accounting profits. Working capital days: inventory 79 days, DSO 61 days, DPO 55 days, suggesting room to improve inventory and receivables efficiency.
[Investment Efficiency] Total asset turnover was 1.43x (prior 1.49x), a slight decline but still efficient. Capex to depreciation ratio was 0.71x, indicating conservative, maintenance-focused capex.
[Financial Health] Equity Ratio was 53.5% (prior 53.1%), D/E 0.87x (prior 0.88x), reflecting conservative leverage. Current ratio 168%, quick ratio 111%—short-term liquidity is sound.
Operating Cash Flow was ¥44.9B (prior ¥17.8B, +152.1%), a significant improvement. Pre-tax profit of ¥31.9B plus depreciation ¥11.1B and other items produced a subtotal of ¥54.1B; working capital improvements—inventory decrease (CF contribution +¥0.9B), receivables decrease (+¥4.3B), payables increase (+¥3.5B)—contributed to cash inflow, and after corporate tax payments of -¥9.9B, net OCF was ¥44.9B. Investing CF was -¥13.7B with capex -¥7.9B (capex/depreciation ratio 0.71x), intangible asset additions -¥1.0B, and purchases of investment securities -¥1.4B, reflecting cautious investments. Financing CF was -¥10.5B, mainly dividend payments -¥7.7B and capital transactions -¥2.1B. Free Cash Flow was ¥31.2B (OCF + Investing CF), sufficient to cover dividends and capex, increasing cash to ¥76.7B (+¥22.0B), expanding liquidity buffer.
Earnings are primarily from core operations, with limited one-off influences. Non-operating income of ¥3.4B (0.5% of revenue) consisted mainly of dividends ¥1.4B and interest received ¥0.3B, providing sustainable financial income support to ordinary results. The gap between Ordinary Income ¥31.9B and Net Income ¥20.7B is attributable to corporate taxes ¥10.4B (effective tax rate 32.7%), with no material extraordinary items. OCF exceeds Net Income by 2.09x, accrual ratio is -4.9%, and OCF/EBITDA is 1.13x, indicating healthy cash backing. Under JGAAP, goodwill amortization was ¥0.4B (≈1.1% of EBITDA), goodwill balance ¥7.9B (3.1% of equity), goodwill/EBITDA 0.20x—low levels suggesting limited M&A risk or IFRS comparability distortions.
Company guidance for the next full year: Revenue ¥840.0B (YoY +23.3%), Operating Income ¥43.1B (+50.1%), Ordinary Income ¥47.0B (+47.3%), Net Income ¥29.1B (+40.7%)—an optimistic plan for revenue and profit growth. Progress ratios (current period / next-year guidance) are: Revenue 81.1%, Operating Income 66.6%, Ordinary Income 67.9%, Net Income 71.1%, indicating a profit-weighted plan concentrated in H2. Assumptions include both volume growth and margin recovery: gross margin restoration targeting the mid-16% range, North American profit improvement, and sustained China profitability. The plan aims to raise operating margin from 4.2% to ~5.1%; realization depends on price pass-through, higher value-added processing mix, and better inventory turns.
Annual dividend is ¥86 (interim ¥28, year-end ¥58), with a Payout Ratio of 45.1%, at a sustainable level. Free Cash Flow of ¥31.2B versus dividends paid ¥7.7B yields an FCF coverage of 4.05x, indicating ample safety. Ending cash ¥76.7B (+40% YoY) and low leverage (D/E 0.87x) imply strong financial capacity and high potential to maintain stable dividends. Share buybacks were effectively zero (CF -¥0.0B), so shareholder returns are dividend-focused. Next-year dividend guidance is annual ¥64, implying a dividend cut; Payout Ratio would decline to 22.6%, suggesting retained earnings and reinvestment will be prioritized.
Japan Concentration Risk: Japan accounts for 87.2% of revenue and over 96% of segment profit, creating high domestic dependency. Performance will be closely tied to domestic demand and pricing conditions. Although regional diversification is progressing, concentration remains high and downside resilience in a weak Japanese market is limited.
Low Profitability / Gross Margin Risk: Gross margin of 15.6% is low within the industry, limiting profit leverage under pricing pressure or mix deterioration. Continued North American deficits (-¥0.8B) and Japanese profit declines (-4.8%) indicate that delayed margin recovery would jeopardize next-year guidance.
Working Capital Efficiency Risk: Inventory days 79 and DSO 61 are around industry averages, but prolonged build-up could cause markdown and bad-debt risks, harming cash flow and increasing losses. Inventory of ¥125.0B represents 26.3% of total assets; delays in efficiency gains could strain liquidity.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 4.2% | 3.4% (1.4%–5.0%) | +0.9pt |
| Net Margin | 3.0% | 2.3% (1.0%–4.6%) | +0.7pt |
The company’s profitability exceeds the industry median, maintaining relatively solid margin levels.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 2.6% | 5.9% (0.4%–10.7%) | -3.2pt |
The company’s growth rate lags the industry median, indicating more limited growth momentum versus peers.
※ Source: Company compilation
Cash Flow Improvement and Strengthened Liquidity: OCF improved +152% and cash increased +40%, expanding capacity for dividends and investment. FCF coverage >4x and low leverage (D/E 0.87x) support financial stability and dividend sustainability. Continued working capital efficiency and North American profit improvement are keys to further boosting cash generation.
Feasibility of Next-Year’s Aggressive Guidance: The targets of +23% Revenue and +50% Operating Income are ambitious, contingent on gross margin recovery (target mid-16%), North American profitability, and higher inventory turnover. Progress on price pass-through, mix improvement, and regional portfolio rebalancing will be critical, making interim disclosures important monitoring points.
Japan Concentration and Margin Improvement Opportunity: While Japan remains the main profit source, the low gross margin of 15.6% caps upside. Deepening value-added processing, optimizing the supply chain to lift gross margin, and expanding revenue contribution from North America and China are medium-term priorities to enhance earnings power.
This report was automatically generated by AI analyzing XBRL financial statement data and is a fiscal analysis document. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on publicly disclosed financial statements. Investment decisions are your own responsibility; consult a professional advisor as needed.