NAGANO KEIKI CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

FY2027 Q1 delivered increases in both revenue and earnings, driven by growth in the core pressure sensor and pressure gauge businesses and improved profitability. Revenue was ¥17.88B (+12.6% YoY), Operating Income was ¥2.04B (+51.6%), Ordinary Income was ¥2.14B (+64.3%), and Net Income was ¥1.50B (+37.4%). The gross margin improved to 33.7% from the same period of the previous year, while the Operating Income margin expanded to 11.4%. The difference between the growth rates of Ordinary Income and Net Income was attributable to the recognition of ¥0.28B in extraordinary income, primarily gains on the sale of shares in a subsidiary, as well as the impact of the corporate tax burden.

Factors Affecting Results

【Revenue】Revenue was ¥17.88B (+12.6% YoY), with the two major segments of pressure gauges (¥9.42B, +13.7%) and pressure sensors (¥5.46B, +10.9%) accounting for 83.1% of the total and driving growth. Measurement and Control Devices (PressureControlDevice) posted strong growth of 30.2% to ¥1.11B, while die casting grew somewhat more moderately by 7.5% to ¥1.43B. Other businesses, including real estate leasing and automotive electrical components, declined 4.0% to ¥0.47B.

【Profit and Loss】Operating Income increased 51.6% YoY to ¥2.04B, and the Operating Income margin improved to 11.4% from approximately 8.5% in the previous year. The primary factor was an improvement in the gross margin to 33.7%, reflecting cost control and a better product mix. The SG&A ratio was broadly unchanged at 22.3%, indicating the effect of operating leverage. Ordinary Income rose 64.3% to ¥2.14B, supported by non-operating income and expenses, including dividend income of ¥0.09B and equity-method income of ¥0.07B. Net Income of ¥1.50B (+37.4%) included ¥0.28B in extraordinary income, primarily gains on the sale of shares in a subsidiary, as an earnings-enhancing factor; excluding this item, the underlying earnings growth rate would be somewhat more moderate. Overall, the Company delivered increases in both revenue and earnings, confirming a structural improvement in profitability driven by a better business mix.

Segment Analysis

There were significant differences in segment profit margins. Pressure sensors had the highest margin at 19.1% and drove overall Company profitability. Pressure gauges were the largest segment, accounting for 52.6% of revenue, but had a mid-range profit margin of 8.2%. Measurement and Control Devices had a profit margin of 12.9%, with profit increasing sharply by 1420.5% YoY, largely reflecting the small size of the prior-year base. Die casting had a low profit margin of 3.2% and diluted the Company-wide margin. While dependence on pressure sensors is increasing, the continued presence of low-profitability businesses in the portfolio remains a point of consideration for the earnings structure.

Key Financial Indicators

【Profitability】The Operating Income margin of 11.4% and Net Income margin of 8.4% both improved from the previous year, primarily due to the increase in the gross margin to 33.7%. 【Cash Flow Quality】The combined balance of accounts receivable and electronically recorded monetary claims increased significantly YoY, while inventories remained high at ¥16.82B, indicating room for improvement in asset efficiency relative to revenue growth. 【Investment Efficiency】ROE was 2.9%; despite the improvement in the Net Income margin, the low total asset turnover ratio remained a constraining factor. 【Financial Soundness】The Equity Ratio was 63.6%, and the Current Ratio reflected a substantial current asset surplus, with current assets of ¥48.41B against current liabilities of ¥16.78B, indicating a sound financial foundation.

Cash Flow Analysis

As the statement of cash flows has not been disclosed, cash trends are analyzed based on changes in the balance sheet. Cash and deposits totaled ¥13.50B, slightly down from ¥13.86B in the previous year, while accounts receivable and electronically recorded monetary claims increased significantly and inventories remained high, suggesting that funds generated through operating activities may be increasingly tied up in working capital. Investment securities increased from the previous year to ¥11.34B, indicating accumulated valuation gains. Short-term borrowings increased from the previous year to ¥4.32B, providing part of the funding for the increase in assets. Overall, although earnings generation from higher revenue and earnings is progressing, the expansion of working capital appears to be affecting cash-generation capacity.

Quality of Earnings

Current-period earnings were supported by improvements at the operating level and were generally of good quality, although the contribution from temporary factors also warrants attention. Non-operating income consisted of dividend income of ¥0.09B, foreign exchange gains of ¥0.02B, and other income of ¥0.04B. These items were limited to slightly more than 1% of revenue and did not materially affect the recurring earnings base. Meanwhile, extraordinary income of ¥0.28B, primarily consisting of a ¥0.278B gain on the sale of shares in a subsidiary, boosted profit before tax, making a meaningful contribution to Net Income of ¥1.50B. Extraordinary losses were small at ¥0.03B, confirming a net earnings-enhancing effect. The divergence between Ordinary Income and Net Income was mainly attributable to the corporate tax burden, with corporate taxes and other taxes of ¥0.89B against profit before tax of ¥2.39B. The effects of non-operating and extraordinary items remained within an identifiable range.

Earnings Forecast and Guidance

Progress toward the full-year plan in Q1 was 26.5% for Revenue, 30.0% for Operating Income, 33.5% for Ordinary Income, and 34.4% for Net Income, including progress against the EPS forecast of ¥227.60. All exceeded the 25% benchmark for simple linear progress. In particular, profit progress exceeded revenue progress, reflecting growth in high-profitability segments such as pressure sensors, as well as the temporary contribution of ¥0.28B in extraordinary income. The full-year Revenue forecast is ¥67.50B (-0.3% YoY), and the Operating Income forecast is ¥6.80B (-2.6%), indicating that management assumes a slowdown in the pace of growth from the second half onward. There were no revisions to the earnings or dividend forecasts during the quarter.

Shareholder Returns

The full-year dividend forecast is ¥60.00, implying a Payout Ratio of approximately 26.4% based on the EPS forecast of ¥227.60. The dividend per share was ¥26 in the previous year, compared with a full-year forecast of ¥60, indicating a planned dividend increase. Cash and deposits totaled ¥13.50B, and cash remained at an adequate level relative to interest-bearing debt, including short-term borrowings of ¥4.32B and long-term borrowings of ¥4.01B, supporting the stability of the dividend funding base. There was no mention of share repurchases, and shareholder returns are centered on dividends.

Risk Factors

1. Working Capital Expansion Risk: Electronically recorded monetary claims and notes receivable increased significantly from the previous year, while inventories remained high at ¥16.82B. If improvements in asset efficiency lag revenue growth, cash-generation capacity may be affected.

2. Concentration of Segment Profitability: While dependence on pressure sensors, with a profit margin of 19.1%, is increasing, die casting has low profitability, with a profit margin of 3.2%, creating a structure in which Company-wide profitability may fluctuate more significantly when demand changes.

3. Dependence on Temporary Gains: Extraordinary income of ¥0.28B, primarily gains on the sale of shares in a subsidiary, contributed to Net Income of ¥1.50B. Accordingly, part of the high full-year progress rate is supported by this temporary factor.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The Company’s Operating Income margin and Net Income margin both exceed the industry median, placing its profitability in the upper range of the industry.

Growth and Capital Efficiency

The Revenue growth rate significantly exceeds the industry median, representing a pace of growth in the upper range of the IQR.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. The improvement in the gross margin to 33.7% and the expansion of the Operating Income margin to 11.4% demonstrate the results of product-mix improvement centered on pressure sensors and cost control. Whether this improvement can be sustained will depend on trends in raw material costs and production yields.

2. Full-year progress is ahead on the profit side, but the temporary contribution from extraordinary income should be considered when evaluating progress.

3. The upward trend in trade receivables and inventories is consistent with the general expansion of assets accompanying revenue growth, but it will remain a monitoring point from the perspective of asset efficiency.

Theoretical Share Price (Reference Value)

Sensitivity: ¥2,629–¥2,784 at Cost of Equity ±1%, and ¥2,702–¥2,706 at ω±0.1.

Notes:

• As forecast ROE is below the Cost of Equity, the theoretical value is below Book Value per Share.
• Net assets as of the quarter-end are used, resulting in a timing mismatch with the full-year forecast.
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Model used: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee the future share price.)

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This report is an automatically generated earnings analysis document created 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 the Company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting professionals as necessary.

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