| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥611.9B | ¥576.5B | +6.1% |
| Operating Income / Operating Profit | ¥53.6B | ¥48.6B | +10.4% |
| Ordinary Income | ¥54.9B | ¥50.0B | +9.8% |
| Net Income / Net Profit | ¥35.3B | ¥37.2B | -5.1% |
| ROE | 7.7% | 9.1% | - |
For the fiscal year ended March 2026, Revenue was ¥611.9B (YoY +¥35.4B, +6.1%), Operating Income was ¥53.6B (YoY +¥5.1B, +10.4%), Ordinary Income was ¥54.9B (YoY +¥4.9B, +9.8%), and Net Income attributable to owners of the parent was ¥35.3B (YoY -¥1.9B, -5.1%). At the operating level, gross margin improved to 28.2% (prior year 27.5%, +0.7pt). Selling, general and administrative expense ratio rose to 19.5% (prior year 19.0%, +0.5pt) but was absorbed, resulting in an operating margin expansion to 8.8% (prior year 8.4%, +0.4pt). Ordinary Income benefited from equity-method investment income of ¥0.2B and dividend income of ¥1.4B, but Net Income declined YoY due to the recording of special losses of ¥6.0B, including head office relocation costs of ¥5.8B. On a quarterly basis, Operating Cash Flow (OCF) was ¥-1.6B, materially below Net Income of ¥40.1B, driven primarily by a buildup of work-in-process of ¥155.1B and an increase in trade receivables of ¥-5.6B, highlighting the burden of working capital.
[Revenue] Revenue reached ¥611.9B (YoY +6.1%), marking a second consecutive year of top-line growth. By segment, Defense & Communications Equipment was the largest contributor at ¥261.6B (+6.6%) and delivered substantial profit growth with Operating Income ¥234.4B (+43.4%). Marine (Ship & Port Equipment) increased revenue to ¥139.0B (+8.5%) but saw Operating Income decline to ¥131.7B (-15.1%), indicating deterioration in profitability. Flow Meters (Fluid Equipment) achieved ¥54.1B (+7.8%) while maintaining a high-margin Operating Income ratio of 16.1%, supporting overall company profitability. Hydraulic & Pneumatic Equipment grew to ¥119.9B (+2.8%) with Operating Income of ¥2.2B (+12.7%), though margin remains low at 1.9%. Other businesses were ¥52.7B (+0.1%) with Operating Income of ¥6.8B (-9.5%).
[Profitability] Operating Income rose to ¥53.6B (+10.4%), outpacing revenue growth. Cost of goods sold ratio improved to 71.8% (prior year 72.5%, -0.7pt), aided by product mix improvement and price pass-through. SG&A increased to ¥119.2B (prior year ¥109.7B, +8.7%), rising faster than sales and lifting SG&A ratio to 19.5% (+0.5pt), but gross margin improvement absorbed the impact. Non-operating items were a net positive ¥1.3B (prior year +¥1.5B), where dividend income ¥1.4B and interest income ¥0.1B offset interest expense ¥1.9B. Ordinary Income was ¥54.9B (+9.8%), in line with operating gains. Extraordinary items were net -¥2.3B, with special losses of ¥6.0B (mainly head office relocation costs ¥5.8B) exceeding special gains ¥3.7B (including gain on sale of investment securities ¥0.5B). Profit before income taxes was ¥52.6B (prior year ¥48.8B, +7.9%), and after income taxes ¥11.9B (effective tax rate 22.6%), Net Income was ¥35.3B (-5.1%) due to one-off factors, although the company recorded revenue and operating profit growth through the ordinary level.
Defense & Communications Equipment posted Revenue ¥261.6B (prior ¥245.3B, +6.6%) and Operating Income ¥234.4B (prior ¥163.5B, +43.4%) with an operating margin of 9.0%, making it the largest contributor to consolidated profit. Marine recorded Revenue ¥139.0B (prior ¥128.1B, +8.5%) but Operating Income decreased to ¥131.7B (prior ¥155.1B, -15.1%), lowering margin to 9.5%. Flow Meters achieved Revenue ¥54.1B (prior ¥50.2B, +7.8%) and Operating Income ¥8.7B (prior ¥7.9B, +10.6%), maintaining a high margin of 16.1% and underpinning consolidated gross margin through both margin improvement and scale expansion. Hydraulic & Pneumatic Equipment had Revenue ¥119.9B (prior ¥116.7B, +2.8%) and Operating Income ¥2.2B (prior ¥2.0B, +12.7%) with a low margin of 1.9% despite earnings growth. Other businesses recorded Revenue ¥52.7B (prior ¥52.6B, +0.1%) and Operating Income ¥6.8B (prior ¥7.6B, -9.5%).
[Profitability] Operating margin 8.8% (prior 8.4%, +0.4pt), Net margin 5.8% (prior 6.5%, -0.7pt), ROE 7.7% (stable within the observed data range). Gross margin improved to 28.2% (prior 27.5%, +0.7pt) due to product mix enhancement and price realization. SG&A ratio rose to 19.5% (prior 19.0%, +0.5pt), but revenue growth absorbed fixed costs. [Cash Quality] Operating Cash Flow / Net Income is -0.04x: OCF was ¥-1.6B versus Net Income ¥40.1B, reflecting a substantial divergence driven by a buildup of work-in-process ¥155.1B and increased trade receivables -¥5.6B. EBITDA (Operating Income ¥53.6B + Depreciation ¥17.3B) was ¥70.9B, yielding OCF/EBITDA of -0.02x, very low. Working capital days: DSO 119 days, DIO 226 days, DPO 65 days, CCC 293 days, indicating inventory and receivable stagnation weighing on capital efficiency. [Investment Efficiency] Total asset turnover 0.72x (prior 0.75x) declined as total assets increased (Total assets ¥847.8B, prior ¥765.0B, +10.8%) relative to sales growth. Tangible fixed assets rose substantially to ¥129.5B (prior ¥97.1B, +33.4%), reflecting front-loaded CapEx ¥46.5B (2.7x depreciation ¥17.3B). [Financial Soundness] Equity Ratio 54.4% (prior 53.6%), Current Ratio 213.5%, Quick Ratio 204.0% indicate strong solvency. However, cash and deposits decreased to ¥40.2B (prior ¥76.0B, -47.1%) while short-term borrowings rose to ¥134.9B (prior ¥104.2B, +29.5%), lowering Cash/Short-term Liabilities to 0.30x. Debt/Equity ratio 0.50x (interest-bearing debt ¥212.9B / equity ¥455.2B) and Debt/EBITDA 3.00x represent neutral leverage, but the short-term debt ratio of 61.9% signals increased reliance on short-term funding.
Operating Cash Flow was ¥-1.6B (prior ¥-4.6B, improvement ¥+3.0B) and significantly below Net Income ¥40.1B. Subtotal (cash flow before tax and other adjustments) was ¥12.7B (prior ¥2.1B), driven by add-backs such as depreciation ¥17.3B and adjustments for allowances and equity-method gains/losses, but working capital increases substantially depressed cash flow. Inventory increase -¥32.0B (including work-in-process buildup ¥155.1B), trade receivables increase -¥5.6B, and trade payables increase +¥2.5B combined for a net cash outflow of -¥35.1B. Corporate tax payments -¥13.9B also compressed cash. Investing Cash Flow was ¥-51.5B (prior ¥-40.3B), centered on acquisition of tangible fixed assets -¥46.5B. Free Cash Flow was ¥-53.1B (prior ¥-44.8B), widening the deficit. Financing Cash Flow was ¥+17.1B (prior ¥+41.8B), with long-term borrowings raised +¥44.6B, repayments -¥26.0B, and net short-term borrowings +¥4.5B exceeding dividend payments -¥5.8B to fund the shortfall. Cash balance declined from ¥75.5B at the beginning of the period to ¥39.5B at period-end, a decrease of ¥-36.0B. OCF/EBITDA was -0.02x and remains very low; absent improved monetization of inventory and receivables, cash generation is forecast to remain weak.
Core earnings consist of Operating Income ¥53.6B. Non-operating income ¥3.4B (0.6% of sales) is mainly dividend income ¥1.4B and interest income ¥0.1B, representing a stable recurring income source. One-off items include special losses ¥6.0B (head office relocation costs ¥5.8B) and special gains ¥3.7B (gain on sale of investment securities ¥0.5B, gain on sale of fixed assets ¥0.1B), with net extraordinary items -¥2.3B, roughly -6.5% relative to Net Income ¥35.3B. The head office relocation cost is non-recurring and is not expected to recur in subsequent periods; adjusting the pre-tax baseline ¥52.6B for the one-off yields an effective recurring equivalent of approximately ¥54.9B (¥52.6B + ¥2.3B). The accrual ratio (Net Income - OCF) / Total Assets is (¥40.1B - (¥-1.6B)) / ¥847.8B = 4.9%, within a healthy range, but the negative OCF driven by inventory and receivable increases indicates weak real cash-generating capacity. Comprehensive income ¥57.3B exceeded Net Income ¥35.3B by ¥22.0B, primarily due to valuation gains on other securities ¥7.1B and actuarial gains/losses adjustments ¥9.3B, which boosted equity on the balance sheet. The gap between Ordinary Income ¥54.9B and Net Income ¥35.3B is explained by extraordinary items net -¥2.3B and tax burden ¥11.9B (effective tax rate 22.6%), a standard tax rate.
Company plan for FY ending March 2027 projects Revenue ¥683.0B (YoY +11.6%), Operating Income ¥64.0B (YoY +19.4%), and Ordinary Income ¥65.1B (YoY +18.5%), implying revenue and profit growth. Operating margin is planned to improve from 8.8% to 9.4% (+0.6pt), predicated on accelerated growth in high-margin segments and improvement in low-margin businesses. EPS guidance is ¥304.27 (current ¥243.75, +24.8%). Dividend forecast is ¥48 (current ¥40, +¥8), implying a forecast payout ratio of 15.8%, conservative. Full-year progress ratio (current results / next year plan) is 89.6% for Revenue, 83.8% for Operating Income, and 84.3% for Ordinary Income, indicating concentration of bookings toward H2 and that normalization of working capital and realization of backlog will be key to achieving the plan. The disposition of work-in-process buildup ¥155.1B and order/sales expansion in Defense & Communications Equipment and Fluid Equipment are prerequisites for plan execution.
The year-end dividend was ¥40 (prior ¥35, +¥5), with a payout ratio of 15.1% (total dividends ¥5.8B / consolidated net income ¥40.1B) at a low level. No share buybacks were executed (CF statement -¥0.0B), and total shareholder return ratio is at the same level as the payout ratio. With cash and deposits at ¥40.2B against short-term borrowings ¥134.9B, dependence on short-term funding has increased; although distributable capacity on an earnings basis is sufficient (Net Income ¥40.1B, dividends ¥5.8B), on a cash basis dividends plus CapEx were funded by borrowings given OCF ¥-1.6B and FCF ¥-53.1B. The next-period dividend plan of ¥48 (increase +¥8) would be sustainable if the company achieves the planned Net Income ¥50.0B, but normalization of working capital and conversion of OCF to positive are prerequisites for healthy, sustainable returns.
Working capital expansion risk: Work-in-process buildup ¥155.1B and high DSO 119 days, DIO 226 days, CCC 293 days indicate ongoing inventory and receivable stagnation. Prolonged project durations, production bottlenecks, and uneven timing of acceptance could continue to compress OCF; delays in working capital normalization would increase the rollover burden of short-term borrowings ¥134.9B and crystallize liquidity risk.
Segment profitability dispersion: Marine posted revenue growth but Operating Income decreased -15.1% and margin fell to 9.5%. Hydraulic & Pneumatic Equipment margin remains low at 1.9%; unless low-margin businesses improve, upside to consolidated margins is limited. While high-margin Flow Meters (16.1%) and growth in Defense & Communications Equipment drive consolidated results, concentration by business mix could impair stability.
Dependence on short-term debt and liquidity risk: Increase in short-term borrowings to ¥134.9B (YoY +29.5%) and decrease in cash and deposits to ¥40.2B (YoY -47.1%) reduce the Cash/Short-term Liabilities ratio to 0.30x. A short-term debt ratio of 61.9% narrows liquidity cushions and rising interest rates or a shift in credit conditions could raise refinancing costs. If the payback from front-loaded investment (CapEx ¥46.5B / depreciation ¥17.3B = 2.7x) is delayed, interest-bearing debt growth and higher interest expense will weaken financial resilience.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 8.8% | 7.8% (4.6%–12.3%) | +1.0pt |
| Net Margin | 5.8% | 5.2% (2.3%–8.2%) | +0.6pt |
Profitability exceeds the industry median, with both operating and net margins at relatively high levels.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 6.1% | 3.7% (-0.4%–9.3%) | +2.4pt |
Revenue growth outperformed the industry median by +2.4pt, ranking among the higher-growth manufacturers.
※ Source: Company compilation
Trend of operating margin improvement and next-year plan: Operating margin improved to 8.8% (prior 8.4%, +0.4pt) and is planned to expand to 9.4% (+0.6pt) next year. Margin expansion is driven by gross margin improvement and growth in high-margin segments (Flow Meters 16.1%, Defense & Communications Equipment 9.0%), but Marine profit deterioration and low margin in Hydraulic & Pneumatic Equipment (1.9%) are headwinds; progress in business mix improvement is key to achieving the plan.
Weak cash generation and working capital challenge: OCF/Net Income -0.04x and OCF/EBITDA -0.02x are extremely low; inventory (notably work-in-process ¥155.1B) and receivable stagnation compress cash. CCC of 293 days and Cash/Short-term Liabilities 0.30x indicate thin liquidity cushions. Unless recovery of CapEx payback (CapEx/Depreciation 2.7x) and normalization of working capital occur, achieving sustained positive OCF and financial stability will be difficult; quarter-to-quarter reductions in DIO and DSO should be monitored.
Sustainability of dividend policy vs. growth investment: Payout ratio 15.1% is conservative, and the planned dividend increase (¥40 → ¥48) is sustainable on an earnings basis, but cash-wise FCF ¥-53.1B indicates dividends plus CapEx have been financed by borrowings. With short-term debt ratio 61.9% and increasing funding dependence, normalization of working capital and OCF positivity are prerequisites for balancing shareholder returns and growth investment.
This report is an AI-generated earnings analysis based on XBRL financial statement data and is not a recommendation to invest in any particular security. Industry benchmarks are compiled by the Company from public financial statements and are provided for reference. Investment decisions are the sole responsibility of the investor; please consult a professional advisor as needed.