| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥15125.7B | ¥14576.1B | +3.8% |
| Operating Income / Operating Profit | ¥1010.4B | ¥936.1B | +7.9% |
| Ordinary Income | ¥1192.4B | ¥1159.2B | +2.9% |
| Net Income / Net Profit | ¥814.3B | ¥931.5B | -12.6% |
| ROE | 6.4% | 7.7% | - |
For the fiscal year ended March 2026, Revenue was ¥15125.7B (YoY +¥549.6B +3.8%), Operating Income was ¥1010.4B (YoY +¥74.3B +7.9%), Ordinary Income was ¥1192.4B (YoY +¥33.2B +2.9%), and Net Income was ¥814.3B (YoY -¥117.2B -12.6%). Operating-stage performance improved via maintained gross margin of 24.2% and SG&A control, resulting in Operating Margin improvement from 6.4% to 6.7% (+0.3pt). Ordinary Income was supported by equity-method income of ¥125.6B and dividend income of ¥359.6B, but Net Income declined due to variation in non-recurring gains (prior year investment securities sale gains ¥938.3B vs. this period ¥448.1B) and an effective tax rate of 31.4% (prior year 32.7% but higher pre-tax profit in prior period produced larger cash taxes), resulting in a YoY decrease of 12.6%. Top-line was solid, however Operating Cash Flow was ¥403.7B (YoY -69.6%) — only 0.5x of Net Income — with cash taxes paid ¥836.3B and decrease in accounts payable ¥288.9B creating working capital headwinds; Free Cash Flow was -¥332.7B. Financial soundness remains high with Cash ¥2,981.3B and Interest-bearing Debt ¥569.9B resulting in net cash, and Equity Ratio maintained at 62.3%.
[Revenue] Revenue was ¥15125.7B (+3.8%) and grew steadily. By segment, the Smart Communication Business expanded to ¥7503.8B (+4.9%) as a core segment, aided by recovery in digitalization and security-related demand. The Life And Healthcare Business was ¥5123.5B (+3.3%) capturing resilient demand for medical devices and healthcare solutions. The Electronics Business was ¥2518.0B (+1.6%) with continued mix improvement toward higher-value-added products. Regionally, domestic sales were ¥1130.4B (74.8% of sales), Asia ¥258.3B (17.1%), and Other ¥123.9B (8.2%), with domestic markets remaining solid and Other regions growing +19.4% YoY. Contract liabilities accumulated to ¥390.8B (suggesting expansion of backlog) and serve as a foundation for future revenue.
[Profitability] Cost of goods sold was ¥11465.9B (75.8% of sales), maintaining a gross margin of 24.2%. SG&A was ¥2649.4B (17.5% of sales), up YoY +8.4%, but absorbed by gross margin expansion, resulting in Operating Income of ¥1010.4B (+7.9%) and Operating Margin improving to 6.7% (from 6.4% prior, +0.3pt). Non-operating income was ¥243.7B (primarily dividend income ¥359.6B and equity-method income ¥125.6B) and non-operating expenses were ¥61.7B (including interest expense ¥25.8B), yielding Ordinary Income of ¥1192.4B (+2.9%). Extraordinary gains were ¥579.5B (investment securities sale gains ¥448.1B, fixed asset sale gains ¥129.8B) and extraordinary losses were ¥216.1B (including impairment losses ¥132.9B), resulting in Profit Before Tax of ¥1555.8B. Income taxes ¥488.0B (effective tax rate 31.4%) and Non-controlling Interests ¥28.2B were deducted to arrive at Net Income ¥814.3B (-12.6%). By segment, Operating Income improved substantially in Smart Communication to ¥400.0B (+15.4%, margin 5.3%) and Life And Healthcare to ¥372.6B (+56.6%, margin 7.3%), while Electronics declined to ¥507.0B (-11.6%, margin 20.1%) despite high profitability. Variations in non-recurring items and the increase in absolute tax burden led to a decline in Net Income, although operating-stage profitability improved — resulting in higher revenue and Operating / Ordinary Income but lower Net Income.
The Smart Communication Business: Revenue ¥7503.8B (+4.9%), Operating Income ¥400.0B (+15.4%), margin 5.3%. Recovery in demand for digital solutions and security plus cost optimization drove margin improvement. The Life And Healthcare Business: Revenue ¥5123.5B (+3.3%), Operating Income ¥372.6B (+56.6%), margin 7.3%, with boosted margins from expanded sales of medical devices, healthcare services, and a shift to higher-value products. The Electronics Business: Revenue ¥2518.0B (+1.6%), Operating Income ¥507.0B (-11.6%), margin 20.1%. This is the most profitable division company-wide but is in a downtrend, suggesting competitive pressures and price pressure. Adjustments were -¥269.3B (prior -¥222.1B) reflecting increased basic research and common costs. Of the company-wide Operating Income ¥1010.4B, Electronics accounts for approximately 50.2%, Smart Communication 39.6%, and Life And Healthcare 36.9%; Electronics’ high profitability underpins group profitability, but its decline dampens growth in consolidated Net Income.
[Profitability] Operating Margin 6.7% (prior 6.4%, +0.3pt), Net Margin 5.4% (prior 6.4%, -1.0pt). ROE 6.4% (declined from equivalent ROE 9.8% based on prior period equity ¥9484.8B and Net Income ¥931.5B), and ROA (Ordinary) 6.0% — profitability is maintained. Gross margin 24.2% is solid, but rising SG&A ratio 17.5% (prior 16.8%) dampens operating leverage. [Cash Quality] Operating Cash Flow ¥403.7B is 0.5x of Net Income ¥814.3B; considering Depreciation ¥528.1B, OCF/EBITDA (EBITDA approximately ¥1538.5B) is 0.26x, weak. Free Cash Flow -¥332.7B (Operating CF ¥403.7B - Investing CF ¥736.4B) indicates a challenge in cash generation. Cash taxes paid ¥836.3B and decrease in accounts payable ¥288.9B pressured working capital. [Investment Efficiency] Capital expenditures ¥600.3B (4.0% of sales), intangible asset additions ¥129.5B continue growth investments. Capex/Depreciation 1.14x indicates renewal plus growth investment level. Goodwill ¥305.5B (prior ¥102.9B, +196.8%) shows active M&A, but goodwill/Equity 2.4% and goodwill/EBITDA 0.20x indicate high impairment resilience. [Financial Soundness] Equity Ratio 62.3% (prior 63.0%), Current Ratio 226.1%, Quick Ratio 203.1% — liquidity is robust. Interest-bearing Debt ¥569.9B (short-term borrowings ¥329.6B, long-term borrowings ¥240.3B, corporate bonds ¥2000.0B) vs. Cash ¥2,981.3B yields effective net cash. Debt/EBITDA 0.37x and Interest Coverage (Operating Income ¥1010.4B / interest ¥25.8B) 39.2x indicate ample financial capacity.
Operating CF was ¥403.7B (prior ¥1,327.3B, -69.6%) — a substantial decline. Subtotal (before working capital changes) was ¥1297.1B, from which cash taxes paid ¥836.3B flowed out, and working capital headwinds (accounts payable -¥288.9B, reduction in trade payables) further weighed. Inventories increased slightly -¥8.7B, and trade receivables decreased +¥115.1B (improved collections), but the large decrease in accounts payable pressured Operating CF. Investing CF was -¥736.4B, driven by CapEx -¥600.3B, intangible asset acquisitions -¥129.5B, and acquisition of subsidiary shares -¥227.8B (M&A). Proceeds from sale of investment securities ¥578.0B partially offset outflows. Financing CF was +¥233.3B as bond issuance ¥1000.0B exceeded share buybacks -¥507.5B and dividend payments -¥178.8B, increasing liquidity. Cash decreased from ¥2506.3B at the beginning to ¥2435.6B at the end of the period (-¥70.7B, including FX effect +¥28.7B). FCF -¥332.7B was funded by cash and interest-bearing debt; normalizing working capital and smoothing tax payments are key focus areas next period.
Quality of earnings is solid at the operating level, but dependence on one-off items is a driver of Net Income volatility. Operating Income ¥1010.4B is recurring, and of Non-operating Income ¥243.7B, Dividend Income ¥359.6B (2.4% of sales) is relatively sustainable. Equity-method income ¥125.6B is also linked to associate performance and is recurrent. Extraordinary gains ¥579.5B (investment securities sale gains ¥448.1B, fixed asset sale gains ¥129.8B) account for approximately 71.2% of Net Income ¥814.3B and are temporary. Prior year extraordinary gains ¥1304.4B (including investment securities sale gains ¥938.3B) represented about 140% of Net Income ¥931.5B, so asset sale gains have materially inflated Net Income in both periods. Extraordinary losses ¥216.1B (including impairment losses ¥132.9B) are also temporary but impairments could result from restructuring and potentially contribute to future profitability improvement. The marked gap where Operating CF ¥403.7B falls well short of Net Income ¥814.3B is largely due to cash taxes paid ¥836.3B, highlighting divergence between accounting Net Income and cash generation. Accruals (Net Income ¥814.3B - Operating CF ¥403.7B = ¥410.6B, 50.4% of Net Income) are high, reflecting working capital and tax timing effects. Comprehensive Income was ¥1266.3B (Net Income ¥814.3B + Other Comprehensive Income ¥452.0B), with remeasurement of retirement benefits ¥288.0B and FX translation ¥55.1B boosting equity, indicating value changes not captured solely by Net Income.
The company guidance for the full year is Revenue ¥15300.0B (YoY +1.2%), Operating Income ¥1080.0B (+6.9%), Ordinary Income ¥1240.0B (+4.0%), Net Income ¥950.0B (+16.7% relative to prior period Net Income ¥814.3B), EPS forecast ¥224.24, Dividend forecast ¥19.00. Versus current period performance, the company forecasts Revenue +¥174.3B (+1.2%), Operating Income +¥69.6B (+6.9%), Ordinary Income +¥47.6B (+4.0%), Net Income +¥135.7B (+16.7%). Progress ratios are Revenue 98.9%, Operating Income 93.5%, Ordinary Income 96.2%, Net Income 85.7% — indicating some upside required to meet full year targets. The company’s plan assumes reduction in extraordinary items (lower repeatability of asset sale gains) and normalization of tax burdens, with Net Income growth underpinned by operating-stage profitability improvements. Payout Ratio based on forecast EPS ¥224.24 and forecast dividend ¥19.00 is approximately 8.5%, conservative, leaving room to allocate surplus to share buybacks or growth investments.
Dividends were Interim ¥18.00 and Year-end ¥22.00 for an annual dividend of ¥40.00 (adjusted to be equivalent to prior year ¥32.00 after considering share split). With EPS ¥235.49, payout ratio is 17.0%, low and focused on stable dividends. Share buybacks amounted to ¥507.5B; combined with dividends ¥178.8B, total returns were ¥686.3B and Total Return Ratio was 84.3% (vs. Net Income ¥814.3B), indicating an aggressive return policy. Prior year total returns were ¥798.9B (dividends ¥150.3B + buybacks ¥648.6B), with Total Return Ratio 85.8%. These returns, which substantially exceed FCF -¥332.7B, have been funded from cash and interest-bearing debt; sustainability depends on abundant cash (¥2,981.3B) and low leverage (Debt/EBITDA 0.37x). Next fiscal year dividend guidance ¥19.00 corresponds to payout ratio 8.5% on forecast EPS ¥224.24, indicating further room for dividend increases. A 2-for-1 stock split effective October 1, 2024 means on a pre-split basis the Year-end dividend equates to ¥44.00 and annual dividend ¥76.00.
Weakness in Operating Cash Generation: Operating CF ¥403.7B is only 0.5x of Net Income ¥814.3B, and OCF/EBITDA 0.26x significantly below industry standard (≥0.7x). Cash taxes paid ¥836.3B and decrease in accounts payable ¥288.9B are primary causes; if working capital management does not improve, sustainability of growth investments and shareholder returns could be constrained. DSO (Days Sales Outstanding) is 71 days and trending longer, making collection cycle normalization a challenge.
Net Income Structure Dependent on One-off Gains: Of Net Income ¥814.3B, Extraordinary Gains ¥579.5B (investment securities sale gains ¥448.1B, fixed asset sale gains ¥129.8B) account for ~71%, implying core earning power is Operating Income ¥1010.4B. Prior year Extraordinary Gains ¥1304.4B similarly inflated Net Income. As the company projects Net Income ¥950.0B (+16.7%), lower extraordinary items mean Operating Income growth (+6.9%) is expected to underpin Net Income growth; assessing earnings quality will be critical.
Electronics Segment Downside Risk: Electronics Operating Income ¥507.0B (-11.6%) — though highly profitable at 20.1% margin (about 3x company average 6.7%) — is on a downtrend and could materially affect consolidated margins if the decline continues. Competitive intensity, price pressure, or delayed response to technological change could lead to medium-term erosion of profitability. Backlog and contract liabilities of ¥390.8B suggest demand resilience, but segment order trends and recovery in profitability are key monitoring points.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 6.7% | 7.8% (4.6%–12.3%) | -1.1pt |
| Net Margin | 5.4% | 5.2% (2.3%–8.2%) | +0.2pt |
Operating Margin is 1.1pt below the industry median, but Net Margin is 0.2pt above, complemented by non-operating income (dividends, equity-method income) and tax efficiency.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 3.8% | 3.7% (-0.4%–9.3%) | +0.1pt |
Revenue growth is in line with the industry median, following the modest growth trend across manufacturing.
※ Source: Company compilation
Improvement in operating-stage profitability is a positive. Operating Margin 6.7% (+0.3pt) and stable gross margin 24.2%, with Smart Communication and Life And Healthcare showing significant margin gains (+15.4% / +56.6%), indicate structural cost optimization and progress in shifting to higher-value products. The company guidance anticipates Operating Income +6.9%, suggesting continued strengthening of underlying profitability.
Weak cash generation is a short-term constraint on valuation. Operating CF ¥403.7B (OCF/EBITDA 0.26x) and FCF -¥332.7B are fragile relative to Net Income ¥814.3B and Operating Income ¥1010.4B. Cash taxes paid ¥836.3B and decrease in accounts payable ¥288.9B are main drivers; normalizing working capital and smoothing tax timing are keys to improvement. Conversely, Cash ¥2,981.3B and net cash position provide downside protection and support continuation of shareholder returns (Total Return Ratio 84.3%).
Dependence on one-off gains in Net Income requires attention to earnings quality. Extraordinary Gains ¥579.5B (71% of Net Income) have low repeatability; core profitability is operating-stage. The company plans Net Income growth +16.7% next year premised on a reduced level of extraordinary items and Operating Income growth +6.9%, so post-asset-sale trends in profitability will be in focus. Comprehensive Income ¥1266.3B (including retirement benefit remeasurement +¥288.0B) suggests qualitative improvement in equity and is positive for medium-to-long-term enterprise value.
This report was automatically generated by AI analyzing XBRL financial statement data and is a financial analysis document. It does not constitute a recommendation to invest in specific securities. Industry benchmarks are reference information compiled by the Company from public financial statements. Investment decisions are your responsibility; please consult professional advisors as necessary before making investment decisions.