Dai Nippon Printing Co.,Ltd. FY2026 FY Earnings Report

Financial Highlights

• Net Sales: ¥1.51T
• Operating Income: ¥101.04B
• Net Income: ¥81.43B
• EPS: ¥235.49

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

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AI Financial Analysis

Executive Summary

FY2026 results were solid operationally with higher revenue and operating profit, but earnings quality weakened on poor cash conversion and a heavier reliance on one-time gains. Revenue rose 3.8% YoY to 1,512.6bn yen and operating income increased 7.9% to 101.0bn yen, lifting the operating margin to 6.7% (+26bps YoY). Gross profit expanded to 366.0bn yen, pushing gross margin to 24.2% (+98bps YoY) on mix and cost control. Ordinary income was 119.2bn yen (+2.9% YoY), while net income attributable to owners of parent declined 6.1% to 103.96bn yen as extraordinary gains normalized and the effective tax rate rose to 31.4%. EBITDA was 153.9bn yen, with a 10.2% margin, and interest coverage was very strong at 39.1x. ROE printed at 8.2% with a DuPont profile of 6.9% net margin, 0.744x asset turnover, and 1.61x leverage. Operating cash flow deteriorated to 40.4bn yen, only 0.39x net income, hurt by tax payments (83.6bn yen) and working capital outflows, driving negative free cash flow of -33.3bn yen by the provided definition. The balance sheet remains conservative: current ratio 226%, cash/short-term debt 9.0x, and Debt/EBITDA 0.37x. Segment mix improved: Smart Communication and Life & Healthcare posted meaningful profit growth, offsetting lower Electronics profit, though Electronics still delivered a 20.1% margin and was the largest operating income contributor. One-time items were material: net extraordinary gains of 36.3bn yen (gain on securities and asset sales) equated to 25.3% of net income, tempering earnings quality. Guidance implies modest topline growth to 1,530bn yen and operating income of 108bn yen (+6.9%), but net income guidance of 95bn yen is conservative (-8.6% vs FY26), suggesting some normalization of non-recurring gains and continued reinvestment. Dividends rose to 40 yen/share (payout ~16-17%), but were not covered by free cash flow this year; ample liquidity and low leverage provide a buffer. Notable balance sheet movements include a near-tripling of goodwill (M&A consolidation), higher intangibles (software/digital), and a sharp reduction in treasury stock (retirement/cancellation), alongside lower retained earnings reflecting shareholder returns. Overall, fundamentals and capital strength are intact, but investors should monitor cash conversion, working capital discipline, and the reliance on investment gains.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 6.9% × 0.744 × 1.61 ≈ 8.2%. The most meaningful YoY movement came from net margin contraction versus last year’s higher base of extraordinary gains, partially offset by improved operating margin (+26bps) on better gross margin (+98bps) despite SG&A growth outpacing revenue. Asset turnover eased from the prior year as assets expanded with M&A and investment securities remained sizeable relative to revenue generation. Leverage ticked up modestly (equity multiplier ~1.61x) but remains conservative and not a key ROE driver. Business drivers: mix improvement in Smart Communication and Life & Healthcare and disciplined COGS aided operating margin, while a higher effective tax rate and normalization of extraordinary gains weighed on net margin. Sustainability: the operating margin expansion appears more sustainable than last year’s one-time heavy net margin; however, SG&A grew 8.3% YoY vs revenue +3.8%, a negative operating leverage signal that needs monitoring. Equity-method income remained supportive, but lower than last year, underscoring potential volatility. Overall, future ROE improvement hinges on sustaining gross margin, reining in SG&A, and improving asset turnover via better working capital and disciplined capital allocation.

Growth Assessment

Topline grew 3.8% to 1,512.6bn yen, driven by Smart Communication (+4.9% YoY) and Life & Healthcare (+3.3%), with Electronics modest (+1.6%). Operating income rose 7.9% to 101.0bn yen on improved gross profitability. Ordinary income increased 2.9%, while net income to owners fell 6.1% as non-recurring gains normalized and taxes increased. EBITDA reached 153.9bn yen (10.2% margin), indicating healthy underlying earnings power. Segment mix shows broad-based revenue growth with profit leadership in Electronics (20.1% margin) despite YoY profit decline there, while Life & Healthcare delivered the strongest YoY profit growth (+56.6%), supporting portfolio diversification. Geographic revenue was led by Japan (1,130.4bn yen) with overseas growth in Asia and others. Outlook: management’s guidance targets modest sales growth (+1.2%) and higher operating profit (+6.9%), with conservative net income (-8.6%), implying lower reliance on one-time items and ongoing investment. Key to sustaining growth will be execution in high-margin Electronics and scaling Life & Healthcare while containing SG&A.

Financial Health

Liquidity is strong: current ratio 226% and quick ratio 203%, with working capital of 479.3bn yen. No warning on current ratio; it is comfortably above 1.0. Leverage is conservative: Debt/EBITDA 0.37x, Debt/Capital 4.3%, and EBITDA interest coverage 59.6x. D/E of 0.61x is within conservative bounds (<1.0x). Short-term debt constitutes 57.8% of total debt, but refinancing risk is mitigated by cash/short-term debt of 9.0x and minimal absolute debt (interest-bearing debt 56.99bn yen). Contract liabilities stand at 39.1bn yen, supporting near-term revenue visibility. Investment securities (369.5bn yen; 18.2% of assets) provide additional balance sheet flexibility but introduce market valuation sensitivity. Pension items are material: net defined benefit asset and liability balances are sizable, though manageable under current conditions. Overall solvency and liquidity profiles are robust, with low maturity mismatch risk given cash levels and modest borrowings.

Notable B/S Changes

Goodwill: +202.6 (100M JPY) (+196.8%) - Reflects M&A consolidation; payback healthy (Goodwill/EBITDA 0.20x), monitor integration and impairment risk. Intangible assets: +254.35 (100M JPY) (+54.8%) - Likely software/digital investments supporting transformation; slightly higher amortization burden ahead. Treasury stock: +1,192.31 (100M JPY) (reduction in treasury) - Indicates retirement/cancellation and active capital return program; raises per-share metrics. Retained earnings: -837.44 (100M JPY) (-10.2%) - Impact of dividends and buybacks exceeding FCF; offset by current-year profit.

Cash Flow Quality

OCF was 40.4bn yen versus net income to owners of 103.96bn yen, yielding an OCF/NI ratio of 0.39x, which signals weak cash conversion this year. Key drags were large tax payments (83.6bn yen), a decline in trade payables (-28.9bn yen), and defined benefit asset changes, partly offset by solid pre-tax cash earnings (OCF subtotal 129.7bn yen). Free cash flow was negative at -33.3bn yen (definition provided), reflecting OCF shortfall and capex (60.0bn yen) plus cash out for acquisitions (22.8bn yen). Cash conversion versus EBITDA was low at 0.26x, highlighting working capital pressure and non-cash earnings components. CapEx/Depreciation was 1.14x, consistent with maintenance-to-growth investment and not excessive. With dividends (17.3bn yen) and buybacks (50.8bn yen), shareholder returns exceeded FCF, funded by cash and incremental financing (100bn yen bond issuance). No overt signs of working capital manipulation are evident; the main cash drag was tax timing and payables reduction. Sustained improvement requires tighter working capital discipline and smoother tax cash outflows.

Dividend Sustainability

DPS totaled 40 yen (interim 18, year-end 22), equating to a payout ratio of roughly 16-17% on EPS of 235.5 yen, well within sustainable bounds on an earnings basis. Free cash flow coverage was negative (FCF coverage -1.89x), so this year’s dividend and buybacks (total returns ~65% of net income) relied on cash reserves and financing rather than internally generated free cash. The balance sheet’s low leverage and ample liquidity provide capacity to maintain the dividend, but sustainability will be stronger if cash conversion normalizes toward historical levels. Policy-wise, the low payout ratio leaves room for steady increases as consistent cash generation resumes; buybacks may be more opportunistic given this year’s FCF deficit.

Risk Assessment

Business risks include Segment profit dependence on Electronics (20.1% margin) amid cyclical electronics/materials demand, Competitive pressure in Smart Communication that could compress margins despite revenue growth, Equity-method income volatility impacting ordinary income.

Financial risks include Weak cash conversion (OCF/NI 0.39x) raising reliance on financing and cash reserves, Short-term debt ratio at 57.8% requires disciplined liquidity management despite high cash coverage, Valuation risk on sizeable investment securities (18.2% of assets) affecting equity and potential gains.

Key concerns include High contribution from one-time items (25.3% of net income) reducing earnings quality, SG&A growth (+8.3% YoY) outpacing revenue (+3.8%), pressuring operating leverage, Receivables efficiency risk (DSO 71 days) lengthening the cash conversion cycle.

Investment Implications

Key takeaways include Core operations improved: operating margin +26bps to 6.7% on stronger gross margin, Life & Healthcare profit up +56.6% YoY, diversifying earnings beyond Electronics, Cash flow quality weak near term; monitor reversal of working capital outflows and tax timing, Balance sheet conservative (Debt/EBITDA 0.37x, current ratio 226%), cushioning FCF shortfall, Earnings quality tempered by one-time gains; FY2027 guidance appears conservative on net, Shareholder returns were elevated relative to FCF; sustainability hinges on OCF normalization.

Metrics to watch include OCF/Net Income ratio (target >= 0.8), SG&A growth vs revenue growth, Segment OP in Electronics vs Smart Communication/Life & Healthcare mix, Equity-method income trend and commodity/industrial cycle indicators, Inventory, receivables DSO (71 days) and overall CCC, Extraordinary items and gains on securities/assets.

Regarding relative positioning, Within Japan’s diversified manufacturing/printing-tech peers, DNP combines steady core operations and a strong balance sheet with improving portfolio quality; however, cash conversion and reliance on investment-related gains leave it positioned as a high-quality balance sheet name with mid-single-digit operating margins and mixed earnings quality.