| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥256.3B | ¥225.4B | +13.7% |
| Operating Income | ¥19.5B | ¥14.4B | +35.0% |
| Ordinary Income | ¥17.3B | ¥13.4B | +28.9% |
| Net Income | ¥14.4B | ¥18.3B | -21.7% |
| ROE | 3.5% | 4.4% | - |
FY2026 Q1 results: Revenue ¥256.3B (YoY +¥30.9B +13.7%), Operating Income ¥19.5B (YoY +¥5.1B +35.0%), Ordinary Income ¥17.3B (YoY +¥3.9B +28.9%), Net Income ¥14.4B (YoY -¥4.0B -21.7%). While top-line and operating profitability increased, Net Income was compressed by ¥1.5B foreign exchange loss included in non-operating expenses and normalization of the effective tax rate to 16.9% following a deferred tax asset recognition in the prior year (which had produced a negative effective tax rate). On the operating side, gross margin of 41.7% (prior 42.4%) leveraged against SG&A ratio of 34.1% (prior 36.0%) to improve operating margin to 7.6% (prior 6.4%), +1.2pt. Operating Cash Flow (OCF) was ¥49.3B (YoY +26.5%), generating 3.4x the Net Income, indicating very robust cash generation.
【Revenue】 Revenue ¥256.3B (YoY +13.7%) achieved double-digit growth supported by maintained pricing and improved product mix. Cost of sales ¥149.5B resulted in Gross Profit ¥106.8B, securing a gross margin of 41.7%. Although gross margin declined 0.7pt from 42.4% in the prior year period, compression of SG&A relative to revenue drove higher operating profit. Segment information is not disclosed due to a single-business structure, but the ¥9.9B foreign currency translation adjustment suggests overseas operations account for a meaningful portion.
【Profitability】 SG&A ¥87.3B increased only +7.6% YoY, substantially below revenue growth of +13.7%, improving SG&A ratio to 34.1% (prior 36.0%), a 1.9pt improvement. As a result, Operating Income ¥19.5B (+35.0%) and operating margin 7.6% (prior 6.4%) reflect effective operating leverage. Non-operating income was ¥0.1B (interest income, etc.) while non-operating expenses were ¥2.3B (interest expense ¥0.7B, foreign exchange loss ¥1.5B), producing Ordinary Income ¥17.3B (+28.9%). Extraordinary items were net -¥0.0B (gain on sale of fixed assets ¥0.6B offset by loss on disposal ¥0.1B and others), negligible. Profit before tax ¥17.3B was subject to income taxes ¥2.9B (effective tax rate 16.9%), yielding Net Income ¥14.4B (-21.7%). The main reason for the decline in Net Income is the reversal of the prior year’s deferred tax asset recognition of ¥4.7B which produced a negative effective tax rate in the prior year; tax burden normalized this period. Thus, while revenue and operating profit increased, Net Income declined due to the one-off tax effect in the prior year.
【Profitability】Operating margin 7.6% (prior 6.4%) improved by 1.2pt driven by SG&A ratio improvement. Net margin 5.6% (prior 8.1%) declined 2.5pt due to tax normalization. EBITDA margin 10.4% ((Operating Income ¥19.5B + Depreciation ¥7.3B)/Revenue ¥256.3B) indicates stable earning power. ROE 3.5% (annualized) lags prior year period, driven by lower Net Income and flat equity. 【Cash Quality】Operating Cash Flow/Net Income 3.4x, OCF/EBITDA 1.84x — cash backing of profits is very strong. Accrual ratio -4.3% (OCF uplift from working capital decrease) indicates high earnings quality. 【Investment Efficiency】ROIC 3.7% (estimated NOPAT ÷ invested capital) is low with room for improvement. CapEx/Depreciation 0.79x signals conservative investment, focused on maintenance. 【Balance Sheet Health】Current ratio 310.4%, Quick ratio 209.0% — liquidity is ample. Equity Ratio 51.2% (prior 49.2%) improved by 2.0pt from capital accumulation. Debt/EBITDA 7.1x (interest-bearing debt ¥202B ÷ estimated annual EBITDA) is somewhat elevated. Interest coverage 28.2x ((EBITDA ÷ interest expense ¥0.7B×4)) shows strong interest-bearing capacity.
OCF was ¥49.3B (YoY +26.5%), generating 3.4x Net Income ¥14.4B. Starting from pretax income ¥17.3B plus depreciation ¥7.3B and others, subtotal ¥53.7B, a decrease in trade receivables ¥22.1B and decrease in inventories ¥10.6B significantly contributed positively to working capital, and despite decreases in trade payables -¥2.0B and corporate tax payments -¥3.9B, OCF remained at a high level. Investing CF was -¥6.2B, centered on CapEx -¥5.8B and intangible asset investment -¥0.5B. Free Cash Flow was ¥43.1B, sufficient to cover cash dividends paid -¥21.9B (YTD) and CapEx. Financing CF was -¥41.8B, mainly due to ¥58.0B share buybacks. Financing included long-term borrowings ¥79.0B and repayments -¥6.4B, and a decrease in short-term borrowings -¥11.0B; the company utilized cash and borrowings for active shareholder returns. Ending cash and cash equivalents ¥162.6B (YoY +¥3.9B) maintained liquidity, and cash/short-term debt 14.8x versus short-term debt ratio 5.8% indicates very high repayment capacity. The working capital reduction that boosted OCF reflects progress in receivables collection and inventory reduction, but ending inventories ¥181.8B remain high with inventory days of 652 days (finished goods + work in progress + raw materials / daily COGS), indicating structural room for improvement.
Earnings are primarily recurring; extraordinary items were net -¥0.0B (extraordinary gains ¥0.6B, extraordinary losses ¥0.6B), representing 0.0% of Net Income and minimal impact — one-off factors are limited. Non-operating income ¥0.1B (0.0% of revenue) was interest income, offering small structural contribution. Non-operating expenses ¥2.3B (0.9%) were mainly foreign exchange loss ¥1.5B and interest expense ¥0.7B; the FX loss is a temporary volatility factor. The wide gap between Operating Income ¥19.5B and Net Income ¥14.4B (-26.1%) reflects FX loss and interest burden plus normalization of the effective tax rate to 16.9% from a prior-year negative tax rate (deferred tax asset recognition). OCF/Net Income = 3.4x and OCF/EBITDA = 1.84x indicate very strong cash-based profit backing, and accrual ratio -4.3% is driven by decreases in receivables and inventories. Earnings quality is high, but non-operating volatility and tax-rate fluctuations affect Net Income stability.
Full Year guidance: Revenue ¥1,064.0B (YoY +5.4%), Operating Income ¥100.0B (+6.2%), Ordinary Income ¥96.0B (+6.4%), Net Income ¥72.0B. Q1 progress rates were Revenue 24.1% (¥256.3B ÷ ¥1,064.0B), Operating Income 19.5% (¥19.5B ÷ ¥100.0B), Ordinary Income 18.0% (¥17.3B ÷ ¥96.0B), Net Income 19.9% (¥14.4B ÷ ¥72.0B). Compared with a standard Q1 progress rate of 25%, revenue is broadly in line while profit items lag by 5.1–7.0pt. Downside factors include the ¥1.5B FX loss, increased interest burden, and reversal of last year’s tax benefit. Achievement of full-year guidance assumes smoothing of non-operating expenses in H2, maintenance/expansion of margins, and stabilization of tax burden. No revisions to the guidance have been made and the company expects to achieve full-year targets.
Annual dividend forecast is ¥85.00 per share, unchanged from prior year. Based on company EPS forecast ¥273.24, the Payout Ratio is 31.1%, conservative and sustainable relative to core earnings power. Q1 Free Cash Flow ¥43.1B covers cash dividends paid ¥21.9B (YTD) by approximately 2.0x, supporting dividend safety. Share buybacks of ¥58.0B were executed during the period, and combined with dividends total return was approximately ¥80B. Total Return Ratio relative to annualized Net Income (annualized equivalent ¥57.6B) is about 139%, representing returns materially above profit. The sources of total return were Free Cash Flow ¥43.1B combined with cash on hand and borrowings, demonstrating an aggressive shareholder return stance. Dividends are sustainable, but continuation of share buybacks requires careful management of liquidity and leverage tolerance.
Risk of continued low working capital efficiency: DSO 160 days (trade receivables ÷ daily sales), DIO 652 days (inventories ÷ daily COGS), CCC 643 days — prolonged working capital cycle may crystallize cash tie-up and inventory risks. Inventories ¥181.8B represent 70.9% of revenue and are high; product life-cycle changes or demand shifts pose obsolescence and markdown risks. Delays in receivables collection may create credit risk and opportunity loss.
Earnings volatility from FX and interest rate fluctuations: Of non-operating expenses ¥2.3B, FX loss ¥1.5B and interest expense ¥0.7B dominate, so external conditions can swing Ordinary Income. The ¥9.9B foreign currency translation adjustment suggests a high overseas business ratio, posing revenue and profit compression risk in a stronger yen environment. Quarterly interest expense ¥0.7B (annualized ¥2.8B) could rise in a rising-rate environment.
Elevated leverage and weak capital efficiency: Debt/EBITDA 7.1x is somewhat high, creating financial strain risk in case of rising rates or business deterioration. ROIC 3.7% indicates low invested-capital efficiency and limited shareholder value creation. If repayment of long-term borrowings ¥178.5B and improvement in capital efficiency do not progress, liquidity and shareholder return capacity could be constrained.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.6% | 6.8% (2.9%–9.0%) | +0.8pt |
| Net Margin | 5.6% | 5.9% (3.3%–7.7%) | -0.3pt |
Operating margin exceeds industry median by 0.8pt and sits in the upper range, while Net margin is 0.3pt below median. Operating-level earning power is relatively strong, but FX losses and interest burden at the non-operating level compress Net Income.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 13.7% | 13.2% (2.5%–28.5%) | +0.5pt |
Revenue growth slightly exceeds industry median and sits near the middle. Growth is supported by maintained pricing and improved product mix, but relative advantage is limited given the industry’s generally high-growth range.
※Source: Company compilation
Strengthen operating earning power and reduce non-operating volatility: Operating margin 7.6% (industry +0.8pt) is relatively strong, but Net margin 5.6% (industry -0.3pt) lags due to non-operating factors. FX loss ¥1.5B and interest burden ¥0.7B compress Ordinary and Net Income; strengthening FX hedging and optimizing interest costs would contribute to Net Income stability. Q1 progress on guidance trails standard by 5–7pt for profit items, so smoothing non-operating items and sustaining operating leverage in H2 are key to achieving guidance.
Room to improve working capital efficiency and ROIC: CCC 643 days, DIO 652 days, DSO 160 days indicate structurally long working capital cycles; inventory reduction and accelerated receivables collection are directly linked to improved capital efficiency and ROIC. ROIC 3.7% is low; optimizing inventories ¥181.8B (70.9% of revenue) and improving productive asset efficiency are prerequisites for shareholder value creation. Strong OCF ¥49.3B generation suggests further cash potential if working capital structure improves.
Sustainability of shareholder returns and financial discipline: Payout Ratio 31.1% and dividend cover by Free Cash Flow 2.0x indicate high dividend continuity. Total returns including ¥58.0B buybacks exceeded annualized Net Income and were financed by cash and borrowings, showing aggressive returns. However, Debt/EBITDA 7.1x is somewhat high; sustained total returns require leverage management and continued expansion of OCF/FCF. Liquidity is ample (current ratio 310.4%, cash ¥162.6B), so short-term funding risk is low, but medium-term capital allocation discipline will determine return sustainability.
This report was auto-generated by AI analyzing XBRL financial statement data. It is not a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the Company from public financial statements. Investment decisions are your own responsibility; consult a professional advisor as needed.