| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥4653.3B | ¥4620.8B | +0.7% |
| Operating Income | ¥292.7B | ¥206.9B | +41.5% |
| Pre-tax Profit | ¥352.9B | ¥224.6B | +57.1% |
| Net Income | ¥238.1B | ¥134.7B | +76.8% |
| ROE | 5.0% | 3.0% | - |
For the fiscal year ended March 2026, Revenue was ¥4,653.3B (YoY +¥32.5B +0.7%), Operating Income was ¥292.7B (YoY +¥85.8B +41.5%), Ordinary Income was ¥231.7B (YoY ▲¥13.6B ▲5.5%), and Net Income Attributable to Parent was ¥237.2B (YoY +¥103.7B +77.7%). Revenue showed only a slight increase, but a sharp recovery in Operating Income was driven by a large reduction in Other Expenses (prior year ¥182.9B → current ¥52.4B) and compression of Impairment Losses (prior year ¥128.1B → current ¥2.9B). Increased financial income (¥67.3B, YoY +¥20.9B) and reduced financial costs (¥7.2B, YoY ▲¥21.5B) provided additional support, resulting in Net Income rising significantly by 76.8% year-on-year.
[Revenue] Revenue of ¥4,653.3B (+0.7%) was supported by solid growth in the Musical Instruments Business (+3.0%) but offset by a decline in the Audio Equipment Business (▲3.6%). The Musical Instruments Business is the core segment with Revenue of ¥3,049.2B, accounting for 65.5% of the total. FX effects produced a positive Operating Cash Flow impact of ¥89.2B, providing support to the top line. Segment revenue composition: Musical Instruments 65.5%, Audio Equipment 30.6%, Other 3.9%.
[Profitability] Cost of sales was ¥2,903.6B, yielding Gross Profit of ¥1,749.7B (gross margin 37.6%, down ▲0.5pt from 38.1% prior year). SG&A was ¥1,430.9B (SG&A ratio 30.8%, up +0.6pt from 30.2% prior year). On a business-profit basis, segment profit was ¥318.8B (▲13.2% from ¥367.2B prior year), indicating core decline, but a substantial reduction in Other Expenses (¥182.9B → ¥52.4B) and lower impairment losses (¥128.1B → ¥2.9B) lifted Operating Income to ¥292.7B (Operating margin 6.3%). Financial income of ¥67.3B (prior year ¥46.3B) and lower financial costs (¥7.2B, prior year ¥28.6B) resulted in Ordinary Income of ¥231.7B and Pre-tax Profit of ¥352.9B. After corporate taxes of ¥114.7B, Net Income was ¥238.1B, of which Net Income Attributable to Parent was ¥237.2B. In conclusion, the company achieved slight revenue growth, operating and net income growth, but the improvement was largely driven by one-off factors including normalization of Other Expenses and impairments while core business profits declined.
The Musical Instruments Business continued to expand with Revenue of ¥3,049.2B (+3.0%) but saw a decline in Business Profit to ¥212.2B (▲3.8% from ¥220.7B prior year). Small decline in gross margin and higher SG&A pressured profitability. The Audio Equipment Business registered Revenue of ¥1,424.4B (▲3.6%) and Business Profit of ¥107.7B (▲25.0% from ¥143.6B prior year), a significant profit contraction. Deterioration in profitability of this core segment, which accounts for 30.6% of Revenue, suggests room for improvement in company-wide margins. The Other Business posted Revenue of ¥179.6B (▲1.4%) and Business Profit of ▲¥1.1B (down from ¥2.9B prior year), a small deterioration into loss.
[Profitability] ROE 5.1% (Net Income Attributable to Parent ¥237.2B ÷ Average Shareholders’ Equity ¥4,636.9B) improved +2.3pt from 2.8% prior year but remains ▲1.2pt below the industry median of 6.3%. Operating margin 6.3% (up +1.8pt from 4.5% prior year) is ▲1.5pt below the industry median 7.8%, and the decline in Business Profit margin (6.9% → 6.3%) indicates scope to improve core earning power. Net margin 5.1% improved +2.2pt from 2.9% prior year and is roughly in line with the industry median 5.2%.
[Cash Quality] Operating Cash Flow (OCF) was ¥457.8B, 1.9x Net Income ¥238.1B, indicating high quality of earnings. Pre working-capital OCF subtotal was ¥601.2B, from which Inventory increase ¥102.6B and Accounts Receivable increase ¥48.2B were cash outflows. EBITDA approx. ¥498.0B (Operating Income ¥292.7B + Depreciation ¥205.3B) and OCF is about 92% of EBITDA.
[Investment Efficiency] Total asset turnover 0.75x (Revenue ¥4,653.3B ÷ Average Total Assets ¥6,044.2B), Inventory days (DIO) 191 days, Days Sales Outstanding (DSO) 69 days, Days Payable Outstanding (DPO) 79 days, giving a CCC of 181 days—prolonged, indicating significant scope for inventory efficiency improvement.
[Financial Soundness] Equity Ratio 77.5% (up +1.4pt from 76.1% prior year) and Current Ratio 372.6% denote very healthy balance sheet. Interest-bearing debt consists of only ¥4.9B current portion, resulting in minimal leverage and strong interest coverage of about 40.8x (Operating Income ¥292.7B ÷ Financial Costs ¥7.2B).
OCF was ¥457.8B (▲17.2% from ¥553.0B prior year). From the pre-working-capital subtotal of ¥601.2B, increases in Inventory of ¥102.6B and in Accounts Receivable of ¥48.2B were cash outflows, and decrease in trade payables of ¥45.5B also drained cash. Including corporate tax payments ¥174.2B and lease payments ¥57.5B, the company maintained cash-generating capacity of 1.9x Net Income. Investing Cash Flow was ▲¥79.1B: capital expenditures ¥141.3B offset partially by proceeds from sale of tangible fixed assets ¥18.0B and sale of investment securities ¥42.7B. Financing Cash Flow was ▲¥377.8B with dividends paid ¥117.8B, share buybacks ¥150.0B, and lease repayments ¥57.5B as major outflows. Free Cash Flow (FCF) was ¥378.7B (OCF ¥457.8B − Investing CF ¥79.1B), comfortably covering total shareholder returns of approx. ¥267.8B (dividends ¥117.8B + buybacks ¥150.0B). Cash and cash equivalents rose to ¥1,089.5B (up ¥91.3B from ¥998.2B), with FX translation effects contributing ¥89.2B.
Compared with Operating Income ¥292.7B, a reduction in Other Expenses to ¥52.4B (from ¥182.9B prior year, down ▲71.4%) and Impairment Losses ¥2.9B (from ¥128.1B prior year, down ▲97.7%) were the main factors boosting profits. Financial income ¥67.3B includes interest and dividend income ¥37.7B, and a sharp reduction in financial costs to ¥7.2B (from ¥28.6B, down ▲74.8%) also supported the ordinary income level. OCF ¥457.8B being 1.9x Net Income ¥238.1B indicates good cash realization of profits. Comprehensive income ¥563.0B comprises Net Income ¥238.1B plus Foreign Currency Translation Adjustment ¥244.0B and Remeasurements of Defined Benefit Plans ¥77.9B, causing divergence from Net Income largely due to FX and actuarial factors. The temporary reduction in one-off expenses and favorable FX are propping up earnings quality for the period; given the decline in core Business Profit margin year-on-year, sustainable improvement will require a recovery in Audio Equipment and improvements in gross margin and SG&A efficiency.
Full Year guidance: Revenue ¥4,900.0B (YoY +5.3%), Operating Income ¥380.0B (YoY +29.8%), Net Income Attributable to Parent ¥280.0B (YoY +18.0%). Compared with current-year results, the company expects Revenue +5.3% and Operating Income +29.8%. Progress rate stands at Revenue 94.9%, Operating Income 77.0%, Net Income 84.7%, assuming appropriate incremental gains in Q4. Forecasted EPS is ¥63.65, dividend guidance is ¥13.00 per interim and ¥13.00 per year-end (annual ¥26 expected) implying a Payout Ratio of approximately 40.9%. Achieving guidance depends on recovery in Audio Equipment demand, gross margin improvement through inventory normalization, and restraint in SG&A growth.
Current-period dividend is annual ¥26 (interim ¥13 + year-end ¥13), with a Payout Ratio of 91.9%, unchanged from prior year. However, dividends totaling ¥117.8B are covered by FCF ¥378.7B (approximately 3.2x), indicating adequate FCF coverage. Share buybacks of ¥150.0B were executed, and cancellation of treasury shares amounting to ¥869.4B reduced treasury stock balance from ▲¥1,016.4B to ▲¥291.2B. Total shareholder returns (dividends ¥117.8B + buybacks ¥150.0B) amount to ¥267.8B, which is 70.7% of FCF—an acceptable level. Next-year dividend is expected to remain annual ¥26, implying a sustainable Payout Ratio of about 40.9% against forecasted EPS ¥63.65.
Inventory efficiency risk: Inventory ¥1,522.7B (DIO 191 days) indicates high stock levels. Inventory pressures cash generation and carries risks of obsolescence, valuation losses, and discounting. Delays in inventory normalization could depress gross margins and downside OCF risk.
Deterioration in Audio Equipment profitability: Audio Equipment posted Revenue ▲3.6% and Business Profit ▲25.0%. Delayed recovery in this core segment (30.6% of Revenue) would impede company-wide Operating margin improvement and pose a risk of sustained decline in Business Profit margin.
Prolonged working capital cycle: CCC 181 days (DIO 191 + DSO 69 − DPO 79) is prolonged and pressures capital efficiency. Delays in compressing receivables and inventory could erode cash generation and entrench low ROIC (4.1%, below industry average).
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| ROE | 5.1% | 6.3% (3.2%–9.9%) | -1.2pt |
| Operating Margin | 6.3% | 7.8% (4.6%–12.3%) | -1.5pt |
| Net Margin | 5.1% | 5.2% (2.3%–8.2%) | -0.1pt |
Profitability is below the industry median, indicating material room to improve ROE and Operating margin.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 0.7% | 3.7% (-0.4%–9.3%) | -3.0pt |
Revenue growth lags the industry median by 3.0pt, indicating a need to expand the top line.
※Source: Company compilation
Room to improve inventory and collection efficiency: With DIO 191 days and CCC 181 days, prolonged stays make inventory compression and receivables shortening the primary drivers for next-year CF generation and ROIC improvement. Progress in inventory normalization is key to gross margin recovery and operating leverage.
Audio Equipment recovery is the watershed for company profitability: The significant profit decline in Audio Equipment (Business Profit ▲25.0%) pressures overall Business Profit margin. Recovery in demand and gross margin improvement in Audio Equipment are prerequisites for achieving next-year guidance; progress in market inventory adjustments and effectiveness of new product launches are important.
Financial soundness and return capacity: With Equity Ratio 77.5% and FCF ¥378.7B, the company has a strong financial base and executed total shareholder returns at about 71% of FCF. Downside resilience is high, and there is material upside potential if inventory and Audio Equipment issues are resolved.
This report is an earnings analysis document automatically generated by AI analyzing XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on public financial statements. Investment decisions should be made at your own responsibility and, where appropriate, after consulting a professional.