| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥10676.6B | ¥10509.4B | +1.6% |
| Operating Income / Operating Profit | ¥486.6B | ¥420.5B | +15.7% |
| Equity-method Investment Income (Loss) | ¥16.2B | ¥0.9B | +1789.5% |
| Profit Before Tax / Pre-tax Income | ¥471.6B | ¥382.3B | +23.3% |
| Net Income / Net Profit | ¥332.5B | ¥264.4B | +25.8% |
| ROE | 14.9% | 14.1% | - |
For the fiscal year ended March 2026, Revenue was ¥1兆676.6B (YoY +¥167.3B +1.6%), Operating Income was ¥486.6B (YoY +¥66.1B +15.7%), Ordinary Income was ¥191.2B (YoY +¥37.1B +24.1%), and Net Income attributable to owners of the parent was ¥325.2B (YoY +¥51.0B +18.9%). Despite marginally higher revenue, the company delivered substantial profit growth: gross margin improved to 15.8% (prior year 14.7%) up +1.1pt and operating margin expanded to 4.6% (prior year 4.0%) up +0.6pt. SG&A ratio rose to 11.5% (prior year 11.0%) up +0.5pt, but gross margin improvement outpaced SG&A increases, producing operating leverage. Declining finance costs (△¥9.7B) and a marked improvement in equity-method investment income (¥16.3B, prior year ¥0.9B) boosted Ordinary Income, expanding pre-tax income to ¥471.6B (+23.3%). Comprehensive income doubled to ¥457.1B (prior year ¥226.2B), driven by foreign operations translation differences and valuation gains on FVOCI financial assets.
[Revenue] Revenue was ¥1兆676.6B (+1.6%), a modest increase. By segment: Electronics & Devices ¥3,068.9B, Food ¥3,588.7B, ICT Solutions ¥1,107.7B, Vehicles & Aerospace ¥1,198.5B, Steel/Materials/Plant ¥1,694.2B. Steel/Materials/Plant declined due to external environment fluctuations, while Electronics & Devices and ICT growth supported overall revenue. Cost of sales was ¥8,987.5B (+1.0%), controlled below revenue growth, yielding Gross Profit of ¥1,689.1B (+13.9%)—double-digit growth. Gross margin improved to 15.8% from 14.7% (+1.1pt), reflecting a shift to higher value-added projects and improved procurement terms.
[Profitability] SG&A was ¥1,231.0B (+13.8%), increasing roughly in line with gross profit growth; SG&A ratio rose to 11.5% (prior year 11.0%) up +0.5pt. IT infrastructure investments and higher personnel and logistics costs were factors, but gross margin improvement (+1.1pt) exceeded the SG&A ratio increase (+0.5pt), producing Operating Income of ¥486.6B (+15.7%) and Operating Margin of 4.6% (prior year 4.0%) up +0.6pt. Other income/expenses recorded a net gain of ¥28.5B (prior year ¥21.8B), a modest improvement. Finance income was ¥18.9B (prior year ¥20.9B), slightly down, while finance costs declined to ¥50.2B (prior year ¥60.0B) (△¥9.7B), improving net finance costs to △¥31.3B (prior year △¥39.0B). Equity-method investment income was ¥16.3B (prior year ¥0.9B), a substantial increase driven by recovery at associates. Pre-tax income was ¥471.6B (+23.3%); income taxes amounted to ¥139.1B (effective tax rate 29.5%), resulting in Net Income of ¥332.5B (+25.8%) and Net Income attributable to owners of the parent of ¥325.2B (+18.9%). Net income margin improved to 3.1% (prior year 2.5%) up +0.6pt. In conclusion, the company achieved quality growth with both higher revenue and profits and improved margins.
Electronics & Devices delivered Operating Income of ¥161.3B (+41.5%), the largest incremental profit contributor, representing 33.1% of segment profit. Assets were ¥1,796.3B, accounting for 24.5% of the company. ICT Solutions recorded ¥151.7B (+3.4%) with a composition ratio of 31.2% and assets of ¥1,333.8B. Food posted ¥88.4B (+12.8%) with a 18.2% share and assets of ¥1,876.7B—the largest asset base. Vehicles & Aerospace delivered ¥53.4B (+11.1%) with an 11.0% share and assets of ¥1,227.4B. Steel/Materials/Plant was nearly flat at ¥35.2B (△0.1%) with a 7.2% share and assets of ¥1,208.2B. Other recorded a loss of △¥3.2B (prior year △¥2.1B), a contraction of losses. Electronics & Devices and ICT together accounted for 64.3% of consolidated operating income, indicating continued allocation of resources to higher-margin segments.
[Profitability] Operating margin improved to 4.6% (prior year 4.0%) up +0.6pt. ROE was high at 17.0% (prior year 16.5%), exceeding the industry median of 6.8% by +10.2pt. In a DuPont decomposition, Net Profit Margin 3.1% × Total Asset Turnover 1.46x × Financial Leverage 3.28x = ROE 15.0% (theoretical), while the reported ROE of 17.0% includes contributions such as other comprehensive income. Gross margin of 15.8% improved +1.1pt from 14.7%, absorbing an SG&A ratio rise of +0.5pt and delivering operating leverage. [Cash Quality] Operating Cash Flow / Net Income was 1.73x (¥576.6B / ¥332.5B), indicating strong cash generation, and the accrual ratio was △73.4% ((Operating CF ¥576.6B - Net Income ¥332.5B) ÷ Total Assets ¥7,330.1B), deemed appropriate. OCF/EBITDA (Operating Income + Depreciation) was 0.89x (¥576.6B / ¥649.0B), slightly below benchmark and suggesting working capital improvement opportunities. [Investment Efficiency] Invested capital (Shareholders’ Equity ¥2,234.7B + Interest-bearing Debt ¥1,548.4B - Cash ¥584.2B) was ¥3,198.9B; NOPAT (Operating Income ¥486.6B × tax-effect adjustment 0.705) was ¥343.1B, implying ROIC of approximately 10.7%. CapEx was ¥74.3B / Depreciation ¥163.9B = 0.45x, restrained and indicating scope for growth investment. [Financial Soundness] Equity Ratio was 28.4% (prior year 25.2%) up +3.2pt. Current Ratio was 140.7% (Current Assets ¥5,408.9B / Current Liabilities ¥3,843.1B), healthy. D/E ratio (Interest-bearing Debt ¥1,548.4B / Shareholders’ Equity ¥2,234.7B) was 0.69x, in a sound range. Interest Coverage (Operating Income ¥486.6B / Finance Costs ¥50.2B) was 9.7x, sufficient.
Operating Cash Flow was ¥576.6B (prior year ¥583.3B, △1.1%), essentially flat. Adjustments from Net Income ¥332.5B included Depreciation ¥164.2B, changes in working capital (Trade receivables △¥42.8B, Inventories △¥14.1B, Trade payables +¥79.7B for a net increase of ¥22.8B), income taxes paid △¥196.7B, etc. Operating CF / Net Income at 1.73x indicates high quality cash generation, and an accrual ratio of △3.3% suggests cash-led profit recognition. Investing CF was △¥119.3B (prior year +¥13.6B), mainly due to acquisition of tangible fixed assets △¥44.3B, intangible assets △¥11.4B, and acquisitions of subsidiaries △¥63.7B. Free Cash Flow was ¥457.3B (prior year ¥596.9B), ample. Financing CF was △¥469.0B (prior year △¥546.6B), driven by net repayment of borrowings △¥256.8B, dividend payments △¥91.3B, lease liability repayments △¥98.5B, etc. Cash and deposits increased by ¥16.4B to ¥584.2B (prior year ¥567.8B), indicating good liquidity. DSO (Trade receivables ÷ Revenue × 365 days) was 88 days, and inventory days (Inventories ÷ Cost of Sales × 365 days) was 65 days; standard for a trading company but room for improvement. FCF coverage (FCF ¥457.3B ÷ Dividends + CapEx ¥165.6B) was 2.76x, indicating comfortable coverage.
On an Ordinary Income basis, earnings quality is high. Operating Income of ¥486.6B was supplemented by Finance Income ¥18.9B and Equity-method investment income ¥16.3B, totaling ¥35.2B (7.2% of Operating Income) in non-operating income, indicating a business-led structure. After finance costs of ¥50.2B, net finance contribution was △¥31.3B; on a net basis non-operating items were negative, but the large improvement in equity-method income (¥0.9B → ¥16.3B) offset the reduction from Operating Income to Ordinary Income of ¥295.4B. One-off items were limited: impairment losses on fixed assets ¥3.3B and losses on disposal of fixed assets △¥2.4B, totaling △¥5.7B. The gap between Comprehensive Income ¥457.1B and Net Income ¥332.5B (difference ¥124.6B) reflects Other Comprehensive Income (foreign currency translation differences ¥43.8B, FVOCI financial asset valuation gains ¥62.3B, cash flow hedges ¥17.0B, etc.), reflecting expanded valuation differentials. The accrual ratio △3.3% is favorable and Operating CF / Net Income 1.73x confirms strong cash generation. The divergence between Ordinary Income and Net Income is primarily due to structural negative non-operating items (△¥295.4B) and income taxes ¥139.1B; there are no signs of accounting manipulation.
The full-year forecast is Revenue ¥1,1000B (YoY +3.0%), Operating Income ¥540B (+11.0%), Net Income attributable to owners of the parent ¥350B (+7.6%), EPS ¥210.41 (prior year ¥195.52), Dividend ¥35. Progress rates are Revenue 97.1%, Operating Income 90.1%, Net Income 92.9%, generally on track. To meet guidance, an incremental increase of Revenue ¥323B, Operating Income ¥53B, and Net Income ¥25B is required in the remaining quarter; given seasonal factors and year-end demand in Q4, achievement is likely. Forecasted Operating Margin is 4.9% (full-year ¥540B / ¥1,1000B), an additional +0.3pt improvement from this year's 4.6%, premised on maintaining gross margin and SG&A efficiency. Payout Ratio is 16.6% based on forecast EPS ¥210.41 and dividend ¥35 (post-split adjusted basis ¥63 implies 29.9%), maintaining a steady distribution policy.
Interim dividend was ¥57.5, year-end dividend ¥34.25 (both pre-split basis), totaling ¥91.75. A 1:2 stock split effective January 1, 2026 means the split-adjusted annual dividend is ¥63 equivalent. Payout Ratio is 28.1% based on Net Income ¥325.2B and total dividends ¥91.5B (excluding treasury shares; average shares 166,342 thousand × ¥55 equivalent), within an appropriate range. Share buybacks were ¥0.0B, effectively zero. Total Return Ratio is 28.1% solely from dividends, somewhat modest, reflecting emphasis on balancing growth investment. The dividend policy is a stable dividend baseline with flexible increases linked to performance. With FCF of ¥457.3B versus dividends of ¥91.5B, coverage is 5.0x, indicating high sustainability. Cash of ¥584.2B and Operating CF ¥576.6B are sufficient, making dividend cut risk low. Key monitoring points going forward include maintaining ROE around 17%, a gradual increase in payout ratio (toward ~35%), or opportunistic share buybacks to raise Total Return Ratio.
Working capital efficiency deterioration: DSO 88 days and inventory days 65 are industry-standard, but OCF/EBITDA 0.89x indicates room to improve cash conversion. Trade receivables ¥2,582.0B and inventories ¥1,610.1B sum to ¥4,192.1B, representing 57.2% of total assets; if receivables/inventories stagnate or face write-downs, Operating CF and ROIC could decline. Tighter inventory valuation is especially necessary in Electronics & Devices and Food segments.
Leverage and interest rate risk: Interest-bearing debt ¥1,548.4B and lease liabilities ¥281.0B total ¥1,829.4B, or 81.9% of shareholders’ equity ¥2,234.7B. While D/E ratio 0.69x is within a healthy range, rising interest rates could increase finance costs. Current Interest Coverage of 9.7x is comfortable, but a decline of operating margin into the 4% range would increase vulnerability. An increase in deferred tax liabilities to ¥75.9B (from ¥33.1B prior year, +¥42.8B) reflects widening valuation differences and poses a risk of reversal reducing comprehensive income.
Segment concentration and underinvestment: 64.3% of operating income depends on Electronics & Devices (33.1%) and ICT Solutions (31.2%), making company profits sensitive to demand cycles in these sectors (semiconductor and IT investment slowdowns). CapEx/Depreciation of 0.45x is restrained and may reflect underinvestment in growth areas, risking medium- to long-term competitiveness. Goodwill of ¥170.1B (2.3% of total assets) is currently minor but warrants monitoring for impairment risk if M&A increases.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| ROE | 17.0% | 6.8% (3.6%–11.9%) | +10.2pt |
| Operating Margin | 4.6% | 3.4% (1.4%–5.0%) | +1.2pt |
| Net Margin | 3.1% | 2.3% (1.0%–4.6%) | +0.8pt |
Profitability metrics exceed industry medians across the board: ROE by +10.2pt, Operating Margin by +1.2pt, and Net Margin by +0.8pt.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 1.6% | 5.9% (0.4%–10.7%) | -4.2pt |
Revenue growth trails the industry median by △4.2pt, indicating weaker top-line expansion. However, margin improvements have delivered profit growth, supporting a quality-over-quantity strategy.
※ Source: Company compilation
Sustainability of gross margin improvement and operating leverage: Gross margin improvement of +1.1pt was the primary driver of a +0.6pt expansion in operating margin, underpinned by a higher mix of high value-added projects in Electronics & Devices and ICT and improved procurement terms. The increase in SG&A ratio of +0.5pt was absorbed; if gross margin growth continues to exceed SG&A increases, reaching operating margins in the 5% range becomes feasible. However, if SG&A growth outpaces gross margin, margins could reverse—monitor quarterly gross margin trends and SG&A control.
Working capital efficiency and cash conversion improvement potential: OCF/EBITDA 0.89x is slightly below the 0.9x benchmark; reducing DSO (88 days) and inventory days (65) will materially affect cash generation. Trade receivables and inventories totaling ¥4,192B represent 57.2% of assets; shortening these by 10 days would improve cash by approximately ¥292B (Revenue ¥1兆676B × 10 days / 365). ROIC of 10.7% already exceeds cost of capital, but WC optimization could add another +2–3pt, unlocking shareholder value.
Increasing the scale of growth investment while balancing dividend policy: CapEx/Depreciation 0.45x is conservative and FCF coverage 2.76x indicates ample dividend capacity. Payout Ratio 28.1% is somewhat modest, allowing room to raise it toward ~35% or to implement opportunistic buybacks to increase Total Return Ratio. Conversely, expanding growth investments in Electronics & Devices and ICT (M&A, CapEx, IT infrastructure) is essential to sustain ROE over the medium term; improving capital allocation transparency (disclosing investment plans) would strengthen investor confidence.
This report is an AI-generated earnings analysis based on XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are compiled by the firm based on publicly disclosed financials and are for reference only. Investment decisions are your responsibility; please consult an advisor as appropriate.