| Indicator | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1310.3B | ¥1243.2B | +5.4% |
| Operating Income / Operating Profit | ¥65.1B | ¥60.2B | +8.2% |
| Equity-Method Investment Income (Loss) | ¥-0.6B | ¥0.2B | -395.0% |
| Ordinary Income | ¥70.9B | ¥65.1B | +8.9% |
| Net Income / Net Profit | ¥49.4B | ¥45.7B | +8.1% |
| ROE | 9.8% | 10.4% | - |
For the fiscal year ended March 2026, the company reported Revenue of ¥1310.3B (YoY +¥67.1B +5.4%), Operating Income of ¥65.1B (YoY +¥4.9B +8.2%), Ordinary Income of ¥70.9B (YoY +¥5.8B +8.9%), and Net Income attributable to owners of the parent of ¥49.4B (YoY +¥3.7B +8.1%), resulting in a year of higher revenues and profits. Operating margin improved to 5.0% (YoY +0.2pt) and net margin to 3.8% (YoY +0.1pt), indicating improved profitability. However, Operating Cash Flow (OCF) was a significant negative at -¥35.5B, as reductions in accounts payable (-¥61.5B) and contract liabilities (-¥154.8B) caused a working capital reversal that offset profit growth, making a temporary decline in cash generation the primary issue of the fiscal results.
Revenue: Revenue reached ¥1310.3B (YoY +5.4%) and grew steadily. By segment, the West Japan Headquarters led the company with ¥510.1B (+10.7%)—double-digit growth—while the Central Japan Headquarters expanded to ¥195.8B (+7.0%). In contrast, the East Japan Headquarters was effectively flat at ¥447.9B (-0.2%), revealing momentum disparities across regions. The Development & Strategy Headquarters recorded ¥199.6B (+8.2%), with overseas expansion contributing. By business, the Equipment & Machinery Business expanded to ¥636.0B (approx. 49% of total), capturing tailwinds from FA and automation investment demand. The Motion Transmission Business was ¥568.3B (approx. 43% share), and the Industrial Materials Business was ¥106.1B (approx. 8%), both remaining stable. By geography, Japan accounted for ¥1137.1B (86.8% share), while Asia was ¥154.9B (11.8% share; of which China was ¥98.3B), providing external demand support.
Profitability: Gross margin slightly improved to 15.4% (YoY +0.3pt), while SG&A ratio rose marginally to 10.4% (YoY +0.1pt). Operating Income of ¥65.1B (+8.2%) outpaced sales growth, demonstrating operating leverage. Segment profit was largest at West Japan Headquarters ¥34.6B (+17.3%, margin 6.8%), and Central Japan Headquarters also maintained high margins with ¥13.3B (+18.9%, margin 6.8%). Meanwhile, East Japan Headquarters reported a decline to ¥28.8B (-10.7%, margin 6.4%), suggesting deterioration in project profitability. Non-operating income, primarily dividend income received of ¥5.8B, boosted Ordinary Income to ¥70.9B (+8.9%). Extraordinary gain of ¥5.9B (gain on sale of investment securities) less extraordinary losses of ¥2.4B (including valuation losses on investment securities of ¥0.7B) resulted in a net increase of ¥3.5B to pre-tax income, leading to Pre-Tax Profit of ¥74.5B (+8.2%). After corporate taxes of ¥24.3B (effective tax rate 32.6%), Net Income was ¥49.4B (+8.1%). In summary, while revenues and profits grew, the decline in East Japan Headquarters profits and increasing reliance on non-operating and extraordinary items are concerns.
East Japan Headquarters recorded Revenue ¥447.9B (-0.2%) and Operating Income ¥28.8B (-10.7%), with margin falling to 6.4%. Changes in demand composition and weaker project profitability pressured earnings. West Japan Headquarters delivered Revenue ¥510.1B (+10.7%) and Operating Income ¥34.6B (+17.3%), maintaining a high margin of 6.8% and driving company-wide profit growth. Central Japan Headquarters posted Revenue ¥195.8B (+7.0%) and Operating Income ¥13.3B (+18.9%), also with a 6.8% margin, putting it on par with West Japan and in a relatively advantageous position. Development & Strategy Headquarters achieved Revenue ¥199.6B (+8.2%) and Operating Income ¥7.1B (+29.6%), with a lower margin of 3.6% but the highest growth rate; investments in overseas expansion and new product development suppressed margins while contributing to growth. The aggregation of cross-regional FA and labor-saving projects supported the strong performance in West and Central Japan and helped offset weakness in East Japan.
Profitability: Operating margin improved to 5.0% (from 4.8% prior year, +0.2pt), and gross margin to 15.4% (YoY +0.3pt), while SG&A ratio slightly increased to 10.4% (YoY +0.1pt), indicating controlled expenses. ROE remained at 9.8%, reflecting stable return levels. Cash Quality: Operating CF / Net Income fell to -0.72x, indicating weakened cash quality as profits were not converted to cash due to working capital reversal. DSO (Days Sales Outstanding) was approximately 93 days, relatively long with room to shorten collection terms. Free Cash Flow (FCF) was -¥33.0B, insufficient to cover dividend resources, showing a temporary deterioration in cash flows. Investment Efficiency: Total assets were ¥1000.6B, roughly flat YoY, and total asset turnover improved to 1.31x (prior year 1.23x). Investment securities increased +22.6% to ¥189.5B (18.9% of total assets), with unrealized gains boosting equity. Financial Soundness: Equity Ratio improved to 50.2% (from 43.4% prior year, +6.8pt), and Interest Coverage was 814x, indicating extremely strong capacity to bear interest. Current Ratio was 174.5% and Quick Ratio was 169.2%, indicating sufficient short-term liquidity.
Operating CF was -¥35.5B, a large negative against Net Income of ¥49.4B, raising concerns on cash quality. The main causes were reduction in accounts payable (cash outflow of -¥61.5B) and decrease in contract liabilities (advance receipts) (period drawdown of -¥154.8B), producing a working capital reversal, with an increase in accounts receivable (-¥11.0B) exacerbating the situation. Inventory decrease provided some cash recovery (+¥2.7B), and corporate tax payments (-¥24.7B) were made. Pre-working-capital-change subtotal of operating CF was -¥17.5B, and after accounting for depreciation of ¥3.4B, the operational cash reality remained weak. Investing CF was +¥2.5B, aided by cash realization of gain on sale of investment securities ¥5.9B and restrained capital expenditures (tangible fixed assets acquisition -¥3.5B). Financing CF was -¥16.3B, primarily dividend payments of -¥15.8B (¥-15.0B attributable to owners of the parent); share repurchases were immaterial (-¥0.0B). FCF was -¥33.0B and dividends could not be covered by cash flows, reducing period-end cash to ¥241.0B (decline of -¥48.5B). The working capital reversal is likely temporary, attributable to timing of project inspections and seasonality of advance receipts, with normalization at the start of the next fiscal year a key focus.
Ordinary Income of ¥70.9B exceeded Operating Income of ¥65.1B by ¥5.8B, primarily due to dividend income received of ¥5.8B as non-operating income. One-off factors included gain on sale of investment securities of ¥5.9B recorded as extraordinary income, and net extraordinary items (including valuation loss of ¥0.7B) totaling +¥3.5B which boosted pre-tax profit. With an effective tax rate of 32.6%, after-tax contribution is estimated at approximately +¥2.4B; excluding one-off gains, core Net Income would be about ¥47.0B (approximately +6.1% growth) from reported ¥49.4B, indicating somewhat more modest underlying growth than headline figures suggest. Comprehensive income was ¥77.6B, substantially above Net Income of ¥49.4B; the difference of ¥28.2B was mainly due to an increase in valuation difference on available-for-sale securities of ¥25.9B, as rising market values of investment securities bolstered equity. From an accrual perspective, the gap between Operating CF -¥35.5B and Net Income ¥49.4B (difference -¥84.9B) is largely due to working capital reversal, widening the timing gap between profit recognition and cash collection.
Against company plan for the full year: Revenue ¥1320.0B, Operating Income ¥67.0B, Ordinary Income ¥73.0B, Net Income ¥52.0B, actual results were Revenue ¥1310.3B (progress 99.3%), Operating Income ¥65.1B (97.2%), Ordinary Income ¥70.9B (97.1%), and Net Income ¥49.4B (95.0%), broadly achieved but slightly short. Revenue shortfall appears related to timing shifts in project inspections at year-end, and profit shortfall appears affected by working capital movements and higher tax burden. Revenue growth outperformed the initial plan (+5.4% actual vs. plan +0.7%), indicating stronger order capture than assumed at the beginning of the year, but year-end concentration of inspections may have differed from plan. EPS actual was ¥273.54 versus forecast ¥288.57, slightly below expectation, but dividend of ¥90 per annum (including commemorative dividend ¥10) is to be paid as planned.
Annual dividend is ¥90 (interim ¥20, year-end ¥70), with payout ratio of 31.7% (total dividends ¥15.8B / Net Income ¥49.4B), a reasonable level. Year-end dividend includes a commemorative dividend of ¥10. With total dividends of ¥15.8B and FCF of -¥33.0B, dividend coverage on a cash basis was insufficient, but cash balance of ¥241.0B provides ample liquidity and no immediate issue in dividend payment ability. Share repurchases were negligible (-¥0.0B), so shareholder returns are virtually dividend-centric, and Total Return Ratio is in line with the payout ratio. If working capital normalizes, OCF is expected to recover to exceed Net Income, and future dividend sustainability will depend on improvements in project collection and advance receipt management.
Liquidity risk from working capital reversal: Reductions in accounts payable (-¥61.5B) and contract liabilities (-¥154.8B) caused OCF of -¥35.5B, significantly below Net Income. DSO of approximately 93 days indicates long collection terms, and concentration in project inspection and collection timing increases cash flow volatility. If working capital normalization is delayed next fiscal year, risks to dividend and investment funding could materialize.
Earnings deterioration risk in East Japan Headquarters: East Japan was essentially flat in Revenue (-0.2%) and Operating Income declined -10.7%, with margins falling to 6.4%, marking the only region with a profit decline. Changes in demand composition and weaker project profitability are indicated; prolonged softness in construction and manufacturing investment in this region could depress company-wide margins.
Valuation fluctuation risk of investment securities: Investment securities of ¥189.5B (18.9% of total assets) contributed valuation gains of +¥25.9B to comprehensive income this period, but a market reversal could reverse valuation differences, reducing equity and deteriorating equity ratio and other financial soundness metrics.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 5.0% | 3.4% (1.4%–5.0%) | +1.6pt |
| Net Margin | 3.8% | 2.3% (1.0%–4.6%) | +1.5pt |
Profitability exceeds the industry median and places the company in the upper group.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 5.4% | 5.9% (0.4%–10.7%) | -0.4pt |
Growth rate is around the median, ranking the company in the middle tier within the industry.
※ Source: Company compilation
Duality of revenue/profit growth and OCF deterioration: Operating Income +8.2% and operating margin improved to 5.0%, indicating solid earnings, but OCF was -¥35.5B, a large negative in cash generation, making working capital management the focal point of the results. The decline in accounts payable and contract liabilities likely represents a temporary reversal, and whether FCF recovers to Net Income levels upon normalization next fiscal year is a key monitoring point.
Widening regional segment disparity: West and Central Japan recorded double-digit profit growth and maintained high margins of 6.8%, while East Japan showed profit decline and margin deterioration. Sustainable company-wide margin improvement requires profitability correction in East Japan and improved project mix, with optimization of allocation of high-value-added projects across regions being critical going forward.
This report is an earnings analysis document automatically generated by AI from XBRL financial statement data. It does not constitute a recommendation to invest in specific securities. Industry benchmarks are reference information compiled by the company based on disclosed financial statements. Investment decisions are your own responsibility; consult a professional advisor as needed.