KANADEN (8081) FY2026 FY Earnings Report

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Executive Summary

Revenue and profit increased, primarily due to the rapid expansion of the Infrastructure Business; however, the decline in extraordinary gains limited the growth in net income. Revenue was ¥1,456.1B (+15.9% YoY), operating income was ¥53.3B (+18.5%), and ordinary income was ¥57.8B (+22.3%), indicating solid performance in the core business. Meanwhile, net income remained at ¥39.7B (+0.5%), mainly because extraordinary gains declined from ¥11.2B recorded in the previous period to ¥2.0B in the current period.

Factors Affecting Performance

【Revenue】Revenue was ¥1,456.1B, representing a +15.9% YoY increase, with all 4 segments reporting higher revenue. The Infrastructure Business posted the highest growth rate at ¥390.7B (+35.3%), accounting for approximately 51% of the ¥199.5B increase in revenue. This was followed by the FA Systems Business (¥549.4B, +13.9% YoY, 37.7% of total revenue) and the Information & Communications / Devices Business (¥332.7B, +7.3% YoY), while the Building Facilities Business grew relatively moderately to ¥183.3B (+4.6%).

【Profit and Loss】Operating income was ¥53.3B (+18.5% YoY), and the operating margin improved slightly from the previous year to 3.7%. Although the gross margin declined to 13.8%, the SG&A ratio declined by more than this amount, supporting the increase in profit. By segment, on an ordinary income basis, the Infrastructure Business surged to ¥7.7B (+311.3% YoY), leading the company-wide increase in profit, while the FA Systems Business posted ¥22.1B (▲3.3% YoY) and the Building Facilities Business posted ¥3.1B (▲3.5% YoY), resulting in higher revenue but lower profit. Ordinary income was ¥57.8B (+22.3% YoY), boosted by non-operating income including ¥1.6B in foreign exchange gains, while net income remained at ¥39.7B (+0.5%) due to the decline in extraordinary gains. Overall, revenue and profit increased, but the quality of earnings growth should be assessed on a core operating basis excluding extraordinary income and expenses.

Segment Analysis

The Infrastructure Business most strongly drove company-wide growth and profitability improvement, with revenue of ¥390.7B (+35.3% YoY) and segment profit of ¥7.7B (+311.3%). The Information & Communications / Devices Business posted revenue of ¥332.7B (+7.3%) and profit of ¥21.5B (+13.3%), with a 6.5% profit margin, the highest level among the 4 segments. Meanwhile, the core FA Systems Business, which accounts for 37.7% of total revenue, saw profit decline despite higher revenue, making project profitability and trends in capital investment demand key areas of focus going forward. The Building Facilities Business likewise reported higher revenue but lower profit, and improving profitability through cost and pricing measures remains a challenge. It should be noted that segment profit is calculated on an ordinary income basis and therefore differs from consolidated operating income in terms of its calculation basis.

Key Financial Indicators

【Profitability】The operating margin was 3.7%, the net income margin was 2.7%, and ROE was 7.8%. Although none reached the levels generally associated with highly profitable companies, the operating margin improved by 8bp from the previous year. The gross margin declined by 50bp from the previous year to 13.8%, while the decline in the SG&A ratio to 10.2% offset this reduction and contributed to the increase in operating income. 【Cash Flow Quality】Operating Cash Flow (OCF) was ¥92.4B, or 2.33 times net income, indicating cash generation exceeding accounting profit. However, contributions from working capital factors were significant, including a ¥25.9B increase in advances received and a ¥14.6B increase in accounts payable; sustainability requires confirmation through future trends. 【Investment Efficiency】Capital expenditures were ¥3.5B compared with depreciation and amortization of ¥6.98B, resulting in capital expenditures/depreciation and amortization of only 0.50 times, indicating that asset replacement and growth investment were relatively restrained. 【Financial Soundness】The equity ratio was 52.0%, while current assets of ¥804.0B exceeded current liabilities of ¥462.4B, indicating an overall stable financial base. Cash and deposits increased significantly from the previous year to ¥241.3B, strengthening liquidity.

Cash Flow Analysis

Operating Cash Flow (OCF) increased substantially by +80.6% YoY to ¥92.4B, representing cash generation 2.33 times net income of ¥39.7B. Contributing factors included a ¥25.9B increase in advances received, a ¥14.6B increase in accounts payable, and a ¥6.8B decrease in inventories; the improvement in working capital had a significant positive impact. Investing Cash Flow was a modest negative ¥1.6B, mainly due to capital expenditures of ¥3.5B, resulting in Free Cash Flow of ¥90.8B. Financing Cash Flow was a negative ¥17.0B, mainly due to dividend payments of ¥16.7B and other items. As a result, cash and deposits accumulated to ¥241.3B, providing ample financial capacity for dividends, working capital, and growth investment. However, the dependence of the increase in OCF on working capital movements should be noted as a risk of reversal from the following period onward.

Earnings Quality

Ordinary income of ¥57.8B for the current period resulted from operating income of ¥53.3B plus non-operating income, including foreign exchange gains of ¥1.6B and dividend income of ¥1.1B; thus, tailwinds from non-operating items supplemented growth in the core business. Meanwhile, the ¥2.0B in extraordinary gains included in pretax income of ¥59.8B consisted primarily of ¥1.8B in gains on sales of investment securities, representing a substantial decline from extraordinary gains of ¥11.2B in the previous period. The fact that net income growth of +0.5% YoY was significantly below ordinary income growth of +22.3% was mainly due to the reversal of extraordinary income and expenses, and should be evaluated separately from the improvement trend in the core business. The fact that OCF reached 2.33 times net income is positive from the perspective of cash conversion; however, as its composition includes accrual-related factors such as increases in advances received and accounts payable, it is appropriate to assess recurring earning power based on operating income and ordinary income.

Earnings Forecasts and Guidance

Progress against the full-year company forecasts was 97.1% for revenue, at ¥1,456.1B/¥1,500.0B; 90.4% for operating income, at ¥53.3B/¥59.0B; and 96.4% for ordinary income, at ¥57.8B/¥60.0B. Net income had reached 99.2% of the forecast, at ¥39.7B/¥40.0B, leaving only ¥5.7B in operating income and ¥0.3B in net income to achieve the full-year forecasts. Compared with the company’s full-year revenue growth forecast of +3.0%, current-period actual growth has already substantially exceeded it at +15.9%, making achievement of the full-year revenue and profit forecasts appear likely.

Shareholder Returns

The annual dividend for the current period was ¥72 per share (interim ¥36, year-end ¥36), resulting in a payout ratio of 40.5% based on net income. No share repurchases were conducted during the current period, and the Total Return Ratio was therefore at the same level as the payout ratio. Total dividend payments of ¥16.7B represented 18.1% of OCF of ¥92.4B and 18.4% of Free Cash Flow of ¥90.8B, indicating substantial cash capacity for dividends. The company’s forecast indicates an increase in the annual dividend to ¥100, implying a forecast payout ratio of approximately 55.7% based on forecast net income of ¥40.0B.

Risk Factors

1. Low-Margin Structure and Declining Gross Margin: The gross margin declined by 50bp YoY to 13.8%, while the operating margin remained at only 3.7%. Given the thin margins, changes in procurement prices and project mix have a relatively significant impact on profit.

2. Deteriorating Profitability in the FA Systems Business: The FA Systems Business, the core business accounting for 37.7% of company-wide revenue, reported a +13.9% increase in revenue but a ▲3.3% decline in segment profit. The company-wide profit structure is susceptible to trends in capital investment by manufacturers and changes in project profitability.

3. Accounts Receivable Collection Period and Dependence on Working Capital: The increase in OCF during the current period was supported by working capital factors such as increases in advances received and accounts payable and a decrease in inventories. If these factors reverse, the pace of OCF growth may slow.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Return

Profitability is slightly above the industry median.

Growth and Capital Efficiency

Revenue growth was substantially above the industry median and represented a high growth rate exceeding the upper bound of the IQR.

※Source: Compiled by the Company

Key Points in the Earnings Results

1. While the core business continued to generate higher profit, with revenue up +15.9%, operating income up +18.5%, and ordinary income up +22.3%, net income growth remained at +0.5% due to the reversal of extraordinary gains recorded in the previous period. Separating the components of accounting profit is essential to understanding the earnings results.

2. The Infrastructure Business and the Information & Communications / Devices Business drove both growth and profitability, while the core FA Systems Business and the Building Facilities Business reported higher revenue but lower profit, resulting in a widening gap in earnings structures among segments.

3. OCF of ¥92.4B substantially exceeded net income, and cash and deposits accumulated to ¥241.3B. However, dependence on working capital factors such as increases in advances received and accounts payable was significant, making sustainability from the following period onward a key point for confirmation.

Theoretical Share Price (Reference Value)

Sensitivity: ¥2,148–¥2,270 at ±1% in the cost of equity, and ¥2,205–¥2,209 at ω±0.1.

Notes:

• Amortization of goodwill of ¥9.5/share has been added back to profit (due to its nature as a non-cash expense and for comparability with IFRS companies).
• As forecast ROE is below the cost of equity, the theoretical value is below book value per share.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest Rate Reference Month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee the future share price.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting a professional as necessary.

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