| Metric | Current Period | Prior Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥2127.7B | ¥2157.9B | -1.4% |
| Operating Income | ¥52.4B | ¥54.8B | -4.3% |
| Equity-method Investment Income (Loss) | ¥0.5B | ¥0.7B | -23.1% |
| Ordinary Income | ¥57.7B | ¥60.1B | -4.0% |
| Net Income | ¥51.6B | ¥40.9B | +26.2% |
| ROE | 5.5% | 4.6% | - |
For the fiscal year ended March 2026, Revenue was ¥2,127.7B (YoY -¥30.1B, -1.4%), Operating Income ¥52.4B (YoY -¥2.4B, -4.3%), Ordinary Income ¥57.7B (YoY -¥2.4B, -4.0%), and Net Income ¥51.6B (YoY +¥10.7B, +26.2%). Revenue slightly declined, but gross margin improved to 14.0% (prior 12.8%, +1.2pt), enhancing profitability. Meanwhile, SG&A ratio rose to 11.5% (prior 10.2%, +1.3pt), compressing Operating Income and leaving Operating Margin at 2.5% (prior 2.5%, flat). Net Income achieved double-digit growth due to recognition of ¥17.5B in extraordinary gains (¥7.3B gain on sale of investment securities, ¥10.2B gain on sale of subsidiary shares). EPS 244.84¥ (prior 214.80¥, +14.0%), ROE 5.5% (prior 5.3%). The Cold & Thermal Building Systems segment delivered double-digit revenue and profit growth and led results; X-Tech turned profitable and contributed; core Electronics posted revenue decline but maintained resilience through margin improvement.
Revenue of ¥2,127.7B (-1.4% YoY, -¥30.1B) was weighed down by Electronics segment revenue decline (-7.1%), partially offset by double-digit growth in Cold & Thermal Building Systems (+13.4%) and steady performance in FA Systems (+3.8%). Electronics (55.2% of sales) fell to ¥1,175.1B (YoY -¥89.8B) amid semiconductor market adjustment, but Operating Income improved to ¥33.5B (+2.3% YoY) with margin rising to 2.8% (prior 2.6%, +0.2pt). Cold & Thermal Building Systems (17.3% of sales) grew to ¥367.8B (+¥43.5B), delivering Operating Income ¥24.2B (+32.6% YoY) and margin 6.6% (prior 5.6%, +1.0pt). FA Systems (23.5% of sales) increased revenue to ¥500.2B (+¥18.3B) but Operating Income fell to ¥9.6B (-29.1% YoY) with margin deteriorating to 1.9% (prior 2.8%, -0.9pt). X-Tech (4.0% of sales) slightly declined to ¥85.0B (-¥1.9B) but turned profitable with Operating Income ¥1.2B (+¥1.1B), margin improving to 1.4% (prior 0.1%). By geography, Domestic 76.4% (prior 77.8%), Overseas 23.6% (prior 22.2%), with Asia (notably China and other markets) leading growth.
Profitability: Gross margin improved to 14.0% (+1.2pt YoY) supported by high-margin Cold & Thermal Building projects and better product mix. SG&A rose to ¥245.1B (prior ¥220.6B, +11.1%) due to company-wide new business development costs and headquarters relocation-related expenses, increasing SG&A ratio to 11.5% (+1.3pt YoY) and keeping Operating Margin at 2.5% (flat). Non-operating income totaled ¥7.3B (interest income ¥3.2B, dividend income ¥1.7B, equity-method investment income ¥0.5B). Non-operating expenses were ¥2.1B (prior ¥3.5B), resulting in Ordinary Income ¥57.7B (-4.0% YoY). Extraordinary gains of ¥17.5B (gain on sale of investment securities ¥7.3B, gain on sale of subsidiary shares ¥10.2B) lifted Pretax Income to ¥73.1B (+12.9% YoY). After income taxes ¥20.3B (prior ¥17.7B), Net Income was ¥51.6B (+26.2% YoY). In summary, despite revenue decline, final profit increased due to one-time gains.
Electronics (Operating Income ¥33.5B, margin 2.8%) showed resilience with margin improvement despite revenue decline; semiconductor market volume contraction was offset by gross margin improvement, delivering higher operating profit. FA Systems (Operating Income ¥9.6B, margin 1.9%) posted revenue growth but profit decline due to margin deterioration amid demand cycles and price competition. Cold & Thermal Building Systems (Operating Income ¥24.2B, margin 6.6%) achieved double-digit growth in both revenue and profit and is the most profitable segment, driven by accumulation of large HVAC projects and maintenance revenue. X-Tech (Operating Income ¥1.2B, margin 1.4%) turned profitable, with orders in video/image systems and medical facility projects contributing. Corporate expenses were -¥16.0B (prior -¥9.6B), expanded for new business development and DX investments; controlling corporate costs is key to further margin improvement.
Profitability: Operating Margin 2.5% (prior 2.5%, flat), ROE 5.5% (prior 5.3%, +0.2pt). Gross Margin 14.0% (+1.2pt YoY) improved due to high-margin Cold & Thermal Building contribution; SG&A ratio 11.5% (+1.3pt YoY) rose and offset improvements. Net Margin 2.4% (prior 1.9%, +0.5pt) benefited from extraordinary gains. EBITDA ¥60.4B (Operating Income ¥52.4B + Depreciation ¥8.0B), EBITDA margin 2.8% (low). Cash quality: Operating Cash Flow (OCF) ¥60.7B exceeded Net Income ¥51.6B (OCF/NI = 1.18x), indicating good cash backing of profits. OCF/EBITDA = 1.00x (standard). Free Cash Flow ¥30.8B after CapEx ¥11.8B and intangible asset acquisitions ¥32.2B, covering dividends ¥26.0B by 1.18x. Asset efficiency: Total Asset Turnover 1.38x (prior 1.52x) slightly declined; Days Sales Outstanding (DSO) 78 days (prior 74) lengthened. Intangible fixed assets ¥51.5B (prior ¥19.8B, +160%) mainly software investment ¥47.4B for DX and core system enhancements. Financial soundness: Equity Ratio 61.3% (prior 62.7%), Current Ratio 237%, Quick Ratio 188% — high. Interest-bearing debt ¥22.4B (short-term ¥9.9B, long-term ¥12.6B) vs cash and deposits ¥334.6B, net cash ¥312.2B, Debt/Equity 3.6%, Debt/EBITDA 0.37x — extremely conservative.
Operating CF ¥60.7B (prior ¥184.5B, -67.1%) was generated after working capital movements including inventory change +¥2.0B, trade receivables change +¥9.0B, trade payables change +¥41.2B from an OCF subtotal of ¥61.8B. YoY decline mainly reflects contraction of prior-year working capital improvements (prior year had inventory decrease ¥87.2B and receivables decrease ¥231.4B). OCF ¥60.7B exceeded Net Income ¥51.6B (OCF/NI = 1.18x), indicating good cash backing. Investing CF -¥29.9B included CapEx -¥11.8B and intangible asset acquisitions -¥32.2B, partially offset by proceeds from sale of subsidiary shares +¥13.1B and sale of investment securities +¥8.2B. FCF ¥30.8B (OCF + Investing CF) covers dividends ¥26.0B by 1.18x. Financing CF -¥30.0B included dividends -¥26.0B and long-term debt repayments -¥2.1B. Cash and deposits were ¥333.1B at beginning → ¥334.6B at end, essentially flat, maintaining ample liquidity.
Ordinary Income ¥57.7B comprised Operating Income ¥52.4B plus non-operating income ¥7.3B (mainly interest income ¥3.2B and dividend income ¥1.7B), indicating a solid recurring earnings base. Extraordinary gains ¥17.5B (gain on sale of investment securities ¥7.3B, gain on sale of subsidiary shares ¥10.2B) boosted Net Income, with roughly 30% of Net Income dependent on one-off items. Non-operating income as a percentage of sales is 0.3%, so there is no excessive dependence. OCF ¥60.7B / Net Income ¥51.6B = 1.18x; accruals (Net Income - OCF) = -¥9.1B (negative accruals), indicating good cash backing. Comprehensive income ¥78.3B exceeded Net Income by ¥26.7B, contributed by Other Comprehensive Income ¥25.5B (FX translation adjustments ¥2.6B, valuation differences on securities ¥7.7B, adjustments related to retirement benefits ¥15.2B). Core earning power should be assessed on Ordinary Income ¥57.7B, and attention should be paid to the potential reversal of one-time factors next fiscal year.
Full-year guidance: Revenue ¥2,370.0B (YoY +11.4%), Operating Income ¥60.0B (+14.4%), Ordinary Income ¥60.0B (+4.0%), Net Income ¥47.0B (EPS 218.14¥). This fiscal year Net Income was boosted to ¥51.6B by extraordinary gains of ¥17.5B; next fiscal year assumes no extraordinary gains and plans operating-driven profit growth. Progress rate: Revenue 89.7% (¥2,127.7B / ¥2,370B), Operating Income 87.3% (¥52.4B / ¥60B), Ordinary Income 96.2% (¥57.7B / ¥60B) — Ordinary Income level is nearly on plan. To achieve full-year plan, 4Q (remaining period) must generate additional Revenue ¥242.3B (approx +39% YoY) and Operating Income ¥7.6B (approx +45% YoY), premised on securing large Cold & Thermal Building orders and recovery in Electronics market. Planned DPS 75¥ (reduction from current 138¥) is a conservative setting reflecting loss of extraordinary gains, but payout ratio on full-year EPS 218.14¥ would be 34.4%, leaving room and potential for upward revision given progressive dividend policy.
This fiscal year dividend totaled 138¥ (interim 68¥, year-end 70¥) (prior 53¥, 2.6x YoY). Payout ratio 49.3% (prior 49.3%, same level). Total dividends ¥26.0B vs FCF ¥30.8B yields FCF coverage 1.18x, indicating sufficient dividend-paying capacity. Share buybacks were negligible (-¥0.0B), so shareholder returns are dividend-centered. With the introduction of a progressive dividend policy, the company aims to avoid cuts and pursue stable dividend growth. Next-year DPS guidance 75¥ is a reduction from 138¥, but because current year Net Income was lifted by extraordinary gains, payout ratio on EPS 218.14¥ of 34.4% is conservative. Given net cash ¥312.2B and stable OCF, sustainability of progressive dividends is high. Details of dividend policy changes were disclosed in notices published on May 9, 2025: “Notice Regarding Revision of Dividend Forecast (Increase)” and “Notice Regarding Change of Dividend Policy (Introduction of Progressive Dividend)”.
Market volatility in Electronics: Electronics accounts for 55.2% of sales and is highly sensitive to semiconductor cycles and price fluctuations; this fiscal year revenue fell -7.1%. Next-year plan assumes market recovery, but prolonged global semiconductor supply-demand adjustment or intensified price competition could depress gross margins and volumes below expectations. FX moves (USD/JPY appreciation of yen) could squeeze procurement and sales margins; under a low margin structure with Operating Margin 2.5%, absorption capacity is limited.
Deterioration in working capital efficiency: DSO 78 days (prior 74, +4 days) shows elongation; trade receivables ¥453.2B equal 21.3% of sales. Inventory days about 47 days with inventory ¥272.7B, indicating working capital becoming more fixed. Extension of payables (accounts payable ¥307.1B, prior ¥257.2B, +19.4%) helps liquidity but risks supplier relationship deterioration or limits to extending payment terms, potentially lengthening the cash conversion cycle and pressuring Operating CF.
Recovery risk on intangible investments: Intangible fixed assets ¥51.5B (mainly software ¥47.4B, +160% YoY) increased substantially. While DX and core system renewals are expected to improve operational efficiency and gross margins, payback will take several years; in the short term, amortization/depreciation burden (Depreciation ¥8.0B) may pressure profits. System implementation delays or failure to realize expected benefits could trigger impairment risk, which would have relatively large impact given low Operating Margin 2.5%.
Revenue & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 2.5% | 3.4% (1.4%–5.0%) | -0.9pt |
| Net Margin | 2.4% | 2.3% (1.0%–4.6%) | +0.1pt |
Operating Margin is 0.9pt below industry median, impacted by high SG&A ratio and low gross margin. Net Margin is in line with median due to contribution from extraordinary gains.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | -1.4% | 5.9% (0.4%–10.7%) | -7.3pt |
Revenue growth lags industry median by 7.3pt, mainly due to the Electronics market adjustment. Double-digit growth in Cold & Thermal Building was insufficient to lift overall performance, placing the company in the lower range within the industry.
※ Source: Company compilation
Balance between gross margin improvement and SG&A control: Gross Margin improved to 14.0% (+1.2pt YoY) driven by high-margin Cold & Thermal Building projects and better product mix, but SG&A ratio rose to 11.5% (+1.3pt YoY) offsetting gains and sustaining a low-margin Operating structure at 2.5%. Corporate expenses -¥16.0B (prior -¥9.6B) expanded due to new business development and DX investments; monetization of these investments and optimization of fixed costs are key to improving Operating Margin. Effects of ¥51.5B intangible investment (efficiency gains and gross margin improvement) are expected medium-term, but near-term amortization increases may pressure profits. Concurrent achievement of further gross margin improvement (sustained high-margin performance in Cold & Thermal Building and X-Tech) and SG&A productivity gains is critical to observe Operating Margin trends going forward.
Sustainability of earnings after loss of extraordinary gains: Of Net Income ¥51.6B, extraordinary gains ¥17.5B (approx 34%) contributed; core recurring earnings are better reflected by Ordinary Income ¥57.7B. Next-year plan assumes Net Income ¥47.0B with no extraordinary gains and is conservative, but achieving the full-year plan requires a significant 4Q build (Revenue +¥242B, Operating Income +¥7.6B). This assumes large Cold & Thermal Building orders and Electronics cycle recovery, and downside risks remain. Meanwhile, progressive dividend introduction supports dividend stability, and strong financials (Net Cash ¥312.2B, OCF ¥60.7B) suggest high downward resilience. Strengthening recurring earnings (improving Operating Margin and stabilizing OCF) would further support sustainable shareholder returns.
Portfolio quality improvement and working capital efficiency: Double-digit growth in Cold & Thermal Building (margin 6.6%) and X-Tech turning profitable (¥1.2B) have improved portfolio quality, but Electronics (55.2% of sales) remains highly cyclical. DSO 78 days (+4 days YoY) and inventory about 47 days indicate deterioration in working capital efficiency, and OCF fell from ¥184.5B to ¥60.7B. Progress in working capital management (faster receivables collection, improved inventory turnover) is essential to stabilize OCF and maintain FCF coverage (1.18x). If sales mix shifts toward Cold & Thermal Building and X-Tech while Electronics gross margin improves, there is room to approach the industry median Operating Margin (3.4%).
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 any specific security. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your responsibility; consult a professional advisor as needed.