RYODEN CORPORATION FY2027 Q1 Earnings Report

Quick View

Executive Summary

For Q1 of the fiscal year ending March 2027, the Company delivered higher revenue and profits accompanied by improved margins, driven by company-wide revenue growth centered on Electronics and the emergence of operating leverage through fixed-cost absorption. Revenue was ¥610.5B (¥494.2B in the same period of the previous year, YoY +23.5%), Operating Income was ¥20.4B (¥8.8B, YoY +132.8%), Ordinary Income was ¥21.7B (¥10.0B, YoY +117.6%), and Net Income attributable to owners of the parent was ¥14.2B (¥10.0B, YoY +41.7%). The Operating Income margin expanded by +158bp year on year to 3.3%, supported by the decline in the SG&A ratio to 10.5% from 11.9%, in addition to the revenue growth effect. Meanwhile, Operating Cash Flow was negative ¥24.7B, mainly due to increases in trade receivables and inventories, creating a timing gap between profit growth and cash generation.

Factors Affecting Performance

【Revenue】Revenue increased to ¥610.5B (YoY +23.5%), representing broad-based growth, with three of the four segments recording double-digit revenue growth. Electronics, the largest segment by revenue composition, led the overall performance with ¥341.4B (55.9% of total revenue, YoY +23.9%), while FASystems recorded the highest growth rate at ¥151.4B (24.8% of total revenue, YoY +33.7%). Cooling and Heating Building Systems also remained solid at ¥99.9B (16.4% of total revenue, YoY +15.5%), while XTech was the only segment to record a decline, at ¥17.9B (2.9% of total revenue, YoY -5.5%).

【Profit and Loss】Operating Income increased substantially to ¥20.4B (YoY +132.8%). In addition to the gross margin of 13.8% (+18bp), the SG&A ratio declined by ▲139bp to 10.5%, resulting in pronounced operating leverage. By segment, Electronics at ¥15.3B (YoY +107.0%, 4.5% margin) and FASystems at ¥4.4B (YoY +431.3%, 2.9% margin) drove the increase in overall profits. Cooling and Heating also secured the highest margin company-wide at 6.5%, with ¥6.5B (YoY +50.3%), while XTech’s loss widened to ▲¥0.3B. Ordinary Income was ¥21.7B (YoY +117.6%), broadly in line with the growth in Operating Income; however, the growth rate in Net Income (+41.7%) was lower than at the Operating Income and Ordinary Income levels. This reflects the fact that the same period of the previous year included a relatively large extraordinary gain of ¥6.05B from the sale of investment securities, whereas the current period recorded only ¥0.59B. In other words, the previous year’s profit was more dependent on nonrecurring factors, while a relatively higher proportion of the current period’s profit was derived from core operations. In conclusion, the Company recorded higher revenue and profits.

Segment Analysis

• Electronics: Revenue of ¥341.4B (55.9% of total revenue, YoY +23.9%) and Operating Income of ¥15.3B (YoY +107.0%, 4.5% margin). The largest driver of the increase in company-wide profits.
• FASystems: Revenue of ¥151.4B (24.8% of total revenue, YoY +33.7%) and Operating Income of ¥4.4B (YoY +431.3%, 2.9% margin). Recorded the highest revenue and profit growth rates, with a pronounced recovery from the low profitability of the previous year.
• Cooling and Heating Building Systems: Revenue of ¥99.9B (16.4% of total revenue, YoY +15.5%) and Operating Income of ¥6.5B (YoY +50.3%, 6.5% margin). Maintained the highest margin among the four segments.
• XTech: Revenue of ¥17.9B (2.9% of total revenue, YoY -5.5%) and Operating Income of ▲¥0.3B (loss widened from ▲¥0.1B in the previous year). The only segment with declining revenue and continuing losses, as the recovery of investments in new businesses remains ongoing.

Key Financial Indicators

【Profitability】The gross margin was 13.8% (13.7% in the previous year, +18bp), the Operating Income margin was 3.3% (1.8%, +158bp), the Ordinary Income margin was 3.55% (2.02%, +153bp), and the Net Income margin attributable to owners of the parent was 2.33% (2.03%, +30bp). All levels improved from the previous year, with fixed-cost absorption accompanying revenue growth serving as the primary factor behind the margin improvement. 【Cash Flow Quality】Operating Cash Flow was negative ¥24.7B, resulting in a gap from Net Income of ¥14.2B (approximately ▲1.7 times). Cash generation is lagging profit growth. 【Investment Efficiency】ROE (quarterly actual, before annualization) was 1.5%, while ROA was approximately 0.9%. Both represent standalone quarterly levels and should be distinguished from full-year evaluations. Total asset turnover was only 0.38 times for the quarter, with the accumulation of working capital weighing on asset efficiency. 【Financial Soundness】The Equity Ratio was 56.6%, the Current Ratio was 212.9%, and the Quick Ratio was 169.3%, all at high levels. Against Cash and Deposits of ¥271.8B, interest-bearing debt was only ¥20.5B, resulting in net cash of approximately ¥251B and providing substantial financial resilience.

Cash Flow Analysis

Operating Cash Flow was negative ¥24.7B, deteriorating from +¥50.9B in the previous year. The primary factors were increases of +¥66.0B in trade receivables, +¥76.4B in other trade receivables, and +¥22.7B in inventories, which were partially offset by a +¥148.8B increase in trade payables. Investing Cash Flow was negative ¥24.2B, as the Company continued growth investments centered on ▲¥10.9B in acquisitions of intangible assets. Financing Cash Flow was negative ¥19.1B, mainly due to dividend payments of ▲¥14.7B and share repurchases of ▲¥2.4B. As a result, Free Cash Flow (Operating CF + Investing CF) was negative ¥48.9B. Dividends and share repurchases were not covered solely by internally generated cash; however, Cash and Deposits stood at ¥271.8B, and the net decrease in cash during the period was limited to ▲¥67.1B, with the substantial cash balance supporting near-term liquidity. Going forward, progress in collecting and reducing trade receivables and inventories will be key to normalizing Operating CF and restoring cash-generation capacity.

Earnings Quality

The current period’s profit growth shows lower dependence on nonrecurring factors and has improved qualitatively from the previous year. Extraordinary gains consisted solely of a ¥0.6B gain on the sale of investment securities, a significant decrease from ¥6.05B in the same period of the previous year. Accordingly, the growth in Ordinary Income and Net Income has a stronger underlying contribution from core operations. Non-operating income and expenses were also stable, centered on dividend income of ¥1.2B and interest income of ¥0.7B, with limited volatility including a foreign exchange loss of ¥0.2B. Meanwhile, Comprehensive Income was ¥23.3B (¥23.1B attributable to owners of the parent), exceeding Net Income of ¥14.2B. The difference was attributable to unrealized valuation gains such as +¥6.3B in valuation difference on securities and +¥3.0B in foreign currency translation adjustments; these are different in nature from profits accompanied by cash generated through business activities. In addition, the fact that Operating Cash Flow was negative ¥24.7B, below Net Income, indicates that accounting accruals—namely increases in trade receivables and inventories—are accumulating ahead of profit. Cash conversion of earnings therefore requires monitoring.

Earnings Forecast and Guidance

The Q1 progress rates against the full-year earnings forecasts (Revenue of ¥2,520B, Operating Income of ¥75.0B, Ordinary Income of ¥75.0B, and Net Income of ¥60.0B) were 24.2% for Revenue, 27.2% for Operating Income, 28.9% for Ordinary Income, and 23.7% for Net Income. Compared with the simple quarterly equal-progress benchmark of 25%, Operating Income and Ordinary Income were slightly ahead of schedule, while Net Income was slightly behind, resulting in a mixed profile. Although no revisions were made to the earnings forecasts, it should be noted that the dividend forecast was revised in connection with a stock split of 2-for-1, effective October 1, 2026.

Shareholder Returns

The Company’s projected annual dividend, on a basis excluding the impact of the stock split, is ¥85 per share for the year-end dividend and ¥170 per share annually. The Payout Ratio against projected EPS of ¥139.3 is approximately 122.0% (¥170 ÷ ¥139.3), indicating a high level of shareholder returns relative to earnings. The Company also conducted share repurchases during Q1 (▲¥2.4B in cash flow terms), continuing shareholder return activities in addition to dividends. However, Operating Cash Flow was negative ¥24.7B during the quarter, meaning that dividend payments of ▲¥14.7B and share repurchases of ▲¥2.4B were effectively funded by the cash balance. The financial foundation of approximately ¥251B in net cash supports the continuation of near-term shareholder returns, while the sustainability of a 122% Payout Ratio depends on achieving the full-year earnings target and normalizing Operating Cash Flow.

Risk Factors

1. Increase in working capital and cash conversion efficiency: Operating CF was negative ¥24.7B due to increases of +¥66.0B in trade receivables and +¥22.7B in inventories. Based on a 91-day quarter, the estimated days sales outstanding were approximately 75 days, inventory turnover days were approximately 51 days, and accounts payable turnover days were approximately 79 days. The resulting Cash Conversion Cycle was equivalent to approximately 47 days, suggesting that working capital requirements may continue to expand during the revenue growth phase.

2. Segment concentration and continuing losses at XTech: Electronics accounts for 55.9% of total revenue, creating a structure in which demand trends in this segment have a significant impact on company-wide performance. XTech recorded Revenue of ¥17.9B (YoY -5.5%) and an Operating Loss of ▲¥0.3B, with losses widening from the previous year. The timing of monetization of the new business remains uncertain.

3. High Payout Ratio and sources of shareholder returns: The projected Payout Ratio is approximately 122%, with dividend payments and share repurchases being made while Operating CF is negative for the current quarter. Approximately ¥251B in net cash will serve as the source of funding for the time being, but the sustainability of shareholder returns will depend on the achievement of the full-year earnings and cash flow plans.

Industry Benchmark (Reference; Prepared by the Company)

Profitability and Return

Growth and Capital Efficiency

※Source: Compiled by the Company

Key Points from the Earnings Results

1. The +158bp improvement in the Operating Income margin reflects fixed-cost absorption accompanying revenue growth and reduced dependence on extraordinary gains (¥6.05B in the previous year → ¥0.59B in the current period). The “quality” of profit growth has improved, with a higher proportion derived from core operations than in the previous year.

2. Operating Cash Flow was negative ¥24.7B, creating a gap from Net Income of ¥14.2B. This reflects the accumulation of trade receivables and inventories during the revenue growth phase, and progress in collecting and reducing these balances will be a key focus in evaluating the cash conversion of earnings.

3. The dividend forecast was revised in connection with the stock split, and the Payout Ratio on a pre-split equivalent basis is approximately 122%, a high level. The appropriateness of this level depends on achieving the full-year earnings plan and progress toward normalizing cash flow.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type model with an explicit five-year fade). It is not a forecast of the market share price or a recommendation to take any specific investment action.

Sensitivity: ¥3,556–¥3,762 at ±1% for the cost of equity, and ¥3,632–¥3,673 at ±0.1 for ω.

Notes:

• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the end of the quarter are used; there is a timing difference relative to the full-year forecast.

(Model used: Residual Income Model / Interest Rate Reference Month: 2026-06 / This value does not forecast or guarantee the future share price.)

---

This report is an earnings analysis document automatically generated by AI based on XBRL earnings release 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 with a professional as necessary.

---End of Report---