| Indicator | Current Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥6589.4B | ¥5477.8B | +20.3% |
| Operating Income / Operating Profit | ¥278.2B | ¥236.0B | +17.9% |
| Equity Method Investment Income (Loss) | ¥0.4B | ¥-0.9B | +143.3% |
| Ordinary Income | ¥299.3B | ¥225.9B | +32.5% |
| Net Income / Net Profit | ¥198.9B | ¥127.1B | +56.5% |
| ROE | 10.8% | 7.6% | - |
For the fiscal year ended March 2026, Kaga Electronics achieved revenue of ¥6,589.4B (YoY +¥1,111.6B +20.3%), Operating Income of ¥278.2B (YoY +¥42.2B +17.9%), Ordinary Income of ¥299.3B (YoY +¥73.4B +32.5%), and Net Income attributable to owners of the parent of ¥198.9B (YoY +¥71.8B +56.5%), representing year-on-year revenue and profit growth. Extraordinary gains of ¥109.2B, including ¥78.0B gain on negative goodwill arising from consolidation of 8 newly consolidated companies, lifted profit before tax to ¥403.8B and resulted in a substantial increase in net income. The core Electronic Components Business drove results with a 86.9% revenue composition and Operating Income of ¥193.0B, while the Information Equipment Business also performed well with revenue up +29.7%. Conversely, Operating Cash Flow was negative ¥-24.7B, representing -0.12x of Net Income, as working capital expansion prevented realization of profits into cash, producing Free Cash Flow of negative ¥-59.4B. Total assets expanded to ¥4,036.9B (YoY +¥980.2B), and short-term borrowings surged to ¥683.98B (+¥535.1B), increasing reliance on short-term funding.
[Revenue] Revenue of ¥6,589.4B (YoY +20.3%) was led by the core Electronic Components Business at ¥5,727.9B (YoY +20.2%), accounting for 86.9% of sales, supported by rising demand for semiconductors, general electronic components and EMS, and the effect of consolidation of 8 new companies. The Information Equipment Business recorded ¥696.8B (YoY +29.7%) with strong sales of PCs, peripherals and home appliances, and Other Businesses posted ¥383.7B (YoY +10.6%) driven by steady electronics equipment repair and amusement machines. The Software Business declined to ¥44.4B (YoY -4.6%) as CG video production and amusement-related revenues decreased. Gross profit was ¥853.5B (gross margin 13.0%), up ¥181.9B YoY, but gross margin declined 0.1pp from 13.1% due to product mix changes and pricing competition.
[Profitability] SG&A expenses were ¥575.2B (SG&A ratio 8.7%), up ¥95.6B YoY, but improved 0.1pp against sales from 8.8% the prior year, resulting in Operating Income of ¥278.2B (Operating margin 4.2%), up 17.9% YoY. Non-operating income included interest income ¥10.6B (prior ¥13.0B), dividend income ¥4.0B (prior ¥2.5B), and foreign exchange gains ¥1.8B; non-operating expenses included foreign exchange losses ¥23.4B (prior ¥23.4B) and interest expense ¥9.1B (prior ¥7.7B), producing Ordinary Income of ¥299.3B (YoY +32.5%), exceeding operating-stage growth. Extraordinary gains of ¥109.2B comprised ¥78.0B gain on negative goodwill, ¥16.6B gain on sales of investment securities, etc., and pushed profit before tax to ¥403.8B. After deducting income taxes of ¥92.1B (effective tax rate 22.8%), Net Income attributable to owners of the parent was ¥198.9B (YoY +56.5%).
The Electronic Components Business is the core segment with Revenue ¥5,727.9B (YoY +20.2%) and Operating Income ¥193.0B (YoY +14.0%), representing 86.9% of sales and 69.4% of Operating Income. Its margin of 3.4% fell 0.2pp from 3.6% due to volatility in semiconductor and electronic component markets and changes in procurement terms. The Information Equipment Business recorded Revenue ¥696.8B (YoY +29.7%) and Operating Income ¥44.4B (YoY +34.4%), with margin improving to 6.4% from 6.1% owing to recovery in PC and peripheral demand and improved product mix. The Software Business posted Revenue ¥44.4B (YoY -4.6%) and Operating Income ¥3.6B (YoY -28.3%), margin deteriorating to 8.2% from 10.1% due to reduced CG video production projects. Other Businesses achieved Revenue ¥383.7B (YoY +10.6%) and Operating Income ¥34.9B (YoY +28.8%), margin improving to 9.1% from 8.4% supported by expansion in electronics equipment repair and support services.
[Profitability] Operating margin 4.2% (prior 4.3%), Net margin 3.0% (prior 2.3%), showing slight decline at the operating level but improvement in net margin due to extraordinary gains. Gross margin 13.0% (prior 13.1%), SG&A ratio 8.7% (prior 8.8%), indicating partial absorption of gross margin decline through SG&A efficiency. ROE 10.8% (prior 8.7%) was driven by substantial net income increase and equity reduction via share buybacks. ROA (on Ordinary Income basis) improved to 8.4% (prior 7.6%). [Cash Quality] Operating Cash Flow of ¥-24.7B equals -0.12x of Net Income ¥198.9B, primarily due to working capital expansion: Accounts receivable increase ¥-388.7B and inventories increase ¥-69.6B. Operating CF subtotal was ¥45.5B including depreciation ¥53.1B, from which working capital changes of ¥-94.9B and tax payments ¥-75.8B were deducted. [Investment Efficiency] Capex ¥37.9B is 0.71x of depreciation ¥53.1B, a conservative level; total asset turnover was 1.63x, reflecting efficient asset use. Basic EPS 627.71円 (prior 325.08円) increased +93.1%, BPS 3,850.35円 (prior 3,162.68円) increased +21.8%. [Financial Soundness] Equity Ratio 45.5% (prior 54.4%) declined 8.9pp due to increase in short-term borrowings; Interest-bearing debt ¥749.7B (prior ¥253.9B), Debt/EBITDA ratio 2.26x increased, but current ratio 175.2% and quick ratio 149.8% indicate maintained liquidity.
Operating Cash Flow was ¥-24.7B (prior +¥250.5B), a sharp deterioration from ¥250.5B. From an operating CF subtotal of ¥45.5B (prior ¥278.0B), working capital changes included accounts receivable increase ¥-388.7B (prior ¥-10.4B), inventories increase ¥-69.6B (prior a decrease of ¥+23.6B), and trade payables increase ¥+101.1B (prior +¥20.4B), reflecting pronounced working capital expansion due to sales growth and newly consolidated companies. Payments of income taxes ¥-75.8B, cash receipts of interest and dividends ¥+14.7B, and interest payments ¥-9.2B contributed, resulting in negative operating CF. Investing CF was ¥-34.7B (prior -¥99.7B); Capex was ¥-37.9B (prior -¥52.5B), kept restrained, while acquisition of subsidiary shares ¥-73.7B and purchases of investment securities ¥-49.7B were offset by sales of investment securities ¥+60.2B and net changes in time deposits ¥+72.3B. Free Cash Flow was ¥-59.4B (prior +¥150.8B). Financing CF was ¥+203.3B (prior -¥73.4B), with net increase in short-term borrowings ¥+534.9B as the primary funding source, long-term borrowings net +¥1.0B, repayments -¥67.1B, bond redemptions -¥52.0B, dividend payments -¥57.4B, and share buybacks -¥144.5B covered. Cash and cash equivalents increased from ¥726.8B at the beginning of the period to ¥882.9B at the end (after foreign exchange effect +¥8.9B), up ¥152.8B, indicating liquidity secured through short-term borrowings.
Of Net Income ¥198.9B, Extraordinary Gains ¥109.2B (including ¥78.0B gain on negative goodwill and ¥16.6B gain on sales of investment securities) significantly contributed, and the uplift from Ordinary Income ¥299.3B to profit before tax ¥403.8B was driven by transitory factors. Non-operating income comprised interest income ¥10.6B and dividend income ¥4.0B, while foreign exchange losses ¥23.4B offset some of this, leaving net non-operating income at +¥21.1B, a positive contribution. The divergence between Operating CF ¥-24.7B and Net Income ¥198.9B is mainly due to working capital expansion from accounts receivable +¥388.7B and inventories +¥69.6B, and the non-cash adjustment of gain on negative goodwill -¥78.0B also suppressed operating CF. Comprehensive Income ¥377.1B exceeded Net Income ¥198.9B substantially, with other comprehensive income of +¥65.5B comprising foreign currency translation adjustment +¥47.0B, valuation difference on available-for-sale securities +¥15.7B, and actuarial differences related to retirement benefits +¥2.6B. Comprehensive income attributable to owners of the parent was ¥374.3B and to non-controlling interests ¥2.8B, indicating that FX fluctuations and valuation gains on holdings materially increased comprehensive shareholder value; however, earnings quality depends on extraordinary gains and valuation gains.
The company initial plan (start of FY ended March 2026) was Revenue ¥6,450.0B (YoY -2.1%), Operating Income ¥285.0B (YoY +2.4%), Ordinary Income ¥280.0B (YoY -6.5%), Net Income attributable to owners of the parent ¥200.0B, EPS 419.65円, and dividend ¥70.00円. Actual results were Revenue ¥6,589.4B (vs plan +2.2%), Operating Income ¥278.2B (vs plan -2.4%), Ordinary Income ¥299.3B (vs plan +6.9%), Net Income ¥198.9B (vs plan -0.5%), EPS 627.71円 (vs plan +49.6%), and dividend ¥140.00円 (vs plan +100.0%), with revenue and ordinary income exceeding plan, operating income slightly below plan, and net income nearly in line. Outperformance was mainly due to contributions from 8 newly consolidated companies and extraordinary gains including ¥78.0B gain on negative goodwill; on an operating-performance basis, results broadly matched plan. The dividend comprised ordinary dividend ¥110 and a special dividend ¥30, totaling ¥140, a substantial raise of ¥70 from plan. For the next fiscal year, excluding one-off extraordinary gains, net income is expected to decline to around ¥200.0B, and normalization of operating CF and release of working capital will determine achievability of forecasts.
Annual dividend was ¥140.00 (Q2-end ¥60.00, Year-end ¥80.00), with a payout ratio of 33.8%, a healthy level. The dividend consisted of ordinary dividend ¥110 (Q2-end ¥55, Year-end ¥55) plus special dividend ¥30 (Q2-end ¥5, Year-end ¥25), representing an increase of ¥30 from the prior year dividend ¥110 (adjusted for stock split). Share buybacks amounted to ¥144.5B, aimed at restraining dilution and improving capital efficiency against an average shares outstanding of 49,544 thousand during the period. Combined dividends ¥57.8B and share buybacks ¥144.5B yielded total shareholder returns of ¥202.3B, and a Total Return Ratio of 101.7%, exceeding Net Income. However, with Operating CF ¥-24.7B and Free Cash Flow ¥-59.4B negative, the period’s total return was funded by net short-term borrowings ¥+534.9B. Going forward, dividend policy should consider the disappearance of one-off extraordinary gains and be based on sustainable profit levels and FCF generation. A target payout ratio in the 30% range is suggested, contingent on normalization of working capital and improvement in operating CF to sustain total returns.
Working Capital Management Risk: Accounts receivable ¥1,633.3B (YoY +54.0%), inventories ¥495.0B (YoY +37.9%) indicate significant working capital expansion and operating CF turned negative ¥-24.7B. Days Sales Outstanding (DSO) deteriorated to 90.5 days (prior 70.7 days), and inventory days lengthened to 31.6 days (prior 27.6 days), raising risks of delayed collections and inventory stagnation. If normalization of working capital does not progress, increased reliance on short-term borrowings and higher interest burden are concerns.
Short-term Funding Dependency Risk: Of interest-bearing debt ¥749.7B, short-term borrowings ¥683.98B account for 91.2%, indicating extremely high refinancing dependence. Against short-term liabilities ¥1,954.4B, cash and deposits ¥897.1B (coverage ratio 45.9%) raise the risk that deterioration in market conditions or higher interest rates could worsen rollover conditions and strain liquidity. Improvements to the financing structure such as conversion to long-term funding or securing committed lines are needed.
Reliance on One-off Gains Risk: Of Net Income ¥198.9B, Extraordinary Gains ¥109.2B (including ¥78.0B gain on negative goodwill and ¥16.6B gain on sale of investment securities) are included, and the disappearance of these one-off items next fiscal year is expected to materially reduce Net Income. Operating margin 4.2% and gross margin 13.0% are low, so a deterioration in electronic components markets or adverse currency movements could weaken earnings power on an ordinary basis.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 4.2% | 3.4% (1.4%–5.0%) | +0.9pt |
| Net Margin | 3.0% | 2.3% (1.0%–4.6%) | +0.7pt |
Both operating margin and net margin exceed the industry median, placing the company in a favorable profitability position among specialized trading companies.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 20.3% | 5.9% (0.4%–10.7%) | +14.5pt |
Revenue growth of +20.3% substantially exceeds the industry median +5.9%, driven by new consolidations and recovery in demand for electronic components.
※ Source: Company compilation
The substantial increase in Net Income this period (+56.5%) was mainly driven by Extraordinary Gains including ¥78.0B gain on negative goodwill; next fiscal year is expected to revert to performance closer to underlying operating capability as one-off factors fade. With Operating margin 4.2% and Gross margin 13.0%, the earnings cushion is thin and the company is sensitive to electronic components market conditions and currency movements. While ROE 10.8% indicates good capital efficiency, it is important to assess sustainable ROE excluding the effects of extraordinary gains and share buybacks.
Operating CF ¥-24.7B and FCF ¥-59.4B indicate poor cash conversion, mainly due to working capital expansion with Accounts receivable +¥388.7B and inventories +¥69.6B. Total shareholder returns ¥202.3B (dividends + buybacks) were funded by short-term borrowings of ¥+534.9B, so improving cash flow structure is urgent. High short-term borrowing dependency of 91.2% increases refinancing risk in a rising interest rate or deteriorating market environment. Key points to monitor next year are the pace of working capital normalization, improvement in operating CF, and progress in reducing short-term funding dependency, which will determine sustainability of shareholder returns.
This report is an earnings analysis document automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are aggregated by our firm using public financial statement data as reference information. Investment decisions should be made at your own responsibility; consult a professional advisor as necessary.