| Metric | This Period | Prior Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥7886.7B | ¥6783.9B | +16.3% |
| Operating Income | ¥405.4B | ¥647.6B | -37.4% |
| Ordinary Income | ¥382.5B | ¥690.4B | -44.6% |
| Net Income | ¥98.6B | ¥305.7B | -67.7% |
| ROE | 1.7% | 5.7% | - |
For the fiscal year ended March 2026, Revenue was ¥7,886.7B (YoY +¥1,102.8B, +16.3%), achieving double-digit top-line growth. However, Operating Income was ¥405.4B (YoY -¥242.2B, -37.4%), Ordinary Income ¥382.5B (YoY -¥307.9B, -44.6%), and Net Income attributable to owners of the parent ¥98.6B (YoY -¥207.1B, -67.7%), representing significant profit declines. Revenue growth was driven by strong performance in the core Lease & Installment segment (+16.0%) and the Finance segment (+16.1%), but gross margin deteriorated to 13.1% from 17.6% a year earlier (≈-4.5pt), and the operating margin fell to 5.1% from 9.5% (≈-4.4pt). The sharp decline in Finance segment operating profit (-95.7%) was the main cause of the company-wide profit drop. In addition, higher non-operating expenses such as interest expense of ¥43.2B and forex losses of ¥10.8B further pressured Ordinary Income.
[Revenue] Revenue was ¥7,886.7B (+16.3%). By segment, Lease & Installment external customer sales were ¥6,770.1B (+16.0%), Finance ¥455.7B (+16.1%), and Others ¥660.9B (+18.6%), all recording double-digit growth. Segment composition was Lease & Installment 85.8%, Finance 5.8%, Others 8.4%, with the core Lease & Installment business driving revenue. Growth was supported by increases in lease contract volumes and asset sales, but gross margin declined substantially due to spread compression and changes in sales mix.
[Profitability] Operating Income decreased sharply to ¥405.4B (-37.4%), with an operating margin of 5.1% (down ≈4.4pt from 9.5% a year ago). Cost of sales was ¥6,854.4B so gross profit was ¥1,032.2B (gross margin 13.1%), about 4.5pt worse than the prior year. SG&A was ¥626.8B (SG&A ratio 7.9%, improved ≈-0.1pt YoY) reflecting cost control efforts, but could not offset gross profit deterioration. By segment, Lease & Installment Operating Income was ¥446.3B (+2.0%, margin 6.6%) and remained resilient, while Finance declined to ¥10.9B (-95.7%, margin 1.9%) causing the bulk of the firmwide profit fall. Ordinary Income was ¥382.5B (-44.6%); non-operating income totaled ¥61.4B (dividends received ¥37.3B, interest received ¥4.3B, etc.) while non-operating expenses were ¥84.4B (interest expense ¥43.2B, forex losses ¥10.8B, equity method losses ¥17.4B, etc.) weighing on results. Extraordinary items contributed a net +¥17.2B (gains on sales of investment securities ¥14.2B, gain on negative goodwill ¥10.4B, impairment losses -¥2.5B, valuation losses on investment securities -¥3.5B, etc.) providing a temporary boost. After income taxes of ¥151.2B and non-controlling interests of ¥32.8B, Net Income attributable to owners of the parent was ¥98.6B (-67.7%). In summary, the company delivered revenue growth but profit contraction driven by margin compression and higher non-operating costs.
The Lease & Installment segment reported Revenue ¥6,776.4B (+16.0%) and Operating Income ¥446.3B (+2.0%), with a stable margin of 6.6%. The Finance segment had Revenue ¥557.3B (+16.1%) but Operating Income plunged to ¥10.9B (-95.7%), lowering margin to 1.9%. Factors likely include changes in the interest rate environment, higher credit costs, and reduced securities investment returns. The Others segment lacks detailed disclosure, but total segment Operating Income of the two main segments was ¥457.2B versus consolidated Operating Income of ¥405.4B, implying corporate adjustments of about -¥51.8B. Earnings volatility in the Finance segment is a material source of company-wide instability; profit margin recovery in that segment will be a key focus next fiscal year.
[Profitability] Operating margin 5.1%, Net margin 1.3% (on parent company net income basis), ROE 1.7%, ROA 1.1% (on Ordinary Income basis) — all at low levels and materially worse than the prior year. ROE of 1.7% decomposes as Net margin 1.3% × Asset turnover 0.21 × Financial leverage 6.16x, with the decline in net margin being the largest driver. [Cash Quality] Operating Cash Flow (OCF) was -¥1,649.2B, a large negative. OCF/NI ratio was -16.72x, and OCF/EBITDA ratio was -3.45x (EBITDA computed as Operating Income ¥405.4B + Depreciation ¥47.2B + Goodwill amortization ¥3.2B ≈ ¥477.2B), indicating very weak cash conversion. Free Cash Flow was -¥1,637.5B, implying reliance on external financing for dividends. [Investment Efficiency] Total asset turnover 0.21x, ROIC 1.2% (NOPAT ¥297.6B ÷ Invested capital ≈ ¥24.5T = liabilities + equity - cash; approximate), indicating low capital efficiency. Goodwill was ¥369.5B, about 0.77x of EBITDA, and goodwill amortization as a percentage of EBITDA is about 0.7%, a minor burden. [Financial Soundness] Equity Ratio 14.8% (prior 15.0%), D/E ratio 5.76x, Debt/Equity 74.6%, Current Ratio 145.8%, Quick Ratio 145.8% — high leverage but short-term liquidity is maintained. However, cash & deposits ¥799.5B versus short-term borrowings ¥5,984.3B, CP ¥2,920.0B, and bonds maturing within one year ¥816.0B results in a cash/short-term debt ratio of 0.13x, indicating weak immediate liquidity. Interest coverage is 9.38x (EBIT ¥405.4B ÷ interest expense ¥43.2B), suggesting interest payment capacity is secured for now, but Debt/EBITDA is about 36.9x — extremely high — and long-term debt is substantial (long-term borrowings ¥10,711.3B, bonds ¥4,143.2B).
Operating Cash Flow was deeply negative at -¥1,649.2B, worsening from -¥1,363.8B the prior year. Operating CF subtotal (before working capital changes) was -¥1,095.5B, with interest & dividend received ¥49.4B, interest paid -¥415.1B, and income taxes paid -¥188.0B as major components. In working capital movements, accounts payable increased by ¥96.9B, but asset build-up in lease receivables and trading securities resulted in large net cash outflows. Investing Cash Flow was a net inflow of ¥11.7B, with subsidiary share acquisitions -¥15.0B and purchases of investment securities -¥175.5B offset by proceeds from subsidiary share sales and similar receipts of ¥105.4B and proceeds from sales of securities ¥128.6B. Financing Cash Flow was a large inflow of ¥1,717.6B: proceeds from long-term borrowings ¥6,107.0B, bond issuances ¥843.1B, net increase in CP ¥790.0B, offset by long-term borrowings repayments -¥4,917.7B, bond redemptions -¥957.4B, dividends paid -¥141.2B, and share buybacks -¥0.0B. Cash increased by ¥133.5B to ¥799.5B at year-end. The company’s business model—asset expansion accompanying growth investment—makes Operating CF structurally prone to negative outcomes, and high dependence on external financing increases liquidity risk if funding conditions deteriorate.
Operating Income ¥405.4B reflects the recurring earnings base, but non-operating items contributed a net -¥22.9B. Non-operating income of ¥61.4B includes dividends received ¥37.3B (0.5% of Revenue) and interest received ¥4.3B, indicating stable returns from investment securities. Non-operating expenses of ¥84.4B include interest expense ¥43.2B, forex losses ¥10.8B, and equity-method losses ¥17.4B, showing that interest rates, FX, and equity-method investments depressed earnings. Extraordinary items netted +¥17.2B (gains on sales of investment securities ¥14.2B, gain on negative goodwill ¥10.4B, etc.), but their impact on consolidated profits is limited. The difference between Ordinary Income ¥382.5B and Pre-tax Income ¥399.7B is due to extraordinary items; the decline from Pre-tax Income to Net Income attributable to owners of the parent ¥98.6B is driven by income taxes ¥151.2B (effective tax rate ≈37.8%) and non-controlling interests ¥32.8B. The accrual ratio ((Net Income ¥98.6B - Operating CF -¥1,649.2B) ÷ Total Assets ¥3.84T) is about 4.8%, within an acceptable range, but the significant shortfall of Operating CF relative to Net Income and EBITDA indicates weak cash-based earnings quality, with asset-driven working capital expansion widening the gap between profit and cash.
Full-year guidance projects Operating Income ¥700.0B (YoY +72.7%), Ordinary Income ¥750.0B (+96.1%), and Net Income attributable to owners of the parent ¥480.0B (implying a >+122% increase by calculation), expecting a significant rebound. Operating Income progress is ¥405.4B ÷ ¥700.0B ≈ 57.9%, implying substantial improvement is assumed in the second half. EPS forecast is ¥532.14 and dividend forecast is ¥86.00. Guidance assumes normalization of Finance segment earnings, improvement in spreads/margins, convergence of FX and one-off gains/losses, and stabilization of funding conditions. Given the large YoY profit decline in H1, achieving guidance requires meaningful improvement in the operating environment and successful execution of business initiatives; downside risks remain.
Dividends were interim ¥79 and year-end ¥79, totaling ¥158 (based on pre-split record, as a 1:3 stock split was implemented on April 1, 2025). With parent company Net Income ¥98.6B and weighted average shares outstanding during the period of 90,184 thousand shares, the payout ratio was approximately 66%, a high level. Free Cash Flow was -¥1,637.5B and FCF coverage was -11.6x, indicating dividends are not covered by internal cash generation and the company is dependent on external financing. However, the business model tends to generate negative Operating CF due to asset growth from investment for growth; dividend capacity therefore depends on capital market access and earnings stability. Share buybacks were -¥0.0B (negligible), so the Total Return Ratio is roughly in line with the payout ratio. The full-year dividend forecast is ¥86; if earnings recover as guided, the payout ratio would fall and sustainability would improve, but failure to meet guidance would raise concerns about dividend capacity. Cash & deposits ¥799.5B and investment securities ¥1,930.3B provide cushions, but continued high payout ratios warrant caution.
Margin compression and interest rate environment: Gross margin fell to 13.1% from 17.6% (≈-4.5pt), and operating margin declined to 5.1%. Continued spread compression or rising funding costs could prolong weak profitability. Interest expense rose to ¥43.2B from ¥29.4B a year earlier (≈+47%), so persistent high interest rates would further pressure profits.
Earnings volatility in the Finance segment: Finance segment Operating Income fell to ¥10.9B (-95.7%), with margin down to 1.9%. Performance is sensitive to interest rates, credit costs, and securities investment returns; volatility here is a key risk to achieving guidance. Failure to normalize Finance segment earnings next year would likely drag consolidated results down.
High leverage and liquidity risk: D/E ratio 5.76x and Debt/EBITDA ≈36.9x reflect high leverage. Short-term liabilities are substantial: short-term borrowings ¥5,984.3B, CP ¥2,920.0B, and bonds maturing within one year ¥816.0B. Cash/short-term debt ratio 0.13x indicates fragile immediate liquidity; deterioration in funding conditions or a ratings downgrade could crystallize refinancing risk and higher funding costs.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 5.1% | 8.8% (4.0%–20.0%) | -3.7pt |
| Net Margin | 1.3% | 4.3% (0.6%–11.3%) | -3.1pt |
Profitability metrics are below industry medians; both Operating Margin and Net Margin rank in the lower tier within the peer group.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 16.3% | 2.1% (-4.5%–6.9%) | +14.3pt |
Revenue growth substantially exceeds the industry median; the company belongs to the high-growth group within the sector.
※ Source: Company aggregation
Gap between revenue growth and profit decline, and margin trends: While Revenue grew +16.3%, Operating Income fell -37.4% and Net Income -67.7%, with gross margin worsening by about 4.5pt. The Finance segment’s steep profit decline and higher interest costs are primary causes. The next fiscal year’s guidance assumes a strong recovery, but realization depends on spread/margin improvement and normalization of funding conditions. Monitoring quarterly trends in gross margin and operating margin and the degree of profit recovery in the Finance segment will be important.
Weak cash conversion and high payout ratio: Operating CF was -¥1,649.2B (OCF/NI -16.72x), Free CF -¥1,637.5B, indicating very weak internal cash generation, while payout ratio is about 66% and dividends are financed externally. Asset-driven working capital increases are the main cause, and depending on interest rates this raises concerns about dividend sustainability. Cash & deposits ¥799.5B and investment securities ¥1,930.3B provide a buffer, but absent profit and OCF recovery, there is a risk that shareholder return capacity will need to be revised.
This report is an earnings analysis document automatically generated by AI analyzing XBRL earnings release data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information aggregated by the firm based on public financial statements. Investment decisions are your responsibility; please consult professionals as appropriate before acting.