| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥2098.4B | ¥1790.9B | +17.2% |
| Operating Income / Operating Profit | ¥128.8B | ¥106.3B | +21.2% |
| Ordinary Income | ¥131.8B | ¥99.5B | +32.4% |
| Net Income / Net Profit | ¥53.2B | ¥28.1B | +89.4% |
| ROE | 5.6% | 3.3% | - |
For the fiscal year ending March 2026, revenue was ¥2,098B (YoY +¥307B +17.2%), Operating Income was ¥129B (YoY +¥23B +21.2%), Ordinary Income was ¥132B (YoY +¥32B +32.4%), and Net Income attributable to owners of the parent was ¥91B (YoY +¥22B +33.3%), achieving revenue and profit increases at all stages. Revenue expanded by several hundreds of billions of yen, with a gross margin of 22.4% (previous year 21.6%, +0.8pt) and an operating margin of 6.1% (previous year 5.9%, +0.2pt), reflecting multi-level profitability improvements. Rapid overseas expansion (International revenue +50.4%) and profitability recovery in Plant Engineering (Operating Income +92.3%) drove growth, and foreign exchange gains of ¥6.2B in non-operating items also contributed to growth at the ordinary income level. Operating Cash Flow was ¥151B, 1.7x Net Income, supported by an increase in contract liabilities (+¥48B) providing cash inflows, while Investing Cash Flow was -¥170B due to proactive investments, resulting in Free Cash Flow of -¥19B. Progress against the full-year forecasts was 87% for revenue and 86% for operating income, short of targets, but a contract liabilities balance of ¥195B suggests room for future revenue recognition.
[Revenue] Revenue reached ¥2,098B (YoY +17.2%), achieving double-digit growth. By segment, International (Revenue ¥568B, +50.4%) was the largest growth driver, aided by expanded domestic demand and progress on overseas projects. Plant Engineering (¥585B, +11.7%) also achieved double-digit growth, with steady digestion of EPC orders. Service Solutions (¥612B, +6.9%) and Operating (¥335B, +5.2%) maintained stable expansion. In revenue composition, Service Solutions was largest at 29.1%, followed by Plant and International at 27.9% and 27.0% respectively. Contract liabilities accumulated to ¥195B (YoY +¥48B), confirming a healthy backlog.
[Profitability] Operating Income of ¥129B (+21.2%) outpaced revenue growth, aided by improvement in gross margin (22.4%, YoY +0.8pt) and absorption of SG&A. SG&A ratio rose slightly to 16.3% (previous year 15.7%), but the absolute SG&A increase (+21.6%) was broadly in line with revenue growth, indicating operating leverage largely at work. By segment, Plant Engineering materially improved its margin to 7.8% (previously 4.5%, +3.3pt), doubling Operating Income to ¥45B (+92.3%). Conversely, Service Solutions saw Operating Income decline to ¥26B (-23.3%), with margin falling to 4.3% (previously 5.6%, -1.3pt). International’s margin at 5.8% lagged Operating’s 7.2%, indicating room for profitability management. Non-operating items included foreign exchange gains of ¥6.2B and interest income of ¥2.8B, which substantially exceeded interest expense of ¥5.1B (Interest Coverage 25.1x). Extraordinary items were minor (Extraordinary Income ¥0.9B, Extraordinary Loss ¥2.1B), and after an effective tax rate of 27.3%, Net Income was ¥91B. In conclusion, revenue and profit growth was achieved, driven by overseas expansion and EPC profitability recovery.
Plant Engineering (Revenue ¥585B, +11.7%) saw Operating Income of ¥45B (+92.3%), with margin sharply improving to 7.8%. Profitability recovery in water and sewage plant EPC projects and established project cost management contributed, making it the highest-margin segment. Service Solutions (Revenue ¥612B, +6.9%) reported Operating Income of ¥26B (-23.3%) and a margin decline to 4.3%. While revenues in electrical equipment maintenance and upkeep expanded, higher SG&A and project cost increases pressured profitability. Operating (Revenue ¥335B, +5.2%) delivered Operating Income of ¥24B (+9.3%), maintaining a 7.2% margin and demonstrating stable profitability in operations. International (Revenue ¥568B, +50.4%) recorded Operating Income of ¥33B (+25.3%), with a 5.8% margin. Significant expansion of overseas plant projects drove company-wide growth, but the margin lags those of Operating and Plant Engineering, highlighting the need for improved execution management.
[Profitability] Operating margin 6.1% (previous year 5.9%, +0.2pt), Gross margin 22.4% (previous year 21.6%, +0.8pt), Net margin 4.3% (previous year 3.8%, +0.5pt) all improved across stages. ROE 5.6% (as stated in financial data) benefited from higher net margin and an increase in total asset turnover to 0.95 (prior year equivalent 0.91). EBIT margin 6.1% aligns with operating margin, and interest burden is minimal (interest burden factor 1.014, Interest Coverage 25.1x), indicating no material pressure from financing costs. [Cash Quality] Operating Cash Flow / Net Income 1.66x is high, and Operating CF / EBITDA 0.93x shows good conversion of earnings to cash. The accrual ratio is -2.7% (=1 – ¥151.3B/¥91.4B), indicating limited distortion and solid earnings quality. [Investment Efficiency] Capital Expenditure / Depreciation 1.37x indicates a growth investment phase; Goodwill / Shareholders’ Equity 4.1%, Goodwill / EBITDA 0.24x suggest minimal M&A burden. Total asset turnover improved to 0.95x. [Financial Soundness] Equity Ratio 42.7% (previous year 43.4%, -0.7pt), Current Ratio 205.8%, Quick Ratio 205.8% show ample liquidity; Debt/EBITDA 0.31x and Debt/Capital 5.1% reflect a conservative balance sheet. DSO 191 days and CCC 130 days indicate working capital efficiency challenges, but cash of ¥272.7B sufficiently covers short-term liabilities.
Operating Cash Flow was ¥151.3B (YoY +13.6%), 1.66x Net Income of ¥91.4B, reflecting high-quality cash generation. Operating CF subtotal (pre-working capital changes) was ¥189.6B, with decreases in trade receivables of ¥46.3B and increases in contract liabilities of ¥47.7B as primary cash inflows, where accumulation of advance payments typical of project businesses supported liquidity. Inventories increased by ¥25.0B and trade payables increased by ¥27.1B, but net working capital movements were net positive. Even after tax payments of ¥37.8B and interest payments of ¥5.2B, Operating CF remained at a solid level. Investing Cash Flow was -¥170.3B, driven by capital expenditures of ¥47.3B, acquisition of investment securities ¥64.3B (previous year ¥1.4B), and acquisition of intangible assets ¥24.2B, reflecting active growth investment and portfolio-building. Free Cash Flow was -¥18.9B, a temporary negative driven by front-loaded investments; given the quality of Operating CF and the buildup of contract liabilities, there is significant scope for recovery in subsequent periods. Financing Cash Flow was -¥71.7B, primarily due to dividend payments of ¥26.6B and net repayments of short-term borrowings (-¥35.4B). Cash and cash equivalents decreased to ¥267.4B (previous year ¥356.8B, -¥89.5B), but liquidity risk remains very low.
The bulk of revenue derives from four businesses—Environmental Engineering, System Solutions, Operations, and International—which provide recurring earnings; the combination of project-type EPC and stable operations revenue forms a structural revenue base. Non-operating income totaled ¥11.8B (0.6% of revenue), mainly foreign exchange gains ¥6.2B, interest income ¥2.8B, and dividend income ¥1.9B. Although the foreign exchange gains include transitory elements, their impact on Operating Income is limited and they serve mainly as an uplift at the ordinary income level. Extraordinary items were minor (Extraordinary Income ¥0.9B, Extraordinary Loss ¥2.1B), indicating no distortion of the profit structure. With an accrual ratio of -2.7%, Operating CF / Net Income 1.66x, and Operating CF / EBITDA 0.93x, cash realization of earnings is healthy and reliance on accounting estimates is low. Comprehensive income of ¥113.5B exceeded Net Income of ¥53.2B, with other comprehensive income including foreign currency translation adjustments ¥9.0B, retirement benefit adjustments ¥6.9B, and deferred hedge gains/losses ¥2.6B, all within normal business fluctuation ranges.
The full-year forecast called for Revenue ¥2,400B (YoY +14.4%), Operating Income ¥150B (+16.5%), Ordinary Income ¥145B (+10.1%), and Net Income attributable to owners of the parent ¥100B. Actuals reached 87.4% of revenue, 85.9% of operating income, and 91.4% of Net Income attributable to owners of the parent, falling short of targets. The approximate 10–14% shortfall in revenue and operating income is likely attributable to timing shifts in overseas projects and softness in Service Solutions profitability. Conversely, contract liabilities rose substantially to ¥195B (YoY +¥48B), securing a backlog that should feed revenue recognition in subsequent periods. Forecast dividend was ¥40 per share annually, while actual dividend was ¥70 (interim ¥35 + year-end ¥35); the payout ratio was 31.8%, a reasonable level, suggesting a flexible shareholder return stance based on progress and capital efficiency.
Dividends were interim ¥35 and year-end ¥35, annual ¥70, with a payout ratio of 31.8% relative to Net Income attributable to owners of the parent ¥91.4B, at an appropriate level. Total dividends amounted to ¥26.6B, representing 17.6% of Operating Cash Flow of ¥151.3B; relative to Free Cash Flow of -¥18.9B this temporarily exceeds coverage, but this is due to front-loaded investments, and sustainability is high given expected normalization of Operating CF and investments in subsequent periods. Share buybacks were limited to ¥2.5B, keeping Total Return Ratio around 32%. With cash and deposits of ¥272.7B and Debt/EBITDA 0.31x, internal funding coverage for dividends is sufficient in the medium term, and scope for dividend increases remains.
Project-based business cost overruns and schedule delay risk: Provisions for construction losses ¥12.3B and warranty provisions for completed construction ¥24.4B have been recorded, indicating the importance of cost control and timely delivery on large EPC projects. The presence of Work-in-Progress ratio (WIP ¥20.7B / Total inventory ¥142.4B = 14.5%) and Construction in Progress ¥30.4B (22.0% of tangible fixed assets) suggests material execution risk on projects.
Prolonged working capital efficiency risk: DSO 191 days and CCC 130 days indicate an extended working capital cycle; delays in collection of trade receivables ¥1,099B or delays in converting contract liabilities ¥195B to revenue could increase cash flow volatility. Pace of backlog digestion and stringent receivables management are essential for cash flow stability.
Execution management and foreign exchange risk in overseas operations: International revenue rapidly expanded to ¥568B (+50.4%), and foreign exchange gains of ¥6.2B boosted non-operating income, but reversal of currency movements or uncertainties in local construction could impact earnings and cash flows. Valuation volatility risk on investment securities of ¥85.4B (YoY +268%) is an additional concern.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 6.1% | 19.9% (6.5%–38.3%) | -13.8pt |
| Net Margin | 2.5% | 5.6% (3.8%–22.2%) | -3.1pt |
Profitability is well below the industry median, reflecting structural differences from the mix of project-type EPC and operations business. Margin improvement trends (Operating Margin +0.2pt, Gross Margin +0.8pt) are nonetheless commendable.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 17.2% | -0.5% (-0.9%–13.1%) | +17.7pt |
Revenue growth outperformed the industry median by 17.7pt, clearly demonstrating the competitive advantage of international expansion as a growth driver.
※ Source: Company aggregation
Acceleration of International and Plant Engineering growth: International revenue +50.4% and Plant Engineering Operating Income +92.3% indicate overseas expansion and EPC profitability recovery driving profit growth. Accumulation of contract liabilities ¥195B (+¥48B) suggests room for future revenue recognition and supports the continuation of the medium-term growth story. Operating margin 6.1% (+0.2pt) and Gross margin 22.4% (+0.8pt) are on an improving trend; if order pricing and cost controls remain in place, there is further upside to margins.
Cash generation quality is strong, but FCF is negative due to front-loaded investments: Operating CF ¥151B is 1.66x Net Income and OCF/EBITDA 0.93x shows solid cash conversion. However, Investing CF -¥170B (acquisition of investment securities ¥64B, CapEx ¥47B) resulted in FCF -¥19B temporarily. Normalization of investment pace and improvements in working capital (DSO 191 days, CCC 130 days) should materially improve FCF, restoring internal cash coverage for dividends. Financial soundness is high (Debt/EBITDA 0.31x, Equity Ratio 42.7%), providing room to balance growth investments and shareholder returns.
Recovery in Service Solutions profitability and working capital efficiency are next catalysts: Service Solutions grew revenue +6.9% but Operating Income fell -23.3%, reducing margin to 4.3%. A review of the segment’s cost structure and fixed-cost absorption is required. Long working capital cycles (DSO, CCC) depend on backlog digestion pace and receivables management; normalization will be key to improving cash flow and capital efficiency. Goodwill / Equity 4.1% and Goodwill / EBITDA 0.24x indicate limited M&A burden, leaving room to focus on improving profitability of existing businesses.
This report was auto-generated by AI analyzing 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 appropriate before acting.