| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1700.1B | ¥1559.6B | +9.0% |
| Operating Income | ¥171.2B | ¥146.9B | +16.6% |
| Equity Method Investment Income (Loss) | - | - | - |
| Ordinary Income | ¥179.8B | ¥155.7B | +15.5% |
| Net Income | ¥131.3B | ¥111.9B | +17.3% |
| ROE | 17.8% | 18.3% | - |
For the fiscal year ended March 2026, Totech achieved revenue of ¥1700.1B (YoY +¥140.5B +9.0%), Operating Income of ¥171.2B (YoY +¥24.3B +16.6%), Ordinary Income of ¥179.8B (YoY +¥24.1B +15.5%), and Net Income of ¥131.3B (YoY +¥19.4B +17.3%), resulting in higher revenue and profit. Operating income expanded faster than revenue growth, improving the operating margin to 10.1% (prior year 9.4%) (+0.7pt), and gross margin rose to 28.4% (prior year 26.8%) (+1.6pt). The Construction Business drove high growth with sales up +16.8%, and segment profit margins improved for both Construction (34.9%) and Product Sales (23.1%). Net income grew faster than operating income due to a special gain on sale of available-for-sale securities of ¥3.2B and increased dividend income (+¥0.9B). Financially, the equity ratio is solid at 64.0% and capital efficiency remained high with ROE of 17.8%, while Operating Cash Flow was down to ¥95.9B (YoY -30.9%) as a large decrease in accounts payable and tax payments pressured cash generation.
Revenue: Revenue was ¥1700.1B (+9.0%), with the Construction Business showing high growth at ¥762.9B (+16.8%) and the Product Sales Business delivering stable growth at ¥968.2B (+4.0%). Segment mix was Product Sales 56.9% and Construction 44.9%, indicating a significant contribution from Construction growth. External demand for air-conditioning and control equipment remained firm, and expanded orders for instrumentation and machinery installation work likely contributed. Gross profit was ¥482.8B (gross margin 28.4%), up ¥40.9B YoY and gross margin improved by +1.6pt. Segment profit margins improved to 34.9% for Construction (prior year 33.9%) and 23.1% for Product Sales (prior year 21.2%), reflecting favorable project mix and cost management contributing to gross profit expansion.
Profitability: Cost of sales was ¥1217.3B (cost ratio 71.6%), and cost ratio declined by -1.6pt YoY due to gross margin improvement. SG&A was ¥311.6B (SG&A ratio 18.3%), up ¥39.6B YoY (+14.6%), outpacing sales growth (+9.0%). SG&A increase was mainly due to higher depreciation from expanded PPE (+26.2%) and increased personnel and administrative costs associated with business expansion. As a result, Operating Income was ¥171.2B (Operating margin 10.1%), up +16.6%. Non-operating income was ¥13.4B, mainly dividend income ¥5.0B (prior ¥4.0B) and interest income ¥0.7B; non-operating expenses were ¥4.8B, with interest expense ¥1.3B (prior ¥0.8B) rising due to increased short-term borrowings. Ordinary Income was ¥179.8B (+15.5%). Extraordinary items were net +¥1.2B (extraordinary gains ¥3.2B, extraordinary losses ¥2.0B), with gains on sale of investment securities contributing but limited in scale. Profit before tax was ¥181.0B (+14.0%), income taxes ¥49.7B (effective tax rate 27.4%), resulting in Net Income of ¥131.3B (+17.3%). In conclusion, high growth in the Construction Business and margin improvements across both segments drove higher revenue and profit.
Product Sales Business: Revenue ¥968.2B (+4.0%), Segment Profit ¥216.9B (+10.0%), Segment Profit Margin 23.1% (prior year 21.2%)—margin improvement is notable. Demand for air-conditioning, control, and energy-saving equipment remained firm; price maintenance and cost control contributed to margin improvement. Construction Business: Revenue ¥762.9B (+16.8%), Segment Profit ¥265.7B (+20.0%), Segment Profit Margin 34.9% (prior year 33.9%)—both revenue growth and margin improvement were realized. Expanded orders in instrumentation, piping, and electrical installation works and an increase in high-margin projects likely contributed. Segment profit composition was Product Sales 45%, Construction 55%, indicating Construction contributes disproportionally more to profits relative to its sales share (Product 57%, Construction 43%). Other segments (solar power business) are very small: Revenue ¥0.3B (-13.2%), Segment Profit ¥0.1B.
Profitability: Operating margin 10.1% (prior 9.4%) improved +0.7pt, primarily driven by gross margin expansion to 28.4% (prior 26.8%) +1.6pt. SG&A ratio rose to 18.3% (prior 17.4%) +0.9pt, but gross margin expansion absorbed SG&A increases. ROE remained high at 17.8%, explained by Net Profit Margin 7.7% (prior 7.2%) × Total Asset Turnover 1.48× × Financial Leverage 1.56×. Improvement in net profit margin contributed to improved capital efficiency. EBIT was ¥171.2B with an EBIT margin of 10.1%; adjusting for goodwill amortization ¥7.3B, EBITDA is estimated at approximately ¥192B with an EBITDA margin of 11.3%. Cash Quality: Operating Cash Flow was ¥95.9B, representing 0.73× of Net Income ¥131.3B, indicating a deterioration in cash conversion. OCF/EBITDA ratio is about 0.50×, mainly due to working capital reversal (accounts payable decrease -¥79.9B) and tax payments -¥55.3B. Accrual ratio (Net Income - OCF)/Total Assets = 3.1% is acceptable, though temporary working capital volatility is significant. Investment Efficiency: Total Asset Turnover 1.48× (prior 1.48×) was flat; Days Sales Outstanding (DSO) improved to 70 days (prior 78 days). Inventory days shortened to 8 days (prior 10 days), improving inventory efficiency. Capex ¥57.3B is 3.6× depreciation ¥15.8B, indicating aggressive growth investment. PPE increased to ¥264.2B (prior ¥209.4B) +26.2%, expected to support future utilization and revenue. Financial Soundness: Equity Ratio rose to 64.0% (prior 58.2%), strengthening the financial base. Interest-bearing debt was ¥52.9B (short-term borrowings ¥49.6B, long-term borrowings ¥3.3B), Debt/EBITDA 0.28×, and Interest Coverage approximately 130× (EBIT/interest expense), indicating minimal interest burden. Current ratio 162.4%, quick ratio 151.4% indicate sound short-term payment capacity. However, short-term debt ratio 93.7% indicates concentration in short-term funding and highlights the importance of refinance management. Cash and deposits ¥113.0B are 2.3× short-term borrowings, providing ample liquidity.
Operating Cash Flow was ¥95.9B (YoY -30.9%). Starting from profit before tax ¥181.0B and adding non-cash expenses such as depreciation ¥15.8B and goodwill amortization ¥7.3B, subtotal OCF was ¥146.6B, but working capital reversal substantially reduced cash. The main driver was accounts payable decrease of -¥79.9B (prior -¥6.8B), likely affected by payment timing for construction projects and a reduction in payables at fiscal year-end. Accounts receivable worsened by +¥16.2B, and inventories contributed +¥8.6B. Corporate tax payments -¥55.3B were also a cash outflow. Investing Cash Flow was -¥85.1B, driven by capex -¥57.3B, acquisition of subsidiary shares -¥11.5B, and intangible asset acquisitions -¥5.8B. Proceeds from sale of investment securities ¥6.2B and net increase in time deposits ¥3.3B were positives. Free Cash Flow was ¥10.9B (OCF + Investing CF), down sharply from ¥138.8B prior year. Financing Cash Flow was -¥49.7B: net increase in short-term borrowings ¥39.2B was a positive, but dividend payments -¥52.5B, share buybacks -¥7.8B, and long-term debt repayments -¥29.3B were outflows. As a result, cash and cash equivalents decreased by -¥38.4B to ¥92.1B (prior ¥130.5B). Total shareholder returns (dividends + buybacks) of ¥60.3B substantially exceeded FCF ¥10.9B, with liquidity supplemented by cash on hand and short-term borrowings.
Of Net Income ¥131.3B, core driver was Operating Income ¥171.2B; net non-operating items were limited at +¥8.6B (Non-operating income ¥13.4B - Non-operating expense ¥4.8B). Dividend income ¥5.0B and interest income ¥0.7B are main non-operating income items and represent stable income sources. Extraordinary items were net +¥1.2B, including ¥3.2B gain on sale of investment securities, but one-time charges such as ¥0.6B loss on disposal of fixed assets occurred; overall size is small. The difference between Ordinary Income ¥179.8B and Net Income ¥131.3B is mainly taxes ¥49.7B (effective tax rate 27.4%), with no large deviations from one-off factors. That OCF ¥95.9B is below Net Income ¥131.3B is largely due to accounts payable decrease and timing of tax payments, and does not necessarily indicate deterioration in core earnings power, but normalization of working capital management is a future task. Comprehensive income ¥184.2B exceeded Net Income by +¥52.9B, contributed by valuation gains on available-for-sale securities +¥43.8B, retirement benefit adjustments +¥6.2B, and foreign currency translation adjustments +¥2.9B. Accumulated valuation gains indicate increased unrealized gains on the balance sheet and strengthen the qualitative depth of equity.
Full year forecast: Revenue ¥1800.0B (vs. current period +5.9%), Operating Income ¥180.0B (vs. +5.1%), Ordinary Income ¥185.0B (vs. +2.9%), Net Income ¥137.0B (vs. +4.3%), expecting higher sales and profits. Achievement rates to date are Revenue 94.5%, Operating Income 95.1%, Ordinary Income 97.2%, Net Income 95.8%, around mid-90% range. Operating margin assumed at 10.0% (current 10.1%) with maintenance of gross margin and control of SG&A as key. Achieving full year targets requires solid progress and margin maintenance of Construction projects and normalization of working capital (stabilizing accounts payable and continued collection of receivables) to improve OCF. Dividend forecast ¥42 per share is materially different from current period dividend ¥128 per share and may be a documentation error (e.g., only final dividend part of ¥128 was noted instead of midterm ¥35 + final ¥93 = 128); confirmation from earnings presentation materials is necessary. EPS forecast ¥334.10 exceeds current EPS ¥319.18 and is consistent with planned profit growth.
Current period dividend was interim ¥35 and final ¥93 totaling ¥128 per share, resulting in a payout ratio of 42.6% (based on EPS ¥319.18), an appropriate level. Prior year dividend was ¥24 per share (data may have listed only interim dividend), indicating a large increase. Total shareholder returns included dividends ¥52.5B and share buybacks ¥7.8B (approximately 8k shares), resulting in a Total Return Ratio of (¥52.5+¥7.8)/¥131.3 = 45.9%. Total return ¥60.3B is 5.5× Free Cash Flow ¥10.9B, indicating that shareholder returns in the period relied on cash on hand and balance sheet strength. Treasury stock purchases increased to -¥9.7B (prior -¥2.1B), contributing to per-share value and capital efficiency improvement. Sustainability going forward depends on recovery of Operating CF (stabilization of accounts payable and improved working capital management) and stable FCF generation. If a payout ratio policy in the 40% range continues, dividend stability and growth are expected under profit-increasing trend.
Working Capital Management Risk: This period accounts payable decreased by -¥79.9B, significantly compressing OCF. Changes in payment timing for construction projects or transaction terms could lead to working capital reversal. Continued volatility in accounts payable or delays in receivables collection could deteriorate liquidity and increase short-term borrowings, reducing financial flexibility. Cash and deposits ¥113.0B and short-term borrowings ¥49.6B provide a buffer, but if OCF/Net Income 0.73× becomes persistent, sustainability of dividends and investments may be affected.
Short-Term Debt Concentration Risk: Of interest-bearing debt ¥52.9B, short-term borrowings are ¥49.6B (93.7%), showing a concentration in short-term funding. In a rising interest rate environment, refinancing costs could increase at rollover, and interest expense rose +63% from ¥0.8B to ¥1.3B YoY. Current interest burden is minor (Interest Coverage approx. 130×), but managing refinancing of short-term borrowings and considering lengthening/diversifying maturities is advisable.
Capex Utilization Risk: Capex ¥57.3B is 3.6× depreciation ¥15.8B, and PPE rose sharply to ¥264.2B (prior ¥209.4B) +26.2%. If new sites or equipment do not ramp up as planned, fixed cost increase and front-loaded depreciation could pressure margins. SG&A grew +14.6% YoY, outpacing sales growth +9.0%, so realizing returns on investments and improving utilization are key to sustaining profitability.
Revenue & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 10.1% | 3.4% (1.4%–5.0%) | +6.7pt |
| Net Profit Margin | 7.7% | 2.3% (1.0%–4.6%) | +5.4pt |
Operating margin 10.1% and Net Profit margin 7.7% materially exceed industry medians, placing the company in the upper tier of industry profitability.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 9.0% | 5.9% (0.4%–10.7%) | +3.1pt |
Revenue growth 9.0% exceeds the industry median 5.9%, indicating strong growth performance.
※Source: Company compilation
Growth and high-margin structure of the Construction Business: With sales +16.8% and segment margin 34.9%, Construction is driving company-wide growth and profitability. Continued expansion of orders in instrumentation and machinery installation and growth in high-margin projects could sustain medium-term revenue and profit growth. Product Sales margin improvement to 23.1% (prior 21.2%) further supports the high ROE of 17.8%. Aggressive capex (PPE +26.2%) should strengthen future production and service capacity, and if utilization and revenue contributions materialize, additional growth potential exists.
Normalization of cash conversion is key: Operating Cash Flow ¥95.9B is below Net Income ¥131.3B, with OCF/Net Income 0.73× showing weakened cash conversion. Main causes were accounts payable decrease -¥79.9B and tax payments -¥55.3B; while these are largely temporary factors, working capital management (stabilizing payables, continued receivables collection) is important. Free Cash Flow ¥10.9B is far below total shareholder returns ¥60.3B, indicating that shareholder returns relied on cash on hand and balance sheet strength. With equity ratio 64.0% and cash and deposits ¥113.0B, the financial base is solid, but recovery of Operating CF and stable FCF generation will enhance sustainability of dividends and investments.
This report was automatically generated by AI analyzing XBRL financial statement data and is a financial analysis document. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are compiled by the Company based on public financial data and are provided for reference only. Investment decisions are your responsibility; consult professionals as necessary before making investment decisions.