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[TOKYO KEIKI] How long will record profits continue? A profit structure supported by marine, fluid measurement, and hydraulics

2026年8月3日 19:45

Can Tokyo Keiki convert defense demand into profit and cash? The wall of record-high order backlogs and cash flow

Executive Summary

Tokyo Keiki is a measurement and control equipment manufacturer that handles gyrocompasses for measuring ship direction, inertial navigation systems for defense equipment, hydraulic equipment for construction and machine tools, and flow meters for water and river systems.

The company's greatest strength lies not just in manufacturing sensors, but in incorporating 'measurement, recognition, and control' technologies into applications where stops and failures are not tolerated, such as marine, defense, water infrastructure, and industrial machinery.

For the fiscal year ending March 2026, the company reported sales of 61.19 billion yen and an operating profit of 5.36 billion yen, marking the second consecutive year of record-high operating profits. For the fiscal year ending March 2027, it plans for sales of 68.3 billion yen and an operating profit of 6.4 billion yen. The biggest growth driver is the high level of order backlogs in the defense and communications equipment business.

On the other hand, cash flow is not as strong as profit growth. For the fiscal year ending March 2026, operating cash flow saw an expenditure of 160 million yen, and free cash flow was in the red by 5.31 billion yen. The main reason is an increase in inventory of 3.2 billion yen due to the rise in parts and work-in-progress required for defense projects.

Therefore, what is important when looking at Tokyo Keiki is not 'will it grow because it is a defense-related stock?'

Can it convert its abundant order backlog into on-time sales, appropriate profit margins, and final cash collection?

This is the core of the investment hypothesis.

Why investigate Tokyo Keiki now?

The Japanese government is expanding defense-related spending based on the Defense Buildup Program. In the fiscal year 2026 budget, 8.8093 trillion yen on an expenditure basis and 8.2607 trillion yen on a contract basis were allocated as expenses subject to the Defense Buildup Program. Priority areas include unmanned assets, stand-off defense, integrated air and missile defense, and cross-domain operational capabilities.

Tokyo Keiki supplies aircraft-mounted equipment, vessel-mounted equipment, inertial navigation systems, and radar warning receivers. The expansion of the defense budget has boosted the company's orders and sales.

However, there is a common misunderstanding in the evaluation of defense-related companies.

Even if the defense budget increases, sales and cash do not arrive the day after an order is received. It takes a long time from research and development, design, parts procurement, testing, and production to final inspection. In the early stages of an increase in orders, inventory, equipment, personnel, and borrowings may actually increase first.

Tokyo Keiki is in exactly this growth phase.

Profits are hitting record highs, but cash is being absorbed into equipment and working capital. Without understanding both sides, one cannot correctly evaluate the company's growth potential or financial risks.

Tokyo Keiki in 30 seconds

Item Details Official Company Name TOKYO KEIKI INC. English Company Name TOKYO KEIKI INC. Securities Code 7721 Listed Market Tokyo Stock Exchange Prime Founded 1896 Headquarters Haneda Airport, Ota-ku, Tokyo President Mr. Tsuyoshi Ando Fiscal Year-End March Number of Employees 1,768 (consolidated) Main Businesses Marine & Port, Oil & Air Pressure, Fluid, Defense & Communications, Others Sales for FY ending March 2026 61.19 billion yen Operating Profit for FY ending March 2026 5.36 billion yen

Corporate information is as of the end of March 2026 and the survey reference date.

In a nutshell, Tokyo Keiki is the following type of company.

A company that provides safe navigation, precise positioning, labor-saving, and equipment control through high-precision measurement, recognition, and control for customers in fields such as marine, defense, industrial machinery, and water infrastructure.

A 130-year history that began with the "domestication of imported goods"

The origins of Tokyo Keiki lie in the Wada Keiki Seisakusho, established in 1896. At the time, the business began with the domestic production of pressure gauges, which Japan had previously relied on imports for.

In 1917, it was reorganized into Tokyo Keiki Seisakusho Co., Ltd., and expanded beyond mechanical instruments into the electrical and optical fields. The company established at this time by separating the optical division in collaboration with Mitsubishi Goshi Kaisha is what leads to the current Nikon.

Subsequently, Tokyo Keiki expanded its technical scope into marine gyros, hydraulic equipment, flowmeters, and defense and aerospace equipment.

The businesses may appear disparate at first glance. However, the underlying technology is common.

"Measurement" to gauge the state of objects and fluids
"Recognition" to grasp surrounding conditions and positions
"Control" to move machinery and equipment as intended

The history of Tokyo Keiki is not one of mass-producing specific end products. It is a history of responding to the strict, unique requirements of customers and horizontally deploying measurement and control technologies across multiple niche markets.

The largest business is defense and communications, but it is not the only source of profit

The business composition for the fiscal year ending March 2026 is as follows.

Operating profit is before inter-segment adjustments. Calculations are operating profit divided by sales, rounded to the first decimal place.

The defense and communications equipment business is the largest, accounting for 42.5% of sales. It handles aircraft-mounted equipment, ship-mounted equipment, inertial navigation systems, space-related equipment, and antennas for mobile satellite communications.

However, it is not only the defense business that generates profit.

The operating profit margins for the fluid equipment business and other businesses are in the 16% range, exceeding that of the defense and communications equipment business. In fluid equipment, ultrasonic flowmeters for government agencies and water infrastructure, as well as gas-based fire extinguishing systems, support earnings. Other businesses include railway rail flaw detection, track inspection, and testing equipment.

This composition is important.

While Tokyo Keiki benefits from defense demand, it is not a company dependent solely on the defense business. It maintains a portfolio that invests in defense and new areas while earning profits from mature niche businesses.

On the other hand, the operating profit margin for the hydraulic and pneumatic equipment business is low at 1.9%. Although the optimization of sales prices and the transition to high-value-added products are underway, turning around this low-profit business is essential to improving the company's overall capital efficiency.

Sales are determined by "order volume" and "time to revenue recognition"

Tokyo Keiki's sales structure differs from that of typical mass-production manufacturers.

Conceptually, it can be organized by the following formula:

Sales = Revenue from past order backlog + Current period orders/sales + Maintenance, repair, and replacement demand

Defense equipment, naval vessel equipment, large flow meters, and railway inspection devices take time from order to delivery. Future sales are influenced more by the content of the order backlog, delivery schedules, production capacity, and inspection timing than by the order volume itself.

For the fiscal year ending March 2026, total company orders were 64.65 billion yen, and the year-end order backlog was 59.88 billion yen. The order backlog is equivalent to approximately 98% of annual sales.

In particular, the order backlog for the Defense and Communications Equipment business is 43.24 billion yen, reaching approximately 1.7 times the annual sales of 26.02 billion yen for that business.

This is a factor that increases the visibility of future sales. However, the entire order backlog is not necessarily recorded in the following fiscal year. Since it includes research and development projects spanning multiple years and long-lead-time projects, it is necessary to confirm the speed of revenue recognition.

Additionally, orders for the Defense and Communications Equipment business for the fiscal year ending March 2026 decreased by 23.5% compared to the previous fiscal year. This is largely a reaction to receiving large-scale development projects in the previous year and does not immediately indicate a decline in demand, but it is dangerous to linearly extrapolate long-term growth by looking only at the order backlog.

Tokyo Keiki's competitors vary by business segment

There are no listed companies whose business composition matches that of Tokyo Keiki. Therefore, competitors must be considered by business segment.

Competitor/Comparison Target Overlapping Area Difference from Tokyo Keiki Furuno Electric Marine navigation and communication equipment Degree of concentration on marine electronic equipment and extensive overseas service network Japan Radio / Nisshinbo HD Marine navigation and communication, defense and social infrastructure Broad business areas in wireless communication and systems Yuken Kogyo Hydraulic equipment for machine tools and industrial machinery Wide product line specializing in hydraulics Azbil Industrial flow meters and measurement control Comprehensive control company including factory and building automation Major defense electronics companies Naval, aviation, communication, and sensors Larger R&D funding and project scale, but different company size

Furuno Electric develops marine equipment, fishing equipment, and wireless communication devices worldwide, possessing sales regions in over 90 countries and numerous service bases. For Tokyo Keiki, they are a strong direct competitor in marine electronic equipment.

Nisshinbo Holdings, which owns Japan Radio, develops marine navigation equipment and wireless communication equipment as marine systems. This overlaps with Tokyo Keiki's Marine and Communications business.

In hydraulic and pneumatic equipment, Yuken Kogyo has a wide range of products including pumps, control valves, servo valves, actuators, and hydraulic units.

In fluid measurement, Azbil provides electromagnetic flow meters, differential pressure flow meters, and mass flow meters.

Tokyo Keiki's advantage is not necessarily having the largest scale in every market. It lies in possessing sensors, inertial technology, and control technology across multiple fields, which can be combined according to customer applications.

Conversely, its weakness is the need to compete with specialized major companies in each market, making R&D resources prone to dispersion.

Competitive advantage lies in integration into customer processes rather than "product performance"

Tokyo Keiki's competitive advantage can be organized by the following causal relationship.

Measurement and control technology accumulated over a long period
→ Design and certification tailored to customer applications
→ Integration into marine, defense, and infrastructure
→ Time and cost required for replacement and re-evaluation
→ Continued adoption, repair, maintenance, and upgrade demand

Applications where failure is not tolerated

Information such as ship headings, the position of aircraft and naval vessels, flow rates in rivers and water supply systems, and cracks in railway rails is directly linked to safety.

What is important to customers is not simply the low purchase price.

Can it maintain the necessary precision?
Will it operate stably over a long period?
Can it connect to existing systems?
Can it be repaired and maintained in the event of a failure?
Is there no need to redo certifications or tests?

In such applications, even if a new entrant develops a product with equivalent performance, it is not easy to replicate the track record of adoption, quality assurance, long-term supply, and maintenance systems in a short period.

The number of installed marine units generates maintenance demand

Marine equipment generates demand not only for sales to new ships but also for maintenance, repair, and replacement after the ships enter service.

In the fiscal year ending March 2026, the Marine and Port Equipment business saw steady performance in both equipment for new ships and maintenance services. On the other hand, despite an increase in sales, operating profit decreased by 15.1% due to an increase in research and development expenses for areas such as autonomous navigation.

While the existing installed base is a source of stable revenue, investment in next-generation products is also necessary to maintain competitiveness. If research and development are cut to protect current profits, there is a possibility of falling behind in the future autonomous navigation market.

The defense business has high barriers to entry, but also high customer concentration

Sales to the Ministry of Defense for the fiscal year ending March 2026 were 13.25 billion yen, equivalent to approximately 22% of consolidated net sales.

In the defense sector, long development periods, testing, quality control, information management, and continuous supply capability act as barriers to entry. On the other hand, because major customers are concentrated in the government, it is strongly influenced by budgets, procurement timing, specification changes, and inspection timing.

High barriers to entry and high customer concentration are two sides of the same coin.

Profit margins have improved significantly over five years

Looking at Tokyo Keiki's consolidated performance over five years, the profit level has clearly changed since the fiscal year ending March 2024.

Units are in 100 million yen. Operating profit margin and ROE are rounded to the first decimal place.

Fiscal Year Ending March | Sales | Operating Profit | Operating Profit Margin | Net Profit | ROE | 2022 | 415.1 | 16.4 | 3.9% | 14.9 | 4.6% | 2023 | 443.0 | 13.1 | 3.0% | 8.7 | 2.7% | 2024 | 471.7 | 27.7 | 5.9% | 22.8 | 6.5% | 2025 | 576.5 | 48.6 | 8.4% | 38.0 | 9.8% | 2026 | 611.9 | 53.6 | 8.8% | 40.1 | 9.3%

The compound annual growth rate from the fiscal year ending March 2022 to the fiscal year ending March 2026 was approximately 10.2% for sales and approximately 34.6% for operating profit. Operating profit grew faster than sales, and the operating profit margin rose from 3.9% to 8.8%.

The main reason for the improvement in profit margins is the increase in revenue and improved profitability in the defense and communications equipment business. In the fiscal year ending March 2026, the company absorbed costs associated with the head office relocation and increased personnel expenses, increasing operating profit by 10.4% year-on-year.

However, ROE declined from 9.8% in the fiscal year ending March 2025 to 9.3% in the fiscal year ending March 2026. This is because while profits increased, inventories, equipment, and net assets also increased.

The next challenge is not just the amount of profit, but how much profit can be generated from the increased assets.

The biggest challenge is that profits are not turning into cash.

Operating profit is at a record high, but operating cash flow is weak.

Fiscal Year Ending March | Operating CF | 2022 | +2.26 billion yen | 2023 | -2.83 billion yen | 2024 | -2.84 billion yen | 2025 | -0.46 billion yen | 2026 | -0.16 billion yen

In the fiscal year ending March 2026, although the company recorded a pre-tax profit of 5.26 billion yen, inventories increased by 3.20 billion yen and corporate tax payments of 1.39 billion yen were incurred, resulting in an operating cash flow outflow of 160 million yen.

Furthermore, as a result of spending 4.65 billion yen on the acquisition of fixed assets, free cash flow was a deficit of 5.31 billion yen. Cash and cash equivalents decreased from 7.55 billion yen to 3.95 billion yen.

This does not immediately imply a financial crisis. The equity ratio is 53.7%, and net assets are 46.16 billion yen.

However, it is an important warning when looking at the quality of growth.

Orders increase
→ Secure materials and work-in-progress first
→ Inventories increase
→ Capital investment also becomes necessary
→ Cash collection lags behind profit

If this structure is temporary, inventory will decrease as delivery and acceptance proceed, and operating cash flow will recover.

Conversely, if delivery delays, specification changes, material stagnation, and production capacity shortages continue, cash will not increase even if orders increase.

Tokyo Keiki itself has identified the lengthening of the inventory turnover period to 219.4 days as of March 2024 as an issue and has incorporated inventory reduction and CCC improvement into its medium-term management plan.

Prioritizing growth investment, dividends are still low.

Tokyo Keiki has made it clear that it prioritizes growth investment over shareholder returns.

The capital investment plan for the fiscal year ending March 2027 is 4.00 billion yen, and research and development expenses are 3.38 billion yen. About half of the capital investment is directed toward the defense and communications equipment business, and the company is also planning equipment maintenance to improve production costs in the hydraulic and pneumatic equipment business.

Meanwhile, the annual dividend has been increasing as follows.

Fiscal year ending March 2024: 32.5 yen
Fiscal year ending March 2025: 35 yen
Fiscal year ending March 2026: 40 yen
Fiscal year ending March 2027 forecast: 48 yen

The dividend payout ratio forecast for the fiscal year ending March 2027 is 15.8%.

Although dividend increases are continuing, the return rate relative to profits is not high. For investors, returns depend more on whether capital investment and R&D lead to future profits than on dividends.

The medium-term plan has already exceeded the level after the upward revision

Tokyo Keiki has positioned the period from fiscal year 2024 to fiscal year 2026 as a 'period of leap' toward growth.

The initial target for the fiscal year ending March 2027 was 60.3 billion yen in sales and 4.81 billion yen in operating profit. Subsequently, reflecting large-scale defense projects and other factors, this was revised upward to 68.3 billion yen in sales and 5.58 billion yen in operating profit.

The current company forecast for the fiscal year ending March 2027 is as follows.

The forecast of 6.4 billion yen in operating profit exceeds even the upwardly revised medium-term target of 5.58 billion yen.

The company anticipates large-scale R&D projects in the defense and communications equipment business, marine demand, expanded sales of fluid equipment, and improved profitability in hydraulic and pneumatic equipment.

A point to note is that sales in the defense and communications equipment business are expected to be concentrated in the fourth quarter. While weak profits in the first quarter or the first half do not necessarily mean the full-year plan will not be met, delays in year-end deliveries or inspections could have a significant impact on performance.

The road to 100 billion yen in sales cannot be reached by defense alone

In the long-term goal 'Tokyo Keiki Vision 2030', the company is aiming for the following levels in the fiscal year ending March 2031.

Sales of 100 billion yen or more
Operating profit of 10 billion yen or more
Operating profit margin of 10% or more
ROE of 10% or more

To reach 100 billion yen in sales from the 61.19 billion yen recorded in the fiscal year ending March 2026, an average annual growth rate of approximately 10.3% over five years is required.

Even if the 68.3 billion yen target for the fiscal year ending March 2027 is achieved, a gap of 31.7 billion yen will still remain.

It is unclear whether this can be filled by existing defense and marine businesses alone. The company identifies the following areas as potential growth drivers.

Inertial sensors and unmanned systems

The company is developing small, high-precision inertial sensors such as MEMS hemispherical resonator gyroscopes. There is potential for deployment in aviation, marine, defense, unmanned vehicles, and railways.

Space and satellite communications

The company is expanding existing communication technologies into the space sector, including microwave application equipment and satellite communication antennas. While space-related sales are expected to increase, they are subject to significant fluctuations per project, and at this point, it cannot be confirmed as an independent, large-scale revenue source.

Edge AI

Leveraging its proprietary 'DAPDNA' device and image enhancement technology, the company is working on edge AI that processes images on-site without constant network connection. Its investment in Logic & Design also complements product development in this field.

Hydrogen and energy

The company is positioning hydrogen compressors and small hydrogen stations that apply hydraulic technology as growth candidates.

Railway inspection

In addition to ultrasonic rail flaw detection, the company is expanding its product range to include inertial track inspection equipment.

While these are options for growth, there is no evidence yet that they have grown to a scale capable of supporting 100 billion yen in sales.

Therefore, when evaluating the 2030 Vision, it is necessary to check new business sales, orders, customer adoption, and operating profit, rather than the number of research and development themes.

The stock price already incorporates corresponding growth expectations

The closing price on August 3, 2026, was 6,820 yen. The year-to-date high is 9,540 yen and the year-to-date low is 4,850 yen, indicating significant stock price volatility.

Using the company's projected EPS of 304.27 yen, the projected PER is as follows.

6,820 yen ÷ 304.27 yen = approximately 22.4x

The PBR using the BPS of 2,770.05 yen for the fiscal year ending March 2026 is approximately 2.46x, and the dividend yield against the projected dividend of 48 yen is approximately 0.70%.

It is difficult to evaluate this level as simply undervalued.

Considering that operating profit is at a record high and an increase of approximately 19% is planned for the next fiscal year, there is a certain justification for the high multiple.

On the other hand, to maintain a valuation of a projected PER in the 22x range and a PBR in the mid-2x range, the following conditions are necessary.

Convert defense order backlogs into sales as scheduled
Maintain an operating profit margin of 9-10%
Reduce inventory and turn operating cash flow positive
Continue growth beyond the fiscal year ending March 2028
Transition new businesses from the R&D stage to the revenue stage

Even if business performance grows according to the company's plan, if future growth rates fall below market expectations, the stock price may not rise due to a decline in PER.

The growth potential of a company and the current attractiveness of its stock price are separate issues.

Bull/Base/Bear Scenarios

Scenario Main Conditions Impact on Performance Bull Smooth delivery of defense projects, continued marine demand, improved profit margins in oil/air pressure, inventory reduction Sales and profits exceed plans, operating CF turns significantly positive Base Digest order backlog in line with company plans, absorb R&D and labor costs with revenue growth Revenue and profit growth in the fiscal year ending March 2027, profit margin in the 9% range Bear Delivery/inspection delays, high material costs, marine price competition, inventory stagnation, decline in next-year orders Profit targets missed, FCF deficit continues, valuation multiples decline

Bull Case

Defense equipment deliveries proceed as planned, and cost ratios improve. In marine and port equipment, new shipbuilding and maintenance demand continue, and in oil and air pressure equipment, profit margins improve through facility reorganization and price optimization.

If inventory assets decrease at the same time, operating cash flow will recover in addition to profit growth. This is a case where Tokyo Keiki transitions from an 'order-growth company' to a 'growth company that generates profit and cash.'

Base Case

For the fiscal year ending March 2027, the company will achieve sales of 68.3 billion yen and operating profit of 6.4 billion yen, close to the company's plan. However, because capital investment and R&D will continue, the improvement in free cash flow will be gradual.

While defense and marine sectors support growth, the company remains in a state where expanding new businesses is necessary to reach the 100 billion yen sales target by 2030.

Bear Case

Deliveries and inspections of defense projects are delayed until the end of the fiscal year, pushing sales into the following fiscal year. Material costs, labor costs, and depreciation expenses increase first, leading to a decline in operating profit margins.

In the new shipbuilding market, price competition with Chinese companies intensifies, and the profitability of marine and port equipment deteriorates. Inventory levels do not decrease, necessitating additional borrowing.

Even if performance does not deteriorate, if orders for the following fiscal year and beyond do not grow, expectations for future growth may decline, potentially leading to a downward revision in valuation.

Greatest Risks

Dependence on growth in the defense business

The defense and communications equipment business accounts for over 40% of sales. It is subject to the influence of government budgets, procurement plans, inspection timing, and specification changes.

Risk of inability to convert order backlogs into sales

Even with a large order backlog, sales cannot be realized if there are material shortages, insufficient production capacity, quality issues, or delivery delays. In the defense business, there is a particularly high concentration of activity at the end of the fiscal year.

Inventory and cash flow

If inventory continues to increase even as profits grow, reliance on borrowing will rise, reducing the capacity for growth investment and shareholder returns.

Price competition in the marine market

The company recognizes the rise of high-performance Chinese-made gyrocompasses as a competitive factor. Projects for new ships face more intense price competition than maintenance services, which could lead to lower profit margins even if sales increase.

Low profitability of hydraulic and pneumatic equipment

The operating profit margin remains at just under 2%. Unless productivity or product mix improves despite capital investment, it will not generate profits commensurate with the invested capital.

Monetization of new businesses

AI, space, and hydrogen are attractive growth themes, but there is no guarantee that research and development will translate into sales and profits. As the number of themes increases, there is a possibility that R&D resources may become diluted.

Valuation

The stock price already incorporates a certain level of expectation for profit growth and defense demand. Even if the company's plans are achieved, if growth beyond that is not visible, the stock valuation may decline.

KPIs to watch in the next earnings report

The next first-quarter earnings report is scheduled to be released on August 10, 2026.

Sales and operating profit of defense and communication equipment

Since the plan is weighted toward the end of the fiscal year, do not judge based solely on the absolute amount in the first quarter. However, I want to check whether the cost-to-sales ratio or the scale of the deficit has worsened compared to the same period last year.

Order intake and order backlog for defense and communication equipment

Distinguish whether a decrease in order backlog is due to revenue recognition or a lack of new orders. It is important to see not only the reaction to large-scale projects but also whether projects that will support sales from the fiscal year ending March 2028 onward are being secured.

Inventories

Even if inventory is being built up in preparation for increased orders, caution is required if it continues to grow at a pace faster than sales. Observe whether work-in-progress decreases as the order backlog is converted into sales.

Operating cash flow

This is a more important KPI than profit. If operating cash flow returns to the black and the cash outflow due to inventory increases shrinks, the investment thesis will strengthen.

Orders and profit margins for marine and harbor equipment

Confirm the continuity of demand for new shipbuilding and maintenance. If profit margins decline even as sales increase, it is possible that price competition for new ships or research and development burdens are greater than expected.

Operating profit margin of hydraulic and pneumatic equipment

Observe whether capital investment, price optimization, and the shift to high-value-added products are leading to actual improvements in profit margins.

Capital investment and R&D expenses

Check not only the expenditure amount but also whether it is connecting to concrete results, such as defense production capacity, new product orders, and cost reductions in hydraulics and pneumatics.

Conditions under which the investment thesis collapses

The investment thesis in this article needs to be reviewed if the following events are confirmed.

Order intake for defense and communication equipment remains sluggish for multiple quarters, and the order backlog decreases at a faster rate than revenue recognition
Delivery and acceptance delays for defense projects are repeated, making it impossible to achieve the full-year sales plan
Inventory continues to grow faster than sales growth, and the deficit in operating cash flow remains unresolved
Operating profit margin consistently remains below 8% despite sales growth
Even if orders for marine and port equipment increase, profit margins drop significantly due to price competition
Profit margins do not improve even after capital investment in hydraulic and pneumatic equipment
R&D investments in AI, space, hydrogen, etc., do not translate into orders or sales
Growth targets after achieving the medium-term plan are not presented, creating an unsubstantiated gap leading up to the 100 billion yen sales target for 2030
Profit growth rate drops to single digits while maintaining a high valuation
Competitive advantages such as long-term adoption and customer trust are damaged by quality and delivery issues

Summary

Tokyo Keiki is not just a simple defense-related stock.

It is a company that has integrated measurement, recognition, and control technologies into customer processes across multiple niche markets, including marine, defense, fluid measurement, hydraulics, and railways.

Over the five years leading up to the fiscal year ending March 2026, sales grew from 41.51 billion yen to 61.19 billion yen, and operating profit grew from 1.64 billion yen to 5.36 billion yen. The operating profit margin also rose from 3.9% to 8.8%.

The order backlog for the defense and communications equipment business is high, and there is a possibility that record profits will be updated again for the fiscal year ending March 2027.

However, operating profit is not the only figure investors should pay the most attention to.

It is the inventory, operating cash flow, capital expenditure, and the speed at which the order backlog is converted into sales.

The growth story of Tokyo Keiki will be complete not when orders increase, nor when profits reach a record high.

It will be when the order backlog can be converted into sales, sales into profits, and profits into cash.

The company's competitiveness is increasing. On the other hand, the stock price as of August 3, 2026, already incorporates corresponding growth expectations.

Going forward, tracking the entire process from orders, production, inventory, and inspection to cash collection, rather than just the increase in the defense budget itself, will be the key to correctly evaluating Tokyo Keiki.

Research reference date

August 3, 2026

Main Reference Materials

Tokyo Keiki 'Annual Securities Report for the Fiscal Year Ended March 2026'
Tokyo Keiki 'Financial Results for the Fiscal Year Ended March 2026'
Tokyo Keiki 'Financial Results Briefing for the Fiscal Year Ended March 2026'
Tokyo Keiki 'Medium-Term Management Plan 2024-2026'
Tokyo Keiki 'Tokyo Keiki Vision 2030'
Tokyo Keiki 'Shareholder Returns'
Ministry of Defense 'FY2026 Budget: Progress and Budget for Fundamental Strengthening of Defense Capabilities'
Furuno Electric 'Integrated Report 2025'
Nisshinbo Holdings 'Wireless and Communications Business'
Yuken Kogyo 'Hydraulic Equipment Product Information'
Azbil 'Flow Meter Product Information'
Tokyo Stock Exchange stock price information as of August 3, 2026

Unconfirmed matters and limitations for readers

Since public information regarding the profitability, contract unit prices, quantities, and delivery dates for specific defense equipment items is limited, this article uses segment-level disclosures. Competitor comparisons are conducted by business segment, and the consolidated profit margins of each company cannot be simply compared. The financial results for the first quarter of the fiscal year ending March 2027 are scheduled to be announced on August 10, 2026, after the research cutoff date, and are not reflected in this article.

Disclaimer

This article is a corporate study based on public information available as of the research cutoff date and does not recommend the purchase, sale, or holding of any specific securities. It does not guarantee future performance, stock prices, dividends, or the realization of any plans, nor does it guarantee the accuracy or completeness of the information. Please make investment decisions based on your own judgment and responsibility after reviewing the latest disclosure materials.

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