Breaking Down IHI Corporation Financial Health: Key Insights for Investors

Dive into IHI Corporation's financial landscape where headline figures jump off the page: fiscal year revenue of ¥1.63 trillion (up 23% YoY) against a trailing twelve months revenue of ¥1.58 trillion (a 1.66% YoY decline) and a Q2 Sept. 30, 2025 dip to ¥375.86 billion (‑8.18% YoY); profitability shows a gross margin 22.71%, operating and EBIT margins at 8.77%, net margin 8.17% and a standout ROE of 26.76%, while valuation and balance-sheet signals-market cap ~¥3.11 trillion, P/S 1.96, P/B 5.37, EV/EBITDA 17.88, total debt ¥581.18 billion vs. equity ¥566.09 billion, a negative net cash position of ¥479.23 billion, current ratio 1.20 and quick ratio 0.54-compound the risk picture supported by an Altman Z‑Score of 1.79 and Piotroski F‑Score of 4; add cash ¥101.96 billion, free cash flow ¥42.46 billion, revised orders to ¥1.85 trillion and FY2025 forecasts (revenue ¥1,640.0 billion, operating profit ¥160.0 billion, net income ¥125.0 billion, EPS ¥117.49, EBITDA ¥230.0 billion) as indicators of upside-read on to parse these metrics, the debt vs. equity structure, liquidity signals and sector growth catalysts in civil aero engines, defense and nuclear energy.

IHI Corporation (7013.T) Revenue Analysis

• Fiscal year (ending March 31, 2025) revenue: ¥1.63 trillion (up 23% YoY).
• Quarter (ending Sept 30, 2025) revenue: ¥375.86 billion (down 8.18% YoY).
• TTM revenue: ¥1.58 trillion (down 1.66% YoY).
• Revenue per employee: ¥56.56 million (total employees: 27,990).
• Market capitalization: ≈ ¥3.11 trillion; Price-to-Sales (P/S) ratio: 1.96.

• Growth dynamics: FY 2025's 23% surge suggests strong segment recovery or large project recognition during the year; however, the TTM decline (-1.66%) and the Q2 FY2026 quarter decline (-8.18% YoY) point to near-term softness or timing shifts in contract revenues.
• Operational productivity: ¥56.56 million revenue per employee is a useful comparator for peers in heavy machinery, aerospace and energy engineering to assess labor efficiency and capital intensity.
• Valuation context: At a market cap of ~¥3.11 trillion and P/S of 1.96, the market is valuing roughly two years of sales at current revenue run-rate; investors should weigh this against margins, backlog and order intake trends.

IHI Corporation (7013.T) - Profitability Metrics

IHI Corporation (7013.T) displays profitability figures that reflect operational resilience and shareholder returns across recent trailing twelve-month performance.

Key takeaways for investors:

• Gross margin of 22.71% provides a solid buffer to absorb cost pressures and sustain R&D or capital spending.
• Operating and EBIT margins at 8.77% indicate consistent operating profitability; EBITDA margin (11.84%) suggests manageable depreciation and amortization impact.
• Net margin of 8.17% combined with ROE of 26.76% points to strong bottom-line conversion and effective equity deployment.
• Dividend policy yields modest income (0.68%); annual payout of ¥20.00 signals continued shareholder distributions but limited yield-driven appeal.

For context on strategic direction that may influence these profitability metrics, see Mission Statement, Vision, & Core Values (2026) of IHI Corporation.

IHI Corporation (7013.T) - Debt vs. Equity Structure

• Debt-to-equity ratio: 1.03 - indicates a near parity between debt and equity financing.
• Total debt: ¥581.18 billion; Equity (book value): ¥566.09 billion.
• Net cash position: negative ¥479.23 billion - more debt than cash and cash equivalents.
• Current ratio: 1.20 - short-term assets exceed short-term liabilities, but not by a wide margin.
• Quick ratio: 0.54 - suggests limited immediate liquidity when inventories are excluded.
• Interest coverage ratio: not available - prevents direct assessment of interest-servicing capacity.

• A debt-to-equity near 1.0 typically signals a neutral leverage stance; however, net indebtedness (negative net cash) raises refinancing and interest-rate sensitivity considerations.
• Current ratio above 1.0 is reassuring for short-term obligations, but the low quick ratio highlights reliance on inventory or other non-liquid current assets to meet those obligations.
• Absence of an interest coverage ratio means analysts should examine EBITDA, operating income, and interest expense lines from financial statements to estimate coverage manually.

IHI Corporation (7013.T) - Liquidity and Solvency

IHI Corporation's liquidity and solvency position as of September 30, 2025 combines strong cash generation with indicators that warrant caution on bankruptcy risk and underlying financial stability.

• Cash and cash equivalents: ¥101.96 billion (as of 2025-09-30)
• Working capital: ¥237.06 billion
• Operating cash flow: ¥127.95 billion
• Capital expenditures (CapEx): ¥85.48 billion
• Free cash flow (OCF - CapEx): ¥42.46 billion
• Altman Z-Score: 1.79 (elevated bankruptcy risk zone)
• Piotroski F-Score: 4 (moderate/weak financial health signal)

Practical implications for investors:

• Positive: Solid operating cash flow (¥127.95B) and positive free cash flow (¥42.46B) provide internal funding for operations and some discretionary uses.
• Watchlist: Altman Z-Score at 1.79 places IHI near the distress zone; insolvency risk should be monitored alongside leverage and interest coverage metrics.
• Fundamentals: Piotroski F-Score of 4 indicates several accounting/operational signals are not firmly positive-investors should review profitability, accruals, and leverage trends.
• Balance: Cash buffer (¥101.96B) and working capital (¥237.06B) support near-term liquidity, but continued capex (¥85.48B) reduces free cash flow available for debt reduction.

Further contextual reading: Mission Statement, Vision, & Core Values (2026) of IHI Corporation.

IHI Corporation (7013.T) - Valuation Analysis

• Premium valuation drivers:
  • Strong backlog or order pipeline expectations that justify P/B and EV/Sales premiums.
  • High perceived strategic value of assets (engineering, IP, long-term contracts) reflected in P/TBV.
  • Market pricing in improved margins or FCF conversion over the investment horizon.
• Key valuation risks:
  • Sensitivity to FCF: P/FCF 71.56 and EV/FCF 83.45 mean small FCF misses could materially affect implied return.
  • Asset revaluation risk: P/B 5.37 could compress if intangible optimism fades or asset impairments occur.
  • Industry cyclicality: EV/Sales 2.24 and EV/EBITDA 17.88 assume mid-cycle demand; downturns would widen downside risk.

• Practical investor checks:
  • Confirm trailing and forward FCF levels to reconcile the P/FCF and EV/FCF premiums.
  • Assess return on tangible equity and ROIC versus the P/TBV premium to validate pricing.
  • Compare EV/EBITDA and EV/Sales to sector peers to determine relative premium/discount.

IHI Corporation (7013.T) - Risk Factors

• Altman Z-Score: 1.79 - indicates elevated bankruptcy risk relative to healthy companies.
• Piotroski F-Score: 4 - signals mixed/weak fundamental signals; several areas of financial underperformance.
• Net cash position: ¥-479.23 billion - more debt than cash and cash equivalents, increasing leverage exposure.
• Quick ratio: 0.54 - suggests potential short-term liquidity constraints to meet immediate obligations.
• Operating margin: 8.77% - relatively low operating profitability for capital-intensive industrials.
• Net profit margin: 8.17% - limited conversion of revenue to net income, pointing to margin pressure.
• Removed from S&P Japan Mid Cap 100 in June 2025 - a market signal that may reflect investor concerns about size, liquidity, or financial health.

• Key investor considerations:
  • Leverage management - large negative net cash suggests priority on debt reduction or refinancing strategy.
  • Liquidity monitoring - quick ratio below 1.0 warrants attention to near-term covenant and working capital risk.
  • Margin improvement plans - operational initiatives or portfolio shifts required to lift operating and net margins.
  • Market perception - removal from a major mid-cap index can reduce passive demand and liquidity for the stock.

IHI Corporation (7013.T) Growth Opportunities

IHI Corporation (7013.T) is positioning for accelerated growth driven by upgraded order inflows, targeted end-market expansion, and completion of structural reforms that free resources for aggressive investment and early commercialization of new growth businesses. The FY2025 guidance and strategic focus areas highlight both near-term earnings improvement and medium-term revenue expansion potential.

• Orders: revised upward by ¥60.0 billion to ¥1,850.0 billion for FY2025, signaling stronger backlog and demand visibility.
• Revenue outlook: forecasted at ¥1,640.0 billion for FY2025, up from prior guidance.
• Profitability: operating profit projected at ¥160.0 billion, with an operating margin of 9.8%.
• Cash-flow proxy: EBITDA expected to reach ¥230.0 billion.
• Net income and EPS: net income projected at ¥125.0 billion and basic EPS at ¥117.49 (stock-split adjusted).

Key sectoral levers for growth:

• Civil aero engines - demand recovery and long-term aftermarket growth underpin higher-margin opportunities.
• Defense - stable order streams and higher-content systems sales support revenue visibility.
• Nuclear energy - capital intensity and long project lead times but large contract values and strategic importance.

Operational and strategic notes:

• Structural reforms are approaching completion, which should reduce legacy drag and enable redeployment of capital toward growth initiatives.
• Management is prioritizing aggressive investment and early commercialization in targeted growth businesses to capture market share during sector upcycles.
• Improved operating margin (9.8%) and elevated EBITDA (¥230.0 billion) imply better cost structure and higher cash-generation capacity to fund R&D and CAPEX.

For historical context, ownership and mission details relevant to understanding IHI's strategic posture can be reviewed here: IHI Corporation: History, Ownership, Mission, How It Works & Makes Money