Otani Kogyo Co., Ltd. (5939) AI Stock Analysis

• Market Cap: ¥5.58B
• Dividend Yield: 0.55%
• Average Volume (3M): 1.71K
• Price to Earnings (P/E): 19.7
• Beta (1Y): 0.47
• Revenue Growth: -3.52%
• EPS Growth: -32.97%
• Country: JP
• Employees: 177
• Sector: Industrials
• Sector Strength: 72
• Industry: Electrical Equipment & Parts
• EPS (TTM): 51.77
• Shares Outstanding: 780,000
• 10 Day Avg. Volume: 520
• 30 Day Avg. Volume: 1,713
• PEG Ratio: 1.23
• Price to Book (P/B): 1.17
• Price to Sales (P/S): 0.61
• P/FCF Ratio: 11.17
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: N/A
• Price Target Upside: N/A
• Rating Consensus: N/A
• Number of Analyst Covering: 0
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 66 Neutral
• Price Target: ¥7,560.00 ▲(45.95% Upside)

The score is anchored by solid financial stability (low leverage) but held back by weak cash generation and declining profitability/revenue trends. Technicals are supportive due to a strong uptrend, though overbought signals raise near-term risk. Valuation is neutral with a modest P/E and a low dividend yield.

Positive Factors

Low leverage / strong balance sheet

A debt-to-equity of 0.14 and high equity ratio gives the company durable financial resilience. Low leverage reduces refinancing and interest risks, preserves borrowing capacity for capex or working capital, and supports continuity through cyclical downturns in industrial demand.

Stable gross margin (~20%)

A consistent gross margin near 20% indicates sustained manufacturing efficiency and some pricing power. This margin buffer helps absorb raw material volatility and supports long-term profitability even if top-line growth softens, enabling incremental investments and quality maintenance.

Essential, diversified end markets

Supplying steel pipes, valves and fittings to construction, infrastructure and energy creates structural demand and diversification across project cycles. Essential industrial components reduce product obsolescence risk and international sales potential expands the addressable market over the medium term.

Negative Factors

Declining revenue trend

A nearly 2% TTM revenue decline signals weakening sales momentum or market share pressure. Sustained top-line contraction erodes scale advantages, limits reinvestment capacity, and can amplify margin pressure if fixed costs remain, challenging medium-term earnings recovery.

Weak cash generation

A >50% drop in free cash flow and an operating cash flow to net income ratio of 0.08 shows poor conversion of earnings into cash. Limited cash generation constrains capex, dividends, and working-capital needs, increasing reliance on external funding despite low leverage.

Compressing net and operating margins

Falling net and operating margins suggest rising operating costs, pricing pressure, or lower operational efficiency. Margin compression reduces return on invested capital and free cash flow, undermining the company’s ability to fund growth and absorb commodity or demand shocks over the medium term.

Otani Kogyo Co., Ltd. Business Overview & Revenue Model

Company Description

Otani Kogyo Co., Ltd. (5939) is a Japanese company primarily engaged in the manufacturing and sales of various types of industrial equipment and materials. The company specializes in the production of high-quality steel pipes, valves, and fittings used across multiple sectors, including construction, infrastructure, and energy. Otani Kogyo is known for its innovation in product design and commitment to quality, serving a diverse clientele both domestically and internationally.

How the Company Makes Money

Otani Kogyo Co., Ltd. generates revenue primarily through the sale of its industrial products, including steel pipes, valves, and fittings, which are essential components in various industrial applications. The company's revenue model is based on direct sales to businesses in sectors such as construction, manufacturing, and energy, where demand for reliable and durable materials is high. Key revenue streams include bulk orders from construction firms, long-term contracts with infrastructure projects, and partnerships with other manufacturers for component supply. Additionally, Otani Kogyo may benefit from exporting products to international markets, which can further enhance its earnings. The company's focus on quality and customer service, along with strategic partnerships in the industry, also contributes to its financial success.

Otani Kogyo Co., Ltd. Financial Statement Overview

Summary

Strong balance sheet (low debt-to-equity of 0.14 and solid equity ratio) supports stability, but operating performance is mixed: revenue growth is negative (-1.96% TTM) and net margin has fallen to 3.63% TTM. Cash flow is the main weakness, with free cash flow down -53.19% TTM and low operating cash flow to net income (0.08).

Income Statement

Otani Kogyo Co., Ltd. shows a mixed performance in its income statement. The gross profit margin is stable at around 20%, indicating efficient cost management. However, the net profit margin has decreased to 3.63% in the TTM, reflecting reduced profitability. The revenue growth rate is negative at -1.96% for the TTM, suggesting a decline in sales. EBIT and EBITDA margins have also decreased, indicating pressure on operating efficiency.

Balance Sheet

The company maintains a strong balance sheet with a low debt-to-equity ratio of 0.14, indicating low leverage and financial stability. The return on equity is moderate at 6.87% in the TTM, showing decent profitability from shareholders' equity. The equity ratio is robust, reflecting a solid capital structure with a high proportion of equity financing.

Cash Flow

Cash flow analysis reveals challenges, with a significant decline in free cash flow growth at -53.19% in the TTM. The operating cash flow to net income ratio is low at 0.08, indicating limited cash generation from operations relative to net income. The negative free cash flow to net income ratio highlights cash flow constraints, potentially impacting future investments and liquidity.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	7.80B	7.90B	7.91B	7.19B	6.41B	6.06B
Gross Profit	1.58B	1.72B	1.55B	1.29B	1.23B	1.33B
EBITDA	522.52M	606.68M	587.22M	402.64M	352.84M	482.74M
Net Income	282.79M	369.16M	334.57M	173.88M	127.00M	206.57M
Balance Sheet
Total Assets	7.77B	7.56B	7.19B	6.23B	5.49B	5.34B
Cash, Cash Equivalents and Short-Term Investments	1.18B	1.91B	1.56B	1.16B	1.23B	1.52B
Total Debt	585.16M	478.52M	525.77M	48.00M	48.00M	48.00M
Total Liabilities	3.56B	3.49B	3.46B	2.84B	2.26B	2.21B
Stockholders Equity	4.21B	4.08B	3.73B	3.38B	3.23B	3.13B
Cash Flow
Free Cash Flow	-248.42M	428.38M	-70.72M	-42.59M	-273.54M	116.09M
Operating Cash Flow	163.44M	783.41M	183.99M	112.25M	56.95M	336.18M
Investing Cash Flow	-401.29M	-356.69M	-241.34M	-150.96M	-325.00M	-217.00M
Financing Cash Flow	-121.52M	-74.36M	451.09M	-23.39M	-28.92M	-32.63M

Otani Kogyo Co., Ltd. Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 5180.00
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Negative
• STOCH: Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For JP:5939, the sentiment is Positive. The current price of 5180 is below the 20-day moving average (MA) of 6595.50, below the 50-day MA of 5887.30, and below the 200-day MA of 5540.80, indicating a bullish trend. The MACD of 322.25 indicates Negative momentum. The RSI at 71.13 is Negative, neither overbought nor oversold. The STOCH value of 87.38 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for JP:5939.

Otani Kogyo Co., Ltd. Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
6894	76 Outperform	¥3.12B	7.78	―	3.92%	-1.32%	45.44%
6654	68 Neutral	¥5.72B	32.39	―	2.90%	-0.14%	-32.62%
5939	66 Neutral	¥5.58B	19.70	―	0.55%	-3.52%	-32.97%
5820	64 Neutral	¥2.69B	13.16	―	2.69%	2.48%	161.80%
Sector *	63 Neutral	$10.79B	15.43	7.44%	2.01%	2.89%	-14.66%
6943	51 Neutral	¥3.86B	-9.09	―	1.79%	-10.43%	-368.47%
6993	46 Neutral	¥117.64B	-28.74	―	―	-2.35%	16.12%