Araya Industrial Co., Ltd. (7305) AI Stock Analysis

• Market Cap: ¥20.98B
• Dividend Yield: 6%
• Average Volume (3M): 20.75K
• Price to Earnings (P/E): 11.2
• Beta (1Y): 0.67
• Revenue Growth: -5.76%
• EPS Growth: 56.13%
• Country: JP
• Employees: 480
• Sector: Basic Materials
• Sector Strength: 58
• Industry: Steel
• EPS (TTM): 111.83
• Shares Outstanding: 5,200,000
• 10 Day Avg. Volume: 16,370
• 30 Day Avg. Volume: 20,746
• PEG Ratio: 0.39
• Price to Book (P/B): 0.78
• Price to Sales (P/S): 0.57
• P/FCF Ratio: 13.15
• 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: 69 Neutral
• Price Target: ¥5,957.00 ▲(18.90% Upside)
• Action: Downgraded Date: 10/30/25
• Date: Action: Downgraded 10/30/25

The overall stock score is driven by a strong financial foundation and attractive valuation, offset by bearish technical indicators. The company's solid balance sheet and high dividend yield are significant strengths, while the current market momentum suggests caution.

Positive Factors

Strong balance sheet

Low leverage and a high equity ratio provide a durable capital cushion that reduces refinancing and solvency risk in cyclical steel markets. A positive ROE (6.84%) shows the business can generate returns for shareholders, supporting long-term financial flexibility and stability.

Solid cash conversion

Operating cash flow exceeding net income indicates strong cash conversion, which supports operations, interest coverage and distributions. The FCF-to-net-income ratio remains reasonable, meaning the company still converts earnings into cash to fund core needs despite recent FCF pressure.

Resilient gross margins

A roughly 18% gross margin points to efficient production and cost control versus peers. Sustained gross margins help insulate operating profitability from commodity swings, supporting durable operating cash flow and the ability to withstand demand cycles over months ahead.

Negative Factors

Revenue contraction

Falling revenue reduces scale and weakens fixed-cost absorption in a cyclical steel industry. Continued top-line decline can limit pricing power, reduce operating leverage benefits, and constrain the company’s ability to invest in growth or respond to competitive pressures over the medium term.

Compressing net margins

Narrowing net and operating margins lower earnings resilience and reduce retained earnings available for reinvestment. If margin pressure persists, the firm may face tougher choices on capex, dividends or pricing strategy, impairing long-term profitability and shareholder return potential.

Declining free cash flow

A sizable drop in free cash flow limits the company’s ability to fund capital expenditures, repay debt, or sustain distributions without tapping reserves. Over several months this reduction can constrain strategic initiatives and force reliance on the balance sheet or external financing for growth.

Araya Industrial Co., Ltd. Business Overview & Revenue Model

Company Description

Araya Industrial Co., Ltd. manufactures and sells steel products in Japan and internationally. The company offers ordinary steel pipes, stainless steel pipes, special-shaped steel pipes, various sections, and precision parts for OA machines for use in automobiles, motorcycles, bicycles, construction, furniture products, industrial machinery, welfare equipment, and logistics equipment. It also offers suspensions for wheelchairs, wheel chairs, industrial absolex, and wing arms for toilet, as well as bicycles and rims. The company was founded in 1903 and is headquartered in Osaka, Japan.

How the Company Makes Money

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Araya Industrial Co., Ltd. Financial Statement Overview

Summary

Araya Industrial Co., Ltd. showcases a robust financial foundation with strengths in equity management and cash flow generation. However, challenges in revenue growth and profit margins indicate potential areas for improvement. The company maintains a conservative leverage position, minimizing financial risk.

Income Statement

The company demonstrates moderate revenue stability with fluctuations over the years, showing a decrease in revenue from the previous year by 3.84%. The Gross Profit Margin remains strong at approximately 18%, indicating efficient production processes. However, the declining Net Profit Margin from 5.56% last year to 4.97% this year suggests narrowing profitability. The EBIT Margin and EBITDA Margin also show slight declines, reflecting some operational challenges.

Balance Sheet

Araya Industrial Co., Ltd. maintains a solid financial structure with a healthy Debt-to-Equity Ratio of 0.18, showcasing prudent debt management. The Return on Equity (ROE) is strong at 6.84%, highlighting effective shareholder value creation. The Equity Ratio of 59.76% suggests a stable asset base funded largely by equity, providing a cushion against liabilities.

Cash Flow

The company's cash flow shows resilience with a positive Operating Cash Flow to Net Income Ratio of 1.28, indicating strong cash generation relative to net income. However, the Free Cash Flow decreased by 23.41% from last year, which could pressure future investments. The Free Cash Flow to Net Income Ratio remains healthy at 0.87, although it's down from the previous year, suggesting room for improvement in cash management.

Breakdown	TTM	Mar 2025	Mar 2024	Mar 2023	Mar 2022	Mar 2021
Income Statement
Total Revenue	42.27B	42.84B	44.56B	46.43B	40.76B	36.50B
Gross Profit	8.04B	7.72B	7.81B	10.43B	8.98B	6.21B
EBITDA	2.77B	2.50B	2.88B	5.47B	4.16B	1.43B
Net Income	2.11B	2.13B	1.69B	3.06B	2.57B	1.28B
Balance Sheet
Total Assets	52.89B	52.06B	58.19B	54.04B	52.52B	45.57B
Cash, Cash Equivalents and Short-Term Investments	6.93B	6.70B	9.60B	8.33B	8.14B	8.41B
Total Debt	7.15B	5.74B	5.90B	6.25B	6.62B	6.84B
Total Liabilities	21.80B	20.48B	22.18B	21.82B	23.67B	19.35B
Stockholders Equity	30.59B	31.11B	35.60B	31.86B	28.64B	26.04B
Cash Flow
Free Cash Flow	0.00	1.84B	2.42B	1.02B	335.00M	1.04B
Operating Cash Flow	0.00	2.73B	2.87B	2.07B	1.22B	2.31B
Investing Cash Flow	0.00	590.00M	-683.00M	-1.07B	-849.00M	-671.00M
Financing Cash Flow	0.00	-6.05B	-1.05B	-896.00M	-729.00M	-1.07B

Araya Industrial Co., Ltd. Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 5010.00
• 50DMA: Negative
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For JP:7305, the sentiment is Neutral. The current price of 5010 is below the 20-day moving average (MA) of 5574.00, below the 50-day MA of 5492.40, and below the 200-day MA of 5018.87, indicating a neutral trend. The MACD of -37.74 indicates Positive momentum. The RSI at 40.88 is Neutral, neither overbought nor oversold. The STOCH value of 18.76 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for JP:7305.

Araya Industrial Co., Ltd. Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
8046	82 Outperform	¥20.08B	5.36	―	2.73%	8.19%	22.55%
5463	74 Outperform	¥343.57B	12.83	―	3.26%	-7.77%	58.84%
7305	69 Neutral	¥20.98B	11.22	―	6.00%	-5.76%	56.13%
5484	68 Neutral	¥16.98B	10.27	―	1.71%	-4.31%	8.40%
5632	66 Neutral	¥27.73B	21.77	―	4.13%	-2.96%	―
5408	64 Neutral	¥33.35B	-185.54	―	5.02%	-13.64%	-45.74%
Sector *	61 Neutral	$10.43B	7.12	-0.05%	2.87%	2.86%	-36.73%