Howa Machinery, Ltd.
6203・Standard Market・Machinery
Business
Howa Machinery, founded in 1907 and headquartered in Aichi Prefecture, is a diversified manufacturing company. Its four core businesses are Machine Tools (including Machining Centers & Special-Purpose Machines and Pneumatic & Hydraulic Equipment), Firearms (including the Type 20 Rifle for the Ministry of Defense), Special-Purpose Vehicles (including Road Sweepers), and Building Materials (including Soundproof Sashes), and it also has subsidiaries in real estate leasing, trading, and logistics. Its main customers are the Acquisition, Technology & Logistics Agency (accounting for ¥6,428 million, or 26.7% of net sales in FY2026 (ending March 2026)) and the automotive-related industry. The company is listed on the Tokyo Stock Exchange Standard Market and the Nagoya Stock Exchange Premier Market. Consolidated net sales for FY2026 (ending March 2026) were ¥24,064 million.
Business Model
The core Firearms business is a delivery-based business built on order contracts with the Ministry of Defense, with an order backlog of ¥3,761 million (as of the end of FY2026 (ending March 2026)) underpinning revenue visibility. Building Materials and Special-Purpose Vehicles are produced to order for niche markets. Real Estate Leasing (operating margin of approximately 80.9%) provides stable cash flow, absorbing the structural reform costs of the Machine Tools business. The trading and logistics functions of subsidiaries complement the group's internal value chain.
Company Strengths
The company holds a high degree of specialization in manufacturing Ministry of Defense equipment, including the Type 20 5.56mm rifle. In FY2026 (ending March 2026), the Firearms segment achieved net sales of ¥8,965 million (up 13.4% year on year) and operating profit of ¥1,255 million (up 37.8% year on year). The order backlog at fiscal year-end of ¥3,761 million underpins sales for the following period and beyond. The company also utilizes a new contract format, the Specific Initiative Contract, based on the Act on Strengthening Defense Production Bases.
The Real Estate Leasing segment recorded net sales of ¥508 million against operating profit of ¥411 million (an operating margin of approximately 80.9%). The segment maintains high cash generation efficiency with zero additional investment, functioning as a stabilizing mechanism for the group's overall earnings by absorbing losses (operating loss of ¥1,017 million) arising from structural reforms in the Machine Tools segment.
In the Building Materials segment, increased sales of Soundproof Sashes drove net sales of ¥3,232 million (up 7.2% year on year) and operating profit of ¥276 million (up 607.7% year on year) for FY2026 (ending March 2026). The order backlog for the Special-Purpose Vehicles segment rose substantially to ¥790 million (up 90.8% from the end of the previous fiscal year). Both results demonstrate sustained product demand and order-winning capability in niche markets.
ENVALITH's Perspective
Performance Trend
Revenue expanded from ¥19,697 million in FY2022 to ¥24,827 million in FY2025, but fell back to ¥24,064 million in FY2026 (down 3.1% year on year). The main cause was a 22.1% decline in Machine Tools to ¥5,421 million, driven by reduced capital expenditure demand in the automotive industry. Firearms performed well, up 13.4% to ¥8,965 million, supported by increased deliveries of the Type 20 Rifle to the Ministry of Defense and revenue recognition from specific initiative contracts under the Act on Strengthening the Defense Production and Technology Base. Operating profit came in at ¥1,186 million (down 5.3% year on year), a modest decline, while the gross profit margin improved from 17.0% in the previous period to 17.6%. Extraordinary losses included a ¥116 million valuation loss on shares of affiliated companies and a ¥112 million business restructuring loss, partially offset by a ¥216 million gain on sale of investment securities, resulting in net income of ¥741 million (down 1.1% year on year). For FY2027 (ending March 2027), the company forecasts revenue of ¥23,560 million (down 2.1% year on year), operating profit of ¥1,410 million (up 18.9%), and net income of ¥1,080 million (up 45.7%).
Growth Strategy
Aiming for profit growth in FY2028 (ending March 2028) through profit structure reform in the Machine Tools business and improved profitability in Firearms and Building Materials
With a policy of transforming the profit structure to align with market scale, the company resolved to dissolve and liquidate its China local subsidiary (Howa (Tianjin) Machine Tool Co., Ltd.), separating out the unprofitable business. Structural reform costs, including valuation losses on inventory for China-bound stock, have already been recorded in advance. The company is pursuing a profitability-focused product and sales strategy and developing niche-top market segments.
The company continues to increase deliveries of the Type 20 Rifle and expand sales of equipment such as replacement parts. Leveraging new contract forms such as specified initiative contracts based on the Act on Strengthening Defense Production Bases, the company is maintaining and expanding supply capacity through investment in its production base (depreciation expense of ¥326 million in the Firearms segment in FY2026 (ending March 2026)). For FY2027 (ending March 2027), the policy is to offset the anticipated disappearance of sales from specified initiative contracts with increased deliveries of the Type 20 Rifle.
Effective April 1, 2026, the company made Machine Service Co., Ltd. (sale, leasing, and maintenance of special-purpose vehicles) a subsidiary (51% voting rights). Through a tripartite business operation with Eiwa Co., Ltd., the company is pursuing synergies in the reuse business and after-sales service field for road sweepers. The order backlog for Special-Purpose Vehicles at the end of FY2026 (ending March 2026) stood at ¥790 million (up 90.8% from ¥414 million at the end of the previous fiscal year), and this is expected to contribute to sales in the next fiscal year.
The company is promoting expanded sales capturing increased demand for Soundproof Sashes and improving profitability through price pass-through. In FY2026 (ending March 2026), the company achieved net sales of ¥3,232 million (up 7.2% year on year) and operating profit of ¥276 million (a substantial increase from ¥39 million in the previous fiscal year). The order backlog also increased to ¥904 million (up 42.6% from ¥634 million in the previous fiscal year), and stable sales contribution is expected in the next fiscal year.
While maintaining stable dividends over the medium to long term (¥20 per year as a base), the company has clarified a policy of strengthening shareholder returns with a target dividend payout ratio of 30% in the event of increased profits. Against a forecasted net income of ¥1,080 million for FY2027 (ending March 2027), the company forecasts a dividend payout ratio of 22.3%, indicating room for dividend increases if profits grow.
Last updated: July 19, 2026