Iwatani Corporation

All figures are consolidated, Japanese GAAP, in JPY millions unless stated. Sources: Yuho FY2025 (five-year table), Tanshin FY2026, and StockAnalysis.com for gross profit, D&A and capex where noted. FY2024 and FY2025 use restated figures (Cosmo purchase-price allocation finalised in FY2025; ISG allocation finalised in FY2026).

Restatement note. FY2024 net income was originally reported as JPY47,363m and was restated to JPY43,468m after provisional negative goodwill on Cosmo was cut by JPY3,895m. Some aggregators still show the original figure.

Income statement

Notes on the income statement:

• Amounts were small before Cosmo was consolidated under the equity method.

• Diluted EPS equals basic EPS because the company has no dilutive securities.

• DPS before FY2025 is the pre-split amount divided by 4: JPY85, 95 and 130 pre-split for FY2022–FY2024.

• EBITDA is the analyst's definition. A broker source (Matsui) shows JPY79.5bn for FY2026 under a different definition.

Margins

Revenue CAGR:

• FY2022 to FY2026 (4 years): about 7.1%.

• FY2021 (JPY562,223m) to FY2026 (5 years): about 10.1%.

Both are heavily influenced by LPG price pass-through.

Balance sheet

FY2022 equity is derived from the equity ratio multiplied by total assets and is approximate.

Debt, goodwill and working capital (last three years; earlier years not fully disclosed in sources retrieved)

How these rows were built:

• FY2024 total debt is derived as the FY2025 total less the disclosed JPY9.926bn increase.

• FY2026 short-term debt: borrowings 38,036, current portion of LT borrowings 16,576 and leases 863; commercial paper fell to nil after a JPY33bn net redemption.

• FY2026 long-term debt: bonds 70,000, LT borrowings 120,254 and leases 1,512.

• FY2025 short-term debt includes JPY33,000m of commercial paper.

• FY2024 split is approximate; it is dominated by the Cosmo bridge loan recorded in short-term borrowings of JPY129,161m.

• For FY2023 and FY2022, debt can be approximated from the company's "interest-bearing debt to operating CF" ratio: about 2.7 years × JPY51.5bn ≈ JPY139bn (FY2023) and about 8.5 years × JPY13.1bn ≈ JPY111bn (FY2022). These are flagged as approximate.

Cash flow

Signs for investing and financing cash flows follow the Yuho FY2025 and Tanshin FY2026 narratives. The company's own free-cash-flow definition (operating plus investing cash flow) was −JPY5.9bn in FY2025 and +JPY35.3bn in FY2026.

The FY2026 dividend cash outflow more than doubled because the company paid the FY2025 year-end dividend and the newly introduced FY2026 interim dividend in the same year. Buybacks are odd-lot purchases only; there is no buyback programme.

Ratios

The company defines ROIC as operating profit after tax divided by average equity plus interest-bearing debt.

Net debt/EBITDA excludes roughly JPY12bn of equity-method income (mostly Cosmo), whose cash dividends were JPY6.3bn in FY2026. Including that income, leverage is about 2.6x.

Cash conversion cycle

Commentary on trends and drivers

Revenue is largely a price variable, not a volume variable. FY2023's +31% jump and FY2024's −6% decline track LPG import prices (Saudi CP) and resource prices more than underlying demand. LPG volume was essentially flat over FY2025–FY2026 (+0.5%), while LPG revenue fell 5.2%. The more informative indicator is gross profit, which compounded steadily from JPY191.8bn to JPY235.9bn (about 5.3% a year). It flattened in FY2026 (+0.7%) as helium and LPG margins compressed.

Operating profit peaked in FY2024 and has declined for two years. It went from JPY50.6bn to JPY46.2bn to JPY38.3bn.

LPG price lag: The company used first-in, first-out (FIFO) inventory accounting for LPG until the third quarter of FY2026, when it switched to gross average cost on implementing a new core system. With an approximately three-month import-to-sale lag, falling CP prices created a JPY5.7bn negative "market factor" in FY2026, versus +JPY0.2bn in FY2025.

Helium: Prices softened from the 2022–2023 shortage-era highs, especially in China.

SG&A: SG&A rose 5.0% in FY2026 (personnel, commissions, depreciation, rent). Two consecutive years of SG&A growth ahead of gross profit is the core margin problem.

Underlying trend: Excluding the LPG market factor, operating profit was JPY44.0bn in FY2026 versus JPY46.0bn in FY2025 (−4.3%). This is a moderate decline, not a collapse.

Below operating profit, quality has shifted.

• Ordinary profit now carries JPY12.2bn of equity-method income, mainly Cosmo.

• FY2026 net income (+17.8%) was flattered by JPY19.0bn of extraordinary income: a JPY12.0bn gain on sale of fixed assets (consistent with the Tokyo HQ disposal disclosed as planned for July 2025) and JPY4.9bn from selling cross-shareholdings.

• FY2025 carried JPY7.1bn of extraordinary losses, including the CQ-H2 withdrawal (JPY1.8bn) and the US hydrogen-station impairment (JPY3.5bn).

• Investors should therefore treat FY2026 EPS of JPY207 as overstated relative to run-rate.

• Management's FY2027 guidance of JPY197.67 EPS implies lower net income despite higher operating profit.

Balance sheet absorbed the Cosmo deal and is de-risking.

• The JPY105bn Cosmo purchase in FY2024 pushed investing outflow to JPY161bn and equity ratio to 43.2%. It also left short-term borrowings at JPY129bn, which made the current ratio fall below 1.0x.

• Refinancing into JPY30bn of bonds and a JPY45bn syndicated loan (maturities 2028–2032) termed out the debt.

• By FY2026, gross debt/equity had fallen to 0.56x, equity ratio had recovered to 48.6%, and commercial paper was fully repaid.

• Asset turnover has structurally fallen from 1.49x to 1.02x because the Cosmo stake (about JPY140bn in affiliate investments) produces equity income, not revenue.

ROIC is the weak spot. ROIC fell from 6.8% (FY2023) to 4.0% (FY2026), against a PLAN27 target of 6% or more. Hitting the FY2028 target of JPY65bn operating profit requires about 70% growth from FY2026 in two years. FY2027 guidance of JPY48.8bn leaves a further JPY16bn gap.

Cash generation is stable but modest. Operating cash flow has been JPY51–59bn for four years. After PP&E capex, free cash flow has been JPY9–23bn, which covers the current JPY10.8bn dividend but leaves little for M&A without debt or asset sales.

Guidance and consensus

Consensus figures: ordinary profit from 7 August 2026; other items from late June 2026. Q1 progress is cumulative actual divided by full-year company guidance (edinetdb, kabuyoho).

Q1 progress on ordinary and net profit far exceeds the 25% linear pace. This strongly suggests guidance is conservative, particularly given rising LPG import prices (positive price-lag effects) and probable Cosmo inventory gains. An upward revision at the H1 results (November 2026) is a plausible catalyst. The magnitude depends on oil and LPG prices in H2.

Bull case

1. Operating recovery is under way. Q1 FY2027 operating profit more than doubled (+109%) on LPG, semiconductors and helium. Full-year operating profit of JPY48.8bn or more (+27%) would restore ROIC towards 5%.

2. Cheap for its strategic optionality. A forward P/E of about 10.7x and P/B of about 1.1x is in line with Iwatani's own two-year average (8.4x ± 1.6x). That price includes Japan's dominant hydrogen platform (100% of liquid H₂) at little implied value, and a 22% Cosmo stake that produced JPY12bn of equity income.

3. De-risked balance sheet and better governance. Equity ratio is 48.6%, gross debt/equity 0.56x, commercial paper is repaid, cross-shareholdings are being sold, the CEO succession is complete, director terms are one year, and the dividend is progressive with interim payments.

Bear case

1. PLAN27 targets look unreachable. Reaching JPY65bn of operating profit by FY2028 requires about +33% beyond FY2027 guidance, while SG&A has outgrown gross profit for two years. FY2026 ROIC of 4.0% sits well below the 6% target and plausibly below the cost of capital.

2. Low earnings quality and high volatility. FY2026 net income relied on JPY19bn of one-off gains. Q1 FY2027 strength depends on commodity price lags and Cosmo's refinery inventory gains, which reverse when oil falls. JCR flagged this volatility when the Cosmo stake was taken.

3. The hydrogen thesis keeps slipping. CQ-H2 was abandoned, US stations were impaired, and fuel-cell vehicle adoption is weak. Hydrogen R&D was only JPY0.4bn (FY2025), and large-scale supply chains (JSE) are a 2030s story requiring subsidies. Meanwhile the LPG core faces structural decline.

Key catalysts and monitorables (next 12 months)

1. H1 FY2027 results (early-to-mid November 2026): guidance revision, Q2 LPG market factor, helium pricing.

2. Cosmo Energy earnings and policy: refining margins, inventory effects, buybacks (which push Iwatani's stake higher), and the dividend contribution under the formula.

3. CP propane price trajectory and JPY/USD, given the price-lag effects, now dampened by gross-average costing.

4. Hydrogen milestones: JSE carrier construction, CfD awards, Cosmo joint stations, Aichi Steel project, liquid-H₂ station commercialisation.

5. Critical minerals: Nordic Mining first green titanium sales, Caremag plant progress, Coburn productivity.

6. Capital allocation: pace of cross-shareholding sales, LPG M&A, and any buyback initiative under the TSE's P/B and capital-cost push.

7. Governance: confirmation of Makino's post-2026 role, board independence and diversity, FY2026 Yuho compensation disclosures.

8. PLAN27 successor plan: likely to be unveiled around May 2027–2028, with possible target resets.

Analyst verdict

Iwatani sits between a defensive utility and a cyclical commodity trader, and its share price has spent two years reflecting that ambiguity. The core facts are clear from the filings.

On the positive side, the company owns irreplaceable domestic infrastructure: Japan's only nationwide import-to-retail LPG chain and an effective monopoly in liquid hydrogen. It generates JPY50–60bn of operating cash flow a year, and its balance sheet has recovered from the JPY105bn Cosmo purchase faster than many expected.

On the negative side, operating profit has fallen for two years, and ROIC has sunk to 4.0%. The FY2026 headline net income gain was manufactured by asset sales rather than operations.

The Q1 FY2027 print changes the near-term tone materially. Operating profit more than doubled. Ordinary and net profit progress is already at 58% and 70% of full-year guidance. Consensus ordinary profit (about JPY66.8bn) sits well above the company's JPY59.0bn. An upward revision in November looks more likely than not.

However, investors should separate what is cyclical from what is structural. The LPG price lag, helium recovery and Cosmo inventory gains are cyclical and can reverse with oil prices. Structurally, the questions are whether management can stop SG&A outgrowing gross profit, monetise the Cosmo alliance beyond equity accounting, and convert hydrogen leadership into returns before subsidy-dependent mega-projects mature in the 2030s.

At about 10.7x forward earnings and 1.1x book, the valuation does not demand heroic assumptions. The stock is reasonably priced for a business of this quality. It is not obviously mispriced, because PLAN27's JPY65bn operating profit target is very likely to be missed.

We would characterise Iwatani as a hold with positive near-term earnings momentum and a long-dated hydrogen option. Upside depends on (1) sustained operating recovery to JPY50bn or more, (2) evidence of tangible Cosmo synergies, and (3) a credible successor plan with ROIC discipline under the new CEO. Downside risks centre on commodity reversal and further hydrogen write-downs.