Takasago's FY 25 shines with growth and space tech innovation

Takasago Thermal Engineering Co. Ltd. ended the financial year on a high note, posting record revenue, profit and margins. These results were driven by improvements in the profitability of large-scale projects and O&M works, bolstered by accumulated expertise and operational know-how in designing and building large-scale industrial projects, driving steady project progress and minimizing delivery risk.

Takasago Thermal Engineering Co., Ltd. is a Japanese company founded in 1923, which has around 5,850 employees. It is primarily involved in the equipment construction business as well as the manufacturing and sale of equipment. The company operates through two major segments, namely : Equipment Construction segment (98% of FY 25 net sales), which involves the maintenance and general management of equipment, the design and construction of air conditioning systems and water supply/drainage facilities, technical assistance to overseas subsidiaries, and the manufacturing, sales, and installation of cleanroom-related equipment and interior materials and Equipment Manufacturing and Sales segment (2%), which mainly focuses on the design, manufacturing, and sales of air conditioners.

In addition, the company also participates in ancillary activities including the sales and leasing of real estate and insurance agency operations. The company is also geographically segmented into: Japan (81% of FY 25 net sales), Other countries (12%), and South-East Asia (7%).

Robust FY 25 performance

Takasago released its FY 25 financial results on May 13, 2025. The company posted a 5.2% y/y increase in revenue, reaching JPY382bn. This growth was driven by flexible resource allocation and off-site production capabilities enabling the company to address an increased project scale and active response to robust market demand, resulting in a record-high carryforward order book.

EBITDA grew by 32.5% y/y to JPY35.7bn, with margins expanding by 200bp to 9.4%. Net income experienced a notable 40.9% y/y increase, reaching JPY27.6bn. These growth rates are attributed to incremental investments in capabilities, technology, and scale support, strategic pipeline management, and stepped-up efficiency in cost planning and project execution.

Exploring thermal mining technology

Takasago signed a MoU with ispace, Inc. on May 9, 2025, to explore the feasibility of thermal mining technology for moon water extraction. The partnership aims to integrate Takasago’s thermal mining technology into a future ispace lunar rover. This collaboration follows Takasago’s previous contribution through development of water electrolysis equipment intended for use on the lunar surface. It highlights the company’s commitment to space-based resource technologies.

This agreement strengthens the company’s positioning beyond its core HVAC expertise, underpinning diversification into advanced space technologies. Takasago aims to strategically enter an emerging sector with high-innovation potential, enhancing its technological edge and long-term growth profile, while reinforcing its branding as an environment and sustainability-focused solutions provider.

Strong financial performance

Takasago posted a decent revenue CAGR of 8% over FY 22-25, reaching JPY382bn in FY 25, primarily driven by higher demand for energy-efficient solutions, expansion in international markets, product innovation, and strategic acquisitions. EBITDA grew at a CAGR of 31% to JPY35.7bn, with margin expanding from 5.2% in FY 22 to 9.4% in FY 25. Net income rose at a CAGR of 33.8% to JPY27.6bn in FY 25.

The cash from operations increased from JPY1.2bn to JPY5.9bn over the same period on account of robust growth in net income. During this period, the company’s total debt-to-equity ratio improved, decreasing from 2.4x to 2.1x, while its ROE rose from 8.5% to 15.9%.

In comparison, Kinden Corporation, a local peer, reported a lower revenue CAGR of 7.6% over the past three years, reaching JPY705bn in FY 25. EBITDA grew at a CAGR of 15.9% to JPY68.1bn in FY 25. Net income grew at a CAGR of 21.5%, reaching JPY47.3bn in FY 25.

Looking ahead, the analysts estimate a revenue CAGR of 5.1% over FY 25-28, reaching JPY443.6bn. EBITDA is expected to grow at a CAGR of 8.7% to JPY45.9bn, with margins expanding from 9.4% to 10.3% in FY 28. In addition, analysts anticipate a net income CAGR of 6.7% to JPY33.6bn, with EPS expected to increase to JPY516.7 in FY 28 from JPY416.2 in FY 25. Likewise, analysts estimate EBITDA CAGR of 10.7% and net profit CAGR of 7.7% for Kinden Corporation.

Robust stock performance

Over the past 12 months, the company’s stock has delivered robust returns of 23.8%, reflecting earnings growth. In comparison, Kinden Corporation delivered higher returns of 49.1% over the same period.

Takasago is currently trading at a P/E of 16.4x, based on the FY 26 estimated EPS of JPY447.6, which is higher than its 3-year historical average of 13.7x but lower than Kinden Corporation, which is trading at 17.3x. The company is trading at an EV/EBITDA of 11.6x, based on the FY 26 estimated EBITDA of JPY39,667m, which is higher than its 3-year historical average of 8.9x and Kinden Corporation (9.8x).

Takasago is monitored by six analysts, with two having ‘Buy’ ratings and four having ‘Hold’ ratings for an average target price of JPY7,283.3. However, the recent run-up in its share price means that the target price has already been reached, implying 6.3% upside potential from its current price.

Overall, the company has strong financial performance and strategic partnerships, in line with the current business environment, positioning it well for continued long-term growth and expansion. With a solid track record and promising future projections, the company is poised to capitalize on its strengths in thermal technology and developing entire building lifecycles. However, Takasago’s business is subject to a variety of risks and uncertainties, including slower demand in its core HVAC business due to economic downturns and construction slowdowns, rising competition, and supply chain disruptions.