Japanese Small‑Cap Firms See Margin Expansion

Japanese small- and mid-cap companies reported broad margin expansion and strong year‑over‑year earnings gains, though valuations and momentum vary across firms. Kawasaki Setsubi Kogyo posted a turnaround with net profit margin rising to 9.1% from 4.5% and earnings up 204.1% year‑over‑year, extending a five‑year average EPS growth of 27%. Tokyo Kiraboshi Financial Group reported a 24% net margin (from 18.5%) and 51.3% earnings growth, trading cheaply at about 5.9x P/E and appealing to income-focused investors. Yashima Denki saw margins of 6.6% (from 4.1%) and earnings growth of 86.2%, trading slightly below its DCF fair value at ¥2,600 (P/E 11.7x). Japan Investment Adviser delivered the largest leap—margin 32.9% versus 11.9% and earnings +288.1%—though its shares trade above fair value (P/E 8.3x). Kobe Electric Railway and Konishi posted modest margin gains to 5.5% and 5.9%, respectively; Kobe’s recent growth (18.5%) trails its five‑year average and the stock trades at a higher P/E (14.8x), while Konishi’s steady ~10% growth and low P/E belie a market price above its DCF fair value and raise minor dividend sustainability questions.