As Partners (160A) FY2026 Q3 Earnings Report

Quick View

Executive Summary

The company secured higher revenue and income while maintaining strong revenue growth, although profit margins declined due to rising costs. Revenue was ¥190.8B (+34.8% YoY), Operating Income was ¥16.1B (+22.6%), Ordinary Income was ¥16.9B (+25.7%), and Net Income was ¥11.4B (+25.9%). As the revenue growth rate exceeded the Operating Income growth rate, the gross margin declined from 22.7% to 19.0%, while a decline in the SG&A expense ratio partially offset this impact.

Factors Affecting Performance

【Revenue】Revenue was ¥190.8B, maintaining strong growth of +34.8% YoY. By segment, the Nursing Care & Senior Business generated ¥114.8B (59.9% of total), while the Real Estate Business generated ¥76.9B (40.1% of total), with the Real Estate Business driving overall growth.

【Profit and Loss】Operating Income was limited to ¥16.1B (+22.6% YoY), resulting in an income growth rate below the revenue growth rate. Cost of sales increased +41.3% YoY, outpacing revenue growth, causing the gross margin to decline by approximately 370bp from 22.7% to 19.0%. Meanwhile, SG&A expenses were contained at +5.8% YoY, and the ratio to revenue declined from 13.4% to 10.6%, limiting the decline in the Operating Income margin to 8.4% (9.3% in the previous year). Non-operating income and expenses contributed a surplus of ¥0.8B, lifting Ordinary Income to ¥16.9B (+25.7% YoY). After a ¥5.5B income tax burden, Net Income was ¥11.4B (+25.9% YoY), with no significant divergence arising from extraordinary income and expenses. In conclusion, the company achieved higher revenue and income.

Segment Analysis

The Nursing Care & Senior Business generated revenue of ¥114.8B and Operating Income of ¥11.8B, for a margin of 10.3%. The Real Estate Business generated revenue of ¥76.9B and Operating Income of ¥19.0B, for a margin of 24.6%, with the profitability of the Real Estate Business providing substantial support to company-wide profit. Although the Nursing Care & Senior Business has the larger revenue scale, the Real Estate Business exceeds it in absolute profit, resulting in contrasting earnings structures between the two businesses. While the Real Estate Business has a high profit margin, it should be noted that period profit is more susceptible to fluctuations due to changes in project composition and sales progress.

Key Financial Indicators

【Profitability】The Operating Income margin was 8.4%, down from 9.3% in the same period of the previous year, while the Net Income margin also declined from 6.4% to 6.0%. The gross margin fell by approximately 370bp from 22.7% to 19.0%, with rising costs being the primary factor behind the deterioration in profitability.【Cash Flow Quality】Against Operating Income of ¥16.1B, Ordinary Income was ¥16.9B, while non-operating income of ¥1.6B accounted for only 0.8% of revenue, indicating that operating activities are the core source of profit. Operating Income covered interest expense of ¥0.8B by approximately 21 times, indicating strong interest-bearing capacity.【Investment Efficiency】Annualized ROE was high at 29.7%, comprising a Net Income margin of 6.0% × total asset turnover of approximately 1.10 times × financial leverage of 4.53 times, with leverage making a significant contribution.【Financial Soundness】The Equity Ratio was 22.1%, improving from 19.4% in the previous year, although the D/E ratio was 3.53 times and the Debt/Capital ratio was 63.2%, both high levels. The Current Ratio was 105.9%; while short-term payment capacity is secured, the margin of safety is limited.

Cash Flow Analysis

Cash and deposits decreased 38.1% YoY to ¥42.4B, while property, plant and equipment increased 100.8% YoY to ¥74.4B, intangible assets increased 636.2% YoY to ¥6.1B, and investments and other assets increased 251.5% YoY to ¥44.5B. The asset composition has shifted substantially from cash toward long-term holdings and development-related assets. Meanwhile, real estate for sale declined from ¥42.2B to ¥17.0B, and real estate for sale under development declined from ¥25.2B to ¥19.3B, suggesting that the sale of inventories and progress in development contributed to cash collection. Contract liabilities were ¥51.6B, a major component of current liabilities, indicating that advance payments from customers supplement a portion of business funding. Going forward, the key focus will be whether investments in fixed assets and investments and other assets are monetized and lead to an improved balance between cash balances and interest-bearing debt.

Earnings Quality

Against Operating Income of ¥16.1B, Ordinary Income was ¥16.9B, with non-operating income and expenses contributing only ¥0.8B positively. Non-operating income of ¥1.6B represented 0.8% of revenue and was not large enough to materially affect the earnings structure; operating activities remain the core source of earnings. Interest coverage was approximately 21 times against interest expense of ¥0.8B, indicating that interest costs are not currently impairing earnings power. Net Income of ¥11.4B was 32.6% below Ordinary Income of ¥16.9B, primarily due to income taxes of ¥5.5B (effective tax rate of 32.6%), with no significant divergence attributable to extraordinary income and expenses. Nevertheless, the approximately 370bp decline in the gross margin represents a qualitative change accompanied by changes in the cost structure, and the fact that revenue growth has not been fully converted into profit growth warrants attention from an earnings quality perspective.

Earnings Forecasts and Guidance

The cumulative Q3 revenue progress rate was 80.0%, exceeding the standard progress rate of 75% by 5.0pt. The progress rates for Operating Income, Ordinary Income, and Net Income were 110.1%, 112.1%, and 107.0%, respectively, all exceeding the Full-Year forecasts on a cumulative basis. The Full-Year forecasts are revenue of ¥238.6B (+33.2% YoY) and Operating Income of ¥14.6B (+11.9% YoY). Given that cumulative actual results have already exceeded the Full-Year forecasts, conservative assumptions such as rising costs and investment-related expenses may be incorporated into the Q4 outlook.

Shareholder Returns

The Q2 dividend was ¥0, and the Full-Year dividend forecast is ¥65 per share. The Payout Ratio based solely on dividends is 21.8% against Full-Year forecast EPS of ¥297.62, remaining at a low level below 60%. Based on the average number of shares outstanding during the period of approximately 3.58 million shares, the estimated annual total dividend is approximately ¥2.3B, leaving room relative to forecast Full-Year Net Income of ¥10.7B. However, there has been no revision to the dividend forecast for the current quarter, and the policy is centered on the year-end dividend. In addition, given the expansion of asset investments and the capital structure reflected by a D/E ratio of 3.53 times, dividend sustainability will depend not only on earnings levels but also on the management of investment funding and borrowings.

Risk Factors

1. Decline in gross margin: The gross margin declined by approximately 370bp YoY to 19.0%. Cost growth (+41.3%) exceeded revenue growth (+34.8%), creating a risk that revenue growth will not be sufficiently converted into profit growth if project composition changes and cost increases persist.

2. High financial leverage: The D/E ratio was 3.53 times and the Debt/Capital ratio was 63.2%, both exceeding generally recognized cautionary levels. Interest-bearing debt was ¥88.1B against equity of ¥51.2B. While improved capital efficiency accompanying investment expansion is expected, this structure is susceptible to amplified financial risk when performance fluctuates.

3. Declining on-hand liquidity: Cash and deposits decreased 38.1% YoY to ¥42.4B, while short-term borrowings increased 80.3% YoY to ¥20.4B. Cash/short-term borrowings stood at 2.08 times, maintaining coverage, but the continuing decline in liquidity requires ongoing monitoring.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Return

Profitability is broadly in line with the industry median; the Operating Income margin is slightly higher, while the Net Income margin is slightly lower.

Growth and Capital Efficiency

The revenue growth rate substantially exceeds the industry median, positioning the company among the high-growth companies in the industry.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. Revenue maintained strong growth of +34.8% YoY, while Net Income grew +25.9% YoY; however, the gross margin declined by approximately 370bp to 19.0%. The fact that a decline in the SG&A expense ratio partially offset the deterioration in the Operating Income margin is noteworthy from a cost management perspective.

2. Annualized ROE of 29.7% is high, but financial leverage of 4.53 times makes a substantial contribution. Investment in property, plant and equipment, intangible assets, and investments and other assets is expanding, and the monetization of these assets will determine future capital efficiency.

3. Cumulative Q3 Operating Income, Ordinary Income, and Net Income all exceeded the Full-Year forecasts, with progress rates above 100%. The cost and expense structure in Q4 relative to the Full-Year forecasts is a key factor that will determine the final results.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,922–¥2,038 at ±1% for the cost of equity, and ¥1,965–¥2,000 at ±0.1 for ω.

Notes:

• As Net Income progress against the Full-Year forecast (107%) exceeds the standard level (75%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies ahead of forecast progress tend to exceed their forecasts. For businesses with strong seasonality, the adjustment may be excessive).
• Net assets as of the quarter-end have been used (there is a time lag relative to the Full-Year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson-type; explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; it is not a forecast of the market share price or a recommendation of any specific investment action, and does not forecast or guarantee future share prices.)

---

This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting professionals as necessary.

---End of Report---