Nihon M&A Center Holdings (2127) FY2026 Q3 Earnings Report

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Executive Summary

This earnings period delivered a significant improvement in profitability, with profit growth exceeding revenue growth. Revenue was ¥377.4B (+26.5% YoY), Operating Income was ¥156.4B (+48.2%), Ordinary Income was ¥157.2B (+46.8%), and Net Income attributable to owners of the parent was ¥100.5B (+47.2%). The Operating Income growth rate exceeded the revenue growth rate by 21.7pt, confirming operating leverage driven by an improved gross margin and restrained growth in selling, general and administrative expenses.

Factors Affecting Financial Performance

【Revenue】Revenue increased 26.5% YoY to ¥377.4B. The expansion of demand for M&A advisory services and the accumulation of completed transactions appear to have been the primary drivers of revenue growth.

【Profit and Loss】The gross profit margin increased 2.2pt from 61.4% in the same period of the previous year to 63.6%, while selling, general and administrative expenses rose only 7.7% YoY to ¥83.7B, significantly below the revenue growth rate. As a result, the Operating Income margin increased 6.0pt from 35.4% in the same period of the previous year to 41.4%. Non-operating income and expenses resulted in net income of ¥0.8B, and Ordinary Income of ¥157.2B was approximately at the same level as Operating Income, indicating a profit structure led by the core business. Net Income was ¥100.5B (+46.8% YoY), representing both revenue and profit growth.

Key Financial Indicators

【Profitability】The Operating Income margin of 41.4% and Net Income margin of 26.6% both clearly improved from the same period of the previous year (35.4% and 22.8%, respectively). The gross margin also increased to 63.6%, indicating that an improved transaction mix or transaction pricing has driven higher profitability.【Cash Flow Quality】Interest income of ¥1.2B was the primary component of non-operating income, with investment returns on ample cash and deposits supporting Ordinary Income. Accounts receivable decreased significantly to ¥8.4B from ¥26.3B in the previous year, indicating progress in working capital efficiency.【Investment Efficiency】ROE (annualized) remained high at 27.8%, achieving high capital efficiency under a conservative financial structure with an Equity Ratio of 80.4%.【Financial Soundness】Current assets of ¥410.6B versus current liabilities of ¥93.2B indicate a high current ratio, while long-term borrowings were reduced to ¥21.0B. Cash and deposits of ¥374.9B accounted for 62.5% of total assets, providing substantial financial resilience.

Cash Flow Analysis

Although the cash flow statement has not been directly disclosed, fund movements can be assessed from changes in the balance sheet. Cash and deposits stood at ¥374.9B, slightly down from ¥392.1B in the previous year, but remained ample at more than 6割 of total assets. Long-term borrowings were halved from the equivalent of ¥40.0B to ¥21.0B, suggesting that borrowings were reduced using internally generated funds from accumulated profits. The significant decrease in accounts receivable and increase in retained earnings (¥577.6B) suggest that funds generated through operating activities are being allocated to strengthening the financial position.

Quality of Earnings

Most profits were generated by the core business. The difference between Ordinary Income of ¥157.2B and Operating Income of ¥156.4B was small, and non-operating income was limited primarily to investment returns centered on interest income of ¥1.2B. No extraordinary gains or losses were recorded, and there was no earnings boost from temporary factors. Comprehensive income was ¥97.9B, slightly below Net Income of ¥100.5B. The primary causes of the difference were valuation difference on available-for-sale securities of -¥2.1B and foreign currency translation adjustments of -¥0.5B, indicating that changes in the market value of investment securities held had a negative impact on comprehensive income. The divergence between Net Income and comprehensive income was limited, and the overall quality of earnings can be assessed as high.

Earnings Forecast and Guidance

The full-year company forecasts are revenue of ¥463.0B (+5.0% YoY), Operating Income of ¥170.0B (+1.7%), and Ordinary Income of ¥170.0B (+0.5%). Current-period results (equivalent to cumulative Q3 results) were ¥377.4B, ¥156.4B, and ¥157.2B, respectively, representing progress rates of 81.5% for revenue, 92.0% for Operating Income, and 92.5% for Ordinary Income. These figures are substantially above the standard progress level of approximately 75%, suggesting potential upside to the full-year plan. However, because the forecast YoY growth rates are substantially below the actual growth rates to date, attention should be paid to the possibility that quarterly performance may fluctuate depending on the timing and scale of future transaction completions.

Shareholder Returns

The full-year dividend forecast is 29.00 yen per share, resulting in a forecast Payout Ratio of 83.6% based on forecast EPS of 34.67 yen. The interim dividend in the previous year was 14 yen. The Payout Ratio is expected to increase from the previous year’s actual level (EPS of 21.47 yen; Payout Ratio limited in the available data), indicating a policy of increasing dividends against a backdrop of earnings growth. Cash and deposits of ¥374.9B and an Equity Ratio of 80.4% provide resilience for dividend payments; however, a Payout Ratio of 83.6% is relatively high, and the sustainability of earnings growth will determine future capacity for shareholder returns.

Risk Factors

1. Dependence on transaction closing timing: M&A advisory fees are recognized when transactions are completed, and shifts in closing dates or a decline in large transactions could cause significant fluctuations in quarterly performance. The fact that the full-year forecast calls for growth of only 5.0%, compared with revenue growth of 26.5%, indicates dependence on transaction-closing trends in the second half and beyond.

2. High Payout Ratio: The full-year forecast Payout Ratio is 83.6%, relatively high considering the characteristics of the advisory business, which is susceptible to earnings volatility. If earnings fall below plan, flexibility in dividend capacity may decline.

3. Price fluctuations in investment securities: Investment securities of ¥140.9B account for 23.5% of total assets, while the valuation difference was -¥2.1B for the current period. The company’s structure is such that market price fluctuations affect comprehensive income and net assets.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (healthcare)

Profitability and Returns

The Company’s Operating Income margin and Net Income margin both substantially exceed the industry median, demonstrating exceptional profitability within the industry.

Growth and Capital Efficiency

The revenue growth rate also substantially exceeds the industry median, placing the Company among the industry leaders in both profitability and growth.

※Source: Compiled by the Company

Key Earnings Highlights

1. Operating Income increased 48.2%, exceeding the 26.5% increase in revenue. The Operating Income margin improved 6.0pt YoY to 41.4%, clearly demonstrating operating leverage resulting from selling, general and administrative expenses growing substantially more slowly than revenue.

2. The progress rate for full-year Operating Income was 92.0%, while that for Ordinary Income was 92.5%, both substantially above the standard progress level. At the same time, the YoY growth rate embedded in the full-year forecasts themselves remains modest, creating a structure in which transaction-closing trends in the second half will determine the full-year outcome.

3. Under a conservative financial structure featuring an Equity Ratio of 80.4% and long-term borrowings of ¥21.0B, the Company achieved high capital efficiency, with ROE of 27.8%. The forecast Payout Ratio of 83.6% is relatively high, and the reproducibility of future earnings growth will be key to assessing the sustainability of shareholder returns.

Theoretical Share Price (Reference Value)

Sensitivity: ¥213–¥224 at ±1% for the cost of equity, and ¥217–¥221 at ±0.1 for ω.

Notes:

• Because Net Income progress against the full-year forecast (91%) exceeds the standard level (75%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies ahead of schedule tend to exceed forecasts; the adjustment may be excessive for businesses with strong seasonality).
• Net assets as of the quarter-end are used (there is a timing gap 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 predict or guarantee future share prices.)

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

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