KAMEDA SEIKA (2220) FY2026 Q3 Earnings Report

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Executive Summary

Although both revenue and operating income increased substantially, the sharp expansion in net income was primarily attributable to extraordinary income, including the gain on step acquisitions, and must be evaluated separately from improvements in core earnings power. Revenue was ¥1,043.1B (+34.9% YoY), operating income was ¥61.9B (+43.6%), ordinary income was ¥63.7B (+7.4%), and net income was ¥252.1B (¥39.0B in the previous year). The operating margin improved from the previous year to 5.9%, but the primary driver of the surge in net income was extraordinary income of ¥212.0B, including a ¥206.0B gain on step acquisitions. A key feature was that growth at the ordinary income level lagged growth at the operating income level.

Factors Affecting Performance

【Revenue】Revenue was ¥1,043.1B, representing a substantial 34.9% YoY increase. Changes in the scope of consolidation, including the addition of two newly consolidated subsidiaries, appear to have contributed to the increase in revenue. Progress against the full-year forecast of ¥1,375.0B was 75.9%, broadly in line with the standard quarterly progress rate of 75%.

【Profit and Loss】Operating income increased 43.6% YoY to ¥61.9B, exceeding the rate of revenue growth, and the operating margin improved to 5.9%. In contrast, ordinary income was limited to ¥63.7B (+7.4% YoY), as increases in non-operating expenses, including ¥2.6B in interest expense, slowed growth at the ordinary income level. Net income expanded substantially to ¥252.1B (¥39.0B in the previous year), driven by extraordinary income of ¥212.0B, primarily the ¥206.0B gain on step acquisitions. The effective tax rate against profit before tax of ¥274.1B was low at 8.0%. Overall, the Company achieved higher revenue and profits, but net income growth was highly dependent on temporary factors.

Key Financial Indicators

【Profitability】The 5.9% operating margin improved from the previous year, while the 29.4% gross margin and 70.6% cost-of-sales ratio indicate that cost pass-through has progressed to a certain degree. Although the net profit margin was 23.9%, operating margin is the appropriate measure of underlying profitability after excluding the portion dependent on extraordinary income.【Cash Flow Quality】Corporate income taxes and other taxes were limited to ¥22.1B against profit before tax of ¥274.1B, and the 8.0% effective tax rate reflects the reduction in the tax burden resulting from the composition of extraordinary income.【Investment Efficiency】ROE was high at 24.3%, but because the sharp increase in net income depended on the gain on step acquisitions, improvement in capital efficiency on a core business basis was more modest. BPS expanded to ¥4,759.12 from ¥3,585.50 in the previous year.【Financial Soundness】The equity ratio was a solid 58.5%, but current assets of ¥548.3B and current liabilities of ¥546.9B were nearly balanced, indicating limited short-term liquidity headroom. Goodwill of ¥417.1B accounted for 40.2% of net assets, indicating a high degree of concentration in M&A-related assets.

Cash Flow Analysis

Although detailed disclosure of the cash flow statement is not available, funding trends are analyzed based on movements in the balance sheet. Cash and deposits increased significantly to ¥187.0B from ¥101.0B in the previous year, while short-term borrowings expanded to ¥327.2B, suggesting that financing to support business expansion and M&A progressed. Fixed assets increased substantially to ¥1,224.1B from ¥905.9B in the previous year, with notable increases in goodwill of ¥417.1B and intangible fixed assets of ¥446.8B. This indicates more active investment associated with the expansion of the scope of consolidation, while suggesting that financing through financing activities supported this investment.

Earnings Quality

The quality of current-period net income of ¥252.1B requires attention because recurring earnings power and temporary factors are clearly separable. Of the ¥212.0B in extraordinary income, ¥206.0B was the gain on step acquisitions, representing a one-time accounting gain that accounted for the majority of net income. Meanwhile, operating income of ¥61.9B and ordinary income of ¥63.7B represent the underlying earnings power of the core business, and the ordinary income growth rate of +7.4% was below the operating income growth rate of +43.6%. This was due to increases in non-operating expenses, including ¥2.6B in interest expense. Comprehensive income was ¥262.1B, a level close to net income of ¥252.1B, as foreign currency translation adjustments of +¥45.9B and the share of OCI of equity-method affiliates of -¥38.3B offset each other. Overall, it would not be appropriate to extrapolate the high growth rate in current-period net income as a sustainable earnings trend.

Earnings Forecasts and Guidance

Progress for Q3 cumulative results against the full-year Company forecasts was 75.9% for revenue, 88.4% for operating income, 88.5% for ordinary income, and 102.1% for net income. While revenue is progressing broadly in line with the standard progress rate of 75%, operating income and ordinary income are more than 13pt above the standard progress rate, leaving only approximately ¥8.1B of additional operating income and ¥8.3B of additional ordinary income required in Q4. Net income has already exceeded the full-year forecast of ¥242.0B, but this was primarily driven by extraordinary income and must be considered separately from the progress pace of the core business.

Shareholder Returns

The Company’s full-year dividend forecast is ¥58.00 per share, including the actual Q2 dividend of ¥15.00. The payout ratio calculated using forecast full-year net income of ¥242.0B and the average number of shares outstanding during the period of 21.083M shares is approximately 5.1%, a low level. While the low payout ratio indicates resilience to earnings volatility, current-period net income includes the gain on step acquisitions. Accordingly, the sustainability of the dividend funding base must be evaluated in light of trends in core operating income and the capital allocation policy.

Risk Factors

1. Refinancing and liquidity risk: Short-term liabilities accounted for 70.8% of total liabilities, indicating that the majority of liabilities are short-term in nature. Cash and deposits of ¥187.0B were only 0.57 times short-term borrowings of ¥327.2B, and changes in the refinancing environment could affect liquidity.

2. Goodwill impairment risk: Goodwill of ¥417.1B accounted for 40.2% of net assets and 23.5% of total assets. If the earnings plans of the acquired businesses fall short of expectations, goodwill impairment could erode shareholders’ equity.

3. Cost pass-through and profitability risk: Although the operating margin improved to 5.9%, maintaining the 29.4% gross margin during another period of rising raw material, energy, and logistics costs will be a challenge.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The operating margin was slightly above the industry median, while the net profit margin was substantially above the industry median due to the impact of extraordinary income.

Growth and Capital Efficiency

The revenue growth rate was substantially above the industry median, with the expansion of the scope of consolidation contributing to high growth relative to the industry average.

※Source: Compiled by the Company

Key Points in the Financial Results

1. The core business achieved higher revenue and profits, with revenue up +34.9% and operating income up +43.6%. The operating margin also improved from the previous year, indicating progress in cost pass-through and fixed-cost absorption.

2. The substantial increase in net income (from ¥39.0B in the previous year to ¥252.1B) was primarily attributable to the ¥206.0B gain on step acquisitions. The 102.1% progress against the full-year plan reflects this temporary factor and should be interpreted accordingly.

3. The short-term liabilities ratio of 70.8% and the goodwill ratio to net assets of 40.2% remain key points for ongoing monitoring of financial management following the M&A.

Theoretical Stock Price (Reference Value)

Sensitivity: ¥4,170–¥4,419 at ±1% cost of equity, and ¥4,275–¥4,303 at ω±0.1.

Notes:

• Normalized EPS calculated from ordinary income and other items is used to exclude the impact of temporary gains and losses (the Company’s forecast EPS is ¥1,147.8).
• Because net income progress against the full-year forecast is 103%, above the standard level of 75%, forecast EPS is adjusted upward within a maximum range of +10% (because companies progressing ahead of plan tend to exceed their forecasts; the adjustment may be excessive for businesses with strong seasonality).
• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Goodwill represents a high proportion of net assets, and the assumptions would change substantially if impairment occurred.
• Net assets as of the end of the quarter are used (there is a timing difference relative to the full-year forecast).

(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 stock price or a recommendation of any specific investment action, and does not predict or guarantee future stock prices.)

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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 a professional as necessary.

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