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23932026 Q3StandardJGAAP

Nippon Care Supply (2393) FY2026 Q3 Earnings Report

For FY2026 Q3, revenue came to ¥25.9B (+8.8% year on year) and operating income ¥2.4B (+29.9%). The segment drivers and cash flow follow.

Nippon Care Supply Co.,Ltd.

IT & Services, Others/Services

executive_summary

In Q3 of the fiscal year ending March 2026, Revenue was ¥25.94B (YoY +¥2.09B +8.8%), Operating Income was ¥2.40B (YoY +¥0.56B +29.9%), Ordinary Income was ¥2.43B (YoY +¥0.55B +29.5%), and Net Income was ¥1.62B (YoY +¥0.37B +29.9%), achieving significant increases in both revenue and earnings. Assistive Equipment Services tracked at 7.4%, outpacing the national nursing care insurance rental cost aggregate growth rate (4.6%), and with the rental asset accumulated depreciation ratio rising to 73.6%, operating leverage kicked in. Gross margin improved to 36.8%, and Operating Margin reached 9.2%. Full-year guidance was revised upward to Operating Income of ¥3.15B (vs. previous forecast +¥5B) and Net Income of ¥2.20B (vs. previous forecast +¥3B), with Revenue expected at ¥35.00B (YoY +9.4%).

performance_drivers

[Revenue] The top line was ¥25.94B, up +8.8% YoY, setting a new record high for the 10th consecutive period. The core Assistive Equipment Rental service tracked at a 7.4% growth rate, exceeding the national nursing care insurance rental cost aggregate growth rate of 4.6%, supported by expansion of the branch network mainly in urban areas and aggressive deployment of rental assets. In Elderly Lifestyle Support Services, orders for “Balance Bento” expanded, and sales through the e-commerce site for care providers progressed.

[Profit and loss] Gross profit was ¥9.53B, with gross margin improving to 36.8%. SG&A was ¥7.14B, but the increased revenue reduced the relative burden, driving Operating Income to ¥2.40B (+29.9%), a substantial increase. Operating Margin reached 9.2%, and as the accumulated depreciation ratio of rental assets rose from 72.3% at the end of the previous fiscal year to 73.6%, the relative depreciation burden eased, enhancing operating leverage. Non-operating income/expenses were nearly neutral, and with interest expense of ¥0.12B, interest coverage was approximately 198x, an extremely healthy level. The gap between Ordinary Income of ¥2.43B and Net Income of ¥1.62B was due to tax burden (effective tax rate about 33.3%), with only a minor impact from extraordinary gains/losses.

Conclusion: Higher revenue and earnings. Sales growth driven by improved rental asset utilization and branch expansion, and margin improvement from operating leverage were achieved.

segment_analysis

Although there is no detailed disclosure of segment-level operating profit, PDF materials confirm that Assistive Equipment Services are the core business. The YoY growth rate of Assistive Equipment Rental revenue was 7.4% (as of December 2025), maintaining growth above the national nursing care insurance rental cost aggregate growth rate of 4.6%. From the book value of rental assets of ¥15.24B (acquisition cost ¥57.82B, accumulated depreciation ratio 73.6%), it can be inferred that Assistive Equipment Services account for the majority of company-wide revenue. Elderly Lifestyle Support Services are expanding primarily through “Balance Bento,” but the revenue mix is relatively small. The main drivers of higher revenue and earnings are revenue growth in the core Assistive Equipment Services and margin improvement due to a higher accumulated depreciation ratio.

key_metrics

  • Profitability: ROE 9.0% (YoY improvement), Operating Margin 9.2% (previous year 7.7%), Net Margin 6.2% (previous year 5.2%)
  • Cash quality: Operating CF/Net Income not disclosed; cannot be calculated
  • Financial soundness: Equity Ratio 66.2% (previous fiscal year-end 65.6%), Current Ratio 79.0% (short-term liquidity issues)
  • Leverage: Interest-bearing debt ¥1.80B, Debt/Capital 9.1%, Interest coverage approx. 198x
  • Liquidity metrics: Cash and deposits ¥0.71B, Cash/Short-term liabilities 0.40x (liquidity stress level)
  • Working capital: ▲¥1.65B (negative)

guidance_update

Full-year guidance is Revenue ¥35.00B (YoY +9.4%), Operating Income ¥3.15B (YoY +28.1%), and Net Income ¥2.20B. Progress versus cumulative Q3 results is Revenue 74.1%, Operating Income 76.1%, and Net Income 73.6%, tracking largely in line with the standard progress rate of 75.0%. The company revised its full-year guidance upward, increasing Operating Income by +¥5B and Net Income by +¥3B versus the previous forecast. The main reasons for the revision are the strong performance of Assistive Equipment Rental and margin improvement from enhanced rental asset utilization efficiency. As progress does not deviate significantly from standard, Q4 is expected to record approximately ¥9.06B in Revenue and approximately ¥0.75B in Operating Income; considering seasonality and year-end demand, achievement appears reasonable.

shareholder_returns

The dividend policy adopts a progressive dividend framework and a DOE (Dividend on Equity) floor target of 6%. The annual dividend forecast for the fiscal year ending March 2026 is ¥72 (previous year ¥70), and the Payout Ratio against Net Income of ¥2.20B (full-year forecast) is estimated at about 65%. Assuming an interim dividend of ¥0 against Q3 YTD Net Income of ¥1.62B and a year-end dividend forecast of ¥70, the quarterly-based Payout Ratio reaches approximately 70.2%. While a DOE 6% floor target indicates a focus on shareholder returns, a Payout Ratio above 60% constrains the capacity to build retained earnings. Given cash and deposits of ¥0.71B and short-term liquidity fragility (Current Ratio 79.0%, Cash/Short-term liabilities 0.40x), dividend payments may rely on Operating CF or short-term borrowings. No share repurchases have been disclosed, and shareholder returns are dividends only. Dividend sustainability depends on improvements in Operating CF and the status of short-term borrowing refinancing; therefore, attention is needed on future CF disclosure.

catalysts

[Short term]

  • Disclosure of Q4 FY March 2026 Operating CF results (to confirm dividend funding and refinancing capacity)
  • Progress in urban branch expansion such as the relocation of the Shizuoka Sales Office and regional sales trends
  • Effectiveness of promotional activities for “Balance Bento” and the status of order expansion

[Long term]

  • Progress toward 2030 targets (organic growth 6% or more, Net Income CAGR 5%) under the long-term vision “Keasap VISION 2040”
  • Impact of nursing care insurance system revisions (fee schedule revisions) and demand trends for Assistive Equipment Rental
  • Specific development of new businesses including M&A and timing of earnings contribution

industry_benchmark

[Industry position] (Reference information; our research)

  • Profitability: Operating Margin 9.2% (above the industry median 8.2% by +1.0pt), Net Margin 6.2% (above the industry median 5.7% by +0.5pt)
  • ROE: 9.0% (below the industry median 9.7% by ▲0.7pt), ROA: 6.0% (above the industry median 4.7% by +1.3pt)
  • Growth: Revenue growth rate 8.8% (below the industry median 9.5% by ▲0.7pt)
  • Financial soundness: Equity Ratio 66.2% (above the industry median 49.0% by +17.2pt), Current Ratio 79.0% (far below the industry median 2.06x = 206%)
  • Leverage: Net Debt/EBITDA approx. 0.38x (industry median ▲1.75x; unlike many peers that are effectively net cash, the company holds interest-bearing debt)

(Industry: Healthcare; comparison period: Q3 2025; sample size N=44 companies; source: our compilation)

Overall assessment: Profitability indicators (Operating Margin, Net Margin, ROA) are above the industry median and favorable. The Equity Ratio is well above the industry median, indicating a conservative capital structure, while the Current Ratio is significantly below the industry median, highlighting weak short-term liquidity. ROE is around the median, and the Revenue growth rate is also near the median level.

risk_factors

  • Short-term liquidity risk (materiality: High): A Current Ratio of 79.0% and Cash/Short-term liabilities of 0.40x are far below the industry median of 206%, making the refinancing capacity of ¥1.80B in short-term borrowings a prerequisite for maintaining dividends and working capital. As Operating CF is not disclosed, it is difficult to verify cash generation capacity, posing a risk of cash management stress materializing.
  • Dividend continuity risk (materiality: Medium): A Payout Ratio of about 70% and maintaining a progressive dividend framework and a DOE 6% floor target presuppose improvements in Operating CF. With a cash balance of ¥0.71B, the dividend payment (about ¥1.44B annually, estimated from shares outstanding) cannot be covered, implying potential drawdown of retained earnings or additional borrowings.
  • Nursing care insurance system revision risk (materiality: Medium): Revisions to nursing care fees and system changes for Assistive Equipment Rental directly affect the profitability of the core business. There is a risk that the current strong growth rate (7.4%) will slow due to system revisions.

investment_implications

Key takeaways from the results:

  • The rise in the rental asset accumulated depreciation ratio to 73.6% indicates a relative easing of the depreciation burden, a structural change whereby operating leverage contributes to margin improvement. The future trajectory of the accumulated depreciation ratio and its relationship with Operating Margin will shape medium-term profitability.
  • Short-term liquidity fragility—Current Ratio 79.0% and Cash/Short-term liabilities 0.40x—is conspicuously low within the industry; the ability to roll over ¥1.80B in short-term borrowings and generate Operating CF will determine the sustainability of the dividend policy and business investments. CF disclosures from Q4 onward will be key to assessing liquidity.
  • The upward revision to full-year guidance signals management confidence, but maintaining the progressive dividend framework and the DOE 6% floor target requires backing from cash generation. Whether a Payout Ratio of about 70% is sustainable depends on the future Operating CF/Net Income ratio and working capital management trends.

disclaimer

This report is an automatically generated earnings analysis prepared by AI that integrates XBRL earnings release data and PDF results briefing materials. It does not constitute a recommendation to invest in any specific security. The industry benchmarks are reference information compiled by our firm based on publicly available financial data. Investment decisions are your own responsibility; consult a professional as needed.

cash_flow_analysis

A quantitative assessment is difficult due to the absence of separate disclosures for Operating CF, Investing CF, and Financing CF. However, the rise in the accumulated depreciation ratio of rental assets to 73.6% suggests that recognition of depreciation expense is progressing, indicating a structure in which Operating CF tends to exceed Net Income. Negative working capital of ¥1.65B indicates that increases in receivables and inventories are being financed by payables and short-term borrowings, implying potential reliance on short-term funding. Interest-bearing debt consists mainly of ¥1.80B in short-term borrowings, and cash and deposits of ¥0.71B are insufficient to fully cover short-term liabilities. The PDF materials state that “with the rise in the accumulated depreciation ratio of rental assets, a favorable environment has been formed for improving profit and operating cash flow,” but without disclosure of specific CF results, cash backing for dividends and capital expenditures cannot be quantitatively confirmed. Cash generation assessment: Needs monitoring (definitive evaluation not possible due to insufficient disclosure).

AI Financial Analysis

Executive Summary

FY2026 Q3 performance was strong, with revenue growth translating into materially faster profit growth and the company tracking broadly in line with its full-year plan. Cumulative Q3 revenue rose 8.8% YoY to ¥25.94bn. Operating income increased 29.9% to ¥2.40bn, outpacing sales growth by 21.1 percentage points. Ordinary income grew 29.5% to ¥2.43bn. Net income attributable to owners increased 29.9% to ¥1.62bn, and EPS rose to ¥104.29 from ¥80.27. Gross profit increased 13.6% to ¥9.53bn. The gross margin expanded 156bp YoY to 36.8%, from 35.2% in the prior-year period. The operating margin improved 150bp to 9.2%, from 7.7%. The net margin rose 101bp to 6.2%, from 5.2%. SG&A expenses rose 9.0% YoY, only marginally above revenue growth, while the SG&A-to-sales ratio was essentially stable at 27.5%. This shows that gross-margin expansion, rather than an aggressive reduction in operating investment, was the principal source of earnings leverage. Non-operating items were immaterial relative to revenue, and ordinary income was closely aligned with operating income. Extraordinary gains and losses were both approximately ¥5m, leaving reported net income representative of recurring performance. The annualized ROE of 12.0% is within the good benchmark range and is supported primarily by a 6.2% net margin and annualized asset turnover of 1.274x. Q3 progress against the full-year forecast is 74.1% for revenue, 76.1% for operating income, and 73.6% for net income, broadly consistent with the standard 75% progress rate. The principal balance-sheet issue is liquidity: current assets of ¥6.19bn do not fully cover current liabilities of ¥7.83bn. Refinancing execution for short-term borrowings remains important because virtually all interest-bearing debt is short term. Nevertheless, debt capitalization is low and interest servicing capacity is very strong. The full-year dividend forecast of ¥72 per share implies a dividend payout ratio of approximately 50.9%, which is within a generally sustainable range based on forecast earnings.

Profitability Analysis

Annualized DuPont ROE is 12.0%, comprising a 6.2% net profit margin, annualized asset turnover of 1.274x, and financial leverage of 1.51x. The main positive YoY movement was margin expansion: operating margin improved 150bp to 9.2% and net margin improved 101bp to 6.2%. Gross margin expanded more sharply, by 156bp to 36.8%, indicating improved pricing, procurement, product/service mix, or utilization economics. SG&A grew 9.0%, broadly in line with the 8.8% revenue increase, and the SG&A ratio was stable at 27.5%; this limits concern that profit growth was obtained by cutting selling and administrative capacity. Operating income growth of 29.9% substantially exceeded sales growth, demonstrating favorable operating leverage from the gross-profit improvement. The company’s 9.2% operating margin is in the good benchmark range, while the 6.2% net margin is also in the good range. Financial leverage is moderate rather than aggressive, with a debt-to-equity ratio of 0.51x and liabilities representing 33.8% of total assets. Interest burden is favorable at 1.013, as ordinary income slightly exceeded EBIT owing to net non-operating income. The tax burden of 0.667 corresponds to a 33.3% effective tax rate and is the main deduction between pre-tax profit and net income. Profitability therefore rests principally on operational execution rather than financial leverage or non-recurring gains. For a healthcare and welfare equipment service provider, sustaining margin expansion will depend on maintaining service pricing and rental/utilization economics while containing personnel, logistics, maintenance, and procurement costs.

Growth Assessment

Revenue growth of 8.8% to ¥25.94bn indicates continued demand expansion in the company’s healthcare and welfare-support service activities. Gross profit growth of 13.6% exceeded revenue growth, producing the key 156bp gross-margin improvement. Operating and net income each grew approximately 30%, confirming that the sales increase was accompanied by strong incremental profitability. The Q3 revenue progress rate is 74.1% versus the ¥35.00bn full-year forecast, only 0.9 percentage points below the standard 75% pace. Operating income progress is 76.1% against the ¥3.15bn forecast, 1.1 percentage points above the standard pace. Ordinary income progress is 75.9% against the ¥3.20bn forecast, also slightly ahead of the standard pace. Net income progress is 73.6% against the ¥2.20bn forecast, 1.4 percentage points below the standard pace but still broadly on schedule. The full-year plan assumes 9.4% revenue growth and 28.1% operating-income growth, broadly consistent with the Q3 run rate. Forecast achievement will require Q4 revenue of ¥9.06bn and operating income of ¥753m. This equates to a required Q4 operating margin of approximately 8.3%, below the cumulative Q3 margin of 9.2%, providing a reasonable operating cushion. The company’s large PPE base, equal to 67.4% of total assets, is consistent with an asset-intensive service/rental model and makes utilization discipline important to sustaining returns. Aging demographics and continuing demand for care-related services remain structural support factors, while reimbursement and care-service policy revisions, labor availability, and regional demand conditions remain central determinants of medium-term growth.

Financial Health

Liquidity is the principal financial-health concern. The current ratio is 0.79x and the quick ratio is 0.77x, both below 1.0x; current assets of ¥6.19bn are ¥1.65bn below current liabilities of ¥7.83bn. Working capital is negative ¥1.65bn. This creates a maturity mismatch because short-term obligations exceed liquid current assets. Short-term loans were ¥1.80bn and represented 99.8% of interest-bearing debt, while long-term loans were only ¥4m. Cash and deposits of ¥712m covered only 0.40x of short-term loans, highlighting reliance on continued operating cash generation, banking facilities, and refinancing access. These liquidity indicators require attention even though they may partly reflect the normal financing structure of an asset-intensive rental and care-support service business. Solvency is otherwise sound: total equity was ¥17.97bn and the equity ratio was 66.2%. Debt-to-equity was a moderate 0.51x, well below the 2.0x level associated with aggressive leverage. Debt-to-capital was only 9.1%, showing that debt is a limited component of permanent capitalization. Interest coverage was exceptionally strong at 198.28x, indicating that the current earnings base can comfortably absorb interest expense. Total liabilities declined slightly YoY to ¥9.18bn despite business growth. Net defined-benefit liability increased 9.2% YoY to ¥1.11bn and remains a meaningful long-term obligation to monitor. No material goodwill concentration is indicated, and intangible assets represented only 1.7% of total assets.

Notable B/S Changes

Provision for share-based remuneration: +¥0.62bn (+163% YoY) to ¥1.00bn - increased equity-compensation obligation; monitor dilution and future settlement effects. Net defined-benefit liability: +¥0.10bn (+9% YoY) to ¥1.11bn - a meaningful employee-benefit obligation that remains relevant to long-term balance-sheet commitments.

Cash Flow Quality

Dividend Sustainability

The full-year dividend forecast is ¥72 per share. Against forecast EPS of ¥141.58, the implied dividend payout ratio is approximately 50.9%. This is below the 60% sustainability benchmark and leaves approximately half of forecast earnings available for reinvestment, debt management, and balance-sheet support. The forecast dividend represents a meaningful shareholder distribution while remaining aligned with projected profitability. Given the current ratio of 0.79x and the concentration of debt in short-term borrowings, preservation of liquidity remains relevant to the dividend outlook. Retained earnings were ¥13.62bn at Q3, providing a substantial accumulated equity buffer relative to the planned distribution.

Risk Assessment

Business risks include Healthcare and care-service demand can be affected by reimbursement and medical/care fee revisions, which may pressure rental/service pricing and profitability., Labor shortages and wage inflation among care-related personnel, delivery, maintenance, and service staff could erode the recently improved gross and operating margins., The asset-intensive operating model, with PPE equal to 67.4% of total assets, increases exposure to equipment utilization, maintenance requirements, replacement cycles, and potential returns pressure if demand slows., Regional demographic trends and competition in welfare-equipment and care-support services could affect customer acquisition, utilization, and pricing discipline..

Financial risks include LOW_LIQUIDITY: the 0.79x current ratio and negative ¥1.65bn working capital mean current assets do not fully cover current liabilities. This elevates dependence on timely cash conversion and short-term funding availability., REFINANCING_RISK: 99.8% of interest-bearing debt is short term, with ¥1.80bn of short-term loans versus only ¥4m of long-term loans. The capital structure therefore requires routine refinancing rather than relying on long-dated debt., LIQUIDITY_STRESS: cash and deposits of ¥712m cover only 0.40x of short-term loans. Although interest coverage is very strong, the low cash-to-short-term-debt ratio reduces the immediate liquidity buffer., Net defined-benefit liability of ¥1.11bn is a material non-debt long-term obligation and could be sensitive to discount-rate and asset-return assumptions..

Key concerns include The highest-priority financial issue is the combination of sub-1.0x liquidity ratios, negative working capital, and debt concentrated in short-term facilities., The current earnings thesis depends on retaining the 156bp gross-margin improvement; renewed cost inflation or reimbursement pressure would have a disproportionate effect on operating profit growth., The forecast implies a manageable Q4 operating margin of approximately 8.3%, but any deterioration in utilization or service cost control could narrow the available cushion..

Investment Implications

Key takeaways include Revenue grew 8.8% YoY, while operating income and net income each rose about 30%, evidencing strong earnings leverage., Gross margin expanded 156bp to 36.8% and operating margin expanded 150bp to 9.2%, making operational margin retention the central performance variable., Annualized ROE of 12.0% is supported by good profitability and asset turnover rather than high financial leverage., Q3 operating-income progress of 76.1% is slightly ahead of the standard 75% seasonal benchmark and supports the attainability of the full-year operating-income plan., Liquidity and short-term refinancing remain the principal counterweights to otherwise conservative capitalization and very strong interest coverage., The forecast ¥72 DPS implies a 50.9% dividend payout ratio, consistent with earnings-based sustainability..

Metrics to watch include Gross margin and operating margin, particularly whether the Q3 levels of 36.8% and 9.2% can be sustained., Q4 revenue and operating income relative to the required ¥9.06bn and ¥753m to meet full-year guidance., Current ratio, quick ratio, working capital, and cash-to-short-term-debt coverage., Short-term loan refinancing terms and the mix of short-term versus longer-dated funding., Personnel, logistics, maintenance, procurement, and equipment-utilization trends., Net defined-benefit liability and related actuarial movements..

Regarding relative positioning, The company presents a favorable profitability profile for a healthcare and welfare-support service operator, with a 9.2% operating margin, 6.2% net margin, 12.0% annualized ROE, low debt-to-capital of 9.1%, and exceptionally strong interest coverage. Its relative weakness is not leverage magnitude but liquidity structure: the 0.79x current ratio, 0.40x cash-to-short-term-debt ratio, and near-total concentration of borrowings in short-term debt require closer monitoring than the headline debt-to-equity ratio alone would suggest.