HAKUHODO DY HOLDINGS (2433) FY2027 Q1 Earnings Report

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Executive Summary

Operating income increased as a result of improved gross profit in the domestic business, while the net loss attributable to owners of the parent continued due to widening losses in the overseas business and a high tax burden. Consolidated revenue was ¥1,762.2B (+3.8% YoY), operating income was ¥30.2B (+19.4%), and ordinary income was ¥30.4B (+4.6%). The net loss attributable to owners of the parent was ¥17.6B, a slight improvement from the ¥18.2B loss in the same period last year. The primary driver of the profit increase was expanded gross profit in the domestic advertising business, while the main factors behind the continued net loss were extraordinary losses of ¥8.3B and the high tax burden, with the effective tax rate reaching 170.8%.

Factors Affecting Performance

【Revenue】Consolidated revenue was ¥1,762.2B, up +3.8% YoY. By region, Japan led growth with revenue of ¥1,295.1B (+4.8%), while overseas revenue remained sluggish at ¥467.2B (+1.0%). The overseas revenue ratio increased to 29.3% from 28.8% in the same period last year.

【Profit and Loss】Gross profit was ¥906.5B (+5.9%), and the gross profit margin improved by 90bp to 51.4% from 50.5% in the same period last year. SG&A expenses were ¥876.4B (+5.2%), exceeding revenue growth; however, the improvement in the gross profit margin absorbed this increase, and operating income reached ¥30.2B (+19.4%). Ordinary income remained at ¥30.4B (+4.6%), with non-operating income and expenses broadly balanced. Extraordinary losses of ¥8.3B (including ¥0.7B in losses on disposal of non-current assets and ¥1.5B in impairment losses on investment securities, among others) temporarily reduced profit before tax to ¥2.299B. Income taxes of ¥39.3B exceeded profit before tax, resulting in an effective tax rate of 170.8%. Consequently, the net loss attributable to owners of the parent was ¥17.6B. Although the Company achieved higher revenue and operating income, the final loss continued due to extraordinary losses and the tax burden.

Segment Analysis

As the Company has a single segment, no business-by-business breakdown is provided; however, regional performance is disclosed. Japan expanded both revenue and profit, with revenue from external customers of ¥1,295.1B (+4.8%) and operating income of ¥162.4B (+16.4%). Overseas revenue from external customers remained at ¥467.2B (+1.0%), while the operating loss widened to ¥37.5B (a loss of ¥23.1B in the same period last year). The structure is one in which higher domestic profits absorb widening overseas losses, leaving consolidated profitability subject to deterioration in overseas earnings.

Key Financial Indicators

【Profitability】The gross profit margin improved to 51.4% from 50.5% in the same period last year, and the operating margin improved by 22bp to 1.7%; however, the ordinary income margin remained at 1.7%. Annualized ROE was approximately -1.6%, mainly due to the loss attributable to owners of the parent. ROIC of 1.9% indicates a low level of earnings generation relative to invested capital.【Cash Quality】Cash and deposits were ¥1,515.8B, down 36.6% YoY; however, accounts receivable, accounts payable, and current liabilities also declined substantially at the same time, suggesting that the timing of settlement of receivables and payables associated with advertising transactions affected the balance sheet scale.【Investment Efficiency】Operating income was limited relative to invested capital, including goodwill of ¥481.6B and intangible assets of ¥896.6B. Goodwill amortization of ¥26.2B was equivalent to 87.0% of operating income, indicating a heavy amortization burden.【Financial Soundness】The equity ratio was 43.8%, the current ratio was 156.3%, the debt-to-equity ratio was 1.29x, and the interest coverage ratio was 7.34x, indicating sound levels of short-term liquidity and financial safety.

Cash Flow Analysis

Although detailed cash flow statement information has not been disclosed, an analysis of funding trends based on changes in the balance sheet shows that cash and deposits were ¥1,515.8B, a decrease of ¥873.8B from ¥2,389.6B in the same period last year. At the same time, accounts receivable decreased by ¥954.0B, accounts payable decreased by ¥547.3B, and total current liabilities contracted by ¥1,704.1B, suggesting that the timing of settlement of receivables, payables, and deposits associated with advertising transactions had a significant impact on the cash balance. Current assets exceeded current liabilities by ¥2,057.6B, leaving sufficient working capital. Inventories were ¥294.8B, up 30.4% YoY, warranting confirmation as to whether this reflects a temporary increase associated with project progress or inventory accumulation.

Quality of Earnings

Operating income increased due to improved domestic gross profit; however, multiple factors reduced earnings quality in the progression from ordinary income to profit before tax and net income. Of ¥18.7B in non-operating income, dividends received accounted for ¥12.9B, or 68.9%, indicating a certain degree of dependence on financial income outside the core business. Extraordinary losses of ¥8.3B were recorded against extraordinary income of ¥0.9B, and profit before tax was compressed to ¥23.0B by temporary factors such as losses on disposal of non-current assets and impairment losses on investment securities. In addition, income taxes of ¥39.3B exceeded profit before tax, resulting in an effective tax rate of 170.8%, which was the primary reason the net loss continued despite higher operating income. Comprehensive income was positive at ¥4.6B, with valuation difference on available-for-sale securities of ¥19.1B offsetting the net loss, creating a structural divergence between net income and comprehensive income.

Earnings Forecast and Guidance

The full-year Company plan calls for revenue of ¥9,100B (+5.7% YoY), operating income of ¥467.0B (+4.5%), and ordinary income of ¥470.0B (+2.0%). The Q1 operating income progress rate was approximately 6.5%, and the ordinary income progress rate was also approximately 6.5%, substantially below the 25% benchmark for simple progress. Although the advertising and marketing business is seasonal, achieving the full-year plan will require an acceleration in profit accumulation in the second half of the fiscal year. No revision to the earnings forecast was made during this quarter.

Shareholder Returns

The expected full-year annual dividend is ¥32.00 per share. Based on projected full-year EPS of ¥72.42, the projected payout ratio is approximately 44.2%, below the 60% level generally considered a guideline for sustainability when dividends are viewed in isolation. As the net loss attributable to owners of the parent was ¥17.6B in Q1, a quarterly payout ratio assessment is not meaningful; therefore, maintaining the dividend is contingent on profit recovery in line with the full-year plan. No revision to the dividend forecast was made during this quarter.

Risk Factors

1. Deterioration in overseas business profitability: The overseas operating loss widened from ¥23.1B in the same period last year to ¥37.5B. With the overseas revenue ratio reaching 29.3%, overseas personnel expenses, project profitability, and foreign exchange trends pose risks to consolidated earnings.

2. Impediment to earnings conversion due to the high tax burden: Income taxes of ¥39.3B were recorded against profit before tax of ¥23.0B, resulting in an effective tax rate of 170.8%. Despite higher operating income, the loss attributable to owners of the parent continued, making normalization of the tax burden a key focus going forward.

3. Low capital efficiency: ROIC of 1.9% is below 5%, indicating insufficient earnings generation relative to invested capital, including investment securities of ¥1,419.2B, goodwill of ¥481.6B, and intangible assets of ¥896.6B. Goodwill amortization of ¥26.2B was equivalent to 87.0% of operating income, representing a heavy amortization burden.

Industry Benchmark (For Reference; Company Research)

No industry benchmark data available

Key Takeaways from the Earnings Results

1. The operating margin improved by 22bp YoY due to improved gross profit margins in the domestic advertising business; however, the increase in operating income has not translated into profitability at the net income level. The primary causes are widening overseas operating losses, extraordinary losses, and the high tax burden.

2. Against the full-year operating income plan of ¥467.0B, the Q1 progress rate was only 6.5%, substantially below the standard progress rate of 25%. Accelerated domestic profit growth and a reduction in overseas losses in the second half of the fiscal year are prerequisites for achieving the full-year plan.

3. Although financial soundness indicators, including an equity ratio of 43.8%, a current ratio of 156.3%, and an interest coverage ratio of 7.34x, remain at favorable levels, ROIC of 1.9% represents an ongoing structural issue in terms of capital efficiency and requires continuous monitoring.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,004–¥1,062 at ±1% in the cost of equity, and ¥1,030–¥1,034 at ±0.1 in ω.

Notes:

• As forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the end of the quarter are used (there is a timing difference from the full-year forecast).
• As 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 / This is a 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 summary data. It does not recommend investment in any specific security. 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.

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