TAKACHIHO KOHEKI (2676) FY2027 Q1 Earnings Report

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Executive Summary

In the April–June 2026 period (Q1), revenue and earnings increased, primarily due to the high growth and improved profitability of the BUSINESSSECURITY segment, with operating income, ordinary income, and net income all improving significantly year on year. Revenue was ¥6.99B (¥6.07B in the same period of the previous year, +15.2%), operating income was ¥0.35B (¥0.18B, +89.1%), ordinary income was ¥0.41B (¥0.17B, +143.8%), and net income was ¥0.21B (¥0.07B, +208.8%). Improvements in the gross profit margin and the favorable change in non-operating income and expenses driven by dividend income and foreign exchange gains contributed to higher operating and ordinary income margins.

Factors Affecting Earnings

【Revenue】Revenue was ¥6.99B, an increase of +15.2% year on year. By segment, BUSINESSSECURITY (53.3% composition ratio) grew substantially to ¥3.73B (+29.6%), while ELECTROMECHANICS (46.7% composition ratio) was nearly flat at ¥3.27B (+2.4%). The increase in revenue was driven by expanded demand for BUSINESSSECURITY.

【Profit and Loss】Gross profit was ¥1.82B (+25.4%), and the gross profit margin improved to 26.0% from 23.9% in the previous year, an improvement of +2.1pt. SG&A expenses were ¥1.47B, representing 21.0% of revenue, and were nearly flat versus 20.9% in the previous year (+0.2pt). Accordingly, the improvement in operating income was primarily attributable to the higher gross profit margin. Operating income was ¥0.35B (+89.1%), and the operating margin was 5.0% (3.0% in the previous year, +2.0pt). Ordinary income also benefited from an improvement in non-operating income and expenses (dividend income of ¥0.04B and a foreign exchange gain of ¥0.02B, compared with a foreign exchange loss in the previous year), reaching ¥0.41B (+143.8%), while the ordinary income margin expanded to 5.8% from 2.8% in the previous year. Net income was ¥0.21B (+208.8%) after an effective tax rate of 48.5% (down from 58.7% in the previous year). Revenue and earnings both increased.

Segment Analysis

BUSINESSSECURITY reported revenue of ¥3.73B (53.3% composition ratio, +29.6%), operating income of ¥0.28B (+142.7%), and a profit margin of 7.6% (4.1% in the previous year), representing a significant improvement and making it the key driver of company-wide earnings. ELECTROMECHANICS reported revenue of ¥3.27B (46.7% composition ratio, +2.4%), operating income of ¥0.06B (-6.1%), and a profit margin of 1.9% (2.1% in the previous year), reflecting a slight decline and continued low profitability. The disparity in profitability between the two segments is a source of volatility in the company-wide margin.

Key Financial Indicators

【Profitability】The operating margin improved to 5.0% (3.0% in the previous year), while the net profit margin improved to 3.0% (1.1% in the previous year). ROE was 1.3%, improving from approximately 0.4% in the same period of the previous year, although the absolute level remains low. The effective tax rate declined to 48.5% from 58.7% in the previous year but remains high. 【Cash Flow Quality】Cash and deposits were ¥6.62B, down -9.9% from ¥7.35B at the end of the same period of the previous year. Inventories increased to ¥4.38B (+21.8%), while accounts receivable declined to ¥5.49B (-19.8%) and contract liabilities increased to ¥2.01B (+18.6%). 【Investment Efficiency】EPS was ¥11.24 (¥3.69 in the previous year, +204.6%), and BPS was ¥898.74 (¥941.91 in the previous year, -4.6%). Total assets were ¥24.14B, down from ¥25.70B in the previous year. 【Financial Soundness】The equity ratio was 69.5% (68.5% in the previous year). Liquidity was ample, with current assets of ¥19.53B against current liabilities of ¥6.52B. Interest-bearing debt consisted primarily of ¥0.81B in short-term borrowings, and financial leverage remained conservative.

Cash Flow Analysis

Cash and deposits were ¥6.62B, a decrease of -¥0.73B (-9.9%) from the end of the same period of the previous year. In terms of working capital, inventories increased to ¥4.38B (+21.8%), while accounts receivable declined to ¥5.49B (-19.8%) and contract liabilities increased to ¥2.01B (+18.6%). Accounts payable declined to ¥2.58B from ¥3.15B in the previous year. Although net income of ¥0.21B was recorded, the buildup of inventories and reduction in accounts payable absorbed cash, resulting in a decline in the cash balance. The increase in contract liabilities represents advance-related funding and provides support for future revenue recognition; however, continued inventory accumulation could reduce capital efficiency and warrants monitoring.

Quality of Earnings

The increase in earnings this period was primarily attributable to improvements at the operating level. Of the ¥0.07B in non-operating income (1.0% of revenue), dividend income of ¥0.04B and a foreign exchange gain of ¥0.02B boosted ordinary income. Because a foreign exchange loss was recorded in the same period of the previous year, this reversal was one factor driving the +143.8% growth in ordinary income. Non-operating income remained limited at approximately 1% of revenue, indicating limited reliance on non-core activities. Meanwhile, the effective tax rate remained high at 48.5% (58.7% in the previous year), and the tax burden significantly compressed earnings, with net income of ¥0.21B against ordinary income of ¥0.41B. Comprehensive income attributable to owners of the parent was -¥0.03B, creating a divergence from net income of ¥0.21B. The primary factor was a deterioration of -¥0.28B in the valuation difference on investment securities, indicating that market fluctuations affected net assets.

Earnings Forecast and Guidance

Progress against the full-year plan was 21.9% for revenue (¥6.99B/¥32.00B), 14.8% for operating income (¥0.35B/¥2.35B), 17.7% for ordinary income (¥0.41B/¥2.30B), and 12.7% for net income (¥0.21B/¥1.65B), all below the simple one-quarter benchmark of 25%. The company made no revisions to either its earnings forecast or dividend forecast on this occasion. The full-year ordinary income forecast calls for a decline of -4.5% from the previous fiscal year, differing in direction from the substantial +143.8% increase in Q1. Whether BUSINESSSECURITY can maintain its high-margin order trend through the second half of the year will be a key point to monitor for progress against the full-year plan.

Shareholder Returns

The company’s annual dividend forecast is ¥76.00, representing an increase from the previous year’s interim dividend of ¥34.5. The payout ratio against the company’s forecast EPS of ¥88.33 is approximately 86.0% (¥76.00/¥88.33), a high level. No revision has been made to the dividend forecast. Treasury shares (1,664 thousand shares) were unchanged from the end of the previous fiscal year, and no share repurchase was confirmed. While the financial foundation of ¥6.62B in cash and deposits and an equity ratio of 69.5% supports dividends, the high payout ratio warrants monitoring with respect to the capacity to maintain shareholder returns when earnings fluctuate.

Risk Factors

1. Segment concentration: BUSINESSSECURITY accounts for 53.3% of revenue and the majority of operating income, creating a structure in which changes in demand trends and the competitive environment for this business can readily affect overall performance.

2. Working capital accumulation: While inventories increased to ¥4.38B (+21.8%), contract assets declined to ¥0.47B (-30.5%), and any mismatch between project progress and acceptance timing could affect capital efficiency.

3. Fluctuations in tax burden and valuation gains and losses: The effective tax rate is high relative to the earnings level at 48.5%. In addition, the valuation difference on investment securities deteriorated by -¥0.28B, weighing on comprehensive income and creating a structure in which market fluctuations affect net assets.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The operating margin exceeds the industry median, while the net profit margin is slightly below the median due to the impact of the tax burden and other factors.

Growth and Capital Efficiency

The revenue growth rate significantly exceeds the industry median, demonstrating a high growth rate within the industry.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. The gross profit margin improved to 26.0% (23.9% in the previous year), and the operating margin improved to 5.0% (3.0% in the previous year), primarily due to the improved profitability of BUSINESSSECURITY.

2. Q1 progress against the full-year plan was 21.9% for revenue, 14.8% for operating income, and 12.7% for net income, all below 25%. Since the company has not revised its earnings or dividend forecasts, the plan assumes progress weighted toward the second half of the fiscal year.

3. Due to the effective tax rate of 48.5% and the deterioration of -¥0.28B in the valuation difference on investment securities, differences can be observed between the growth in ordinary income (+143.8%), the growth in net income (+208.8%), and comprehensive income (-¥0.03B). The tax burden and securities market conditions should be monitored as factors affecting earnings volatility.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade). It is not a forecast of the market share price or a recommendation to take any specific investment action.

Sensitivity: ¥885–¥933 at ±1% for the cost of equity, and ¥908–¥909 at ±0.1 for ω.

Notes:

• 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 / Interest rate reference month: 2026-07 / This figure does not forecast or guarantee the future share price)

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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, and after consulting a professional as necessary.

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AI Financial Analysis

Executive Summary

FY2027 Q1 was a strong operating start, with revenue growth translating into materially faster profit growth and a sharp recovery in both segments. Revenue increased 15.2% YoY to ¥6.99bn. Operating income rose 89.1% to ¥347m, lifting the operating margin by 197bp to 5.0% from 3.0% in the prior-year quarter. Ordinary income increased 143.8% to ¥408m, aided by ¥69m of non-operating income, including ¥44m of dividend income and ¥18m of foreign-exchange gains. Net income attributable to owners increased 205.7% to ¥210m, and basic EPS rose to ¥11.24 from ¥3.69. Gross profit rose 25.4% to ¥1.82bn, substantially outpacing revenue growth, and the gross margin expanded 210bp to 26.0%. SG&A increased 16.2% to ¥1.47bn, broadly tracking revenue growth but remaining well below gross-profit growth. The resulting operating leverage was favorable, although the 5.0% EBIT margin remains modest for a distributor and solutions provider. Business Security was the clear earnings driver, with segment sales increasing 29.6% to ¥3.73bn and segment profit rising 142.7% to ¥284m. Electromechanics sales increased 2.4% to ¥3.27bn, but segment profit declined 6.1% to ¥62m, indicating a weaker margin and/or product-mix outcome in that business. The effective tax rate was high at 48.5%, leaving the tax burden at 0.515 and materially limiting conversion of pre-tax income into net income. Comprehensive income was negative ¥29m despite positive net income, principally reflecting a ¥275m negative valuation difference on securities in OCI. The balance sheet remains liquid, with a 299.6% current ratio, ¥6.62bn of cash, and only ¥811m of interest-bearing debt. However, working-capital discipline warrants attention, as receivable days of 72 and inventory days of 77 are both elevated. Q1 revenue represents 21.9% of the full-year revenue forecast, broadly close to the 25% seasonal reference point, while operating-income progress is a weaker 14.8%. Management has retained its FY2027 guidance, implying that profit delivery must accelerate over the remainder of the fiscal year. The planned full-year dividend of ¥76 per share implies an 86.0% payout ratio against forecast EPS of ¥88.33, supporting shareholder returns but leaving a narrower earnings retention buffer.

Profitability Analysis

Annualized DuPont ROE is 5.0%, decomposed into a 3.0% net profit margin, 1.159x asset turnover, and 1.44x financial leverage. The principal improvement versus the prior-year quarter was operating profitability: gross margin improved to 26.0% and operating margin rose to 5.0%. Revenue growth of 15.2% was amplified into 89.1% operating-income growth because gross profit expanded 25.4%, whereas SG&A grew only 16.2%. Accordingly, the key driver was margin recovery and favorable operating leverage rather than increased balance-sheet leverage. Financial leverage of 1.44x is moderate, while the low annualized ROE primarily reflects the still-thin net margin and a sizable equity base. The EBIT margin is at the boundary of the 5% concern threshold and remains below higher-quality profitability benchmarks. Net margin improved by 188bp from approximately 1.1% to 3.0%, but is still at the low end of the stated profitability range. The tax burden is a material drag: net income of ¥210m represented only 51.5% of ¥408m pre-tax income due to the 48.5% effective tax rate. Interest burden was favorable at 1.176 because non-operating income exceeded interest cost; interest coverage was very strong at 49.57x. Business Security is the core business by segment-profit contribution, accounting for ¥284m, or 81.8%, of consolidated segment profit. Its segment margin expanded to 7.6% from 4.1%, whereas Electromechanics' segment margin declined to 1.9% from 2.1%. The durability of consolidated margin expansion therefore depends particularly on continued Business Security execution and a restoration of Electromechanics profitability.

Growth Assessment

Top-line growth was broad but uneven across the operating segments. Business Security generated ¥3.73bn of sales, up ¥850m or 29.6% YoY, and its ¥167m increase in segment profit accounted for more than all of the consolidated segment-profit growth. Electromechanics generated ¥3.27bn of sales, up ¥75m or 2.4%, but segment profit fell ¥4m to ¥62m. The consolidated gross-margin expansion to 26.0% indicates that product mix, pricing, procurement conditions, or solution value-add improved materially at the group level. Full-year revenue guidance is ¥32.0bn, up 8.4% YoY, and Q1 progress of 21.9% is only 3.1 percentage points below a standard 25% Q1 pace. In contrast, operating-income progress is 14.8% against the ¥2.35bn full-year forecast, 10.2 percentage points below the standard pace. Net-income progress is 12.7% against the ¥1.65bn forecast, 12.3 percentage points below the standard pace. The retained guidance therefore embeds a meaningful increase in quarterly profitability after Q1. Ordinary-income progress is 17.7% against the ¥2.30bn forecast, below the standard quarterly run rate but supported in Q1 by dividend income and foreign-exchange gains. The business mix creates a bifurcated outlook: Business Security momentum supports growth, while Electromechanics needs improved margin conversion to broaden the earnings base. FY2027 guidance implies operating-income growth of 12.0% YoY, appreciably slower than the Q1 89.1% increase, which allows for normalization but also highlights the importance of maintaining current gross-margin gains.

Financial Health

Liquidity is robust. Current assets of ¥19.53bn cover current liabilities of ¥6.52bn by 299.6%, and the 232.5% quick ratio indicates that liquidity remains strong even before reliance on inventory monetization. Working capital totals ¥13.01bn, supported by ¥6.62bn of cash and deposits. Total equity is ¥16.79bn, representing 69.5% of total assets, while liabilities account for 30.5%. Reported debt-to-equity is 0.44x, and debt-to-capital is only 4.6%, indicating a conservatively funded capital structure. Interest-bearing debt totals ¥811m and is entirely short-term, producing a 100% short-term debt ratio and therefore a refinancing-risk flag. This maturity concentration is mitigated by cash equal to 8.17x short-term debt and by the very high current ratio. The company also carries ¥2.01bn of contract liabilities, which provides a source of operating funding but requires delivery execution. Net defined-benefit liability stands at ¥509m. Investment securities of ¥3.67bn represent 15.2% of total assets and create sensitivity of equity and comprehensive income to market-value movements. Total equity declined ¥807m, or 4.6%, YoY, despite positive quarterly net income, reflecting distributions and adverse accumulated OCI movements.

Notable B/S Changes

Inventories: +¥0.78bn (+21.8% YoY) to ¥4.38bn, entirely in finished goods; elevated inventory days of 77 increase sell-through and valuation-monitoring requirements. Total equity: -¥0.81bn (-4.6% YoY) to ¥16.79bn; positive quarterly net income was outweighed by distributions and unfavorable accumulated OCI movements. Accounts receivable: -¥1.35bn (-19.8% YoY) to ¥5.49bn; despite the lower balance, DSO remains elevated at 72 days and collection efficiency remains a focus. Trade payables: -¥0.57bn (-18.2% YoY) to ¥2.58bn; reduced supplier financing can increase operating working-capital funding needs. Provision for bonuses: -¥0.22bn (-56.4% YoY) to ¥0.17bn; this reduced current liabilities and contributed to the stronger current ratio. Accumulated OCI valuation difference on securities: ¥1.09bn versus ¥1.37bn a year earlier, reflecting a ¥0.28bn negative quarterly securities valuation movement and demonstrating equity sensitivity to investment-market prices.

Cash Flow Quality

The quarter delivered ¥210m of net income, but comprehensive income was negative ¥29m because OCI included a ¥275m negative valuation difference on securities. This does not reduce operating profit directly, but it demonstrates that reported equity remains exposed to market valuation movements in the investment-securities portfolio. The balance-sheet working-capital profile requires close monitoring. Accounts receivable were ¥5.49bn and electronic receivables were ¥508m, while the quality-alert DSO was elevated at 72 days. Inventories increased ¥783m, or 21.8% YoY, to ¥4.38bn, and inventory days were elevated at 77 days. Finished goods comprise the entire reported inventory balance, increasing the importance of demand visibility, sell-through, and inventory valuation discipline. Trade payables declined ¥572m, or 18.2% YoY, to ¥2.58bn, reducing supplier-financing support relative to the prior-year quarter. Contract liabilities increased ¥316m, or 18.6%, to ¥2.01bn, partially offsetting the working-capital funding requirement. The combination of higher inventories, elevated receivable days, and lower trade payables can absorb cash if sales conversion slows. Strong cash balances provide near-term resilience, but sustained earnings quality will depend on converting Q1 profit and working capital into operating cash flow.

Dividend Sustainability

The full-year dividend forecast is ¥76 per share, with no revision announced. Against forecast EPS of ¥88.33, the dividend-only payout ratio is 86.0%. This is above the 60% sustainability benchmark and leaves a limited earnings buffer for reinvestment, balance-sheet protection, or cyclical volatility. The company nevertheless enters the period with substantial liquidity, including ¥6.62bn of cash and a low ¥811m interest-bearing debt balance. Retained earnings of ¥13.14bn also provide meaningful accumulated capital support. Dividend sustainability is therefore more dependent on delivery of the ¥1.65bn full-year net-income forecast and working-capital cash conversion than on immediate leverage capacity. Q1 net income of ¥210m represents only 12.7% of forecast full-year profit, so subsequent-quarter earnings progression is important for validating the planned distribution. Elevated inventory and receivable days are especially relevant because they can reduce cash available for dividends even if accounting earnings meet plan. No share buyback information is included in the provided data; the 86.0% figure is therefore a dividend payout ratio rather than a total return ratio.

Risk Assessment

Business risks include Electromechanics profitability weakened: segment profit declined 6.1% YoY to ¥62m despite 2.4% sales growth, leaving a 1.9% segment margin versus 7.6% in Business Security., Business Security concentration: the segment produced 81.8% of consolidated segment profit, making group earnings increasingly dependent on sustained demand, mix, and execution in this core business., Inventory risk: finished-goods inventory increased 21.8% YoY to ¥4.38bn and inventory days were 77, raising exposure to demand volatility, pricing pressure, and potential markdowns or write-downs in technology-related equipment., Receivables collection risk: DSO of 72 days exceeds the 60-day alert threshold, increasing exposure to collection timing and customer-credit risk..

Financial risks include High tax burden: the 48.5% effective tax rate reduced the tax burden to 0.515, materially diluting conversion of ¥408m pre-tax income into ¥210m net income., Short-term refinancing concentration: all ¥811m of interest-bearing debt is short-term. Cash coverage of 8.17x substantially mitigates the immediate risk, but the maturity profile remains concentrated., Investment-securities valuation exposure: ¥3.67bn of investment securities contributed to a ¥275m negative valuation difference in OCI and negative ¥29m comprehensive income., Dividend retention risk: the forecast dividend payout ratio of 86.0% offers a limited buffer if profit delivery or cash conversion weakens..

Key concerns include Operating margin improved sharply but remains only 5.0%; sustaining margin gains while restoring Electromechanics profitability is central to the FY2027 earnings trajectory., Operating-income forecast progress of 14.8% is 10.2 percentage points below a standard Q1 25% pace, requiring stronger profit generation in later quarters., The working-capital combination of elevated receivable days, elevated inventory days, lower trade payables, and higher inventory could constrain cash conversion..

Investment Implications

Key takeaways include Q1 showed strong operating leverage: 15.2% revenue growth produced 89.1% operating-income growth and a 197bp operating-margin expansion., Business Security is the principal value driver, delivering ¥284m of segment profit and a 7.6% margin., The balance sheet is highly liquid and lightly indebted in absolute terms, with cash of ¥6.62bn versus ¥811m of interest-bearing debt., High tax expense, low Electromechanics margin, and working-capital intensity temper the quality of the otherwise strong Q1 profit recovery., The unchanged full-year plan requires a substantial acceleration in operating and net-income progress after Q1..

Metrics to watch include Business Security revenue growth and segment margin, Electromechanics segment-profit recovery and margin progression, Consolidated gross margin and operating margin, Operating-income progress versus the ¥2.35bn FY2027 forecast, DSO, inventory days, finished-goods inventory, and trade-payable trends, Effective tax rate and tax burden, OCI movements and valuation changes in the ¥3.67bn investment-securities portfolio, Short-term debt refinancing and cash coverage, Dividend payout ratio relative to actual earnings delivery.

Regarding relative positioning, The company combines strong liquidity, low absolute debt, and a high-equity capital structure with profitability that is improving rapidly but remains modest on an annualized ROE basis at 5.0%. Its current earnings profile is stronger in Business Security than Electromechanics, making segment diversification of profit and working-capital execution the key determinants of financial quality.