Nisshinbo Holdings (3105) FY2026 Q1 Earnings Report

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Executive Summary

Although growth in the core Wireless & Communications Business supported the Company as a whole, the decline in the Textiles and Real Estate businesses resulted in overall decreases in both revenue and earnings. Revenue was ¥147.69B (-2.3% year on year), Operating Income was ¥20.32B (-4.6%), Ordinary Income was ¥20.67B (-3.6%), and Net Income was ¥14.18B (-12.8%). The significantly larger decline in Net Income than at the operating level was attributable to an increase in the effective tax rate and a reduction in gains on the sale of investment securities recognized in the previous year.

Factors Affecting Performance

【Revenue】Revenue was ¥147.69B, down -2.3% year on year. The Wireless & Communications Business generated ¥90.02B (+10.9%) and the Microdevices Business generated ¥16.01B (+18.5%), driving revenue growth, while Real Estate declined substantially to ¥1.24B (-91.9%) and Textiles fell to ¥6.73B (-15.4%), becoming factors behind the Company-wide revenue decline. Wireless & Communications accounts for approximately 61% of the revenue mix, and the disparity in scale among businesses is widening.

【Profit and Loss】Operating Income was ¥20.32B (-4.6%). Although the gross profit margin declined to 28.5% from 29.5% in the previous year, the Company partially absorbed the deterioration in profitability by controlling SG&A expenses at 14.8% (an improvement year on year). By segment, Wireless & Communications generated segment profit of ¥19.09B (+53.8%), accounting for approximately 89% of reported segment profit, while the loss in Textiles widened to ¥0.44B. Ordinary Income was ¥20.67B (-3.6%), and Net Income was ¥14.18B (-12.8%); the gap from Ordinary Income was attributable to an increase in income taxes and the recognition of profit attributable to non-controlling interests. Overall, the Company recorded declines in both revenue and earnings, with concentration of earnings in Wireless & Communications supporting Company-wide profits.

Segment Analysis

Wireless & Communications is the core business, with Revenue of ¥90.02B (+10.9% year on year), segment profit of ¥19.09B (+53.8%), and a profit margin of 21.2%. It accounts for approximately 89% of total reported segment profit. Microdevices posted Revenue of ¥16.01B (+18.5%) and profit of ¥0.14B, returning to profitability from a loss in the previous year. Brakes recorded Revenue of ¥14.82B (+4.1%), but profit declined to ¥0.97B (-5.1%), resulting in higher revenue but lower earnings. Precision Instruments reported Revenue of ¥13.61B (-3.7%), while profit improved by 43.6% to ¥0.92B, reflecting improved profitability. Chemicals returned to profitability despite a slight decline in revenue, while Textiles posted Revenue of ¥6.73B (-15.4%) and an expanded loss of ¥0.44B. Real Estate recorded sharp declines, with Revenue of ¥1.24B (-91.9%) and profit of ¥0.52B (-95.5%), apparently reflecting the reversal of a large transaction in the previous year. The disparity in profitability among businesses is widening, with increased dependence on Wireless & Communications being a defining feature.

Key Financial Indicators

【Profitability】The Operating Income margin declined to 13.8% from 14.1% in the previous year, while the Net Income margin declined to 9.6% from 10.7%. ROE (annualized) remained high at 17.0%, and overall earnings power has been maintained.【Cash Quality】Accounts receivable and notes receivable stood at ¥158.87B, while inventories were ¥54.02B, indicating room to reduce receivables and inventories relative to the scale of sales.【Investment Efficiency】Total assets increased by ¥24.45B year on year to ¥692.27B, indicating room to improve asset turnover from the perspective of asset efficiency.【Financial Soundness】The Equity Ratio was stable at 48.1%, and net assets increased by ¥16.43B year on year to ¥333.02B. With the liability structure centered on long-term borrowings of ¥113.52B, the financial foundation is generally sound.

Cash Flow Analysis

Cash flow statement data are outside the scope of disclosure; however, an analysis of funding trends based on changes in the balance sheet shows that cash and deposits increased by ¥6.08B to ¥51.71B from ¥45.63B in the previous year. Meanwhile, short-term borrowings surged to ¥43.78B from ¥19.93B in the previous year, an increase of ¥23.85B, or +119.6%, indicating a shift toward shorter-term funding. Accounts receivable and notes receivable remained high at ¥158.87B, and inventories stood at ¥54.02B, suggesting that the accumulation of working capital may be increasing funding requirements. Accounts payable and notes payable totaled ¥43.10B, representing only an increase year on year, and the funding relief effect from trade payables was limited. Overall, the Company appears to be supplementing cash liquidity through short-term financing amid stronger cash constraints associated with operating activities.

Quality of Earnings

Against Operating Income of ¥20.32B, net non-operating income contributed only ¥0.36B, including a foreign exchange gain of ¥0.87B, while equity-method investment losses were incurred, indicating limited stability in non-operating income and expenses. Extraordinary income of ¥1.87B included a gain on the sale of fixed assets of ¥1.48B and a gain on the sale of investment securities of ¥0.39B. After deducting extraordinary losses of ¥0.87B, net extraordinary income contributed approximately ¥1.00B. This represents approximately 7% of Net Income of ¥14.18B, and it should be noted that earnings include temporary factors. The gap between Ordinary Income of ¥20.67B and Net Income of ¥14.18B was approximately 31%, primarily due to income taxes of ¥7.49B and profit attributable to non-controlling interests of ¥1.19B. The increase in the effective tax rate also expanded the decline in Net Income beyond that in Operating Income, resulting in a difference between operating-level earnings power and the volatility of bottom-line profit.

Earnings Forecast and Guidance

The full-year Company forecast is Revenue of ¥511.00B (+1.7% compared with the previous fiscal year), Operating Income of ¥21.00B (-20.5%), and Ordinary Income of ¥21.50B (-26.7%). The Q1 progress rate was 28.9% for Revenue, exceeding the standard progress rate of 25%, while Operating Income and Ordinary Income reached 96.7% and 96.1%, respectively, representing extremely high progress against the full-year forecasts. This high progress suggests that the Company’s plan is set at a conservative level that incorporates a slowdown from Q2 onward and the disappearance of temporary gains, such as gains on asset sales recognized during the current period. No revisions were made to the earnings or dividend forecasts during the current quarter.

Shareholder Returns

The full-year dividend forecast is ¥36.00 per share. Based on the average number of shares outstanding during the period of 156,198 thousand shares, annual total dividends are estimated at approximately ¥5.62B. The Payout Ratio against the full-year Net Income forecast of ¥10.00B is approximately 56.2%, remaining below the benchmark level of 60%. However, Q1 earnings include contributions from temporary extraordinary income and expenses, primarily gains on the sale of fixed assets. Therefore, it will be necessary to monitor subsequent quarterly trends to assess the sustainability of dividend funding from recurring earnings.

Risk Factors

1. Concentration of profit in Wireless & Communications: Wireless & Communications accounts for approximately 89% of reported segment profit, and fluctuations in demand and price competition in this business could have a significant impact on Company-wide earnings.

2. Inefficient working capital: Accounts receivable and notes receivable of ¥158.87B and inventories of ¥54.02B remain high. Delays in collection and inventory reduction could affect financial flexibility through the tying up of funds.

3. Increasing dependence on short-term financing: Short-term borrowings surged to ¥43.78B, up +119.6% year on year. Although liquidity headroom remains available, continued shortening of the funding structure would increase sensitivity to the interest-rate environment.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The Company’s profitability is significantly above the industry median and ranks at a high level within the industry.

Growth and Capital Efficiency

The Revenue growth rate is significantly below the industry median and is less competitive than that of peers experiencing revenue growth.

※Source: Compiled by the Company

Key Points from the Financial Results

1. The Wireless & Communications Business posted substantial growth in both Revenue and profit, accounting for approximately 89% of reported segment profit, while declines in Textiles and Real Estate weighed on Company-wide performance, widening the disparity among the business portfolio segments.

2. The Q1 progress rate against the full-year Operating Income forecast was 96.7%, while Net Income reached 129.9%, both extremely high levels. Since these results include temporary gains such as gains on the sale of fixed assets, the trend in recurring earnings power should be monitored in subsequent quarters.

3. The sharp increase in short-term borrowings and high levels of accounts receivable and inventories indicate room to improve working capital efficiency despite the high level of profits, making monitoring from the perspective of funding efficiency useful.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,741–¥1,840 for ±1% in the cost of equity, and ¥1,778–¥1,797 for ±0.1 in ω.

Notes:

• Since progress of Net Income against the full-year forecast is 130%, exceeding the standard progress rate of 25%, forecast EPS has been adjusted upward within a range capped at +10% (because companies with leading progress tend to outperform forecasts; adjustments may be excessive for businesses with strong seasonality).
• Net Income is substantially compressed relative to Operating Income due to the tax burden, acquisition-related expenses, and non-controlling interests (Net Income ÷ Operating Income 48%). This figure reflects that compression at face value; if these factors are temporary, normalized earnings power may be higher.
• Since 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 time gap relative to the full-year forecast).
• Since net assets include non-controlling interests, the theoretical value may be calculated at a somewhat higher level.

(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 and is not a forecast of the market share price or a recommendation of any specific investment action, nor does it predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI through analysis of 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 discretion and responsibility, after consulting a professional as necessary.

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