Restar Corporation FY2027 Q1 Earnings Report

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Executive Summary

The key highlight this quarter was a significant recovery in operating income, primarily driven by a recovery in demand for the Devices BU, resulting in higher revenue and profits. Revenue was ¥1914.2 billion (+43.4% YoY), operating income was ¥96.4 billion (+487.2%), ordinary income was ¥84.7 billion (+1628.2%), and net income was ¥57.4 billion (+1653.8%). The gross profit margin improved to 9.9% (+193bp), while the SG&A ratio declined to 4.8% (-192bp), significantly amplifying the effect of revenue growth on profits.

Factors Affecting Financial Performance

【Revenue】Revenue rose substantially to ¥1914.2 billion, up +43.4% YoY. The Devices BU accounted for 88.3% of revenue (¥1746.2 billion, +48.4%) and was the primary driver of company-wide growth. Within the Systems BU, Systems Solutions grew to ¥73.7 billion (+24.5%), while Eco Solutions declined to ¥41.0 billion (-9.8%), EMS to ¥51.2 billion (-0.1%), and IT & SIer to ¥59.4 billion (-0.9%), indicating that certain segments experienced revenue declines.

【Profit and Loss】Operating income increased substantially to ¥96.4 billion (¥16.4 billion in the previous year), and the operating margin improved to 5.0% (+approximately 3.8pt YoY). Operating income from the Devices BU was ¥91.8 billion (+672.3%, 5.4% margin), generating nearly all of the company-wide profit, with fixed-cost dilution accompanying the expansion in scale contributing to the improvement. Meanwhile, Eco Solutions’ profit declined to ¥6.0 billion (-27.5%) in line with its revenue decline, although its 14.6% margin remained the highest among the segments. Ordinary income was ¥84.7 billion after absorbing non-operating expenses, including interest expense of ¥9.7 billion and foreign exchange losses of ¥3.6 billion. Net income was ¥57.4 billion, of which ¥54.3 billion was attributable to owners of the parent. Overall, the company delivered a substantial year-on-year increase in both revenue and profit.

Segment Analysis

The Devices BU was the core business, recording revenue of ¥1746.2 billion (+48.4%) and operating income of ¥92.3 billion (+626.4%). The Systems BU (Systems Solutions + Eco Solutions) generated revenue of ¥114.7 billion (+9.6%) and operating income of ¥6.7 billion (+28.2%). While Eco Solutions’ high margin (14.6%) provided support, Systems Solutions led the growth in scale. IT & SIer BU (¥59.4 billion, -0.9%) and EMS (¥51.2 billion, -0.1%) recorded declines in both revenue and profit, making limited contributions to company-wide growth. Segment profit adjustments were negative ¥3.96 billion, indicating that the burden of company-wide expenses continues.

Key Financial Indicators

【Profitability】The operating margin was 5.0% and the net profit margin was approximately 3.0%, both representing substantial improvements from the previous year. ROE was 5.0%, explained by the combination of a 2.8% net profit margin, 0.49x total asset turnover, and 3.41x financial leverage.【Cash Flow Quality】The gross profit margin of 9.9% remains low, while inventories increased to ¥838.4 billion (+30.9% YoY) and accounts receivable to ¥1556.0 billion (+7.9% YoY), indicating a structure in which converting profit into cash requires time.【Investment Efficiency】Total asset turnover was subdued at 0.49x, and improvement in asset efficiency was limited relative to the expansion in Devices BU volumes.【Financial Soundness】The equity ratio was 29.3%, while interest-bearing debt was trending upward, including short-term borrowings of ¥920.7 billion, indicating a high degree of dependence on short-term funding.

Cash Flow Analysis

Although the statement of cash flows is not included in the available data, funding trends can be inferred from movements in the balance sheet. Inventories increased to ¥838.4 billion (+30.9% YoY) and accounts receivable to ¥1556.0 billion (+7.9% YoY), while accounts payable increased only to ¥1030.9 billion (+14.2% YoY), suggesting that the accumulation of working capital is absorbing funds. To offset this increase in working capital, short-term borrowings expanded to ¥920.7 billion (+34.4% YoY), indicating that growth investment and inventory accumulation are being financed with short-term funds. Cash and deposits were ¥453.4 billion, remaining largely flat year on year, suggesting that most of the funding needs associated with revenue growth were absorbed through borrowings. Interest expense was ¥9.7 billion and foreign exchange losses were ¥3.6 billion, placing a certain burden on capital efficiency.

Earnings Quality

Earnings this quarter were driven by operating activities, while the impact of extraordinary gains and losses was limited. Non-operating income was small at ¥2.7 billion, consisting primarily of interest income of ¥0.7 billion and dividend income of ¥0.3 billion, and remained negligible relative to revenue. Meanwhile, non-operating expenses totaled ¥14.4 billion, mainly due to interest expense of ¥9.7 billion and foreign exchange losses of ¥3.6 billion, resulting in a certain reduction between operating income and ordinary income. Income taxes were ¥27.3 billion, representing an effective tax rate of approximately 32.3%. The difference between profit before tax of ¥84.7 billion and net income of ¥57.4 billion was primarily attributable to the tax burden, with limited one-off factors contributing either positively or negatively. Comprehensive income was ¥70.7 billion, exceeding net income of ¥57.4 billion, due to valuation-related factors such as foreign currency translation adjustments of ¥7.3 billion and valuation differences on securities of ¥6.2 billion.

Earnings Forecast and Guidance

Progress against the full-year plan was 25.5% for revenue, at ¥1914.2 billion/¥7500 billion, a standard level. Progress was 36.4% for operating income, at ¥96.4 billion/¥265 billion; 40.3% for ordinary income, at ¥84.7 billion/¥210 billion; and 40.2% for net income, at ¥57.4 billion/¥135 billion (equivalent to 40.2% on an attributable-to-owners-of-the-parent basis, at ¥54.3 billion/¥135 billion). Thus, progress on the profit front is ahead of schedule. Improvements in Devices BU volumes and mix, together with fixed-cost dilution, appear to have contributed to the early accumulation of profit. In addition, both the earnings forecast and dividend forecast were revised upward during the quarter.

Shareholder Returns

The full-year dividend forecast is ¥145 per share (an increase following the previous revision). Using the average number of shares outstanding during the period of 2811.8 thousand shares, the total annual dividend is equivalent to approximately ¥4.08 billion. The payout ratio against the full-year net income plan of ¥135 billion (on an attributable-to-owners-of-the-parent basis) is approximately 30%, a conservative level relative to earnings. As profit progress is ahead of schedule as of this quarter, a certain degree of stability can be observed in terms of securing funds for dividends. No disclosure regarding share repurchases has been made.

Risk Factors

1. Segment concentration risk: The Devices BU accounts for 88.3% of revenue and the majority of operating income, creating a structure in which fluctuations in demand and price competition in this business are likely to have a direct impact on company-wide performance.

2. Working capital and funding risk: Increases in inventories (+30.9% YoY) and accounts receivable (+7.9% YoY) are being absorbed primarily through short-term borrowings (+34.4% YoY, ¥920.7 billion). Short-term borrowings are large relative to cash and deposits of ¥453.4 billion, making monitoring from a liquidity management perspective necessary.

3. Interest rate and foreign exchange risk: Interest expense of ¥9.7 billion and foreign exchange losses of ¥3.6 billion were the primary drivers of non-operating expenses. Under a structure dependent on short-term funding, increases in interest rates and foreign exchange fluctuations are relatively more likely to affect earnings materially.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (trading)

Profitability and Returns

The operating margin exceeds the industry median, while the net profit margin is below the median due to the burden of financial expenses and other costs.

Growth and Capital Efficiency

The revenue growth rate is substantially above the industry median, representing an exceptionally high level of revenue growth within the industry.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. Beginning with improvements in Devices BU volumes and mix, improvements in the gross profit margin (+193bp) and a decline in the SG&A ratio (-192bp) progressed simultaneously, resulting in a recovery in the operating margin to 5.0%. This is noteworthy as a structural change reflecting effective cost-structure control in addition to the recovery in demand.

2. While full-year progress is ahead of schedule on the profit front (40.2% progress for net income), increases in inventories and accounts receivable are being offset by expanded short-term borrowings. The accumulation of working capital and increasing reliance on short-term funding behind the earnings growth are important factors to consider when assessing earnings quality.

3. The dividend forecast was revised upward to ¥145, and the payout ratio based on the full-year plan remains approximately 30%, indicating a structure that supports dividend sustainability relative to the current level of earnings.

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: ¥3,924–¥4,157 at ±1% for the cost of equity, and ¥4,025–¥4,059 at ±0.1 for ω.

Notes:

• As net income progress against the full-year forecast (40%) exceeds the standard level (25%), forecast EPS has been adjusted upward within a ceiling of +10% (because companies ahead of schedule tend to exceed their forecasts. For businesses with strong seasonality, the adjustment may be excessive).
• Net income is substantially compressed relative to operating income due to the tax burden, acquisition-related expenses, and non-controlling interests, among other factors (net income ÷ operating income 51%). This figure reflects that compression at face value, and normalized earnings power may be higher if these factors are temporary.
• Net assets as of the quarter-end have been used (there is a timing difference from 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 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, and you should consult a professional as necessary.

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