DEAR LIFE CO.,LTD. FY2026 Q3 Earnings Report

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Executive Summary

The key point of the results was that profit margins were maintained despite declining revenue. The seasonal concentration of real estate deliveries in Q4 appears to have been the primary cause of the revenue decline. Revenue was ¥29.13B (-17.8% YoY), operating income was ¥2.77B (-4.8%), ordinary income was ¥2.69B (-10.4%), and net income attributable to owners of the parent was ¥1.84B (-9.7%). The operating margin improved to 9.5% (9.2% in the previous year), and the improvement in gross margin offset the increase in the SG&A ratio, limiting the decline in profit relative to the decrease in revenue.

Factors Affecting Business Performance

【Revenue】Revenue was ¥29.13B, down -17.8% YoY. The core Real Estate Business generated ¥26.09B (-19.7%), accounting for 89.6% of total revenue, with the timing difference in real estate deliveries considered the primary cause of the revenue decline. The Sales Promotion Business posted a modest increase in revenue to ¥3.04B (+3.2%), serving a complementary role.

【Profit and Loss】Operating income was ¥2.77B (-4.8%), with the decline in profit limited relative to the decline in revenue. The gross margin improved by +2.6pt to 17.2% (14.6% in the previous year), absorbing the increase in the SG&A ratio to 7.7% (6.4% in the previous year). Ordinary income was ¥2.69B (-10.4%); non-operating expenses of ¥0.36B, including ¥0.31B in interest expenses, exceeded non-operating income of ¥0.29B, resulting in a reduction from operating income. Net income was ¥1.84B (-9.7%), with income taxes and other taxes of ¥0.84B (an effective tax rate of approximately 31.1%) driving the decline from ordinary income. In conclusion, although revenue and profit declined, the results showed improvement in terms of profitability.

Segment Analysis

The Real Estate Business generated revenue of ¥26.09B (-19.7%) and operating income of ¥3.56B (-7.1%), with a profit margin of 13.7%, indicating that profitability remained strong. The decline in profit was smaller than the decline in revenue, suggesting improvements in unit prices and margins. The Sales Promotion Business generated revenue of ¥3.04B (+3.2%) and operating income of ¥0.05B (+11.4%), achieving higher revenue and profit despite its small scale, with a profit margin of 1.6%. Company-wide expenses were ¥0.84B, down from ¥0.97B in the previous year, reducing the adjustment from total segment profit to consolidated operating income. By segment, the Company remains highly dependent on the Real Estate Business, and the timing of deliveries in that business determines consolidated performance.

Key Financial Metrics

【Profitability】The operating margin of 9.5%, ordinary income margin of 9.3%, and net profit margin of 6.3% all improved from the previous year (9.2%, 8.5%, and 5.8%, respectively), indicating that profitability was maintained despite declining revenue. ROE was 5.4%; the increase in net assets to ¥34.50B (¥28.49B in the previous year) expanded the denominator and was a factor depressing ROE. 【Cash Quality】Cash and deposits were ¥20.14B, down from ¥27.10B in the previous year, indicating that funds were directed toward increasing inventories of real estate for sale to ¥39.88B. 【Investment Efficiency】Total assets increased substantially to ¥70.65B from ¥47.38B in the previous year, indicating a declining trend in asset turnover. EPS was ¥38.01 (¥46.96 in the previous year, -19.1%).【Financial Soundness】The equity ratio was 48.8%, down from 59.3% in the previous year, primarily due to increased financing through long-term borrowings of ¥27.89B (+138.9% YoY). Current liabilities were ¥6.45B against current assets of ¥68.69B, indicating substantial short-term liquidity headroom.

Cash Flow Analysis

Although direct data from the cash flow statement is unavailable, the movement of funds can be assessed based on trends in the balance sheet. Cash and deposits were ¥20.14B, a decrease of ¥6.97B from the previous year, while the increase in real estate for sale inventories to ¥39.88B corresponded with an increase in long-term borrowings to ¥27.89B (+¥16.21B YoY). In other words, inventory investment appears to have been financed primarily through long-term borrowings, with cash drawn down to a supplementary extent. Interest expenses were ¥0.31B against operating income of ¥2.77B, indicating that the interest burden remains at a level that can be more than adequately absorbed by operating income. As current assets of ¥68.69B substantially exceeded current liabilities of ¥6.45B, the Company has ample short-term liquidity; however, the timing of inventory monetization through completed deliveries will be key to future cash generation.

Earnings Quality

Recurring earnings are primarily derived from operating income generated by real estate sales. Non-operating income of ¥0.29B, including ¥0.04B in equity-method investment income and ¥0.01B in gains on sales of investment securities, made only a limited contribution. Non-operating expenses were ¥0.36B, most of which consisted of ¥0.31B in interest expenses, creating a structure in which higher interest costs pressure ordinary income. Extraordinary income was only ¥0.01B, and the impact of one-time factors was limited. The decline from ordinary income of ¥2.69B to net income of ¥1.84B was approximately 31.6%, primarily attributable to the ¥0.84B tax burden for income taxes and other taxes, rather than temporary accounting factors, and was based on an effective tax rate of approximately 31.1%. Comprehensive income was ¥1.86B, nearly the same level as net income attributable to owners of the parent of ¥1.84B. Changes in valuation difference on securities (-¥0.01B) were small, and the divergence between comprehensive income and net income was limited. Overall, earnings quality is rooted in operating activities and dependence on one-time items is low; however, attention is warranted regarding performance volatility caused by delivery timing due to the high dependence on inventories.

Earnings Forecasts and Guidance

Against the full-year ordinary income forecast of ¥10.00B (+27.7% YoY), cumulative Q3 ordinary income of ¥2.69B represented a progress rate of only 26.9%, substantially below the standard quarterly benchmark of approximately 75%. Similarly, against the full-year net income forecast of ¥6.80B, cumulative net income of ¥1.84B represented a progress rate of 27.1%. This substantial delay in progress appears to result from the delivery timing specific to the real estate business, and the plan likely assumes that revenue and profit will be concentrated in Q4. There were no revisions to either the earnings forecast or the dividend forecast during the quarter, and the Company maintained its previous plans. Achievement of the full-year plan is highly dependent on the completion of deliveries of large-scale properties in Q4.

Shareholder Returns

The full-year dividend forecast is ¥64.00 per share. As the interim dividend is ¥0, the plan is for a single year-end dividend payment. There was no revision to the dividend forecast during the quarter, and the previous plan was maintained. Based on the full-year net income forecast of ¥6.80B and approximately 48.53 million average shares outstanding during the period, forecast EPS is approximately ¥140, implying an estimated payout ratio of approximately 46%. There is no disclosure regarding share repurchases, and shareholder returns consist solely of dividends. Based on cash and deposits of ¥20.14B, there is no immediate concern regarding the Company’s ability to pay dividends; however, cash flow volatility associated with increased inventories will be a subject for monitoring going forward.

Risk Factors

1. Increased inventory dependence: Inventories consisting of real estate for sale of ¥39.88B plus work in progress of ¥5.46B account for approximately 64.2% of total assets of ¥70.65B. Delays in deliveries or a deterioration in market conditions could increase volatility in gross profit and cash generation.

2. Business concentration risk: The Real Estate Business accounts for 89.6% of revenue and nearly all profit, and diversification of the business portfolio is limited. The timing of deliveries and changes in market conditions in this business directly affect consolidated performance.

3. Increased leverage: Long-term borrowings increased to ¥27.89B (+138.9% YoY), while the equity ratio declined to 48.8% from 59.3% in the previous year. Interest expenses increased to ¥0.31B, raising sensitivity to changes in the interest-rate environment.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (real_estate)

Profitability and Returns

Profitability exceeds the industry median, indicating a relatively favorable level in terms of margins.

Growth and Capital Efficiency

The revenue growth rate is substantially below the industry median, positioning the Company unfavorably within the industry in terms of growth.

※Source: Compiled by the Company

Key Points from the Financial Results

1. Despite declining revenue, profitability improved, with an operating margin of 9.5% and a net profit margin of 6.3%. The gross margin also increased by +2.6pt from the previous year, suggesting qualitative changes in the business cost structure and product mix.

2. Full-year progress was substantially below the standard pace, with ordinary income at 26.9% and net income at 27.1% of the respective full-year forecasts. The execution of real estate deliveries in Q4 will be the key inflection point for achieving the full-year plan.

3. Inventories (real estate for sale plus work in progress) account for 64.2% of total assets, while long-term borrowings have expanded by +138.9% YoY. The consistency between future cash recovery from deliveries and the repayment schedule for borrowings will be a key focus in evaluating the Company’s financial structure going forward.

Theoretical Stock Price (Reference Value)

Sensitivity: ¥906–¥958 for a ±1% change in the cost of equity, and ¥926–¥941 for a ±0.1 change in ω.

Notes:

• Net assets as of the end of the quarter are used (there is a time lag relative to the full-year forecast).
• As net assets include non-controlling interests, the theoretical values may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated values based solely on publicly disclosed data; these do not constitute forecasts of market prices or recommendations for specific investment actions and do not predict or guarantee future stock 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. 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, where necessary, after consulting with a professional advisor.

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