TOYOKOH (341A) FY2026 Q3 Earnings Report

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Executive Summary

The current period produced strong results, with higher revenue and earnings accompanied by margin improvement, as Operating Income growth substantially outpaced Revenue growth. Revenue was ¥22.3B (up +45.1% YoY), Operating Income was ¥4.7B (up +77.8%), Ordinary Income was ¥4.6B (up +85.8%), and Net Income was ¥3.9B (up +45.7%). Gross margin improved to 43.7% (+50bp), while the SG&A ratio declined to 22.7% (-330bp), resulting in a substantial improvement in the Operating Income margin to 21.0% from 17.2% in the same period of the previous year.

Factors Affecting Business Performance

【Revenue】Revenue was ¥22.3B, representing a +45.1% increase YoY. Progress against the full-year company forecast of ¥30.0B (YoY +48.1%) was 74.4%, approximately in line with the standard Q3 progress rate of 75%.

【Profit and Loss】The increase in cost of sales was slightly below the increase in Revenue, improving the gross margin to 43.7% (43.2% in the previous year). SG&A expenses were limited to ¥5.1B (up +26.4%), below the rate of Revenue growth, causing the SG&A ratio to decline by 330bp to 22.7% (26.0% in the previous year). As a result, Operating Income increased by +77.8% to ¥4.7B, substantially outpacing Revenue growth, and the Operating Income margin improved by 380bp to 21.0% (17.2% in the previous year). Ordinary Income was ¥4.6B (up +85.8%), reflecting non-operating expenses of ¥0.2B (including interest expenses). Net Income was ¥3.9B (up +45.7%), with the growth rate restrained relative to Operating Income due to the impact of the low tax expense in the same period of the previous year. This represents high-quality growth characterized by both higher revenue and earnings and improved profitability.

Segment Analysis

Corporate expenses not allocated to individual reportable segments of ¥1.3B were recorded as adjustments to segment profit or loss. As sales and profit figures for individual segments have not been disclosed, a detailed composition-ratio analysis cannot be performed.

Key Financial Indicators

【Profitability】The Operating Income margin of 21.0% (17.2% in the previous year) and Net Income margin of 17.5% (17.4% in the previous year) both show an improving trend, confirming operating leverage driven by gross margin improvement and a lower SG&A ratio.【Cash Quality】Accounts receivable were ¥4.9B, up +93.5% YoY, substantially exceeding Revenue growth (+45.1%). The ratio of accounts receivable to Revenue increased from 16.3% to 21.8%. Inventories remained low at ¥0.0B, indicating limited concern regarding inventory accumulation.【Investment Efficiency】ROE (annualized) was 18.7%, supported by the high Net Income margin (17.5%) and financial leverage (total assets / net assets of 1.86x). Total asset turnover remains low, and improving asset efficiency on the asset base including cash and investment securities will be a key issue going forward.【Financial Soundness】The Equity Ratio was 53.9% (52.2% in the previous year), while the Current Ratio was approximately 500%, based on current assets of ¥40.0B / current liabilities of ¥8.0B, indicating ample liquidity. Interest-bearing debt consists primarily of long-term borrowings of ¥15.6B, and the D/E ratio remains broadly within a conservative range.

Cash Flow Analysis

Although individual disclosures from the statement of cash flows are unavailable, cash flow trends can be assessed from balance sheet movements. Cash and deposits increased by ¥4.3B to ¥25.2B from ¥20.9B in the same period of the previous year, indicating an expansion of the funding base, primarily due to the accumulation of Net Income of ¥3.9B and an increase in long-term borrowings (¥15.6B, up +¥2.3B YoY). Meanwhile, accounts receivable increased by +93.5% YoY to ¥4.9B, suggesting that some of the cash generated from operating activities may remain tied up as uncollected receivables. Property, plant and equipment increased by +26.0% YoY to ¥6.7B, indicating continued investment in operating assets. Overall, funding capacity has expanded due to higher earnings and increased borrowings; however, the conversion of the increase in accounts receivable into cash will determine the quality of cash flow going forward.

Quality of Earnings

Earnings for the current period consisted primarily of recurring elements generated through operating activities, with no apparent temporary factors such as extraordinary gains or losses. Non-operating income was ¥0.1B (including dividends received), while non-operating expenses were ¥0.2B (including ¥0.1B in interest expenses), both limited in scale, resulting in a small difference between Ordinary Income and Operating Income. Meanwhile, Net Income was ¥3.9B against Ordinary Income of ¥4.6B, reflecting ¥0.7B in income taxes and other taxes (an effective tax rate of approximately 14.8%). As the tax expense was low in the same period of the previous year, Net Income growth (+45.7%) was below the growth rates of Operating Income and Ordinary Income (+77.8%, +85.8%). From an accruals perspective, accounts receivable increased by +93.5%, exceeding Revenue growth (+45.1%). The collection status will need to be monitored to assess the extent to which the increase in Revenue and earnings reported in the income statement is being converted into cash receipts.

Earnings Forecast and Guidance

The full-year company forecast is Revenue of ¥30.0B (YoY +48.1%), Operating Income of ¥5.8B (YoY +92.5%), Ordinary Income of ¥5.6B (YoY +113.0%), and Net Income of ¥4.8B (YoY +49.5%). Q3 cumulative progress rates were 74.4% for Revenue, 80.9% for Operating Income, 82.0% for Ordinary Income, and 81.5% for Net Income, all exceeding the standard progress rate of 75%. In particular, profit progress is ahead of Revenue progress. Since the Operating Income required in Q4 is only ¥1.1B (required Operating Income margin of 14.4%), the hurdle for achieving the forecast is relatively low based on the cumulative profitability level.

Shareholder Returns

The Q2 dividend was ¥0 per share, and the full-year company forecast is also ¥0 per share, resulting in a Payout Ratio of 0%. The accumulation of Net Income has been retained as retained earnings (¥7.1B, up +¥3.9B from ¥3.2B in the previous year), representing a capital allocation policy of strengthening equity under a no-dividend policy.

Risk Factors

1. Cash conversion risk from the increase in accounts receivable: While Revenue increased by +45.1% YoY, accounts receivable increased by +93.5%, and the ratio to Revenue rose from 16.3% to 21.8%. If collection delays occur, capital efficiency associated with growth may deteriorate.

2. Risk of a reversal in profit margins: The Operating Income margin improved by 380bp YoY to 21.0%, and could decline reversely in Q4 depending on the project mix and trends in costs and SG&A expenses.

3. Asset utilization risk: Property, plant and equipment increased by +26.0% YoY. If the utilization rate of the expanded operating assets falls below plan, asset efficiency could deteriorate due to increased fixed-cost burdens.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (construction)

Profitability and Returns

The Company’s Operating Income margin and Net Income margin are at high levels; however, their relative positioning is limited because industry median data has not been prepared.

Growth and Capital Efficiency

The Revenue Growth Rate is high at 45.1%, but comparison with the industry median cannot be confirmed in this dataset.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. The Operating Income margin of 21.0%, Net Income margin of 17.5%, and annualized ROE of 18.7% all indicate high profitability and capital efficiency. Operating leverage is evident, with Operating Income increasing by +77.8% against Revenue growth of +45.1%.

2. Q3 cumulative progress against the full-year company forecast was 74.4% for Revenue and 80.9% for Operating Income. The fact that profit progress is ahead of Revenue progress is an important point in evaluating the quality of profitability.

3. Accounts receivable increased at a pace (+93.5%) exceeding Revenue growth. When evaluating the substance of the increase in Revenue and earnings, the trend in this asset item should continue to be monitored as it may represent a structural point of change.

Theoretical Share Price (Reference Value)

Sensitivity: ¥254–¥270 at ±1% for the cost of equity, and ¥261–¥264 at ±0.1 for ω.

Notes:

• Net assets as of the quarter-end were used (there is a time lag relative to 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 Benchmark 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 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, after consulting a professional advisor as necessary.

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