Mitsubishi Research Institute,Inc. FY2026 Q3 Earnings Report

Quick View

Executive Summary

This earnings period recorded higher revenue and higher profit, with Net Income increasing substantially mainly due to the recognition of extraordinary gains. Revenue was ¥982.3B (+7.2% YoY), Operating Income was ¥76.0B (+14.5%), and Ordinary Income was ¥87.0B (+5.3%). Consolidated Net Income, including non-controlling interests, was ¥70.8B (+32.0%), while Net Income attributable to owners of the parent was ¥68.8B (+38.0%). Contributing factors included the recognition of a ¥12.47B gain on the sale of investment securities and a rebound from the previous year's extraordinary losses, including an impairment loss of ¥6.10B. The primary driver of revenue growth was the strong growth of Think Tank and Consulting Services (+16.2%), and the Operating Margin improved to 7.7% (7.2% in the previous year). However, Ordinary Income growth fell below Operating Income growth due to a decline in equity-method investment income (from ¥13.0B to ¥7.1B).

Factors Affecting Performance

【Revenue】Revenue of ¥982.3B (+7.2% YoY) was driven by Think Tank and Consulting Services at ¥427.7B (+16.2%), while IT Services at ¥567.0B (+1.5%) remained sluggish. Revenue composition was 57.7% for IT Services and 43.5% for Think Tank and Consulting Services (before inter-segment transaction adjustments), indicating continued expansion in the revenue mix of the high-growth consulting business.

【Profit and Loss】Operating Income was ¥76.0B (+14.5%), supported by improved cost efficiency as the SG&A expense ratio improved to 15.7%. Ordinary Income was limited to ¥87.0B (+5.3%), as the decline in equity-method investment income to ¥7.1B (¥13.0B in the previous year) offset Operating Income growth. In extraordinary items, a ¥12.47B gain on the sale of investment securities (a temporary factor) was recognized. In addition, the rebound from the recognition of extraordinary losses in the previous year, including an impairment loss of ¥6.10B, resulted in Pretax Income increasing substantially by +29.2% YoY, while consolidated Net Income increased by +32.0%. In conclusion, the company recorded higher revenue and higher profit.

Segment Analysis

Think Tank and Consulting Services generated Revenue of ¥427.7B (+16.2% YoY) and Segment Profit of ¥75.3B (+35.2%), with its profit margin improving to 17.6% (15.2% in the previous year, +2.5pt), making it the leading contributor to company-wide profit growth. IT Services generated Revenue of ¥567.0B (+1.5%), while Segment Profit declined substantially to ¥11.7B (-56.7%), with its profit margin falling to 2.1% (4.9% in the previous year, -2.9pt). In the same period of the previous year, impairment losses of ¥6.05B in Think Tank and Consulting Services and ¥0.04B in IT Services were recognized; no material impairment losses were recognized in the current period. The profitability gap between the two segments is widening, and the company-wide earnings structure is becoming increasingly dependent on improved profitability in the consulting business.

Key Financial Metrics

【Profitability】The Operating Margin improved to 7.7% from 7.2% in the previous year, while the consolidated Net Profit Margin rose to 7.2% (5.9% in the previous year). ROE was 8.2%, indicating that improved profitability is also being reflected in capital efficiency.【Cash Quality】The company held ¥299.2B in cash and deposits and ¥119.8B in current securities, maintaining ample liquidity. Accounts receivable and notes receivable were ¥296.3B, down 30.9% from ¥429.2B in the previous year, indicating progress in working capital reduction.【Investment Efficiency】Total asset turnover was 0.76x, calculated as Revenue of ¥982.3B ÷ Total Assets of ¥1291.0B, and asset efficiency remained broadly in line with the previous year.【Financial Soundness】The Equity Ratio remained high at 66.9%. Current assets of ¥789.4B substantially exceeded current liabilities of ¥296.4B, resulting in a Current Ratio of 266%. On the liabilities side, retirement benefit liabilities of ¥97.8B remain as a structurally fixed liability.

Cash Flow Analysis

As the Cash Flow Statement has not been disclosed, cash trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥299.2B, a slight decrease of -1.3% from ¥303.1B in the same period of the previous year, indicating that the funding level remained broadly stable. Accounts receivable and notes receivable declined 30.9% from ¥429.2B in the previous year to ¥296.3B, while inventories also decreased 61.8% to ¥1.8B, indicating progress in working capital reduction. Meanwhile, accrued expenses decreased 35.8% to ¥6.6B, and the provision for bonuses decreased 57.6% to ¥3.1B, demonstrating that liabilities related to payments were also being streamlined. Construction in progress increased 75.9% to ¥26.3B, suggesting progress in system investments and other projects. Overall, the company has maintained its cash and deposits while reducing both assets and liabilities, and its funding position can be assessed as stable.

Quality of Earnings

Recurring earnings consisted of Operating Income of ¥76.0B and non-operating income of ¥11.3B, including dividend income of ¥2.2B and equity-method income of ¥0.7B. Non-operating income accounted for only approximately 1.2% of Revenue, indicating that earnings were primarily generated by the core business. Meanwhile, a ¥12.5B gain on the sale of investment securities was recognized as an extraordinary gain, equivalent to approximately 1.3% of Revenue, and represents a temporary factor. Net extraordinary items were positive ¥9.9B in the current period (extraordinary gains of ¥12.5B - extraordinary losses of ¥2.5B), compared with negative ¥7.5B in the same period of the previous year, when extraordinary losses of ¥7.6B, including an impairment loss of ¥6.1B, exceeded extraordinary gains of ¥0.1B. This swing of more than ¥17B was one of the primary causes of the high growth rates in Pretax Income and Net Income (+29.2% and +32.0%, respectively). The fact that Net Income growth (+32.0%) substantially exceeded Operating Income growth (+14.5%) warrants caution against overestimating underlying earnings growth after excluding the impact of temporary extraordinary items.

Earnings Forecast and Guidance

Progress against the Full-Year plan was 78.6% for Revenue (¥982.3B/¥1250.0B), 90.5% for Operating Income (¥76.0B/¥84.0B), 91.6% for Ordinary Income (¥87.0B/¥95.0B), and 104.2% for Net Income attributable to owners of the parent (¥68.8B/¥66.0B), indicating that profit progress is ahead of schedule. The Full-Year Ordinary Income forecast of ¥95.0B represents -2.4% YoY, and the implied amount for the remaining quarter is approximately ¥8.0B, a conservative level substantially below the quarterly average of approximately ¥29.0B for the cumulative nine-month period. Similarly, the implied Operating Income for the remaining quarter is only approximately ¥8.0B, suggesting that the plan assumes a slowdown from the recent quarterly pace. As of this quarter, there has been no revision to the earnings forecast or dividend forecast.

Shareholder Returns

The interim dividend was ¥80 per share, maintained at the same level as in the same period of the previous year, while the Full-Year dividend forecast is ¥85, with an increase planned in the year-end dividend. Based on the company forecast EPS of ¥418.88, the Payout Ratio is approximately 20.3%. Given the ample cash and deposits of ¥299.2B and the strong financial base reflected in an Equity Ratio of 66.9%, there is limited concern regarding dividend sustainability. There has been no revision to the dividend forecast for the current quarter.

Risk Factors

1. Deterioration in IT Services profitability: Segment Profit declined to ¥11.7B (-56.7% YoY), and the profit margin fell to 2.1% (4.9% in the previous year). The provision for losses on order contracts increased from ¥0.9B to ¥8.2B, potentially indicating the materialization of cost overrun risks in fixed-price projects and other contracts.

2. Concentration of the business portfolio: IT Services accounts for 57.7% of Revenue (¥567.0B/¥982.3B), creating a structure in which fluctuations in the profitability of this business have a significant impact on company-wide performance.

3. Retirement benefit obligations: Retirement benefit liabilities were ¥97.8B, a slight increase from ¥96.9B in the previous year. Changes in discount rates and the pension investment environment may affect expenses and other comprehensive income.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The Operating Margin is slightly below the industry median, while the Net Profit Margin exceeds the median, placing profitability broadly at the industry-average level.

Growth and Capital Efficiency

The Revenue Growth Rate is below the industry median, indicating a relatively modest position within the industry in terms of growth speed.

※Source: Compiled by the Company

Key Takeaways from the Earnings

1. While the profit margin of Think Tank and Consulting Services increased to 17.6% (+2.5pt YoY), that of IT Services declined to 2.1% (-2.9pt), making the polarization of the profitability structure between segments increasingly pronounced.

2. The +32.0% growth in consolidated Net Income includes the impact of temporary factors, namely the recognition of a ¥12.5B gain on the sale of investment securities and the rebound from the recognition of extraordinary losses in the previous year. The difference from Operating Income growth of +14.5% should therefore be distinguished as an extraordinary-item factor.

3. Progress against the Full-Year plan was ahead of schedule in terms of profit, with Ordinary Income at 91.6% and Net Income attributable to owners of the parent at 104.2%. The company's plan for the remaining quarter may therefore be based on conservative assumptions.

Theoretical Share Price (Reference Value)

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

Sensitivity: ¥5,137–¥5,442 at Cost of Equity ±1%, and ¥5,279–¥5,290 at ω±0.1.

Notes:

• Because Net Income progress against the Full-Year forecast (104%) exceeds the standard level (75%), Forecast EPS has been adjusted upward within a maximum range of +10% (because companies ahead of schedule tend to exceed their forecasts; adjustments may be excessive for businesses with strong seasonality).
• Because forecast ROE is below the Cost of Equity, the theoretical value is below Book Value Per Share.
• Net assets as of the quarter-end are used (there is a timing difference from the Full-Year forecast).
• Because non-controlling interests are included in net assets, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-06 / This value does not forecast or guarantee a future share price)

---

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 discretion and responsibility, after consulting professionals as necessary.

---End of Report---