TOMOKU (3946) FY2026 Q3 Earnings Report

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Executive Summary

While revenue growth remained modest, improvements in profit margins resulted in increases of more than 20% in Operating Income, Ordinary Income, and Net Income. Revenue was ¥166.92B (+1.7% YoY), Operating Income was ¥7.96B (+25.5%), Ordinary Income was ¥8.08B (+23.6%), and Net Income (consolidated net income for the period) increased to ¥5.49B from ¥4.37B in the previous year. The primary driver of earnings growth was an improvement in the Operating Income margin through control of costs and SG&A expenses, with enhanced profitability rather than expansion in sales volume serving as the main growth driver.

Factors Affecting Business Performance

【Revenue】Revenue was ¥166.92B, representing a modest 1.7% increase YoY. By segment, Cardboard was the core business, with revenue of ¥95.13B and accounting for approximately 57% of total revenue, followed by Housing at ¥37.36B and TransportationWarehouse at ¥39.19B. While overall growth was gradual, performance varied across the business portfolio.

【Profit and Loss】Operating Income was ¥7.96B (+25.5% YoY), and the Operating Income margin improved to 4.8% from approximately 3.9% in the previous year. The gross margin was 17.9% and the SG&A ratio was 13.2%, indicating that cost absorption from the gross profit stage generated operating leverage. Extraordinary gains and losses were ¥0.18B and ¥0.14B, respectively, for a net gain of ¥0.04B, resulting in a limited impact on Net Income; the earnings increase therefore reflected recurring improvement rather than reliance on temporary factors. Ordinary Income of ¥8.08B exceeded Operating Income, with non-operating income and expenses resulting in a net gain of ¥0.12B. In conclusion, the Company achieved earnings growth significantly exceeding revenue growth, resulting in both higher revenue and higher profit.

Segment Analysis

Cardboard, with revenue of ¥95.13B and Operating Income of ¥8.28B (8.7% margin), is the core segment generating the majority of Company-wide profit. TransportationWarehouse generated revenue of ¥39.19B and Operating Income of ¥1.08B (2.7% margin), maintaining profitability. In contrast, Housing generated revenue of ¥37.36B but recorded an Operating Loss of ¥0.63B (△1.7% margin), making it a factor depressing the Company-wide profit margin. The Company-wide Operating Income margin of 4.8% can be interpreted as the result of high profitability in Cardboard being offset by losses in Housing.

Key Financial Indicators

【Profitability】The Operating Income margin of 4.8% improved from the previous year, but its absolute level remains low together with the 17.9% gross margin. The Company’s ability to pass through increases in raw material, energy, and logistics costs will therefore be a key focus going forward.【Cash Flow Quality】Net extraordinary gains and losses were small at ¥0.04B, and the increase in Net Income of ¥5.399B (attributable to owners of the parent) was supported by improvement at the operating level, indicating a recurring earnings profile.【Investment Efficiency】ROE was 5.6%. Low total asset turnover and a capital-intensive asset structure, including ¥98.70B of property, plant and equipment accounting for a portion of total assets, are structural factors constraining capital efficiency.【Financial Soundness】The Equity Ratio was 45.3%. Interest-bearing debt (the total of short-term borrowings, current portion of long-term borrowings, and long-term borrowings) was approximately ¥57.0B, but the Company secured a sufficient profit level relative to interest paid of ¥0.65B, maintaining financial stability.

Cash Flow Analysis

Although the items disclosed in the statement of cash flows are limited, cash trends can be assessed based on earnings quality and the composition of assets and liabilities. Against Operating Income of ¥7.96B and Net Income attributable to owners of the parent of ¥5.40B, net extraordinary gains and losses were limited to ¥0.04B, indicating that earnings had little dependence on temporary factors. Cash and deposits were ¥15.63B, down from ¥21.00B in the previous year, suggesting that increases in working capital items such as accounts receivable and notes receivable of ¥32.26B and inventories of ¥26.03B may have absorbed cash. Accounts payable of ¥23.60B covered approximately 91% of inventories, indicating partial mitigation of the working capital burden through trade payables. Property, plant and equipment, corresponding to capital investment, increased YoY, suggesting that investment for business expansion is continuing.

Earnings Quality

The increase in Net Income for the period was driven by improvement in Operating Income, and the recurring nature of earnings can be assessed as high. Non-operating income was ¥0.94B and non-operating expenses were ¥0.82B, resulting in a net gain of ¥0.12B; expenses, including ¥0.65B in interest paid, were largely offset by non-operating income. Extraordinary income of ¥0.18B (gain on sale of fixed assets) and extraordinary losses of ¥0.14B were both small, with a limited impact on Net Income of ¥5.399B, and there was no evidence that temporary factors materially affected performance. Comprehensive Income of ¥7.19B exceeded Net Income, with the difference primarily attributable to fair value movements such as a ¥1.39B increase in valuation difference on securities and a ¥0.50B foreign currency translation adjustment; these factors should be understood separately from the earning power of the core business.

Earnings Forecast and Guidance

The full-year forecast is revenue of ¥230.00B (+4.7% YoY), Operating Income of ¥11.00B (+17.5%), and Ordinary Income of ¥10.80B (+14.9%). Based on comparison data with the same period of the previous year (equivalent to the previous full-year results), achievement of the full-year plan assumes growth in both revenue and profit in the second half. Forecast EPS is ¥424.56, and the dividend forecast is ¥130.00, reflecting the earnings growth trend.

Shareholder Returns

The Q2 dividend was ¥65.00 per share, and the full-year dividend forecast is ¥130.00. Based on the full-year forecast of ¥7.0B in Net Income attributable to owners of the parent, the Payout Ratio is approximately 30.6%. Given substantial retained earnings of ¥67.93B, concerns regarding dividend sustainability are limited. As no data on share repurchases is available, shareholder returns are evaluated using the Payout Ratio.

Risk Factors

1. Absolute level of profit margins: The Operating Income margin of 4.8% and gross margin of 17.9% are both improving but remain low in absolute terms. If increases in raw material, energy, and logistics costs cannot be passed through to customers, profitability may come under renewed pressure.

2. Profitability gap between segments: The Housing segment recorded an Operating Loss of ¥0.63B (△1.7% margin), and trends in housing starts and changes in building material costs may continue to affect the Company-wide profit margin.

3. Capital-intensive asset structure: Property, plant and equipment represents a high proportion of total assets, creating a structure in which depreciation and maintenance costs are more likely to affect profitability when utilization rates decline.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The Company’s profitability is below the industry median and is at a level close to the lower bound of the IQR.

Growth and Capital Efficiency

The revenue growth rate is also below the industry median but remains within the IQR range.

※Source: Compiled by the Company

Key Points in the Financial Results

1. A structural improvement is evident, with Operating Income increasing +25.5% compared with revenue growth of +1.7%, meaning the earnings growth rate significantly exceeded sales growth. The Operating Income margin improved to 4.8%, but the gap with the industry median of 8.6% remains substantial.

2. The Operating Loss of ¥0.63B in the Housing segment is a factor depressing the Company-wide profit margin, resulting in an earnings structure highly dependent on the strong profitability of the Cardboard segment (8.7% margin).

3. The Payout Ratio is approximately 30.6% (based on the full-year forecast), and given retained earnings of ¥67.93B, the current dividend forecast of ¥130.00 is consistent with earnings progress.

Theoretical Stock Price (Reference Value)

Sensitivity: ¥5,470–¥5,789 at Cost of Equity ±1%; ¥5,613–¥5,634 at ω±0.1.

Notes:

• Since 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 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 reference month: 2026-07 / This is a mechanically calculated value based solely on publicly disclosed data; it does not constitute a forecast of the market stock price or a recommendation of any specific investment action, nor does it predict or guarantee the future stock price.)

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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 discretion and responsibility, after consulting a professional as necessary.

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