Quick View
| Metric | Current Period | Same Period of Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥19.87B | ¥16.81B | +18.2% |
| Operating Income | ¥4.24B | ¥3.04B | +39.6% |
| Ordinary Income | ¥4.52B | ¥2.81B | +60.8% |
| Net Income | ¥3.05B | ¥1.96B | +55.4% |
| ROE | 3.1% | 2.1% | - |
Executive Summary
The company delivered a strong set of results, with higher revenue and profits accompanied by a notable improvement in profit margins, primarily driven by high growth in the Chemicals Business, particularly fine chemicals. Revenue was ¥19.87B (+18.2% YoY), Operating Income was ¥4.24B (+39.6%), Ordinary Income was ¥4.52B (+60.8%), and Quarterly Net Income Attributable to Owners of the Parent was ¥3.04B (+58.0%). As profit growth outpaced revenue growth, the Operating Income margin improved to 21.3% from 18.1% in the same period of the previous year, indicating qualitative improvement in the earnings structure in addition to revenue growth.
Factors Affecting Performance
【Revenue】Revenue was ¥19.87B, up +18.2% YoY. The Chemicals Business led growth, expanding to ¥14.61B (+26.1%), with fine chemicals representing the largest growth driver at ¥6.24B, up +56.5% YoY. The Building Materials Business was ¥5.00B, up +1.7% YoY, indicating limited growth. While the exteriors business declined by -4.1% YoY, wall materials recorded substantial revenue growth of +86.2% YoY.
【Profit and Loss】Operating Income was ¥4.24B (+39.6% YoY), primarily due to an improvement in the Chemicals Business profit margin to 25.7% from 23.3% in the previous year. Ordinary Income increased to ¥4.52B (+60.8%), boosted by non-operating income including a foreign exchange gain of ¥0.19B and interest income of ¥0.17B. Special gains and losses were a net gain of +¥0.05B, including a gain on the sale of investment securities of ¥0.29B, indicating that some temporary factors contributed to growth at the Ordinary Income level. Net Income was ¥3.04B (+58.0%). The company achieved higher revenue and profits, with the main drivers of profit growth being high-margin growth in the Chemicals Business and an improvement in non-operating income and expenses.
Segment Analysis
The Chemicals Business generated revenue of ¥14.61B (+26.1% YoY) and segment profit of ¥3.76B (+39.1%), with a profit margin of 25.7%, making it the core contributor to company-wide profit. The Building Materials Business recorded revenue of ¥5.00B (+1.7%), profit of ¥0.36B (+31.0%), and a profit margin of 7.2%; while revenue growth was limited, profitability improved. The profit margin gap between the two businesses was 18.5pt, indicating that consolidated profit is highly correlated with the Chemicals Business, particularly trends in fine chemicals. As a result of the consolidation of subsidiaries including PT Timuraya Tunggal, assets in the Chemicals Business increased by ¥7.46B, and goodwill of ¥2.06B was newly recognized.
Key Financial Indicators
【Profitability】The Operating Income margin improved significantly to 21.3% from 18.1% in the previous year, while the Net Income margin improved to 15.3% from 11.5%. The Gross Profit margin also remained high at 46.8%.【Cash Quality】Cash and deposits were ¥32.62B, accounts receivable were ¥17.38B, and inventories were ¥11.30B, indicating a substantial working capital base. Accounts receivable and inventories showed an increasing trend accompanying revenue growth.【Investment Efficiency】ROE was 3.1%. Despite the high Net Income margin, the Total Asset Turnover ratio was low, while abundant cash and deposits and investment securities constrained asset efficiency.【Financial Soundness】The Equity Ratio was 64.4%. With interest-bearing debt of ¥22.98B compared with cash and deposits of ¥32.62B, the company was in a net cash position and maintained a stable financial foundation.
Cash Flow Analysis
Although the values for each section of the statement of cash flows were not included in the disclosed data, cash trends can be inferred to some extent from changes in the balance sheet. Cash and deposits were ¥32.62B, down from ¥35.53B in the same period of the previous year, while accounts receivable increased to ¥17.38B from ¥15.14B and inventories increased to ¥11.30B from ¥9.84B. Working capital appears to have accumulated alongside revenue expansion, suggesting that the pace of cash conversion may be somewhat slower than profit growth. Meanwhile, long-term borrowings increased to ¥18.30B, potentially reflecting the allocation of funds to acquisition financing and capital expenditures. Cash and deposits continued to exceed interest-bearing debt, providing sufficient liquidity for the time being.
Earnings Quality
Profit growth for the current period included both recurring business growth and temporary factors. While the increase in Operating Income was supported by recurring factors—namely, revenue growth and margin improvement in the Chemicals Business, particularly fine chemicals—non-operating income, including a foreign exchange gain of ¥0.19B and interest income of ¥0.17B, also made a significant contribution to the increase in Ordinary Income. In special gains and losses, special gains of ¥0.29B, including a gain on the sale of investment securities of ¥0.29B, were offset by special losses of ¥0.25B, including losses on the disposal of fixed assets, resulting in a slight net contribution to profit. Comprehensive Income was ¥4.09B, exceeding Net Income of ¥3.05B. The primary reason was a ¥0.95B increase in the valuation difference on securities. It is important to note that changes in asset values unrelated to business profits boosted Comprehensive Income.
Earnings Forecast and Guidance
The full-year company forecast is revenue of ¥88.00B (+24.5% YoY), Operating Income of ¥14.40B (+32.5%), and Ordinary Income of ¥14.50B (+21.6%), and the earnings forecast for the current quarter has been revised. As of Q1, progress toward the full-year forecast was 22.6% for revenue, 29.4% for Operating Income, 31.2% for Ordinary Income, and 30.4% for Net Income. While profit progress exceeded the standard 25%, revenue progress was slightly below that level. The forecast full-year Operating Income margin is 16.4%, below the 21.3% recorded in Q1, suggesting that profit margins may have been estimated somewhat conservatively for the second half of the fiscal year.
Shareholder Returns
The full-year dividend forecast is ¥60.00 per share, with no revision to the dividend forecast. Based on the full-year forecast EPS of ¥231.22, the Payout Ratio is approximately 25.9%, indicating a relatively light dividend burden relative to profit. The estimated annual dividend payout based on the average number of shares outstanding during the period is approximately ¥2.60B, representing approximately 3.9x coverage by the full-year Net Income forecast of ¥10.00B. Treasury stock is recorded at ¥2.997B; however, as no additional purchases during the current period have been disclosed, the Payout Ratio is presented based solely on dividends.
Risk Factors
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Concentration of profit in the Chemicals Business: Segment profit of ¥3.76B in the Chemicals Business accounted for approximately 91% of total reported segment profit of ¥4.12B, creating a structure in which demand and price fluctuations in fine chemicals have a significant impact on consolidated profit.
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Working capital accumulation: Accounts receivable of ¥17.38B and inventories of ¥11.30B increased from the same period of the previous year, indicating an accumulation of receivables and inventories accompanying revenue expansion. If demand slows, the risks of inventory valuation losses and collection delays may increase.
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Uncertainty regarding goodwill and purchase price allocation associated with acquisitions: Goodwill of ¥2.06B arose from the consolidation of PT Timuraya Tunggal and other entities. However, purchase price allocation remains provisional, and changes in asset valuation or impairment assessments after finalization may affect future financial figures.
Industry Benchmarks (For Reference; Compiled by the Company)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Income Margin | 21.3% | 7.2% (3.2%–12.5%) | +14.2pt |
| Net Income Margin | 15.4% | 5.9% (2.9%–12.5%) | +9.5pt |
The Company's Operating Income margin and Net Income margin both significantly exceeded the manufacturing industry median, indicating high profitability within the industry.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 18.2% | 5.6% (1.1%–13.9%) | +12.6pt |
The Revenue Growth Rate also significantly exceeded the industry median, placing the Company among the industry leaders in terms of growth.
※Source: Compiled by the Company
Key Earnings Highlights
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The Operating Income margin of 21.3% and Net Income margin of 15.3% both improved significantly from the same period of the previous year, with high-margin growth in the Chemicals Business being the primary driver of margin expansion.
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Progress toward the full-year forecast was 29.4% for Operating Income and 30.4% for Net Income, exceeding the standard quarterly progress rate of 25%. The Company made a smooth start toward achieving its full-year plan.
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The increase in accounts receivable and inventories appears to represent a natural expansion of working capital accompanying revenue growth. However, the pace of future cash conversion will require ongoing monitoring of earnings data.
Theoretical Share Price (Reference Value)
| Scenario | Theoretical Share Price |
|---|---|
| bear (downside) | ¥2,271 |
| base (base case) | ¥2,334 |
| bull (upside) | ¥2,385 |
| Calculation Assumption | Value |
|---|---|
| Book Value Per Share (BPS) | ¥2,252 |
| Adjusted Forecast EPS | ¥248.5 |
| Cost of Equity r | 9.77% (10-year Japanese government bond 2.77% + Equity Risk Premium 6.00% + Size Premium 1.00%) |
| Persistence Factor of Residual Income ω / Explicit Forecast Period | 0.62 / 5 years |
| Assumed Payout Ratio | 25.9% |
| Forecast EPS Confidence Adjustment | ×1.075 (based on the historical guidance achievement rate of comparable companies) |
| Implied PBR / PER | 1.04x / 9.4x |
Sensitivity: ¥2,269–¥2,403 at ±1% for the cost of equity, and ¥2,332–¥2,337 at ±0.1 for ω.
Notes:
- Net assets as of the quarter-end are used (there is a timing gap 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 reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; this 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.)
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. 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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AI Financial Analysis
Executive Summary
FY2026 Q1 was a strong start, with revenue growth, margin expansion and profit growth materially ahead of the sales increase. Revenue rose 18.2% YoY to ¥19.87bn. Operating income increased 39.6% to ¥4.24bn, exceeding the prior-year growth rate of revenue by 21.4 percentage points. Net income attributable to owners rose 58.0% to ¥3.04bn. The operating margin expanded to 21.3% from 18.1% a year earlier, an improvement of 320bp. Gross margin rose to 46.8% from 44.9%, an improvement of 190bp, indicating that the earnings advance was supported by improved product mix and/or pricing relative to production costs. SG&A increased 12.2% to ¥5.06bn, materially below revenue growth, creating favorable operating leverage. The Chemicals business was the principal profit engine, contributing ¥3.76bn of segment profit, or roughly 89% of consolidated operating income before corporate adjustments. Chemicals segment revenue rose 26.1%, led by Fine Chemicals, where sales increased 56.5% YoY to ¥6.24bn. The Building Materials business also improved, with segment profit rising 31.0% to ¥0.36bn despite broadly flat segment sales. Ordinary income rose 60.8% to ¥4.52bn, aided by a swing from a prior-year foreign-exchange loss to a ¥0.19bn foreign-exchange gain. Profit before tax included a net extraordinary gain of ¥0.46bn, principally reflecting ¥2.86bn of gains on sales of investment securities offset by ¥2.45bn of extraordinary losses. This net extraordinary contribution was modest at approximately 1.5% of net income, although the gross securities-sale gain supports a need to distinguish core operating earnings from investment-related gains. The Q1 operating-income progress rate against full-year guidance is 29.4%, 4.4 percentage points above the standard 25% quarterly pace. The balance sheet remains liquid and conservatively capitalized, even after debt-funded acquisition-related expansion. The acquisition of PT Timuraya Tunggal and PT Pradipa Persada added ¥7.46bn of Chemicals segment assets and generated ¥2.06bn of provisional goodwill. Near-term execution will depend on integration, realization of the acquired business contribution and containment of elevated manufacturing working-capital intensity. Full-year guidance implies continued growth, with sales forecast to increase 24.5% and operating income 32.5%.
Profitability Analysis
Annualized DuPont ROE is 12.5%, decomposed into a 15.3% net profit margin, 0.525x asset turnover and 1.55x financial leverage. The result is primarily margin-led rather than leverage-led: the 21.3% operating margin increased 320bp YoY and gross margin improved 190bp, while SG&A grew only 12.2% against 18.2% revenue growth. This favorable operating leverage is consistent with the 39.6% increase in operating income. The Chemicals business is the core business by operating-income contribution, reporting revenue of ¥14.61bn, up 26.1% YoY, and segment profit of ¥3.76bn, up 39.1%; its segment margin expanded to 25.7% from 23.3%. Within Chemicals, Fine Chemicals sales increased to ¥6.24bn from ¥3.99bn, Organic Chemicals increased to ¥4.45bn from ¥3.75bn, and Inorganic Chemicals rose modestly to ¥3.92bn from ¥3.85bn. Building Materials reported revenue of ¥5.00bn, up 1.7%, and segment profit of ¥0.36bn, up 31.0%, lifting its margin to 7.2% from 5.6%. Building Materials improvement was driven by wall-material sales rising to ¥0.58bn from ¥0.31bn, while exterior sales declined 4.1% to ¥4.42bn. R&D expense increased 22.8% to ¥0.56bn and represented 2.8% of revenue. The 2.8% R&D intensity is below the 3% alert threshold, which may constrain technology renewal in higher-value chemical applications if sustained; it is more defensible for mature manufacturing operations but warrants monitoring given Fine Chemicals is the key growth driver. The five-factor DuPont tax burden was 0.666, reflecting a 33.2% effective tax rate, while the 1.077 interest burden indicates non-operating income more than offset interest expense. Annualized ROE is good relative to the 10-15% benchmark range, but remains below the >15% level generally associated with excellent capital efficiency.
Growth Assessment
Revenue growth was broad within Chemicals but concentrated in Fine Chemicals, which accounted for approximately 74% of the Chemicals segment's ¥3.03bn YoY sales increase. Fine Chemicals' 56.5% sales growth is the most important indicator of both growth quality and sustainability because it is likely to carry higher value-added characteristics than the more mature chemical categories. Organic Chemicals also delivered a solid 18.9% increase, while Inorganic Chemicals grew 1.8%. The acquisition of PT Timuraya Tunggal and PT Pradipa Persada expands the Chemicals asset base by ¥7.46bn and should support the higher FY2026 sales-growth outlook, but it also makes organic-versus-acquired growth and post-acquisition profitability important evaluation points. Q1 sales represent 22.6% of the ¥88.0bn full-year sales forecast, 2.4 percentage points below the standard 25% pace. By contrast, Q1 operating income represents 29.4% of the ¥14.4bn forecast, 4.4 percentage points ahead of the standard pace, while ordinary income and net income represent 31.2% and 30.4%, respectively. The stronger profit progress than sales progress suggests the guidance trajectory relies on continued elevated margins rather than simply volume growth. Full-year guidance calls for operating-income growth of 32.5%, below Q1's 39.6% increase, leaving some room for normalization in later quarters. The revised forecast indicates management has updated expectations, and quarterly execution should be assessed against the need to sustain Chemicals profitability while integrating the acquired Indonesian operations.
Financial Health
Liquidity is strong, with a 313.8% current ratio, 272.1% quick ratio and ¥57.89bn of working capital. Cash and deposits of ¥32.62bn cover short-term loans of ¥4.69bn by 6.96x, substantially limiting near-term refinancing pressure. Current assets of ¥84.96bn exceed current liabilities of ¥27.07bn by a wide margin, so there is no maturity mismatch between current obligations and liquid resources. Interest-bearing debt totals ¥22.98bn, equivalent to a conservative 0.55x debt-to-equity ratio and 19.1% debt-to-capital ratio. Interest coverage of 27.53x indicates substantial capacity to service current borrowing costs. Nevertheless, short-term loans increased 56.2% YoY to ¥4.69bn and long-term loans increased 32.3% to ¥18.30bn, consistent with funding requirements associated with expansion and the acquisition. Total liabilities increased to ¥53.88bn, while total equity rose to ¥97.39bn; equity therefore continues to fund 64.4% of total assets. Goodwill increased from ¥0.66bn to ¥21.23bn and intangible assets rose from ¥6.56bn to ¥26.80bn following the acquisition. Goodwill is only 2.2% of equity and 1.4% of assets, well below risk thresholds, but its provisional purchase-price allocation means subsequent valuation refinement and integration performance merit attention. Asset-retirement obligations of ¥3.72bn equal approximately 0.7% of total liabilities, indicating limited disclosed environmental-remediation balance-sheet exposure. Accounts payable increased 31.8% to ¥11.84bn, partly supporting working-capital funding but also requiring monitoring alongside inventories and receivables.
Notable B/S Changes
Goodwill: +¥20.57bn (+3,116.7%) to ¥21.23bn - primarily reflects the PT Timuraya Tunggal acquisition; low current concentration at 2.2% of equity, but integration and impairment performance should be monitored. Intangible assets: +¥20.24bn (+308.5%) to ¥26.80bn - acquisition-related intangible recognition increases the importance of purchase-price allocation finalization and future amortization/impairment review. Property, plant and equipment: +¥48.43bn (+16.3%) to ¥346.24bn - the increase is below the percentage trigger but is accompanied by construction in progress rising ¥31.73bn (+104.1%) to ¥62.20bn, indicating a sizable investment pipeline and execution requirement. Short-term loans: +¥16.87bn (+56.2%) to ¥46.87bn - increased short-term borrowing accompanies expansion, although cash covers short-term loans by 6.96x. Long-term loans: +¥44.65bn (+32.3%) to ¥182.97bn - debt financing increased alongside acquisition and investment activity, though leverage remains conservative at 0.55x debt-to-equity. Accounts payable: +¥28.56bn (+31.8%) to ¥118.37bn - greater supplier financing partly offsets working-capital needs, but should be assessed alongside high receivable and inventory days.
Cash Flow Quality
Dividend Sustainability
The full-year dividend forecast is ¥60 per share. Against forecast EPS of ¥231.22, the implied dividend payout ratio is approximately 26.0%, comfortably below the 60% sustainability benchmark. Q1 EPS was ¥70.33, and annualized earnings performance is consistent with the ability to support the indicated full-year dividend if the operating-income plan is achieved. The company's strong liquidity, conservative 0.55x debt-to-equity ratio and 27.53x interest coverage provide balance-sheet capacity for shareholder distributions. Dividend capacity should nevertheless be viewed alongside the acquisition-led increase in borrowings and the elevated working-capital requirements associated with receivables and inventory. No dividend revision was indicated alongside the earnings forecast revision.
Risk Assessment
Business risks include Chemicals growth is increasingly dependent on Fine Chemicals, where sales rose 56.5% YoY; any normalization in demand, product mix or pricing would have an outsized effect on consolidated margin performance., The acquisition of PT Timuraya Tunggal and PT Pradipa Persada added ¥7.46bn of Chemicals assets. Integration, realization of synergies and execution in the acquired operations are material risks, particularly because the purchase-price allocation remains provisional., Manufacturing working-capital efficiency is a material operational concern. The 80-day DSO alert indicates comparatively slow customer collections and raises the risk of higher credit exposure or cash tied up in receivables., The 153-day DIO alert indicates substantial inventory funding needs and possible exposure to demand forecasting errors, inventory aging or raw-material and finished-goods price changes., The separate 98-day DIO alert also remains above the 60-day manufacturing efficiency benchmark; regardless of inventory-scope methodology, the alert consistently indicates elevated stockholding relative to industry targets., The 131-day cash conversion cycle alert exceeds the 120-day warning threshold, combining slow receivable conversion with high inventory holdings and raising the amount of capital required to sustain growth., For a chemical manufacturer, raw-material and energy-price volatility, environmental regulation, product quality incidents and foreign-exchange movements remain industry-specific risks. Q1 included a ¥0.19bn FX gain, demonstrating that currency effects can influence earnings outside core operations., R&D intensity of 2.8% is below the 3% alert threshold. While this can be consistent with a mature manufacturing profile, it could weaken long-term innovation capacity if the company seeks to sustain Fine Chemicals-led growth..
Financial risks include Interest-bearing debt increased to ¥22.98bn as short-term and long-term loans rose 56.2% and 32.3% YoY, respectively. Current leverage remains conservative, but acquisition financing reduces flexibility if earnings or working-capital efficiency weaken., Provisional goodwill of ¥21.23bn is currently modest at 2.2% of equity, but the acquired business must deliver expected cash generation to avoid future impairment risk under JGAAP goodwill accounting., Profit before tax benefited from a ¥2.86bn gain on sale of investment securities, offset in part by extraordinary losses. Although the net extraordinary gain was only ¥0.46bn, recurrence of investment gains should not be assumed in assessing normalized earnings..
Key concerns include Highest priority: convert Fine Chemicals-led revenue growth into sustainable post-acquisition earnings while maintaining the Q1 21.3% operating margin., High priority: reduce receivable days, inventory days and the cash conversion cycle to prevent working capital from absorbing the benefits of reported earnings growth., Moderate priority: monitor debt growth, acquired-business profitability, provisional purchase-price allocation and goodwill valuation., Moderate priority: assess whether 2.8% R&D intensity is sufficient to defend product competitiveness and support the higher-growth Chemicals portfolio..
Investment Implications
Key takeaways include Revenue increased 18.2%, operating income 39.6% and net income attributable to owners 58.0%, demonstrating strong earnings momentum., Operating margin improved 320bp to 21.3%, supported by a 190bp gross-margin improvement and SG&A growth below sales growth., Chemicals is the core earnings contributor, producing ¥3.76bn of segment profit, with Fine Chemicals the principal growth driver., Balance-sheet liquidity and solvency are strong: current ratio 313.8%, debt-to-equity 0.55x and interest coverage 27.53x., Acquisition-related goodwill and debt have increased, but goodwill concentration remains low at 2.2% of equity., Elevated DSO, inventory days and cash conversion cycle are the principal operational constraints on earnings-to-cash conversion..
Metrics to watch include Fine Chemicals sales growth and Chemicals segment margin, Operating-margin sustainability versus the Q1 21.3% level, Progress against FY2026 guidance: sales 22.6%, operating income 29.4%, ordinary income 31.2% and net income 30.4% achieved in Q1, Receivable days of 80, inventory-day alerts of 153 and 98, and the 131-day cash conversion cycle, Post-acquisition revenue, profitability, debt usage and provisional goodwill valuation, R&D intensity relative to the current 2.8% of revenue, Foreign-exchange effects and the recurrence of investment-security disposal gains.
Regarding relative positioning, The company combines an excellent 21.3% operating margin, good annualized 12.5% ROE and conservative leverage, positioning it favorably on profitability and balance-sheet resilience. Relative to efficient manufacturing benchmarks, however, working-capital intensity is weak, and the durability of returns increasingly depends on Fine Chemicals growth and disciplined integration of the newly acquired Chemicals assets.