Sekisui Jushi Corporation FY2027 Q1 Earnings Report

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Executive Summary

This quarter saw significant growth in net income, driven not only by higher revenue and earnings but also by the recognition of extraordinary income, including gains on the sale of investment securities. Revenue was ¥18.30B (+10.6% YoY), Operating Income was ¥0.99B (+64.2%), and Ordinary Income was ¥1.23B (+61.5%). Net Income attributable to owners of the parent was ¥1.03B, an increase of +292.2% from ¥0.26B in the previous year. Revenue growth in the private-sector field and an improvement in the gross margin and SG&A ratio drove the increase in the Operating Income margin (3.6%→5.4%), while a ¥0.60B gain on the sale of investment securities recognized as extraordinary income further boosted net income.

Factors Affecting Results

【Revenue】Revenue was ¥18.30B, representing a +10.6% YoY increase. By segment, the private-sector field increased by +15.2% to ¥9.74B (53.2% of total), while the public-sector field increased by +6.0% to ¥8.58B (46.8% of total). Both fields recorded revenue growth, with the private-sector field driving overall growth.

【Profitability】Operating Income was ¥0.99B (+64.2%), and the Operating Income margin improved to 5.4%, up +1.8pt from 3.6% in the previous year. The gross margin rose +1.1pt to 31.3% from 30.3%, while the SG&A ratio declined -0.7pt to 25.9% from 26.6%. Both the revenue growth effect and cost discipline contributed to the improvement. Ordinary Income was ¥1.23B (+61.5%), supported by ¥0.33B in non-operating income, including ¥0.20B in dividends received. A ¥0.60B gain on the sale of investment securities was recognized as an extraordinary gain, a one-time factor, resulting in Profit Before Tax of ¥1.78B. Net Income attributable to owners of the parent was ¥1.03B (+292.2%); however, part of this growth was attributable to the extraordinary gain. Accordingly, the degree of improvement in the core business is more appropriately assessed based on the growth rates of Operating Income and Ordinary Income. In conclusion, the Company recorded higher revenue and earnings.

Segment Analysis

The private-sector field recorded revenue of ¥9.74B (+15.2%) and Operating Income of ¥1.15B (+41.6%). Its profit margin improved to 11.8%, up +2.2pt from approximately 9.6% in the previous year, making it a high-margin segment that is driving Company-wide profitability. The public-sector field recorded revenue of ¥8.58B (+6.0%) and Operating Income of ¥0.04B, turning profitable from an Operating Loss of approximately △¥0.005B in the same period of the previous year, although its profit margin remained low at 0.5%. Company-wide cost adjustments were △¥0.20B, broadly unchanged from the previous year. The private-sector field accounted for 96.4% of the total segment profit of ¥1.19B, highlighting the Company’s substantial dependence on the private-sector field in its earnings structure.

Key Financial Indicators

【Profitability】The Operating Income margin improved to 5.4% from 3.6% in the previous year, an improvement of +1.8pt, while the Net Income margin, based on income attributable to owners of the parent, rose +4.0pt to 5.6% from 1.6%. ROE was 1.0%, primarily reflecting the improvement in the Net Income margin, although the low asset turnover ratio limited the positive impact.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥1.75B, approximately 1.7 times Net Income of ¥1.03B, indicating a favorable level of cash backing for earnings.【Investment Efficiency】The total asset turnover ratio was low at 0.13x on a quarterly basis. Working capital, particularly trade receivables and inventories, remains an area with potential for improving asset efficiency.【Financial Soundness】The Equity Ratio was a robust 72.1%. Cash and deposits totaled ¥17.77B, compared with approximately ¥12.80B in interest-bearing debt, comprising the total of short-term borrowings, current portion of long-term borrowings, long-term borrowings, and bonds. The Company therefore maintained a net cash position, with cash exceeding interest-bearing debt.

Cash Flow Analysis

Operating Cash Flow (OCF) was ¥1.75B, down -31.9% from ¥2.57B in the previous year. The primary factor was a substantial increase in income taxes paid, to ¥1.40B from ¥0.66B in the previous year. In working capital, the decrease in trade receivables contributed positively by +¥3.94B, while the increase in inventories of -¥1.33B and the decrease in accounts payable and notes payable of -¥0.77B had negative impacts, largely offsetting one another. Investing Cash Flow was positive at ¥0.31B, as proceeds from the sale of investment securities exceeded capital expenditures of ¥0.19B. Financing Cash Flow was -¥2.58B, with dividend payments of ¥1.08B being the primary outflow. Free Cash Flow (OCF + Investing Cash Flow) was a substantial ¥2.06B, maintaining sufficient cash-generating capacity to cover the current period’s dividend and capital expenditure requirements.

Quality of Earnings

Against Ordinary Income of ¥1.23B, the Company recognized a ¥0.60B gain on the sale of investment securities as extraordinary income, resulting in Profit Before Tax of ¥1.78B. Extraordinary losses were limited to a ¥0.06B loss on the disposal and sale of fixed assets. Non-operating income totaled ¥0.33B, primarily comprising ¥0.20B in dividends received, and can be regarded as recurring in nature. The effective tax rate was high at approximately 41.7%, calculated as ¥0.74B in income taxes divided by Profit Before Tax of ¥1.78B. Comprehensive Income was ¥1.90B, including ¥1.89B attributable to owners of the parent, exceeding Net Income of ¥1.03B. The primary factor was the expansion of unrealized gains on securities held, reflected in valuation differences on securities of +¥0.98B. The positive divergence between Net Income and Comprehensive Income indicates that, in addition to income statement earnings, valuation gains on held assets supported the Company’s financial position.

Earnings Forecast and Guidance

Full-year progress rates were 21.8% for Revenue, 15.7% for Operating Income, 18.9% for Ordinary Income, and 19.0% for Net Income attributable to owners of the parent (actual ¥1.03B / forecast ¥5.40B). Each remained below the 25% benchmark for evenly distributed quarterly progress. Forecast EPS is ¥180.08 and forecast DPS is ¥56.00. During the current quarter, revisions were made to the earnings forecast and dividend forecast. The generally low progress rates suggest that project recognition is weighted toward the second half of the fiscal year.

Shareholder Returns

The annual forecast dividend is ¥56.00, representing an expected increase from the previous fiscal year’s actual dividend of ¥36. The total dividend based on the average number of shares outstanding during the period is calculated at approximately ¥1.68B, resulting in an estimated Payout Ratio of approximately 31.1% against forecast Net Income of ¥5.40B. Dividend payments during the current period were ¥1.08B and were fully covered by Free Cash Flow of ¥2.06B. No share repurchase was disclosed for the current period.

Risk Factors

1. Segment earnings concentration: The private-sector field accounts for 96.4% of total Operating Income (¥1.15B / ¥1.19B), while the public-sector field’s profit margin remains at 0.5%. The Company’s earnings structure is such that fluctuations in demand in the private-sector field directly affect overall profitability.

2. Working capital volatility: Inventories increased +8.1% YoY to ¥5.44B, while accounts payable and notes payable decreased -6.9% YoY to ¥7.33B. Changes in inventories and trade payables may become sources of quarterly Cash Flow volatility.

3. Dependence on one-time gains: The +292.2% increase in Net Income benefited from the ¥0.60B gain on the sale of investment securities. The significant gap between this figure and the +61.5% growth rate at the Ordinary Income level requires monitoring.

Industry Benchmark (Reference; Compiled by the Company)

Profitability and Returns

Both the Operating Income margin and Net Income margin were below the industry median, placing the Company’s profitability at a relatively low level within the industry.

Growth and Capital Efficiency

The Revenue growth rate exceeded the industry median, indicating a relatively high pace of revenue growth within the industry.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. The Operating Income margin improved to 5.4% from 3.6% in the previous year, confirming structural profitability improvement driven by a higher gross margin and lower SG&A ratio.

2. The substantial increase in Net Income (+292.2%) includes the one-time ¥0.60B gain on the sale of investment securities. The divergence from the +61.5% growth rate at the Ordinary Income level warrants attention.

3. Full-year progress rates, including 21.8% for Revenue and 15.7% for Operating Income, were below the standard 25% benchmark at each level. Project recognition trends in the second half of the fiscal year will determine full-year results.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type model 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: ¥3,084–¥3,264 at ±1% for the cost of equity, and ¥3,165–¥3,177 at ±0.1 for ω.

Notes:

• Goodwill amortization of ¥53.3/share is added back to earnings (to reflect a non-cash expense and improve comparability with IFRS companies).
• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets at the end of the quarter 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.

(Model used: Residual Income Model / Interest Rate Reference Month: 2026-06 / This value does not forecast or guarantee the future share 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. 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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