NICHIBAN CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

The Company started the quarter with higher revenue but slightly lower profit margins, resulting in increased revenue and decreased profit. Revenue was ¥122.6B (up +2.9% year on year), maintaining a trend of revenue growth for the third consecutive period, while Operating Income was ¥6.2B (down -4.7%) and Ordinary Income was ¥6.7B (down -1.2%), both declining year on year. Net Income was ¥3.9B, essentially unchanged from the previous year (up +0.0%). The primary factor was a slowdown of -9.9% in Operating Income from the high-margin Medical Business, which could not be fully offset by improved profitability in the Tape Business (Operating Income +65.1%).

Factors Affecting Performance

【Revenue】Revenue was ¥122.6B, an increase of +2.9% year on year. By segment, Tape generated ¥62.8B (51.2% of total revenue, +4.3%), while Medical generated ¥60.3B (49.2% of total revenue, +1.4%), with Tape leading revenue growth.

【Profit and Loss】Operating Income was ¥6.2B (-4.7%), and Ordinary Income was ¥6.7B (-1.2%), both declining year on year. The gross profit margin remained broadly in line with the previous year at 30.6%, but SG&A expenses increased to ¥31.4B at a pace exceeding revenue growth, causing the SG&A ratio to rise to 25.6%. By segment, Tape’s Operating Income improved significantly to ¥4.1B (+65.1%, 6.5% margin), whereas Medical slowed to ¥14.0B (-9.9%, 23.2% margin), with the dilution of the high-profitability business mix weighing on the Company-wide margin. An extraordinary loss of ¥0.4B (including losses on disposal of fixed assets) was recorded, but its impact was limited. Net Income was ¥3.9B, at the same level as the previous year, resulting in financial results characterized by higher revenue but lower profit.

Segment Analysis

Medical accounted for 49.2% of total revenue and served as the core contributor to Company-wide profit, with Operating Income of ¥14.0B (23.2% margin). However, Operating Income declined -9.9% in the current period, affected by a decrease in revenue from the domestic medical materials field from 1,407 million yen to 1,270 million yen. Tape recorded revenue of ¥62.8B (+4.3%) and Operating Income of ¥4.1B (+65.1%, 6.5% margin), showing notable improvement, driven by growth in the industrial products field (3,302→3,606 million yen). Company-wide expenses (adjustments) represented a burden of ¥11.9B, increasing from ¥11.1B in the previous year and constituting a dilution factor against total segment profit.

Key Financial Indicators

【Profitability】The Operating Income margin was 5.1%, down from approximately 5.5% in the previous year, while the Net Income margin also declined slightly to 3.2% from approximately 3.3% in the previous year. ROE remained low at 0.9%. 【Cash Quality】Cash and deposits were ¥132.1B, down from ¥137.3B in the previous year, while inventories were ¥56.1B (¥54.6B in the previous year) and trade receivables were ¥78.4B (¥90.2B in the previous year). Although receivables were reduced, progress in inventory reduction has been limited. 【Investment Efficiency】Property, plant and equipment was ¥209.2B, down from ¥211.7B in the previous year due to depreciation, while intangible assets remained small at ¥4.6B, limiting impairment risk. 【Financial Soundness】The Equity Ratio remained high at 67.1% (65.9% in the previous year), and interest-bearing debt was minimal, consisting only of ¥10.0B in long-term borrowings, indicating a conservative financial foundation.

Cash Flow Analysis

Although detailed disclosure of the cash flow statement is unavailable, an examination of funding trends based on balance sheet movements shows that cash and deposits decreased by ¥5.2B from ¥132.1B in the previous year to ¥132.1B, while current liabilities were significantly reduced to ¥147.1B from ¥172.1B in the previous year, mainly due to a decrease in accrued bonuses and other factors. Trade receivables declined to ¥78.4B from ¥90.2B in the previous year, indicating progress in collections, while inventories increased slightly to ¥56.1B from ¥54.6B in the previous year, showing limited progress in inventory reduction. Property, plant and equipment was ¥209.2B, down from ¥211.7B in the previous year, with depreciation proceeding at a pace exceeding investment, suggesting restrained investment activity. Long-term borrowings totaled only ¥10.0B, while short-term borrowings equivalent to those in the previous year were eliminated, reducing dependence on financing through financing activities.

Quality of Earnings

Earnings were centered on recurring operating profit, while non-operating income was ¥0.8B (including ¥0.2B in dividend income), representing approximately 0.6% of revenue and indicating low dependence on special factors. Extraordinary losses were ¥0.4B (including losses on disposal of fixed assets), equivalent to approximately 9% of Net Income, so the impact of temporary factors was limited. The gap between Ordinary Income of ¥6.7B and Net Income of ¥3.9B was mainly attributable to income taxes and other taxes of ¥2.4B (an effective tax rate of approximately 37.6%), with the high tax burden weighing on the Net Income margin. Comprehensive Income was ¥4.3B, slightly exceeding Net Income of ¥3.9B. Gains on valuation differences on securities of +¥0.9B were an upward factor, while adjustments related to retirement benefits of minus ¥0.3B offset part of the increase. Accordingly, the gap between Comprehensive Income and Net Income was not significant.

Earnings Forecast and Guidance

Progress against the full-year forecast was 23.6% for Revenue, at ¥122.6B/¥520.0B; 17.3% for Operating Income, at ¥6.2B/¥36.0B; and 17.9% for Ordinary Income, at ¥6.7B/¥37.0B. Profit progress was therefore below the standard quarterly pace of 25% in both cases. While Revenue was broadly in line with the plan, the lag in Operating Income and Ordinary Income progress appears to reflect a plan premised on a recovery in the second half, continued improvement in Tape profitability, or a recovery in Medical. The full-year Operating Income forecast calls for a substantial increase of +58.5% year on year, and the significant gap between this forecast and the Q1 progress pace is an item requiring monitoring in subsequent quarters. The Company has not revised its earnings forecast.

Shareholder Returns

The full-year dividend forecast is ¥40 per share, implying a Payout Ratio of approximately 35.4% against full-year forecast EPS of ¥113.06. The dividend forecast has not been revised. There was no mention of additional share repurchases, and the shareholder return policy appears to center on dividends. Given the conservative financial structure, with an Equity Ratio of 67.1% and interest-bearing debt of ¥10.0B, the financial foundation supporting dividend payments is stable.

Risk Factors

1. Risk of a slowdown in the high-margin business (Medical): Operating Income in the Medical Business declined -9.9% year on year, and a slowdown in this highly profitable business, with a 23.2% margin, is a factor diluting the Company-wide margin. This was attributable to a decline in domestic medical materials field revenue from 1,407 million yen to 1,270 million yen.

2. Risk of working capital stagnation: Inventories of ¥56.1B increased from ¥54.6B in the previous year, indicating limited progress in inventory reduction, while trade receivables declined to ¥78.4B. This indicates a change in the balance between inventory and receivables turnover. Continued inventory stagnation could affect the timing of cash generation.

3. Risk of a persistently high tax burden: Income taxes and other taxes were ¥2.4B against Profit Before Tax of ¥6.3B, resulting in a high effective tax rate of approximately 37.6% and contributing to the gap between Ordinary Income and Net Income. If this level continues, it will constrain the potential for improvement in the Net Income margin.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Both the Operating Income margin and Net Income margin were below the industry median, placing profitability in the lower range within the industry.

Growth and Capital Efficiency

The Revenue growth rate was also below the industry median, with revenue growth at a somewhat low level within the industry.

※Source: Compiled by the Company

Key Takeaways from the Results

1. Progress in improving the profitability of the Tape Business, with Operating Income recovering by +65.1% to a 6.5% margin, is noteworthy as a structural change indicating that improvements in the pricing and cost structure are becoming established.

2. The high-margin Medical Business slowed, with Operating Income declining -9.9%, and changes in the business mix are pushing down the Company-wide margin. As the full-year plan assumes Operating Income growth of +58.5%, the degree of recovery in this business will determine progress in the second half.

3. Q1 progress against the full-year forecast was 23.6% for Revenue, compared with 17.3% for Operating Income and 17.9% for Ordinary Income, highlighting the lag in profit progress. The results indicate a plan structure weighted toward the second half.

Theoretical Share Price (Reference Value)

Sensitivity: 1,874 yen–1,983 yen at ±1% for the cost of equity, and 1,919 yen–1,933 yen at ±0.1 for ω.

Notes:

• Since 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 relative to 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 is not a forecast of the market share price or a recommendation of any specific investment action, and does not forecast or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI through analysis of XBRL earnings summary 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 with professionals as necessary.

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