MORIROKU COMPANY,LTD. FY2027 Q1 Earnings Report

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Executive Summary

For Q1 of the fiscal year ending April 2026, Revenue and profit increased substantially, primarily due to the expansion of the scope of consolidation following the acquisition of three companies from Resonac Corporation (including Moriroku ReNova). Revenue was ¥48.19B (¥33.82B in the same period of the previous year, YoY +42.5%), Operating Income was ¥2.30B (¥1.08B in the previous year, YoY +113.4%), and Ordinary Income was ¥2.30B (¥0.91B in the previous year, YoY +153.6%). Net Income attributable to owners of the parent was ¥3.498B (¥0.529B in the previous year, YoY +560.5%), with a significant contribution from the ¥2.172B gain on bargain purchase recognized as extraordinary income. The Operating Margin improved to 4.8% from 3.2% in the previous year, an improvement of +158bp, supported by economies of scale associated with business expansion and the high profitability of the Chemicals Business.

Factors Affecting Performance

【Revenue】Revenue was ¥48.19B, up +42.5% year on year. The Plastics Processing Products Business led growth, generating ¥41.84B (86.8% of total Revenue, YoY +50.2%), primarily due to the acquisition of three newly consolidated companies. The Chemicals Business recorded ¥6.61B (13.2% of total Revenue, YoY +4.5%), representing only moderate growth.

【Profit and Loss】The gross margin was 19.4%, improving by +204bp from 17.4% in the previous year, while the Operating Margin was 4.8%, improving by +158bp from 3.2% in the previous year. Segment profit increased in both businesses: the Plastics Processing Products Business generated ¥2.04B (YoY +65.2%, margin 4.9%), while the Chemicals Business generated ¥0.72B (YoY +157.7%, margin 11.0%). Ordinary Income was ¥2.30B, approximately the same level as Operating Income, as non-operating income of ¥0.33B and non-operating expenses of ¥0.33B substantially offset each other. The recognition of ¥2.199B in extraordinary income (including a ¥2.172B gain on bargain purchase, a temporary factor) pushed Net Income attributable to owners of the parent up to ¥3.498B. In conclusion, both Revenue and profit increased.

Segment Analysis

The Plastics Processing Products Business led company-wide Revenue growth, recording Revenue of ¥41.84B (86.8% of total Revenue, YoY +50.2%) and segment profit of ¥2.04B (YoY +65.2%, margin 4.9%). The primary factor was the acquisition of Moriroku ReNova (formerly Molded Components Division Preparation Co., Ltd.) and two other newly consolidated companies. Assets in this business also increased by ¥49.87B from the end of the previous fiscal year. The Chemicals Business recorded moderate Revenue growth of ¥6.61B (13.2% of total Revenue, YoY +4.5%), while segment profit increased to ¥0.72B (YoY +157.7%) with a margin of 11.0%, demonstrating substantially higher profitability than the Plastics Processing Products Business and contributing to an improvement in the company-wide business mix. Revenue is highly concentrated in the Plastics Processing Products Business, increasing the sensitivity of company-wide performance to demand trends in that business.

Key Financial Indicators

【Profitability】The Operating Margin was 4.8%, improving by +158bp from 3.2% in the previous year, while the gross margin was 19.4%, improving by +204bp from 17.4% in the previous year. The Net Profit Margin based on Net Income attributable to owners of the parent increased to 7.3% (1.6% in the previous year); however, given the significant contribution from extraordinary income, underlying profitability is considered to be closer to the level of the Operating Margin. 【Cash Flow Quality】Extraordinary income of ¥2.199B was recognized out of Net Income attributable to owners of the parent of ¥3.498B. Accordingly, it is appropriate to assess recurring earnings power as being close to Operating Income of ¥2.30B. 【Investment Efficiency】ROE was 4.4%. Total assets expanded to ¥174.90B (¥123.73B at the end of the previous fiscal year), and the expansion of the asset base associated with the newly consolidated companies is placing downward pressure on total asset turnover. 【Financial Soundness】The Equity Ratio based on equity attributable to owners of the parent was 40.2%, down 13.3pt from 53.5% at the end of the previous fiscal year, mainly due to an increase in non-controlling interests (¥12.87B). The current ratio was 152.2% (current assets of ¥105.04B / current liabilities of ¥69.01B), indicating that short-term liquidity is secured.

Cash Flow Analysis

Cash and deposits were ¥34.66B, an increase of +¥18.78B from ¥15.88B at the end of the previous fiscal year. Long-term borrowings increased to ¥15.50B (¥2.22B at the end of the previous fiscal year, +599%), while short-term borrowings increased to ¥21.49B (¥15.09B at the end of the previous fiscal year, +42.4%), suggesting that funding for the acquisition of newly consolidated subsidiaries and capital expenditures was obtained through borrowings. Property, plant and equipment expanded to ¥54.05B (+¥16.40B, +43.6%), with investment continuing, including ¥10.86B in construction in progress. Increases in accounts receivable of ¥38.58B (+¥8.36B) and accounts payable of ¥23.99B (+¥5.41B) reflect the expansion of working capital associated with business growth. Going forward, cash generation capacity will depend on trends in inventory and collection efficiency.

Earnings Quality

Of Net Income attributable to owners of the parent of ¥3.498B, extraordinary income of ¥2.199B (including a ¥2.172B gain on bargain purchase) accounted for approximately 63%, indicating a significant contribution from temporary factors. Non-operating income of ¥0.33B (including dividend income of ¥0.13B and foreign exchange gains of ¥0.07B) and non-operating expenses of ¥0.33B (including interest expenses of ¥0.27B) substantially offset each other, and Ordinary Income of ¥2.30B remained at approximately the same level as Operating Income of ¥2.30B. Therefore, recurring earnings power is close to the level of Operating Income, and the sharp increase in Net Income was primarily attributable to the one-time gain on bargain purchase, with low recurrence expected in subsequent periods. It should also be noted that the gain on bargain purchase remains a provisional amount because the purchase price allocation has not been completed. Comprehensive income was ¥4.95B (¥4.85B attributable to owners of the parent), with the difference from Net Income attributable to other comprehensive income, including foreign currency translation adjustments of ¥0.62B and valuation differences on securities of ¥0.72B.

Earnings Forecasts and Guidance

The Q1 progress rates against the full-year company plan (Revenue of ¥194.60B, Operating Income of ¥6.50B, and Ordinary Income of ¥5.60B) were 24.8% for Revenue, 35.4% for Operating Income, and 41.1% for Ordinary Income. While Revenue was progressing at approximately a standard pace, Operating Income and Ordinary Income were progressing faster than Revenue, potentially reflecting improved profitability associated with the expansion of the scope of consolidation. Progress toward the full-year plan for Net Income attributable to owners of the parent of ¥5.40B was 64.8%, substantially ahead of schedule; however, this was due to the recognition of extraordinary income (gain on bargain purchase) and differs in nature from an even full-year progression. The earnings forecast was revised during Q1.

Shareholder Returns

The full-year dividend forecast is ¥125.00 per share, an increase from the previous fiscal year's actual dividend of ¥57.50. The Payout Ratio against forecast EPS of ¥376.97 is approximately 33.2%, and there was no revision to the dividend forecast during the quarter. Based on the number of shares outstanding after deducting treasury shares, the total annual dividend is at a level that is more than fully covered by the full-year Net Income forecast of ¥5.40B.

Risk Factors

1. Short-term funding dependence and refinancing risk: Total interest-bearing debt has increased, consisting of short-term borrowings of ¥21.49B and long-term borrowings of ¥15.50B (a sharp increase from ¥2.22B at the end of the previous fiscal year). Dependence on short-term funding is relatively high, resulting in a financial structure that is susceptible to refinancing requirements and interest rate trends.

2. Expansion of working capital: Accounts receivable of ¥38.58B (¥30.22B in the previous year, +27.7%) and work in process of ¥9.28B (¥7.81B in the previous year, +18.9%) indicate that working capital has expanded in line with business growth. The efficiency of collections and inventory management may affect future cash generation capacity.

3. Dependence on temporary gains: Extraordinary income of ¥2.199B (including a ¥2.172B gain on bargain purchase) accounts for a substantial portion of Net Income attributable to owners of the parent of ¥3.498B. The gain on bargain purchase is based on a provisional purchase price allocation and may change as a result of future revisions.

Industry Benchmark (For Reference; Company Analysis)

Industry Benchmark (manufacturing)

Profitability and Returns

The Operating Margin is below the industry median, while the Net Profit Margin is slightly above the industry median, partly due to the contribution from extraordinary income.

Growth and Capital Efficiency

Revenue growth substantially exceeds the industry median, partly due to the impact of the expansion of the scope of consolidation.

※Source: Company compilation

Key Takeaways from the Earnings Results

1. The primary driver of increased Revenue and profit was the expansion of business scale through the acquisition of three newly consolidated subsidiaries (including Moriroku ReNova), with the Plastics Processing Products Business leading both Revenue and profit growth.

2. Extraordinary income (gain on bargain purchase of ¥2.172B) accounted for approximately 60% of Net Income attributable to owners of the parent of ¥3.498B. The fact that recurring earnings power is close to the level of Operating Income of ¥2.30B is an important consideration when assessing earnings quality.

3. Progress rates for Operating Income and Ordinary Income against the full-year plan (35.4% and 41.1%, respectively) exceeded the Revenue progress rate (24.8%), potentially indicating the initial effects of improved profitability associated with the expansion of the scope of consolidation.

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: ¥5,224–¥5,528 at ±1% for the Cost of Equity, and ¥5,358–¥5,382 at ±0.1 for ω.

Notes:

• Because progress of Net Income against the full-year forecast (65%) exceeds the standard level (25%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies progressing ahead of schedule tend to exceed 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 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 at a somewhat high level.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-07 / This value does not forecast or guarantee future share prices)

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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, and after consulting a professional as necessary.

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