Daito Chemix (4366) FY2026 Q3 Earnings Report

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Executive Summary

For the cumulative Q3 period of FY2026, the Company achieved higher revenue and higher earnings, with continued improvement in profit margins, although profitability remains low relative to the industry average. Revenue was ¥144.3B (+2.4% YoY), Operating Income was ¥7.2B (+7.3%), Ordinary Income was ¥7.5B (+11.5%), and Net Income was ¥4.7B (+4.4%). Operating Income growth exceeding revenue growth was primarily attributable to an improvement in the gross profit margin (11.1%→11.9%), while the increase in Ordinary Income was also supported by higher dividend income. The relatively modest growth in Net Income was due to the high tax burden, with an effective tax rate of 44.4%.

Factors Affecting Performance

【Revenue】Revenue was ¥144.3B, representing a 2.4% YoY increase. Expansion of the core ChemicalProducts Business drove growth, and progress against the full-year forecast of ¥195.0B was 74.0%, representing standard progress.

【Profit and Loss】Operating Income was ¥7.2B (+7.3%), and the expansion in gross profit resulting from an improvement in the cost-of-sales ratio exceeded the increase in SG&A expenses (+10.2% YoY), resulting in a 24bp improvement in the Operating Income margin to 5.0%. Ordinary Income was ¥7.5B (+11.5%), supported by non-operating income including dividend income of ¥0.6B. Reflecting extraordinary income of ¥1.0B, including income related to fixed assets, Profit Before Tax increased to ¥8.4B; however, Net Income was limited to ¥4.7B (+4.4%) due to a ¥3.7B burden from income taxes and other taxes. The gap between Ordinary Income and Net Income was approximately 37.5%, attributable to the high tax burden. In conclusion, the Company achieved higher revenue and higher earnings.

Segment Analysis

The ChemicalProducts Business generated revenue of ¥131.3B, accounting for 91.0% of total revenue, and is the core business. Operating Income was ¥5.2B, with a margin of 4.0%, indicating relatively low profitability compared with its scale. Meanwhile, the EnvironmentRelated Business generated revenue of ¥13.2B, accounting for 9.0% of total revenue, but recorded Operating Income of ¥1.9B and a margin of 14.5%, demonstrating profitability more than three times that of the core business. EnvironmentRelated contributed ¥1.9B of the Company-wide Operating Income of ¥7.2B and, despite its smaller scale, serves as a driver of profitability. Future margin improvement will depend on either improving the efficiency of the low-margin core business or expanding the environment-related business.

Key Financial Indicators

Profitability: Annualized ROE was 3.9%, and the Operating Income margin was 5.0% (4.7% in the previous year). Cash flow quality: Net Income was approximately 62.5% of Ordinary Income, with the tax burden constraining earnings conversion. Financial soundness: Equity Ratio was 55.9% (61.1% in the previous year), and the current ratio was 201.7%. Per-share indicators: EPS was ¥14.51 (¥13.90 in the previous year, YoY +4.4%).

Cash Flow Analysis

As this report does not include specific numerical data for Operating CF, Investing CF, or Financing CF, analysis of cash flow items has been omitted.

Earnings Quality

Net Income was ¥4.7B against Ordinary Income of ¥7.5B, representing a 37.5% gap. The primary factor was income taxes and other taxes of ¥3.7B, resulting in a high effective tax rate of 44.4%. Extraordinary income of ¥1.0B, a temporary factor, boosted Profit Before Tax to ¥8.4B, causing Profit Before Tax to slightly exceed the level supported by operating performance, as represented by Operating Income of ¥7.2B. Non-operating income of ¥1.1B was approximately 0.8% of revenue and had no significant impact. Comprehensive Income was ¥12.3B, substantially exceeding Net Income, primarily reflecting an increase in equity due to valuation differences on investment securities (valuation difference on securities of ¥7.0B); this is a fluctuation that should be distinguished from business earnings.

Earnings Forecast and Guidance

The Q3 cumulative progress rates against the full-year forecasts were 74.0% for revenue (forecast: ¥195.0B), 86.5% for Operating Income (forecast: ¥8.3B), and 85.9% for Ordinary Income (forecast: ¥8.7B). Compared with standard progress of 75%, the progress rates for Operating Income and Ordinary Income were more than 10 percentage points higher, suggesting that earnings may have accumulated somewhat ahead of schedule during the first half. The full-year Operating Income forecast represents a -2.1% YoY decline, indicating that the Q4 plan assumes a lower profit margin compared with the previous year’s corresponding period.

Shareholder Returns

The full-year dividend forecast is ¥8 per share (¥5 in the previous year), resulting in a Payout Ratio of approximately 33.5% against the full-year EPS forecast of ¥23.91. The Company identifies a 30% Payout Ratio as an important metric in its medium-term management plan, and the forecast Payout Ratio is broadly consistent with this target level. Beginning in FY2026, the Company also introduced a shareholder benefit program for shareholders holding 1,000 or more shares, offering a TOSHOCARD NEXT. No information on share buybacks is available, and the Total Return Ratio has not been calculated.

Catalysts

【Short Term】Monitoring Q4 progress against the full-year forecasts (revenue of ¥195.0B, Operating Income of ¥8.3B, and Ordinary Income of ¥8.7B), as well as whether the ¥8 dividend forecast can be achieved.

【Long Term】Progress toward achieving the three-year medium-term management plan beginning in FY2025, as well as progress toward the FY2030 targets (revenue of ¥250B, Ordinary Income margin of 10%+α, and EBITDA of ¥35B).

Industry Benchmark (Reference; Compiled by the Company)

Profitability and Returns

Growth and Capital Efficiency

※Source: Compiled by the Company

Risk Factors

1. Profitability risk: The Operating Income margin of 5.0% and Net Income margin of 3.2% are both below the industry medians (8.6% and 6.4%, respectively), making the Company’s ability to pass on increases in raw material and energy prices a key issue.

2. Tax burden risk: The effective tax rate is high at 44.4%, and the conversion rate from Ordinary Income to Net Income is approximately 62.5%. The structure makes it difficult for improvements in Profit Before Tax to be fully reflected in Net Income.

3. Geopolitical and external environment risk: Prolonged instability in the Middle East and Ukraine, U.S. trade policy, deterioration in relations with China, and other geopolitical risks may affect raw material procurement costs and demand trends.

Key Earnings Takeaways

1. Operating Income increased 7.3% against revenue growth of 2.4%, as the improvement in the gross profit margin (+0.8pt) exceeded the increase in SG&A expenses (+10.2% YoY). Whether the margin improvement trend will continue depends on the Company’s ability to pass through raw material costs.

2. The margin of the core ChemicalProducts Business, which accounts for 91.0% of total revenue, was 4.0%, lower than the 14.5% margin of the EnvironmentRelated Business. The difference in profitability between the businesses indicates room for improvement in overall profitability.

3. The dividend forecast is ¥8 per share, resulting in a Payout Ratio of approximately 33.5%, broadly consistent with the Company’s 30% Payout Ratio target. The introduction of a shareholder benefit program beginning in FY2026 is positioned as part of the enhancement of shareholder returns.

Theoretical Share Price (Reference Value)

Sensitivity: ¥410–¥434 at ±1% for the cost of equity, and ¥419–¥423 at ±0.1 for ω.

Notes:

• As forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the end of the quarter are used (there is a timing difference 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 solely from 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.)

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This report is an earnings analysis document automatically generated through AI integration and analysis of XBRL earnings summary data and PDF earnings presentation materials. 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 responsibility, after consulting professionals as necessary.

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