ASAHIPEN (4623) FY2026 Q3 Earnings Report

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Executive Summary

Cumulative results for the first three quarters recorded declines in both revenue and earnings; however, gains on asset sales kept the decline in net income smaller than the decline in operating income. Revenue was ¥12.18B (¥13.65B in the same period of the previous year, YoY -10.8%), operating income was ¥0.60B (¥0.81B, YoY -25.6%), ordinary income was ¥0.68B (¥0.89B, YoY -23.1%), and net income was ¥0.60B (¥0.66B, YoY -10.3%). Declines in revenue from the core Paint Business and Pet Supplies Business reduced consolidated revenue, while an increase in the SG&A ratio (+2.1pt approximately) exceeding the improvement in the gross profit margin (+1.1pt approximately) was the primary cause of the decline in operating income. Meanwhile, extraordinary income of ¥0.27B, including gains on sales of investment securities and gains on sales of fixed assets, supported net income.

Factors Affecting Performance

【Revenue】Revenue was ¥12.18B, down 10.8% year on year. By segment, the DIY Supplies Business generated ¥3.86B (down 3.9%), the Paint Business generated ¥5.59B (composition ratio 45.9%, down 5.8%), and the Pet Supplies Business generated ¥2.57B (down 27.7%), with all businesses recording revenue declines. In particular, the decline in the Pet Supplies Business was the largest factor behind the consolidated revenue decrease.

【Profit and Loss】Operating income was ¥0.60B (down 25.6%), and the operating margin declined to 4.9% from 5.9% in the previous year. The gross profit margin improved to 32.1% from 30.9% in the previous year, but the SG&A ratio rose to 27.1% from 25.0%, resulting in weaker cost absorption amid declining revenue and leading to lower operating income. Ordinary income was ¥0.68B (down 23.1%), supported by dividend income of ¥0.07B. Extraordinary income totaling ¥0.27B, comprising a ¥0.17B gain on sales of investment securities and a ¥0.10B gain on sales of fixed assets, was included in pretax income; consequently, net income of ¥0.60B (down 10.3%) declined less than income at the operating level. In conclusion, the Company recorded declines in both revenue and earnings, while nonrecurring gains on asset sales reduced the extent of the decline in net income.

Segment Analysis

The Paint Business generated revenue of ¥5.59B (composition ratio 45.9%), segment income of ¥0.25B, and a margin of 4.5%. Compared with the previous year, income declined approximately 39.7% against a 5.8% decrease in revenue, meaning that the decline in income substantially exceeded the decline in revenue. The DIY Supplies Business generated revenue of ¥3.86B (composition ratio 31.7%), segment income of ¥0.20B, and a margin of 5.3%. Although revenue declined 3.9%, income increased approximately 6.4%, making it the only major business to secure an earnings increase. The Pet Supplies Business generated revenue of ¥2.57B (composition ratio 21.1%), segment income of ¥0.06B, and a margin of 2.4%, the lowest profitability among the segments. Revenue declined 27.7% and income declined 55.0%, making this business the central factor behind the deterioration in consolidated performance. Amortization of goodwill of ¥0.108B was recorded in this business, and the amortization burden exceeding segment income is putting further pressure on profitability.

Key Financial Indicators

【Profitability】The operating margin of 4.9% declined from 5.9% in the same period of the previous year, while the net profit margin of 4.9% was almost unchanged from 4.9% in the same period of the previous year. The gross profit margin improved to 32.1% from 30.9% in the same period of the previous year, but the SG&A ratio increased to 27.1% from 25.0%, and deterioration in operating leverage led to lower profitability.【Cash Quality】Pretax income of ¥0.96B included net extraordinary income of ¥0.27B, indicating a significant contribution from nonrecurring items to net income. Comprehensive income was ¥1.21B, exceeding net income of ¥0.60B, primarily due to an expansion in valuation gains on investment securities.【Investment Efficiency】Annualized ROE was 5.2%, with the low net profit margin and total asset turnover serving as downward pressure.【Financial Soundness】The equity ratio was 65.9%, virtually unchanged from 65.7% in the same period of the previous year, while current assets of ¥10.11B substantially exceeded current liabilities of ¥4.03B.

Cash Flow Analysis

As this report does not provide detailed disclosure of the statement of cash flows, fund movements are analyzed based on changes in the balance sheet. Cash and deposits were ¥3.53B, up from ¥3.33B in the same period of the previous year, indicating that liquidity on hand has been maintained. Investment securities were ¥3.71B, an increase of ¥0.84B year on year, suggesting that a portion of surplus funds was allocated to securities investments. Property, plant and equipment was ¥7.81B, up from ¥7.44B in the same period of the previous year, indicating that capital investment has continued. Long-term borrowings declined from ¥1.20B in the same period of the previous year to ¥1.03B, reflecting progress in reducing interest-bearing debt. Overall, the Company appears to be allocating funds generated from operating activities to securities investments, capital investment, and debt repayments.

Quality of Earnings

Of net income of ¥0.60B for the current period, net extraordinary income of ¥0.27B, consisting of a ¥0.17B gain on sales of investment securities and a ¥0.10B gain on sales of fixed assets, made a significant contribution. Nonrecurring items accounted for approximately 28% of pretax income of ¥0.96B. Dividend income of ¥0.07B accounted for approximately 58% of non-operating income of ¥0.12B, creating a structure in which revenue sources other than business profits supplement ordinary income. While the operating margin declined year on year, the net profit margin remained almost flat, largely due to these nonrecurring sources of income. Accordingly, it should be noted that the decline in profitability at the operating level has not been fully reflected in final earnings. Comprehensive income of ¥1.21B substantially exceeded net income of ¥0.60B, primarily due to a ¥0.62B increase in the valuation difference on available-for-sale securities. This difference represents valuation gains affected by market conditions; therefore, net income and operating income more closely reflect underlying recurring earnings power as performance indicators.

Earnings Forecasts and Guidance

Progress against the full-year company forecast was 76.1% for revenue (forecast: ¥16.00B), 95.4% for operating income (forecast: ¥0.63B), 97.9% for ordinary income (forecast: ¥0.70B), and 99.4% for net income (forecast: ¥0.60B). Progress for the earnings-related indicators exceeded the standard Q3 progress rate of 75% by 20–24pt, placing achievement of the full-year forecast within reach. However, operating income required in Q4 is only approximately ¥0.03B, meaning that most cumulative earnings have already been recorded. The full-year forecast itself incorporates year-on-year declines in revenue and operating income (down 6.7% and 27.2%, respectively), and it should be noted that the Company’s plan assumes a contraction in business operations.

Shareholder Returns

The Q2 dividend was ¥30 per share, and the full-year dividend forecast is ¥60. Based on the company forecast EPS of ¥154.06, the full-year forecast payout ratio is approximately 39%, below the generally accepted sustainability guideline of 60%. The Company holds 591,616 treasury shares, but the amount of share repurchases conducted during the current period cannot be confirmed from the disclosed information; therefore, the assessment is limited to the payout ratio. Given cash and deposits of ¥3.53B and sound liquidity, there appears to be room to maintain the current dividend level.

Risk Factors

1. Deterioration in the profitability of the Pet Supplies Business: Revenue declined 27.7% year on year, while segment income declined 55.0%, making this business the central factor behind the deterioration in consolidated performance. Goodwill amortization of ¥0.108B exceeds segment income of ¥0.06B, placing further pressure on profitability through the amortization burden.

2. Earnings sensitivity of the core Paint Business: Segment income declined 39.7% against a 5.8% decrease in revenue, indicating a substantially larger decline in income than in revenue. Raw material costs and the extent to which price increases can be passed on to customers will determine future profitability.

3. Inventory levels and short-term debt composition: Most of inventories of ¥2.42B consists of finished goods, creating a risk of inventory accumulation during a slowdown in demand. In addition, the debt structure is skewed toward the short term, including short-term borrowings of ¥1.57B, and changes in refinancing conditions could affect future interest expense.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Both the Company’s operating margin and net profit margin are below the industry median, placing its profitability at the lower end of the industry.

Growth and Capital Efficiency

The Company’s revenue growth rate is substantially below the industry median, with the scale of its revenue decline standing out within the industry.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. The operating margin of 4.9% and annualized ROE of 5.2% are both below historical levels and the industry median, while the resilience of net income is supported by ¥0.27B in extraordinary income, including gains on sales of investment securities. The extent of recovery in recurring earnings power excluding gains on sales will be the key focus going forward.

2. Progress toward the full-year earnings forecast was high at 95.4% for operating income and 99.4% for net income. However, this means that most cumulative earnings have already been recorded; trends in the operating margin excluding gains on sales and inventory levels in Q4 will provide indicators for assessing earnings sustainability after the full-year plan is achieved.

3. While the DIY Supplies Business secured an earnings increase despite declining revenue, deteriorating profitability in the Paint Business and Pet Supplies Business weighed on consolidated performance, clearly highlighting differences in the earnings structures of each business.

Theoretical Share Price (Reference Value)

Sensitivity: ¥3,135–¥3,313 at ±1% for the cost of equity, and ¥3,202–¥3,235 at ±0.1 for ω.

Notes:

• Because net income progress against the full-year forecast (99%) exceeds the standard level (75%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies whose progress is ahead of schedule tend to outperform 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 as of the quarter-end 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 and is not a forecast of the market share price or a recommendation of any specific investment action, nor does it predict 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 responsibility, after consulting with a professional as necessary.

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