ATOMIX (4625) FY2026 Q3 Earnings Report

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Executive Summary

For the cumulative Q3 period, the Company recorded increases in both revenue and profit. A key feature was the substantially faster pace of profit growth than revenue growth, with improved gross margin and cost control driving earnings growth. Revenue was ¥9.08B (+0.8% YoY), Operating Income was ¥0.36B (+47.5%), Ordinary Income was ¥0.39B (+53.5%), and Net Income was ¥0.27B (+69.1%). Despite only modest revenue growth, the primary reasons for the substantial increase in profit were a 1.9pt improvement in gross profit margin (27.0%→28.9%) and a 6.4% reduction in company-wide expenses.

Factors Affecting Results

【Revenue】Revenue was ¥9.08B, essentially flat with a +0.8% YoY increase. The Paint Sales Business (93.0% of revenue) maintained growth in its core operations, with revenue of ¥8.47B (+1.1%), while the Construction Business recorded a revenue decline to ¥0.64B (-3.1%), restraining consolidated growth.

【Profit and Loss】Operating Income was ¥0.36B (+47.5% YoY), Ordinary Income was ¥0.39B (+53.5%), and Net Income was ¥0.27B (+69.1%), with profit expanding at a pace substantially exceeding revenue growth. The Paint Sales Business segment profit margin improved from 5.8% to 7.1%, and segment profit increased by +23.8%, while the Construction Business profit margin declined from 6.1% to 3.6% and profit decreased by -42.5%. The reduction in company-wide expenses to ¥0.262B (-6.4% YoY) also contributed to the increase in profit. The difference between Ordinary Income and Net Income was attributable to the tax burden (effective tax rate of 30.5%), while the impact of extraordinary gains and losses (loss on disposal of property, plant and equipment of ¥0.01B) was minor. In conclusion, the Company achieved increases in both revenue and profit, with improved profitability in its core business being the primary driver of earnings growth.

Segment Analysis

The Paint Sales Business recorded revenue of ¥8.47B (93.0% composition ratio, +1.1% YoY), segment profit of ¥0.60B (+23.8%), and a profit margin of 7.1% (+1.3pt from 5.8% in the previous year), demonstrating improved profitability and supporting consolidated results as the core business, accounting for 96.3% of reported segment profit. The Construction Business recorded revenue of ¥0.64B (7.0% composition ratio, -3.1% YoY), segment profit of ¥0.02B (-42.5%), and a profit margin of 3.6% (-2.5pt from 6.1% in the previous year), indicating deteriorating profitability and a widening earnings gap relative to the core business.

Key Financial Indicators

【Profitability】Operating margin improved to 4.0% (+1.3pt from 2.7% in the previous year), while Net Profit Margin improved to 3.0% (+1.2pt from 1.8% in the previous year). However, both remained in the low single-digit range, leaving room for improvement in pricing power and cost absorption capacity.【Cash Quality】Annualized DSO was 69 days, DIO was 97 days, and CCC was 129 days, confirming the accumulation of working capital. Electronically recorded monetary claims increased to ¥1.33B (+28.2% YoY).【Investment Efficiency】Annualized ROE was 3.4% and annualized ROIC was 4.3%, indicating that capital efficiency remains low relative to the improvement in profit margins.【Financial Soundness】The Equity Ratio was 67.4%, the Current Ratio was approximately 199.5%, and Cash and Deposits of ¥3.01B exceeded Short-Term Borrowings of ¥0.20B by more than 15 times, indicating a conservative liquidity and capital structure.

Cash Flow Analysis

As individual line items from the cash flow statement were not included in the disclosed data, cash trends can be assessed from changes in the balance sheet. Cash and Deposits increased from ¥2.83B in the previous year to ¥3.01B, indicating an expansion of the funding base. Meanwhile, accounts receivable and notes receivable, including electronically recorded monetary claims, totaled ¥2.28B, while inventories totaled ¥1.31B, with operating receivables and inventories trending upward, consistent with the length of the working capital cycle indicated by an annualized CCC of 129 days. Short-Term Borrowings doubled from ¥0.10B to ¥0.20B, suggesting rising short-term funding needs associated with business expansion; however, because Cash and Deposits substantially exceed borrowings, funding liquidity pressure appears limited. Property, plant and equipment expanded to ¥5.34B, primarily due to an increase of +¥0.28B in buildings and structures, indicating continued investment in the production and business infrastructure.

Earnings Quality

The increase in profit for the current period was primarily driven by factors originating from the core business, and earnings quality was generally favorable. Non-operating income was ¥0.03B, primarily consisting of dividend income of ¥0.01B, representing only approximately 0.3% of revenue and therefore having a limited impact on Ordinary Income. Extraordinary gains and losses consisted solely of a loss on disposal of property, plant and equipment of ¥0.01B, with a negligible net impact on Net Income. Comprehensive Income was ¥0.30B, and the difference from Net Income attributable to owners of the parent of ¥0.27B was primarily due to valuation difference on securities of ¥0.03B. The small gap between the two indicates no concerns regarding the quality of revenue recognition. On the other hand, the increase in electronically recorded monetary claims (+28.2% YoY) and the high level of inventories (finished products of ¥1.31B) suggest an accumulation of accruals (profits not yet converted into cash). The extent to which profit growth will translate into cash generation remains a point for future monitoring.

Earnings Forecast and Guidance

The full-year forecasts are revenue of ¥13.00B (+5.3% YoY), Operating Income of ¥0.41B (+16.9%), and Ordinary Income of ¥0.42B (+16.3%). The cumulative Q3 progress rate for revenue was 69.8%, below the standard 75%, while the Operating Income progress rate was 88.5%, 13.5pt above the standard, indicating that earnings progress is ahead of revenue growth. The cumulative progress rate against the full-year Net Income forecast of ¥0.81B was only 33.2%, and the plan incorporates Net Income of approximately ¥0.54B in Q4, making verification of future results necessary.

Shareholder Returns

The Q2 dividend was ¥0 per share, while the full-year dividend forecast is ¥20 per share. Based on the average number of shares outstanding during the period of 5,321,755 shares, the annual total dividend is estimated at approximately ¥0.11B, resulting in a Payout Ratio of approximately 13.1% against the full-year Net Income forecast of ¥0.81B. Relative to net assets of ¥10.55B and Cash and Deposits of ¥3.01B, the total dividend is small, representing a reasonable level in terms of funding capacity. No data regarding share repurchases was identified in the disclosed information.

Risk Factors

1. Widening profitability gap between businesses: While the Paint Sales Business accounts for 96.3% of segment profit, segment profit in the Construction Business declined by -42.5% YoY. The concentration of profit in the core business means that fluctuations in demand and costs in a single business are likely to have a significant impact on consolidated profit.

2. Lengthening working capital cycle: Annualized DSO of 69 days, DIO of 97 days, and CCC of 129 days all exceed generally cautious levels. Electronically recorded monetary claims increased by +28.2% YoY, and finished product inventory stood at ¥1.31B, suggesting accumulation and a significant time lag before profit is converted into cash.

3. Concentration in short-term funding: Short-Term Borrowings doubled from ¥0.10B in the previous year to ¥0.20B, and all interest-bearing debt is concentrated in short-term maturities. Although near-term liquidity concerns are limited because Cash and Deposits of ¥3.01B substantially exceed borrowings, changes in refinancing terms require ongoing monitoring.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The Company’s profitability is below the industry median, with both its Operating Margin and Net Profit Margin positioned in the lower tier of the industry.

Growth and Capital Efficiency

The Revenue Growth Rate is also below the industry median, with the pace of revenue growth remaining moderate within the industry.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. Operating Income increased by +47.5% against revenue growth of 0.8%, confirming an earnings growth structure led by improved profitability through gross margin improvement and reductions in company-wide expenses. While the Paint Sales Business profit margin improved to 7.1%, the Construction Business margin declined to 3.6%, highlighting the divergence in profitability trends between the businesses as a structural change.

2. The full-year Operating Income progress rate was 88.5%, exceeding the standard, while the full-year Net Income progress rate remained at 33.2%, requiring a substantial Net Income contribution in Q4 under the plan. The revenue progress rate was also below the standard at 69.8%, so achievement of the full-year plan requires verification in subsequent quarters.

3. The conservative financial foundation is reflected in an Equity Ratio of 67.4%, a Current Ratio of approximately 199.5%, and Cash and Deposits exceeding Short-Term Borrowings by more than 15 times. Meanwhile, the 129-day annualized CCC indicates a lengthy working capital cycle and remains a key point for assessing the extent to which profit growth translates into cash generation.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,529–¥1,617 for a ±1% change in the cost of equity, and ¥1,559–¥1,581 for a change of ±0.1 in ω.

Notes:

• Normalized EPS calculated from Ordinary Income and other figures is used to exclude the impact of temporary profit and loss factors (the Company’s forecast EPS is ¥152.2).
• Because 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 from 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 / Mechanically calculated value based solely on publicly disclosed data; this 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 based on XBRL earnings release 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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