DUSKIN CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

The Company reported higher revenue and income in Q1, with a marked improvement in profit margins being the most notable feature. Revenue was ¥499.3B (+5.6% YoY), Operating Income was ¥37.8B (+79.0%), Ordinary Income was ¥47.8B (+55.6%), and Net Income was ¥29.0B (+53.5%). The Food Group’s sustained high profitability and the recovery in profitability of the Direct Sales Group, together with improved gross margins and more efficient selling, general and administrative expenses, drove the increase in income.

Factors Affecting Performance

【Revenue】Revenue was ¥499.3B, representing a +5.6% YoY increase. The Food Group posted the strongest growth at ¥179.4B (+11.3%), supported by the expansion of the Mister Donut Business. The Direct Sales Group, the core business, recorded ¥283.5B (+2.4%), reflecting more moderate growth, while the Other Segments were essentially flat at ¥42.5B (+1.0%).

【Profit and Loss】Gross profit was ¥224.4B, with a gross margin of 45.0%, improving from 44.2% in the previous year. The SG&A expense ratio declined to 37.4%, resulting in a significant increase in Operating Income to ¥37.8B (+79.0%). Non-operating income of ¥10.4B, including ¥2.1B in dividends received and ¥3.0B in equity-method income, made a stable contribution, bringing Ordinary Income to ¥47.8B (+55.6%). The effective tax rate was relatively high at approximately 39.3%, resulting in a significant reduction from Ordinary Income to Net Income. Net Income was ¥29.0B (+53.5%), concluding the quarter with higher revenue and income.

Segment Analysis

The Food Group generated Operating Income of ¥34.7B (+22.2%) and an operating margin of 19.4%, serving as the main contributor to consolidated profit. The Direct Sales Group achieved a substantial improvement in Operating Income to ¥19.8B (+146.8%), although its operating margin remained lower than that of the Food Group at 7.0%. The Other Segments posted Operating Income of ¥2.1B (-1.8%), essentially in line with the previous year. Overall profit improvement was primarily driven by the Food Group’s high profitability and cost efficiency improvements in the Direct Sales Group.

Key Financial Indicators

【Profitability】The Operating Income margin improved to 7.6% from 4.5% in the previous year, an improvement of +3.1pt, while the Net Income margin improved to 5.8% from 4.0%, an improvement of +1.8pt.【Cash Quality】The current ratio was approximately 157.8% and the quick ratio was approximately 136.3%, both favorable, indicating limited concerns regarding short-term payment capacity.【Investment Efficiency】ROE remained low at approximately 1.8%, reflecting a level derived from total asset turnover of 0.24x multiplied by financial leverage of 1.31x.【Financial Soundness】The Equity Ratio was extremely high at 76.1%, and the Company continued to operate with effectively no debt, as long-term borrowings were nearly zero.

Cash Flow Analysis

Although detailed disclosure of the statement of cash flows was not available, cash trends can be inferred from balance sheet movements. Cash and deposits were ¥195.0B, maintained at approximately the same level as the previous year, while short-term securities declined significantly to ¥51.0B from ¥111.9B in the previous year. Investment securities also declined to ¥659.3B from ¥677.3B in the previous year, suggesting that the Company is securing on-hand liquidity while reducing part of its investment assets. Current liabilities also declined to ¥397.1B from ¥419.1B in the previous year, primarily due to a decrease in the provision for bonuses. Overall, the accumulation of internally generated funds accompanying profit improvement and the compression of working capital are progressing simultaneously.

Earnings Quality

Profit was primarily generated by core operating activities, and the impact of temporary factors was limited. Non-operating income was ¥10.4B, equivalent to approximately 2.1% of revenue, with dividends received of ¥2.1B and equity-method income of ¥3.0B as the main components. Extraordinary items were immaterial, consisting of extraordinary income of ¥0.1B and extraordinary losses of ¥0.1B. Meanwhile, the effective tax rate was high at approximately 39.3%; against Ordinary Income of ¥47.8B, Net Income was ¥29.0B, indicating that part of the profit was reduced by the tax burden. Given that the turnover of accounts receivable and inventories is relatively long, earnings quality itself is recurring, although attention should be paid to the speed of conversion into cash.

Earnings Forecast and Guidance

Progress against the full-year plan was 24.6% for revenue (against a plan of ¥202.9B, current-period revenue of ¥499.3B was broadly in line with the quarterly run-rate), 37.4% for Operating Income, and 34.1% for Ordinary Income. These figures indicate progress at a pace exceeding the simple one-quarter benchmark of 25%. During the quarter, revisions were made to the earnings and dividend forecasts, and the improvement in the Q1 profit margin may have been reflected in the full-year outlook. If the Food Group maintains its high profitability and the Direct Sales Group continues to improve productivity, full-year profit progress is likely to remain at a favorable level.

Shareholder Returns

The annual dividend forecast is ¥135, revised from the previous year’s actual result in the ¥50 range, and a revision to the dividend forecast was announced during the quarter. The Payout Ratio against the Company’s forecast EPS of ¥225.15 is approximately 60.0%, which can be considered consistent with its policy. The strong financial foundation, including an Equity Ratio of 76.1% and effectively no debt, supports this dividend level.

Risk Factors

1. Rising raw material and labor costs: Although the Food Group’s gross margin of 19.4% is relatively high, prices of oils, wheat, and other materials, as well as increases in the minimum wage, could exert upward pressure on the SG&A expense ratio of 37.4%.

2. Working capital efficiency: The turnover of accounts receivable and inventories is relatively long, indicating delays in cash conversion. Cash flow generation may fail to keep pace with earnings growth.

3. Segment concentration risk: The Direct Sales Group accounts for 56.8% of revenue (¥283.5B / ¥499.3B), creating a structure in which fluctuations in demand for this business have a significant impact on consolidated performance.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

The Company’s profitability is slightly below the industry median but remains within the IQR, representing a mid-range level.

Growth and Capital Efficiency

The Revenue Growth Rate is below the industry median, indicating a relatively moderate growth pace.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. The Operating Income margin improved by +3.1pt from the previous year to 7.6%. The Food Group’s high profitability, with a margin of 19.4%, appears to be contributing to structural earnings improvement.

2. Operating Income progress against the full-year plan was 37.4%, substantially exceeding the one-quarter benchmark of 25%, confirming that profit generation was ahead of schedule as of Q1.

3. Against the backdrop of financial soundness, including an Equity Ratio of 76.1% and effectively no debt, the annual dividend forecast was revised to ¥135, resulting in a Payout Ratio of approximately 60%, a level consistent with the Company’s policy.

Theoretical Share Price (Reference Value)

Sensitivity: ¥3,044–¥3,217 at a ±1% change in the Cost of Equity, and ¥3,122–¥3,133 at a ±0.1 change in 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 time-period mismatch with 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 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, and does not 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 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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