BML (4694) FY2027 Q1 Earnings Report

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Executive Summary

The Company, whose core business is its testing business, reported higher revenue and earnings in FY2027 Q1, with an improvement in gross margin supporting profit growth. Revenue was ¥390.4B (+2.7% year on year), Operating Income was ¥30.0B (+7.0%), Ordinary Income was ¥31.1B (+7.2%), and Net Income attributable to owners of the parent was ¥19.8B (+6.3%). The fact that the earnings growth rate exceeded the revenue growth rate was attributable to an improvement in the cost-of-sales ratio, which absorbed the increase in SG&A expenses.

Factors Affecting Performance

【Revenue】Revenue increased 2.7% year on year to ¥390.4B. The Company has only one reportable segment, the Testing Business, while disclosure of other businesses has been omitted due to their lack of materiality. Accounts receivable increased to ¥289.8B (+8.0% year on year), outpacing revenue growth, and trends in the collection cycle require close monitoring.

【Profit and Loss】Gross profit was ¥130.9B (+4.6% year on year), and the gross margin improved by approximately 0.6pt to 33.5% from 32.9% in the same period of the previous year. The primary factor behind the gross margin improvement was that the 1.7% increase in the cost of sales was below the 2.7% revenue growth rate. Meanwhile, SG&A expenses were ¥100.9B (+3.0%), slightly exceeding the revenue growth rate, and the SG&A ratio increased by 0.3pt to 25.8%. Nevertheless, the benefit of the gross margin improvement exceeded the increase in SG&A expenses, and the Operating Income margin improved to 7.7% from 7.4% in the same period of the previous year. Ordinary Income was ¥31.1B (+7.2%), while net extraordinary gains and losses were limited to a loss of ¥0.1B, resulting in a limited impact on Net Income. In conclusion, the Company achieved higher revenue and earnings, driven by improved cost efficiency.

Segment Analysis

The only reportable segment is the “Testing Business,” and disclosure of other businesses has been omitted due to their lack of materiality. A breakdown of segment-level profit and loss has not been disclosed.

Key Financial Indicators

【Profitability】The Operating Income margin was 7.7%, improving from 7.4% in the same period of the previous year, while the Net Income margin also increased to 5.1% from 4.9%. The primary factor was the improvement in the gross margin to 33.5%, while the SG&A ratio increased slightly to 25.8%.【Cash Quality】Non-operating income was ¥1.6B, including ¥0.8B in dividend income, while net extraordinary gains and losses were limited to a loss of ¥0.1B. Net Income was therefore generally supported by operating earnings.【Investment Efficiency】Annualized ROE was 6.3%, reflecting a conservative capital structure with limited financial leverage, while the effective tax rate of 33.7% compressed the after-tax return to a certain extent.【Financial Soundness】The Equity Ratio was 73.1%. Current assets of ¥889.1B compared with current liabilities of ¥372.0B indicate ample liquidity, while cash and deposits totaled ¥533.6B.

Cash Flow Analysis

As detailed data from the cash flow statement is not included in the disclosed information, cash flow trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥533.6B, a decrease of ¥146.7B from ¥680.3B in the same period of the previous year. Meanwhile, property, plant and equipment increased substantially to ¥724.2B (+¥88.9B year on year), and land increased to ¥253.8B (+¥92.6B), suggesting that investments related to facilities and locations were one factor contributing to the decrease in cash. Current liabilities were ¥372.0B, a decrease of ¥3.69B year on year, and debt reduction also explains part of the decline in cash. Although the cash-to-total-assets ratio decreased, liquidity and financial safety remained at high levels, with a current ratio of 239.0% and an Equity Ratio of 73.1%.

Quality of Earnings

The Company’s earnings for the period were strongly derived from its core business. Non-operating income was ¥1.6B, primarily consisting of ¥0.8B in dividend income, indicating limited reliance on temporary factors. Extraordinary income was ¥0.0B, while extraordinary losses were limited to ¥0.1B, including losses on disposal of fixed assets. The difference between Ordinary Income of ¥31.1B and Net Income of ¥20.6B was primarily attributable to income taxes of ¥10.5B and ¥0.8B attributable to non-controlling interests, with no divergence caused by special factors. However, the fact that accounts receivable increased at a pace exceeding revenue growth should be noted from an accrual perspective, and future collection trends should be monitored to assess the efficiency of converting earnings into cash. Comprehensive income was ¥19.6B, of which ¥18.8B was attributable to owners of the parent. The difference from Net Income of ¥20.6B was attributable to valuation differences, including adjustments related to retirement benefits, totaling approximately ¥1.0B in negative adjustments, and the divergence was limited.

Earnings Forecast and Guidance

Against the full-year forecasts of Revenue of ¥1,550.0B, Operating Income of ¥105.0B, and Ordinary Income of ¥110.0B, Q1 progress rates were 25.2% for Revenue, 28.6% for Operating Income, and 28.3% for Ordinary Income. The progress rates for Operating Income and Ordinary Income exceeded the standard 25%, indicating relatively favorable earnings progress as of Q1. The full-year forecasts call for Revenue growth of +3.2%, Operating Income growth of +0.8%, and Ordinary Income growth of -0.1%. The fact that these forecasts assume that the Q1 earnings growth rate (Operating Income +7.0%) will slow toward the second half warrants monitoring of quarterly progress going forward. There were no revisions to the earnings forecast or dividend forecast during the quarter.

Shareholder Returns

The full-year dividend forecast per share is ¥125.00, and the Payout Ratio based on full-year forecast EPS of ¥186.75 is approximately 66.9%. Compared with the dividend of ¥60 in the same period of the previous year, the forecast of ¥125 represents a substantial planned dividend increase. This Payout Ratio is based solely on dividends and does not represent the Total Return Ratio, which includes share buybacks. Net assets of ¥1,315.1B and cash and deposits of ¥533.6B provide a financial foundation supporting the stability of dividend payments. However, the Payout Ratio of 66.9% exceeds the general benchmark of below 60%, and dividend capacity should be monitored if earnings growth slows.

Risk Factors

1. Concentration in the Testing Business: Since the only substantive reportable segment is the Testing Business, changes in testing demand, medical fee revisions, and testing unit prices directly affect consolidated performance.

2. Increase in the SG&A Ratio: SG&A expenses increased 3.0% year on year, exceeding the 2.7% revenue growth rate, and the SG&A ratio increased by 0.3pt to 25.8%. In a period of slowing revenue growth, this could put pressure on the Operating Income margin.

3. Delays in Collecting Accounts Receivable: Accounts receivable increased 8.0% year on year, outpacing revenue growth. A lengthening collection cycle could tie up working capital, and future bad debt risk requires monitoring.

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.

Growth and Capital Efficiency

The Company’s revenue growth rate is substantially below the industry median, placing its growth profile relatively low within the industry.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. In Q1, Operating Income growth of +7.0% exceeded Revenue growth of +2.7%, resulting in higher revenue and earnings accompanied by an improvement in the gross margin to 33.5% (+0.6pt year on year). The structural point of note is that improved cost efficiency led profit growth.

2. The progress rate of Operating Income against the full-year forecast was 28.6%, exceeding the standard 25%. However, the full-year plan itself is conservative, calling for Operating Income growth of only +0.8%, and quarterly changes in the profit margin toward the second half should be monitored.

3. The dividend forecast calls for an increase from ¥60 in the previous year to ¥125, resulting in a forecast Payout Ratio of approximately 66.9%. Financial soundness—an Equity Ratio of 73.1% and a current ratio of 239.0%—supports dividend stability, although the Payout Ratio itself exceeds the general benchmark.

Theoretical Share Price (For Reference)

Sensitivity: ¥3,033–¥3,203 at ±1% for the cost of equity, and ¥3,104–¥3,124 at ±0.1 for ω.

Notes:

• Since 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).
• Since 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 available data; it 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 through analysis of 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 available earnings data. Investment decisions should be made at your own responsibility, after consulting experts as necessary.

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