Paraca Inc. FY2026 Q3 Earnings Report

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Executive Summary

Despite higher revenue, Operating Income, Ordinary Income, and Net Income all declined, with the increase in the cost structure and financial expenses weighing on profitability. Revenue increased to ¥13.810B (+5.8% YoY), while Operating Income came in at ¥2.242B (-4.6%), Ordinary Income at ¥1.950B (-8.1%), and Net Income at ¥1.314B (-8.1%), all reflecting declines. The primary factors were SG&A expenses increasing (+13.8%) faster than revenue growth (+5.8%), together with higher interest expense associated with increased borrowings (¥0.236B→¥0.299B), which widened the decline at the Ordinary Income level.

Factors Driving Performance Changes

【Revenue】Revenue increased 5.8% YoY to ¥13.810B. Although segment-level disclosure is not available, the expansion of the asset and site base—with land increasing 6.7% from ¥39.747B to ¥42.406B—is believed to have contributed to the expansion of the earnings base.

【Profit and Loss】Gross profit was ¥4.002B, and the gross margin was 29.0%, down -0.8pt from 29.8% in the previous year. SG&A expenses increased +13.8% to ¥1.760B (¥1.547B in the previous year), and the SG&A ratio rose +0.9pt to 12.7% (11.8% in the previous year). As a result, Operating Income was ¥2.242B (-4.6%). In non-operating items, interest expense increased to ¥0.299B (¥0.236B in the previous year, +26.7%), causing the decline in Ordinary Income to widen to ¥1.950B (-8.1%). Although the Company recorded a ¥0.046B loss on disposal of non-current assets as an extraordinary loss, it also recorded a ¥0.009B gain on sale of non-current assets, resulting in only a minor net impact. Net Income was ¥1.314B (-8.1%). The Company recorded higher revenue but lower earnings, as the effects of increased costs and financial expenses offset the benefit of revenue growth.

Key Financial Indicators

【Profitability】The Operating Income margin was 16.2%, down -1.8pt from 17.99% in the previous year (2,349/13,059). The Net Income margin was 9.5%, down -1.4pt from 10.95% in the previous year.【Cash Quality】The effective tax rate was 31.3% (¥0.599B in income taxes and other taxes / ¥1.914B in income before taxes), within a normal range, with no special factors identified in the tax burden. Cash and deposits were ¥3.757B, a slight increase from ¥3.671B in the previous year, and remained substantially above short-term borrowings of ¥0.405B.【Investment Efficiency】ROE was 6.1%, consistent with the product of a 9.5% Net Income margin, total asset turnover of 0.260x, and financial leverage of 2.47x. Dividing NOPAT, calculated by applying the effective tax rate to EBIT (approximately ¥1.54B), by invested capital—defined as the sum of interest-bearing debt and equity less cash (approximately ¥44.7B)—results in an ROIC of approximately 3.4%, remaining below ROE.【Financial Soundness】The Equity Ratio was 40.4%, down -1.8pt from 42.2% in the previous year. Current assets of ¥4.884B versus current liabilities of ¥5.307B resulted in a current ratio of 92.0%, below 1.0x, indicating a level at which short-term funding conditions require ongoing monitoring.

Cash Flow Analysis

Because cash flow statement data has not been disclosed, funding trends are assessed based on changes in the balance sheet. Cash and deposits increased 2.3% to ¥3.757B from ¥3.671B in the previous year, maintaining a level substantially above short-term borrowings of ¥0.405B. Meanwhile, land increased to ¥42.406B (¥39.747B in the previous year, +6.7%), accompanied by an increase in long-term borrowings to ¥23.487B (¥21.427B in the previous year, +9.6%), suggesting that asset expansion is being financed through long-term borrowings. Long-term lease liabilities also increased 41.2% to ¥2.130B (¥1.508B in the previous year), indicating diversification in financing methods for equipment-related investments. Total assets expanded 7.3% to ¥53.058B, while net assets increased only 2.6% to ¥21.454B. As a result of much of the asset expansion being financed through liabilities, the Equity Ratio declined.

Quality of Earnings

Recurring earnings are primarily generated by the core business, while non-operating income was minor at ¥0.008B. Meanwhile, interest expense, the primary non-operating expense, increased to ¥0.299B (¥0.236B in the previous year), clearly identifiable as a factor depressing Ordinary Income. Extraordinary gains and losses comprised a ¥0.046B loss on disposal of non-current assets and a ¥0.009B gain on sale of non-current assets, resulting in a small net loss of approximately ¥0.037B; therefore, the impact of one-time factors on Net Income was limited. The effective tax rate was 31.3%, within a normal range, and the decrease from income before taxes of ¥1.914B to Net Income of ¥1.314B was primarily attributable to ordinary corporate tax expenses. Although the 16.2% Operating Income margin itself remains at a favorable level, both the gross margin and SG&A ratio deteriorated from the previous year, indicating that earnings are being significantly affected by higher financial expenses rather than being driven solely by the efficiency of the core business.

Earnings Forecast and Guidance

Progress against the full-year plan was 73.9% for Revenue (¥13.810B/¥18.700B), 72.0% for Operating Income (¥2.242B/¥3.113B), 70.7% for Ordinary Income (¥1.950B/¥2.759B), and 57.7% for Net Income (¥1.314B/¥2.277B). Compared with the simple progress benchmark of 75% after nine months, Revenue was -1.1pt, Operating Income -3.0pt, Ordinary Income -4.3pt, and Net Income -17.3pt below the benchmark, with Net Income showing a particularly significant delay. To achieve the full-year plan, approximately ¥0.963B in Net Income is required in Q4 alone, equivalent to approximately 2.2 times the average for Q1–Q3 (approximately ¥0.438B per quarter). No revision was made to the full-year earnings forecast during the current quarter.

Shareholder Returns

The interim dividend was ¥0 (no dividend), while the full-year dividend forecast is ¥72. Using the full-year forecast EPS of ¥225.41, the Payout Ratio is 31.9% (¥72/¥225.41). Based on approximately 10,097 thousand shares, calculated by deducting 344 thousand treasury shares from 10,441 thousand issued shares, the annual total dividend is estimated at approximately ¥0.73B, a level sufficiently covered by the full-year forecast Net Income of ¥2.277B. As of Q3, treasury shares had decreased -26.1% YoY (¥0.375B→¥0.473B, increasing on a carrying-value basis), and the change in the number of treasury shares is viewed as part of the capital policy.

Risk Factors

1. Financial expense increase risk: Interest expense increased 26.7% to ¥0.299B (¥0.236B in the previous year), becoming the primary factor causing the decline in Ordinary Income (-8.1%) to exceed the decline in Operating Income (-4.6%). Long-term borrowings increased 9.6% to ¥23.487B, and the expense burden could increase further depending on future interest rate trends.

2. Short-term liquidity risk: Current assets of ¥4.884B versus current liabilities of ¥5.307B resulted in a current ratio of 92.0%, below 1.0x. However, cash and deposits of ¥3.757B substantially exceed short-term borrowings of ¥0.405B, and the Company is not currently in a situation where near-term funding is immediately constrained.

3. Negative operating leverage risk: SG&A expenses increased +13.8% YoY, exceeding the +5.8% revenue growth rate. As a result, the gross margin deteriorated by -0.8pt and the SG&A ratio worsened by +0.9pt. If the pace of expense growth continues to exceed the pace of revenue expansion, profitability could come under further pressure.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The Company’s profitability, as measured by both the Operating Income margin and Net Income margin, is substantially above the industry median.

Growth and Capital Efficiency

The Revenue growth rate is below the industry median, placing the Company in the relatively slower-growth segment in terms of growth pace.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. Both the gross margin (-0.8pt) and SG&A ratio (+0.9pt) deteriorated despite higher revenue, and the increase in financial expenses compounded the impact, confirming a slight change in the earnings structure. The 16.2% Operating Income margin remains favorable within the industry, but it will be important to monitor whether the declining trend from the previous year continues.

2. The progress rate for full-year Net Income was only 57.7%, substantially behind Revenue (73.9%) and Operating Income (72.0%). The earnings data indicates that the Company’s plan requires a substantial accumulation of profit in Q4.

3. Total assets expanded 7.3% to ¥53.058B, while the Equity Ratio declined to 40.4% (42.2% in the previous year) and long-term borrowings increased 9.6% to ¥23.487B. The somewhat higher reliance on liabilities during the asset expansion phase should be noted as a change in the financial structure.

Theoretical Share Price (Reference Value)

This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson-type model with an explicit five-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥2,154–¥2,281 at ±1% for the cost of equity, and ¥2,214–¥2,220 at ±0.1 for ω.

Notes:

• Net assets as of the quarter-end are used (there is a time lag 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 / Interest rate reference month: 2026-07 / This value 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 and, where necessary, after consulting with a professional advisor.

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