| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥124.2B | ¥111.8B | +11.0% |
| Operating Income | ¥12.5B | ¥7.1B | +75.4% |
| Ordinary Income | ¥13.4B | ¥6.2B | +113.7% |
| Net Income | ¥10.2B | ¥4.6B | +119.6% |
| ROE | 2.1% | 0.9% | - |
FY2026 Q1 results delivered significant top-line and bottom-line growth: Revenue ¥124.2B (YoY +¥12.4B +11.0%), Operating Income ¥12.5B (YoY +¥5.4B +75.4%), Ordinary Income ¥13.4B (YoY +¥7.2B +113.7%), and Net Income attributable to owners of the parent ¥10.2B (YoY +¥5.5B +119.6%). Operating margin improved to 10.1% (prior 6.4%) (+3.7pt), driven by maintained gross margin of 63.4% and a reduction in SG&A ratio to 53.3% (prior 56.8%), demonstrating operating leverage. Net margin improved to 8.2% (prior 4.1%) (+4.1pt), confirming profitability improvement centered on core operations. EPS expanded to ¥31.96 (prior ¥14.20, +125.1%).
[Revenue] Revenue reached ¥124.2B (YoY +11.0%), marking double-digit growth. According to qualitative information, the company operates a single cosmetics manufacturing and sales segment with no detailed segment disclosures; domestic and international demand recovery and improvements in price and product mix are inferred to have driven growth. Cost of goods sold increased to ¥45.4B (prior ¥41.2B, +10.2%) but grew below revenue, expanding gross profit to ¥78.7B (prior ¥70.6B, +11.5%). Gross margin remained high and essentially flat at 63.4% (prior 63.1%), indicating effectiveness of pricing and product mix optimization.
[Profitability] SG&A increased to ¥66.2B (prior ¥63.4B, +4.4%) but grew far less than revenue, improving SG&A-to-sales to 53.3% (prior 56.8%) (-3.5pt). Improved cost-effectiveness of advertising and promotion and fixed-cost efficiencies led Operating Income to expand significantly to ¥12.5B (prior ¥7.1B, +75.4%), and operating margin improved to 10.1% (prior 6.4%) (+3.7pt). Non-operating income/expense netted to a profit of ¥0.9B (prior net loss ¥▲0.9B), contributed by interest income ¥0.1B, dividend income ¥0.1B, equity-method investment income ¥0.2B, while foreign exchange losses of ¥1.1B (approximately 8.5% of Operating Income) acted as a headwind. Ordinary Income reached ¥13.4B (prior ¥6.2B, +113.7%). Extraordinary items were negligible (extraordinary gains ¥0.0B, extraordinary losses ¥0.0B). Profit before tax was ¥13.4B (prior ¥6.3B, +113.8%); after income taxes of ¥3.2B (effective tax rate 24.0%), Net Income attributable to owners of the parent was ¥10.2B (prior ¥4.6B, +119.6%), with net margin improving to 8.2% (prior 4.1%) (+4.1pt). Comprehensive income was ¥11.2B (prior ¥▲2.7B), including currency translation adjustments +¥0.7B, unrealized gains on available-for-sale securities +¥0.8B, and actuarial loss adjustment related to retirement benefits ▲¥0.5B. In conclusion, the company achieved higher revenue and income and materially improved margins, confirming an improvement in core-operating profitability.
[Profitability] Operating margin improved to 10.1% (prior 6.4%) (+3.7pt), supported by maintained gross margin of 63.4% and reduced SG&A ratio of 53.3% (prior 56.8%). Net margin improved to 8.2% (prior 4.1%) (+4.1pt), reflecting notable improvement in core profitability. ROE rose to 2.1% (prior 0.9%). DuPont decomposition shows structure of Net margin 8.2% × Total asset turnover 0.218 × Financial leverage 1.17x, indicating that Net margin improvement is the primary driver. [Cash Quality] Days Sales Outstanding (DSO) is 145.9 days, Days Inventory Outstanding (DIO) 247.6 days, Days Payable Outstanding (DPO) 136.7 days, yielding a long Cash Conversion Cycle (CCC) of 256.8 days. Cash collection post-revenue recognition and inventory monetization require time, making working capital efficiency an area for improvement. [Investment Efficiency] Total asset turnover modestly improved to 0.218 (prior 0.193) but remains low; inventory ¥85.1B (prior ¥80.0B, +6.4%) and trade receivables ¥50.0B (prior ¥59.6B, ▲16.0%) affect capital efficiency. Construction in progress declined sharply to ¥2.4B (prior ¥12.4B, ▲80.5%), suggesting completion and commissioning of investment projects. [Financial Soundness] Equity ratio is very high at 85.4% (prior 84.9%); current ratio is 383.8%, quick ratio 266.9%, and debt-to-equity ratio 0.17x, indicating strong balance-sheet. Interest-bearing debt is effectively zero, so there are no short-term liquidity or solvency concerns.
Cash flow statement data were not disclosed, so funding dynamics are analyzed from balance sheet movements. Cash and deposits declined to ¥108.1B (prior ¥118.2B, ▲¥10.1B). Changes in inventory ¥85.1B (prior ¥80.0B, +¥5.1B) and trade receivables ¥50.0B (prior ¥59.6B, ▲¥9.6B) indicate an increasing trend in working capital. The large decrease in construction in progress (▲¥9.95B) reflects completion of investment projects and a shift into tangible fixed assets. Trade payables increased to ¥17.1B (prior ¥14.4B, +¥2.7B) while other payables decreased to ¥31.6B (prior ¥39.9B, ▲¥8.3B), showing variation in procurement and promotion payment cycles. Maintenance of a high equity ratio and debt-free operations indicates financial soundness; however, the long CCC of 256.8 days is high even within the industry, and improving inventory reduction and collection terms is necessary to enhance free cash flow generation.
Quality of earnings is high; extraordinary items are negligible (extraordinary gains ¥0.0B, extraordinary losses ¥0.0B), so one-off effects are limited. Non-operating income is ¥0.9B (0.7% of Revenue), comprising interest income ¥0.1B, dividend income ¥0.1B, and equity-method investment income ¥0.2B. Non-operating expenses ¥0.0B include foreign exchange losses of ¥1.1B, which acted as a headwind roughly equivalent to 8.5% of Operating Income, but the impact was absorbed at the ordinary-income level. The difference between Ordinary Income ¥13.4B and Net Income ¥10.2B (▲24%) is mainly due to income taxes of ¥3.2B, and presents limited qualitative concern. Comprehensive income ¥11.2B exceeded Net Income by ¥1.0B, supported by currency translation adjustments +¥0.7B and unrealized gains on securities +¥0.8B, partially offset by actuarial adjustments ▲¥0.5B. The small divergence between comprehensive income and net income supports the stability of the recurring earnings base.
Full-year plan forecasts Revenue ¥548.0B (YoY +3.7%), Operating Income ¥63.0B (YoY +11.4%), Ordinary Income ¥61.8B (YoY +13.3%), and Net Income ¥43.0B. Q1 progress rates versus the full-year plan are: Revenue 22.7% (standard 25%: ▲2.3pt), Operating Income 19.8% (standard ▲5.2pt), Ordinary Income 21.6% (standard ▲3.4pt), Net Income 23.6% (standard ▲1.4pt). All are within acceptable ranges, though Operating Income progress is somewhat conservative. If gross margin of 63.4% is maintained and SG&A control continues, upside remains from accumulation in Q2 onward; however, foreign exchange movement, raw material cost trends, and progress in working capital efficiency will be key. No forecast revisions have been made.
Annual dividend forecast is maintained at ¥40, implying a payout ratio of approximately 29.6% relative to the full-year EPS forecast ¥135.30, which is a conservative level. Q1 EPS was ¥31.96, consistent with 23.6% progress toward the full-year plan. Given equity ratio 85.4%, cash and deposits ¥108.1B, and effectively debt-free capital structure, dividend sustainability is high. No dividend increase/decrease history is provided in the presented data, but maintaining a payout ratio around 30% allows balancing with earnings growth. No share buyback has been disclosed; total return ratio is equivalent to the payout ratio. Because inventory and receivables tie up funds, free cash flow may fluctuate, so working-capital normalization is a prerequisite for stable continuation of shareholder returns.
Risk of prolonged weak working-capital efficiency: DSO 145.9 days, DIO 247.6 days, CCC 256.8 days are prolonged, and accumulation of inventory and receivables with revenue growth may pressure cash flows. If inventory reduction and collection-term optimization lag, free cash flow generation may be constrained and capital-efficiency improvement may stall. Inventory ¥85.1B is +6.4% YoY, below the revenue growth rate of +11.0%, but the absolute amount equals approximately 68.5% of revenue, so accelerating inventory turnover is a challenge.
Foreign-exchange risk: Foreign exchange losses of ¥1.1B (approximately 8.5% of Operating Income) acted as a headwind at the ordinary-income level. While currency translation adjustments contributed +¥0.7B to comprehensive income, quarterly non-operating expense exposures can affect profitability. Depending on the composition of overseas sales and procurement, future yen movements could remain a significant driver of ordinary-income volatility.
Sustainability risk of margin improvements: Improvement to an operating margin of 10.1% relies on maintaining gross margin 63.4% and reducing SG&A ratio to 53.3%. If pricing strategy is not sustained, if raw material or packaging costs rise, or if competitive dynamics change, gross margin or SG&A ratio could deteriorate, reversing profitability. Achieving the full-year operating margin (implied 11.5%) requires maintaining the pace of profit accumulation from Q2 onward.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 10.1% | 6.8% (2.9%–9.0%) | +3.2pt |
| Net Margin | 8.2% | 5.9% (3.3%–7.7%) | +2.3pt |
Profitability exceeds the industry median, with both operating and net margins positioned in the upper quartile.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 11.0% | 13.2% (2.5%–28.5%) | -2.2pt |
Revenue growth is slightly below the industry median and does not reach the high-growth cohort, but shows stable growth within the mid-range.
※ Source: Company compilation
Key highlights are the substantial improvement to operating margin of 10.1% (prior 6.4%, +3.7pt) and expansion of net margin to 8.2% (prior 4.1%, +4.1pt). Maintenance of a high gross margin of 63.4% and reduction in SG&A ratio to 53.3% (prior 56.8%) generated operating leverage, confirming improvement in core operating profitability. Progress versus the full-year plan is Revenue 22.7% and Operating Income 19.8%; the pace of accumulation from Q2 onward will determine upside.
There is significant room to improve working-capital efficiency: DSO 145.9 days, DIO 247.6 days, CCC 256.8 days are prolonged, indicating potential to enhance capital efficiency and cash generation. Compressing inventory ¥85.1B (68.5% of Revenue) and optimizing collection terms could unlock potential to improve ROE (currently 2.1%) and increase total return ratio. The large decline in construction in progress (▲80.5%) suggests investment projects entering operation, which could drive productivity gains and better fixed-cost absorption as mid-term earnings drivers.
This report is an AI-generated earnings analysis document created by analyzing XBRL earnings statement data. It does not constitute a recommendation to invest in any specific securities. Industry benchmarks are reference information compiled by the firm based on public financial statements. Investment decisions are your own responsibility; consult a professional advisor as appropriate before making investment decisions.