COTA (4923) FY2026 Q3 Earnings Report

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Executive Summary

Cumulative Q3 results recorded increases in both revenue and earnings, demonstrating high profitability, with profit growth exceeding revenue growth. Revenue was ¥7.63B (+2.6% YoY), Operating Income was ¥1.79B (+5.3%), Ordinary Income was ¥1.85B (+9.3%), and Net Income was ¥1.27B (+8.8%). The primary driver of earnings growth was the containment of SG&A expense growth below revenue growth while maintaining a gross margin of 70.0%. An increase in non-operating income, including dividend income, further boosted Ordinary Income growth.

Factors Affecting Performance

【Revenue】Revenue was ¥7.63B, representing an increase of +2.6% YoY. The progress rate against the full-year company forecast of ¥9.67B (+3.1% YoY) was 78.9%, exceeding the standard Q3 progress rate of 75%. Although segment information is not disclosed, the maintenance of a 70.0% gross margin suggests that the product mix, pricing, and brand strength remain stable.

【Profit and Loss】Operating Income increased by 5.3% YoY to ¥1.79B, exceeding the revenue growth rate, supported by the controlled trend in the SG&A expense ratio of 46.5% (SG&A expenses: ¥3.55B). Ordinary Income showed even stronger growth of 9.3% YoY to ¥1.85B, supplemented by ¥0.07B in non-operating income, including ¥0.03B in dividend income and ¥0.02B in interest income. Against Profit Before Tax of ¥1.85B, corporate income taxes and other taxes of ¥0.58B were recorded, resulting in an effective tax rate of approximately 31.3% and Net Income of ¥1.27B (+8.8% YoY). Special gains and losses were limited in the disclosures, and the divergence between Ordinary Income and Net Income was primarily attributable to the tax burden. Overall, the period can be characterized as one of increased revenue and earnings, with positive operating leverage.

Key Financial Indicators

【Profitability】The Operating Income margin was 23.5% and the Net Income margin was 16.7%, both high levels indicating a high-value-added earnings structure underpinned by a gross margin of 70.0%. The Operating Income growth rate of +5.3% exceeded the revenue growth rate of +2.6%, indicating positive operating leverage.【Cash Flow Quality】Cash and deposits were ¥5.14B, accounting for 33.4% of total assets. The current ratio was approximately 442% and the quick ratio approximately 376%, indicating extremely strong short-term liquidity. On the other hand, accounts receivable of ¥2.22B and inventories of ¥1.45B were set against accounts payable of only ¥0.26B, indicating substantial funds tied up in working capital. This requires monitoring from the perspective of the speed at which earnings are converted into cash.【Investment Efficiency】ROE was 10.7%, supported by the high Net Income margin of 16.7%. However, total asset turnover remained low, leaving room for improvement in asset efficiency.【Financial Soundness】The Equity Ratio was 77.4%. Against total liabilities of ¥3.48B, net assets were ¥11.92B, resulting in a debt-to-equity ratio of approximately 0.29x and indicating a conservative capital structure. Fixed liabilities include ¥0.80B in provision for directors’ retirement benefits and ¥0.26B in asset retirement obligations. Their share of total liabilities should be noted as an item requiring management of future expenditures.

Cash Flow Analysis

As cash flow statement data has not been disclosed, funding trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥5.14B, almost unchanged from ¥5.17B in the previous year, meaning that the cash balance declined slightly despite earnings growth. This may have been due to the accumulation of working capital: accounts receivable increased from ¥1.57B in the previous year to ¥2.22B, while inventories remained broadly flat at ¥1.45B versus ¥1.44B, and accounts payable increased only from ¥0.197B in the previous year to ¥0.26B. Net assets increased from ¥11.21B to ¥11.92B, while retained earnings accumulated from ¥13.99B to ¥14.71B. Overall, the structure indicates that earnings growth has not translated directly into a significant increase in cash, with funds tied up in receivables and inventory affecting the timing of cash generation.

Earnings Quality

Ordinary Income grew faster than Operating Income, driven by ¥0.07B in non-operating income, mainly consisting of ¥0.03B in dividend income and ¥0.02B in interest income. These items amounted to approximately 0.9% of revenue and were limited in scale; therefore, the core driver of Ordinary Income growth remains Operating Income from the main business. Non-operating expenses were nearly absent, resulting in a clean earnings structure centered on the core business. Meanwhile, corporate income taxes and other taxes of ¥0.58B were recorded against Profit Before Tax of ¥1.85B, resulting in an effective tax rate of approximately 31.3%, slightly higher than the previous year. This caused Net Income growth of +8.8% to fall slightly below Ordinary Income growth of +9.3%. No significant special gains or losses were recorded, suggesting that earnings for the period reflect recurring earning power rather than a substantial reliance on temporary factors.

Earnings Forecast and Guidance

The cumulative Q3 progress rates against the full-year company forecasts were 78.9% for revenue, 93.4% for Operating Income, 95.0% for Ordinary Income, and 92.9% for Net Income, all substantially exceeding the standard progress rate of 75%. Against the full-year revenue forecast of ¥9.67B (+3.1% YoY) and Operating Income forecast of ¥1.92B (+4.6% YoY), more than 90% of full-year Operating Income had already been achieved in the cumulative Q3 period, leaving only a limited amount of incremental earnings required in Q4. Compared with the cumulative Q3 Operating Income margin of 23.5%, the Q4 Operating Income margin implied by the company’s plan would decline significantly. This suggests that the full-year plan may incorporate assumptions of increased expenses toward the fiscal year-end or conservative demand assumptions. While this progress indicates potential upside to the full-year plan, SG&A expense trends in Q4 will be a key focus.

Shareholder Returns

The full-year company forecast for annual dividends is ¥20.0 per share. The Q2 dividend was ¥0, reflecting a structure that places emphasis on the year-end dividend. Based on the average number of shares outstanding during the period of 27,748,892 shares, total annual dividends are estimated at approximately ¥0.56B, resulting in a Payout Ratio of approximately 40.6% against the full-year Net Income forecast of ¥1.37B. Cumulative Q3 Net Income of ¥1.27B had already reached 92.9% of the full-year forecast, providing strong earnings support for the forecast dividend. The conservative financial structure, including cash and deposits of ¥5.14B and treasury shares of 5,186 thousand shares, also supports the company’s dividend-paying capacity.

Risk Factors

1. Working capital tied up in funds: Against accounts receivable of ¥2.22B and inventories of ¥1.45B (including products of ¥1.45B), accounts payable remained at only ¥0.26B, creating a structure in which increases in sales and inventory are unlikely to translate directly into cash generation. During periods of demand fluctuation, this could also lead to the risk of valuation losses on finished goods inventories.

2. Collection period for accounts receivable: Accounts receivable increased from ¥1.57B in the previous year to ¥2.22B, exceeding the +2.6% revenue growth rate. Continued monitoring is advisable, including changes in collection terms and the composition of business partners.

3. Asset retirement obligations: Asset retirement obligations of ¥0.26B account for approximately 7.5% of total liabilities of ¥3.48B. Future environmental compliance costs or changes in the assumptions underlying removal estimates could become factors increasing fixed liabilities.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Both the Operating Income margin and Net Income margin were substantially above the industry median, placing the company’s profitability in the upper tier of the industry.

Growth and Capital Efficiency

The revenue growth rate was slightly below the industry median, placing growth at approximately the industry-average level.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. The Operating Income margin of 23.5% and Net Income margin of 16.7% both substantially exceeded the industry median, with the high-value-added earnings structure maintained during the period. The fact that Operating Income growth exceeded revenue growth indicates that operating leverage worked positively.

2. Cumulative Q3 profit progress against the full-year company forecast was high, at 93.4% for Operating Income and 92.9% for Net Income, substantially exceeding the standard progress rate. The Q4 profit margin implied by the company’s plan would decline, making expense trends toward the fiscal year-end a key point for confirmation.

3. Accounts receivable and inventory increased at a faster pace than revenue, making funds tied up in working capital a structural point of concern regarding the speed at which profit growth is converted into cash.

Theoretical Share Price (Reference Value)

Sensitivity: ¥452–¥478 at ±1% for the cost of equity, and ¥464–¥466 at ±0.1 for ω.

Notes:

• Because Net Income progress against the full-year forecast (93%) exceeds the standard level (75%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies with progress ahead of plan tend to outperform forecasts. In businesses with strong seasonality, the adjustment may be excessive).
• Net assets as of the quarter-end have been 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 / This is a mechanically calculated value based solely on publicly disclosed data and 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 experts as necessary.

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