C'BON COSMETICS (4926) FY2026 Q3 Earnings Report

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Executive Summary

Operating income and ordinary income increased substantially, driven by higher revenue and an improvement in the SG&A expense ratio; however, the recognition of impairment losses restrained growth in net income. Revenue was ¥6.91B (+5.8% year on year), operating income was ¥0.13B (+237.1%), and ordinary income was ¥0.15B (+281.4%). Net income attributable to owners of the parent was ¥0.08B, representing a return to profitability from the ¥0.03B loss recorded in the same period of the previous year. The operating margin was 1.9%, an improvement of approximately 1.3pt year on year, but remains low in absolute terms.

Factors Affecting Results

【Revenue】Revenue increased 5.8% year on year to ¥6.91B. The gross margin rose slightly to 75.4% from approximately 75.3% in the same period of the previous year, indicating that profitability was maintained despite the increase in revenue.

【Profit and Loss】Operating income increased substantially to ¥0.13B (¥0.04B in the previous year, +237.1%), while ordinary income rose to ¥0.15B (¥0.04B in the previous year, +281.4%). While revenue increased 5.8%, SG&A expenses rose only 4.1%, resulting in an approximately 1.2pt decline in the SG&A expense ratio to 73.5%, which was the primary driver of the profit increase. In addition to operating income, ordinary income benefited from ¥0.03B in non-operating income, including ¥0.01B in gains on sales of securities and ¥0.01B in dividend income. Meanwhile, impairment losses accounted for ¥0.04B of the ¥0.04B in extraordinary losses, limiting profit before tax to ¥0.11B. Net income was ¥0.08B, representing a return to profitability from the previous year's loss; however, as a figure after deduction of extraordinary losses, it was affected by temporary factors. Overall, the company reported higher revenue and higher profit.

Key Financial Indicators

【Profitability】The operating margin of 1.9% and net profit margin of 1.1% both improved from the same period of the previous year, but remain low in absolute terms. ROE (annualized) was limited to 1.8%. 【Cash Quality】Cash and deposits totaled ¥2.94B, exceeding current liabilities of ¥2.71B, and the current ratio was approximately 180%, indicating a sound position. Inventories totaled ¥0.36B, comprising raw materials of ¥0.41B, work in process of ¥0.07B, and finished goods of ¥0.36B; inventory turnover efficiency will influence cash efficiency. 【Investment Efficiency】Property, plant and equipment totaled ¥2.60B, while intangible assets totaled ¥0.02B, down 28.9% year on year, consistent with the recognition of impairment losses. 【Financial Soundness】The equity ratio was 65.0%. Against total liabilities of ¥3.06B, net assets totaled ¥5.68B, indicating a conservative capital structure. Contract liabilities (advance receipts) of ¥1.57B accounted for approximately 58% of current liabilities, forming a funding base supported by customer prepayments.

Cash Flow Analysis

Although detailed disclosure of the cash flow statement is unavailable, cash trends can be confirmed from changes in the balance sheet. Cash and deposits increased from ¥2.65B in the same period of the previous year to ¥2.94B, indicating an accumulation of liquidity. Accounts receivable and notes receivable totaled ¥0.96B, up from ¥0.82B in the previous year, indicating an increase in working capital associated with higher revenue; meanwhile, inventories declined slightly from ¥0.40B to ¥0.36B. Contract liabilities totaled ¥1.57B, remaining at approximately the same level as the previous year, with customer prepayments supporting part of working capital. Property, plant and equipment declined only slightly from ¥2.60B, and no expansion of large-scale capital investment was observed. Overall, higher profit and an increase in cash and deposits have been achieved simultaneously, and liquidity management has remained stable.

Earnings Quality

Ordinary income of ¥0.15B was supported not only by operating income of ¥0.13B from the core business, but also by investment-related non-operating income such as a ¥0.01B gain on sales of securities and ¥0.01B in dividend income; these items should be evaluated separately from the recurring earnings power of the core business. Extraordinary losses of ¥0.04B consisted largely of ¥0.04B in impairment losses, which pressured net income as a temporary factor. The impact of extraordinary losses on net income of ¥0.08B, on a pre-tax basis, was material, and the return to profitability in the current period appears to have been attributable not only to improvements in the cost structure but also to the elimination of loss factors recorded in the previous year. Comprehensive income was ¥0.06B, slightly below net income of ¥0.08B, mainly due to a negative ¥0.01B change in the valuation difference on securities. Overall, the results reflect the coexistence of a recurring factor—improved operating income—and a non-recurring factor—impairment losses. These two factors should be considered separately when evaluating earnings quality.

Earnings Forecast and Guidance

The cumulative Q3 progress rates against the company's full-year forecasts were 75.8% for revenue, a standard level, 63.7% for operating income, and 73.2% for ordinary income. Against the full-year operating income forecast of ¥0.20B, operating income of ¥0.07B will be required in Q4, making the continuation of the improvement in SG&A efficiency a key focus. Q3 net income of ¥0.08B has already exceeded the full-year net income forecast of ¥0.07B, and the final full-year result may be affected by the full-year tax burden and expense trends in Q4. The EPS forecast is ¥17.45, and the dividend forecast is ¥20.00.

Shareholder Returns

The Q2 dividend was ¥10.00 per share, meaning that half of the full-year annual dividend forecast of ¥20.00 has already been paid. The payout ratio based on the full-year forecast EPS of ¥17.45 and annual dividends of ¥20.00 is 114.6%, exceeding 100%. This payout ratio is calculated by dividing dividends by net income and is distinct from the total return ratio, as no share repurchases have been conducted. While the forecast payout ratio exceeds the earnings level, retained earnings of ¥4.68B, cash and deposits of ¥2.94B, and an equity ratio of 65.0% provide a conservative financial base supporting the dividend funding for the current fiscal year.

Risk Factors

1. Thin profitability: Although the operating margin improved to 1.9%, it remains below the industry median of 8.6%. Even a slight deterioration in revenue or the gross margin could have a relatively significant impact on profit.

2. Impact of temporary losses: Impairment losses of ¥0.04B, which account for most of the ¥0.04B in extraordinary losses, pressured net income and suggest that profitability for some operating assets may have fallen below plan.

3. Delayed operating income progress: Cumulative Q3 operating income represented 63.7% of the full-year operating income forecast of ¥0.20B, below the standard benchmark of 75%. Achieving operating income of ¥0.07B in Q4 will be key to meeting the full-year plan.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The company's profitability is substantially below the industry median, placing it toward the lower end of the industry in terms of margins.

Growth and Capital Efficiency

The revenue growth rate exceeds the industry median, placing the company's top-line growth in the relatively favorable range within the industry.

※Source: Compiled by the Company

Key Takeaways from the Results

1. Operating income increased sharply by +237.1% against revenue growth of +5.8%, with operating leverage resulting from an approximately 1.2pt decline in the SG&A expense ratio serving as the primary driver of profit improvement.

2. The operating margin of 1.9% and ROE (annualized) of 1.8% remain low from the perspectives of industry levels and absolute profitability, making the sustainability of the improvement a key focus going forward.

3. The temporary factor of ¥0.04B in impairment losses affected net income. Together with the full-year operating income progress rate of only 63.7%, Q4 earnings trends will influence the full-year results.

Theoretical Share Price (Reference Value)

Sensitivity: ¥985–¥1,038 at ±1% for the cost of equity, and ¥1,002–¥1,017 at ±0.1 for ω.

Notes:

• Because net income progress against the full-year forecast is 103%, exceeding the standard level of 75%, forecast EPS has been adjusted upward within a maximum range of +10% (because companies ahead of plan tend to exceed their forecasts; the adjustment may be excessive for businesses with strong seasonality).
• Net income is substantially compressed relative to operating income by factors including the tax burden, acquisition-related expenses, and non-controlling interests (net income ÷ operating income 37%). This figure reflects that compression at face value, and underlying earnings power may be higher if the factors are temporary.
• Because 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, resulting in a timing difference from the full-year forecast.
• Because net assets include non-controlling interests, the theoretical value may be calculated at a somewhat higher level.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-08 / Mechanically calculated solely from 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. Industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting with professionals as necessary.

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