These are mechanically computed values based on a residual income model. They are not a forecast of market prices or a recommendation of any investment action, and do not predict or guarantee future share prices. Historical values are computed retrospectively using current guidance-achievement statistics.
| Metric | Current Period | Same Period Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥707.5B | ¥690.2B | +2.5% |
| Operating Income | ¥21.6B | ¥66.5B | -67.5% |
| Ordinary Income | ¥30.1B | ¥72.5B | -58.5% |
| Net Income | ¥11.4B | ¥31.6B | -64.0% |
| ROE | 0.5% | 1.5% | - |
The second quarter of the fiscal year ending December 2026 was characterized by higher revenue but a substantial decline in earnings, with deteriorating profitability being the key feature. Revenue increased to ¥707.5B (+2.5% YoY), while Operating Income fell sharply to ¥21.6B (-67.5%), Ordinary Income to ¥30.1B (-58.5%), and Net Income attributable to owners of the parent to ¥11.4B (-64.1%). The primary factors were the substantial outpacing of revenue growth by the increase in SG&A expenses and the widening Operating Loss in the International Business, which placed pressure on company-wide earnings.
【Revenue】Revenue of ¥707.5B represented a 2.5% YoY increase. The International Business was the growth driver, increasing 8.1%; by region, China grew 34.0% and Southeast Asia grew 12.4%, while the United States declined 8.5%, resulting in mixed performance across regions. The Domestic Business remained resilient, increasing 1.8%, and domestic sales accounted for approximately 77% of the sales mix on a segment-reporting basis.
【Profit and Loss】Operating Income of ¥21.6B (-67.5% YoY) was primarily attributable to the decline in the gross profit margin from 52.4% to 51.4%, together with a 5.6pt increase in the SG&A ratio from 42.7% to 48.3%. Ordinary Income of ¥30.1B (-58.5%) was supported by non-operating income and expenses, net (+¥8.5B), but this was insufficient to offset the decline in Operating Income. Net Income of ¥11.4B (-64.1%) declined substantially despite an improvement in extraordinary income and expenses, net, to -¥7.9B from -¥30.0B in the previous year. The decline in Profit Before Tax and the increase in the effective tax rate, from approximately 25.5% to 48.7%, contributed to the decrease. In conclusion, the current period resulted in higher revenue but lower earnings.
By segment, the Domestic Business generated revenue of ¥546.2B (+1.8% YoY) and Operating Income of ¥42.9B (-47.6%), maintaining profitability despite lower earnings, with a profit margin of 7.9%. The International Business generated revenue of ¥191.9B (+8.1%) but recorded an Operating Loss of ¥21.8B, representing a wider loss YoY and a profit margin of -11.3%; profitability deteriorated despite higher revenue. The Other Businesses generated revenue of ¥34.0B (+9.5%) and Operating Income of ¥1.3B (+92.8%), showing improvement despite their small scale. By region, sales to external customers were ¥520.0B in Japan (+0.7%), ¥72.2B in the United States (-8.5%), ¥49.5B in China (+34.0%), ¥40.0B in Southeast Asia (+12.4%), and ¥22.3B in other regions (+19.2%). Growth in China and Southeast Asia contributed to overall revenue growth, while the deterioration in the International segment’s earnings appears to have been affected by lower revenue in the U.S. Business and upfront investments. Both segments are undergoing profitability adjustments, with margins narrowing in the Domestic Business and the loss widening in the International Business.
【Profitability】The Operating Margin was 3.1%, down 6.5pt from 9.6% in the previous year. The Ordinary Income Margin was 4.3% versus 10.5% in the previous year, and the Net Profit Margin attributable to owners of the parent was 1.6% versus 4.6%; all margins contracted, indicating generally weaker profitability. 【Cash Flow Quality】Operating Cash Flow was limited to ¥4.6B, and its ratio to Net Income of ¥11.4B was approximately 0.4x, indicating weak earnings-to-cash conversion. The OCF-to-EBITDA ratio was also low at approximately 7%, based on EBITDA of approximately ¥62.0B. 【Investment Efficiency】ROE was 0.5%, reflecting the decline in Net Income and sluggish Total Asset Turnover due to an increase in inventories. 【Financial Soundness】The Equity Ratio was 83.2%, while the Current Ratio was approximately 328% (Current Assets of ¥1,248.3B / Current Liabilities of ¥380.7B), indicating an extremely strong financial base and a low degree of dependence on interest-bearing debt.
Operating Cash Flow was ¥4.6B. The positive contribution from depreciation and amortization of ¥40.3B was offset by an increase in inventories (-¥67.9B) and corporate income tax payments (-¥20.3B). Although the decline in trade receivables generated a cash inflow of +¥184.0B, OCF remained only slightly positive overall. Investing Cash Flow was -¥102.2B, primarily reflecting capital expenditures of -¥101.4B, indicating that active investment continued. Financing Cash Flow was -¥45.9B, mainly due to cash outflows for dividend payments. As a result, Free Cash Flow (OCF + Investing CF) was -¥97.6B; investment and dividends could not be funded by OCF, and cash and deposits decreased by -¥152.9B (-24.5%) from the end of the previous year. The buildup of inventories and front-loaded investment placed pressure on liquidity, which was the key cash flow feature of the current period.
Current-period earnings were affected not only by recurring operating results but also by extraordinary income and expenses, net of -¥7.9B. Extraordinary income of ¥8.5B primarily included a gain on the sale of investment securities of ¥4.6B, while extraordinary losses totaled ¥16.4B. The impact of extraordinary items improved from the previous year’s net amount of -¥30.0B. Non-operating income and expenses, net, amounted to +¥8.5B, with items such as dividend income of ¥3.0B contributing, but these were small relative to revenue and did not constitute a core earnings pillar. Corporate income taxes of ¥10.8B were recorded against Profit Before Tax of ¥22.2B, resulting in an effective tax rate of approximately 48.7%, a significant increase from approximately 25.5% in the previous year and one of the key factors compressing Net Income. Comprehensive Income was ¥31.0B, exceeding Net Income of ¥11.4B by ¥19.6B. Most of this difference consisted of the unrealized foreign exchange-related factor of +¥24.9B in foreign currency translation adjustments and therefore does not directly indicate operating earnings power. Given that OCF was below Net Income, there was a certain divergence between reported earnings and cash flow, and the quality of earnings had weakened somewhat compared with the previous year.
Progress toward the full-year forecast—Revenue of ¥1,730.0B, Operating Income of ¥125.0B, Ordinary Income of ¥130.0B, and Net Income of ¥100.0B—was 40.9% for Revenue, 17.3% for Operating Income, 23.2% for Ordinary Income, and 11.4% for Net Income, all substantially below the 50% mark implied by simple pro rata allocation. The delay in progress, particularly for earnings indicators, was pronounced. This implies that the second half must generate approximately ¥1,022.5B in Revenue and approximately ¥103.4B in Operating Income, requiring the second-half Operating Margin to improve substantially to approximately 10.1% from the first-half result of 3.1%. As of the current quarter, neither the earnings forecast nor the dividend forecast had been revised, and the full-year plan remained unchanged.
The interim dividend was ¥45 per share, an increase of +¥1 from ¥44 in the same period of the previous year. The full-year dividend forecast remained unchanged at ¥106, implying a Payout Ratio of approximately 78.8% based on the full-year forecast EPS of ¥134.52. Because realized earnings as of the first half are smaller than full-year earnings due to seasonality and other factors, it is appropriate to use the full-year Payout Ratio as the reference. Recovery of earnings in the second half is therefore a prerequisite for achieving the plan. No information regarding share repurchases was provided.
Deterioration in International Business profitability: The International segment recorded an Operating Loss of ¥21.8B, representing a wider loss YoY and a profit margin of -11.3%. Profitability deteriorated despite higher revenue, weighing on the company-wide profit margin.
Increase in inventories and weaker cash conversion: Inventories increased 41.6% YoY, while OCF remained at approximately 0.4x Net Income, indicating that deterioration in working capital was affecting cash-generation capacity.
Hurdle to achieving the full-year plan: First-half progress toward the Operating Income forecast was only 17.3%, implying that an Operating Margin of approximately 10.1% will be required in the second half. This assumes a substantial improvement from the first-half result of 3.1%.
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 3.1% | 9.7% (5.4%–23.7%) | -6.6pt |
| Net Profit Margin | 1.6% | 5.4% (1.3%–20.1%) | -3.8pt |
| The company’s profitability was below the industry median. In particular, its Operating Margin was below the lower bound of the industry IQR of 5.4%. |
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 2.5% | 10.6% (-3.4%–25.4%) | -8.1pt |
| Revenue growth was also below the industry median but remained within the industry IQR. |
※Source: Compiled by the Company
The increase in the SG&A ratio from 42.7% to 48.3% was the primary factor behind the decline in the Operating Margin. The linkage between cost effectiveness and revenue growth will be the focus of future profitability recovery.
The increase in the effective tax rate from approximately 25.5% to 48.7% caused Net Income to decline more sharply than Ordinary Income. Trends in the tax burden will be an important factor affecting Net Income.
Most of the difference between Comprehensive Income of ¥31.0B and Net Income of ¥11.4B was attributable to foreign currency translation adjustments. This factor should be evaluated separately from improvements in operating profit and loss.
This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type, with an explicit five-year fade). It is not a forecast of the market share price or a recommendation to take any specific investment action.
| Scenario | Theoretical Share Price |
|---|---|
| bear | ¥2,528 |
| base | ¥2,561 |
| bull | ¥2,588 |
| Calculation Assumption | Value |
|---|---|
| Book Value Per Share (BPS) | ¥2,821 |
| Adjusted Forecast EPS | ¥164.3 |
| Cost of Equity r | 9.27% (10-year government bond 2.77% + equity risk premium 6.00% + size premium 0.50%) |
| Residual Income Persistence Coefficient ω / Explicit Forecast Period | 0.62 / 5 years |
| Assumed Payout Ratio | 78.8% |
| Forecast EPS Confidence Adjustment | ×1.075 (based on the industry’s historical guidance achievement rate) |
| Implied PBR / PER |
Sensitivity: ¥2,493–¥2,632 at Cost of Equity ±1%; ¥2,553–¥2,566 at ω ±0.1.
Notes:
(Calculation model: Residual Income Model / Interest rate reference month: 2026-07 / This value does not predict or guarantee the future share price.)
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 discretion and responsibility, after consulting professionals as necessary.
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| 0.91x / 15.6x |