OKABE CO.,LTD. FY2026 Q2 Earnings Report

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Executive Summary

Despite higher revenue, this earnings period resulted in a double-digit decline in profit due to lower gross and operating profit margins, with the slowdown in core profitability being the key focus. Revenue was ¥34.56B (+4.5% YoY), Operating Income was ¥1.81B (-20.5%), Ordinary Income was ¥1.98B (-18.8%), and Net Income attributable to owners of the parent was ¥1.48B (-15.2%). The gross profit margin was 30.4%, down approximately 1.4pt from the previous year, with the lag in passing on cost increases to prices considered the primary factor pressuring profit. In addition, extraordinary income of ¥0.29B, primarily consisting of gains on sales of investment securities, contributed to pre-tax income; caution is therefore required when making a simple comparison with Ordinary Income.

Factors Affecting Performance

【Revenue】Revenue was ¥34.56B, representing a 4.5% YoY increase. As the company operates a single segment, the Construction-Related Products Business, no business-by-business breakdown is disclosed; however, the company-wide trend of revenue growth has continued.

【Profit and Loss】The gross profit margin was 30.4%, down approximately 1.4pt from 31.7% in the previous year, while the SG&A ratio was 25.1%, up approximately 0.3pt from 24.9%. As a result, the Operating Income margin narrowed to 5.2%, down approximately 1.7pt from 6.9% in the previous year. Non-operating income exceeded non-operating expenses, resulting in a surplus, with non-operating income of ¥0.27B, including dividend income of ¥0.14B, exceeding non-operating expenses of ¥0.09B, including interest expense of ¥0.04B. Nevertheless, Ordinary Income was limited to ¥1.98B (-18.8% YoY). Extraordinary income of ¥0.29B, primarily consisting of ¥0.29B in gains on sales of investment securities, was offset against extraordinary losses of ¥0.01B, boosting pre-tax income; however, Net Income declined to ¥1.48B (-15.2% YoY), and the company was unable to avoid a profit decline. Higher revenue but lower profit.

Key Financial Indicators

【Profitability】The Operating Income margin was 5.2%, down from 6.9% in the previous year, while the Net Income margin also declined to 4.3% from 5.3%. ROE was 2.4%, indicating a low level of capital efficiency. 【Cash Quality】Of pre-tax income of ¥2.26B, extraordinary income of ¥0.29B, primarily consisting of ¥0.29B in gains on sales of investment securities, made a contribution, indicating an uplift from non-recurring items. Comprehensive income was ¥3.52B, substantially exceeding Net Income of ¥1.48B; the primary factor was a foreign currency translation adjustment of +¥1.52B, representing a divergence driven by factors distinct from the profitability of the core business. 【Investment Efficiency】Basic EPS was ¥33.05, down -13.4% from ¥38.16 in the previous year. 【Financial Soundness】The Equity Ratio was 71.8%, slightly down from 72.8% in the previous year but remaining at a high level. The current ratio was approximately 293% (current assets of ¥47.63B / current liabilities of ¥16.26B), while interest coverage based on Operating Income was approximately 50x, indicating a negligible interest burden.

Cash Flow Analysis

As cash flow statement items are not disclosed, funding trends are reviewed based on changes in the balance sheet. Cash and deposits were ¥8.62B, down -4.4% from ¥9.02B in the previous year, while inventories increased +14.7% to ¥13.06B from ¥11.39B, and accounts receivable and notes receivable decreased -5.4% to ¥12.79B from ¥13.52B. The increase in inventories may therefore have been one factor contributing to funds being tied up. Accounts payable and notes payable increased +19.0% to ¥4.59B from ¥3.86B, indicating a certain degree of funding absorption through trade payables. Short-term borrowings increased +53.3% to ¥1.72B from ¥1.12B, while treasury stock expanded to ¥2.73B from ¥1.27B, suggesting fund-raising activity in response to inventory accumulation and enhanced shareholder returns.

Quality of Earnings

Against Ordinary Income of ¥1.98B, extraordinary income of ¥0.29B, primarily consisting of ¥0.29B in gains on sales of investment securities, less extraordinary losses of ¥0.01B resulted in net extraordinary gains of +¥0.28B. This represented a non-recurring item accounting for approximately 12% of pre-tax income of ¥2.26B. Non-operating income was ¥0.27B, including dividend income of ¥0.14B, and consistently exceeded non-operating expenses of ¥0.09B, including interest expense of ¥0.04B; this component is considered a recurring source of earnings. Meanwhile, Comprehensive Income of ¥3.52B reached approximately 2.4 times Net Income of ¥1.48B. The primary causes of the difference were a foreign currency translation adjustment of +¥1.52B and valuation difference on securities of +¥0.52B, which should be evaluated separately from Net Income generated by the core business. Overall, the structure is one in which the decline in recurring earnings power (Operating Income and Ordinary Income) is partially offset by non-recurring extraordinary income and valuation-driven comprehensive income items. The quality of core earnings therefore requires continued monitoring of trends in the gross profit margin and SG&A ratio.

Earnings Forecasts and Guidance

Progress against the company’s full-year forecast was 47.7% for Revenue (¥34.56B/¥72.50B), 35.1% for Operating Income (¥1.81B/¥5.15B), 37.4% for Ordinary Income (¥1.98B/¥5.30B), and 40.1% for Net Income (¥1.48B/¥3.70B). While Revenue is tracking broadly in line with the plan, progress in Operating Income and Ordinary Income is relatively low. Achieving the full-year plan will therefore require an improvement in the gross profit margin or control of SG&A expenses in the second half. As of this quarter, there have been no revisions to the earnings or dividend forecasts.

Shareholder Returns

The company paid an interim dividend of ¥21 (regular dividend of ¥16 and special dividend of ¥5). The year-end forecast has the same composition, at ¥21 (regular dividend of ¥16 and special dividend of ¥5), resulting in a full-year forecast dividend of ¥42. Based on forecast full-year EPS of ¥81.1, the Payout Ratio will be approximately 51.8% (¥42/¥81.1). Although Operating Income and Net Income for the first half declined YoY, the company’s financial foundation, supported by an Equity Ratio of 71.8% and high interest coverage, provides sufficient capacity to support the current dividend level. As of this quarter, there has been no revision to the dividend forecast.

Risk Factors

1. Profitability deterioration risk: The gross profit margin declined approximately 1.4pt YoY to 30.4%, while the Operating Income margin narrowed approximately 1.7pt to 5.2%. If delays in passing on cost increases to prices continue, this could place further pressure on profitability.

2. Working capital risk: Inventories increased +14.7% YoY to ¥13.06B, while short-term borrowings increased +53.3% to ¥1.72B in response. The relationship between inventory levels and funding trends therefore requires monitoring.

3. Dependence on non-recurring income: Extraordinary income of ¥0.29B, primarily consisting of gains on sales of investment securities, accounted for approximately 12% of pre-tax income of ¥2.26B. Profit levels may fluctuate in periods in which this item does not arise.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The company’s Operating Income margin and Net Income margin are below the industry median, indicating that profitability is at a low level within the industry.

Growth and Capital Efficiency

The company’s revenue growth rate is below the industry median, indicating relatively moderate growth from a growth perspective as well.

※Source: Compiled by the Company

Key Points of Note in the Results

1. Despite revenue growth (+4.5%), the Operating Income margin narrowed approximately 1.7pt YoY, making the balance between revenue growth and cost increases a key point of focus in the results.

2. Full-year progress is 47.7% for Revenue versus 35.1% for Operating Income, indicating a plan weighted toward the second half on the profit front. Trends in the gross profit margin and SG&A ratio in the second half will be key to achieving the plan.

3. An increase in inventories (+14.7%) and an expansion in treasury stock (+114.4%) are occurring simultaneously, indicating changes in capital allocation from both the perspectives of working capital trends and enhanced shareholder returns.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥1,264–¥1,336 at Cost of Equity ±1%, and ¥1,295–¥1,302 at ω±0.1.

Notes:

• Because forecast ROE is below the Cost of Equity, the theoretical value is below Book Value per Share.
• Net assets as of the quarter-end are used (there is a timing difference relative to the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat high.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-06 / This value does not forecast or guarantee the future share price)

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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 with a professional as necessary.

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