KeePer Technical Laboratory Co.,Ltd. FY2026 FY Earnings Report

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Executive Summary

Despite higher revenue, operating income declined during the period, while the increase in net income was primarily attributable to a one-time gain on the sale of investment securities. Revenue was ¥25.96B (+12.4% YoY), operating income was ¥6.91B (-2.6%), and ordinary income was ¥6.93B (-2.8%), while net income rose substantially to ¥9.83B (+101.1%) due to the recognition of ¥6.79B in extraordinary income. The gross profit margin declined by approximately 3.9pt from the previous year, indicating sluggish profitability at the operating level.

Factors Affecting Results

【Revenue】Revenue was ¥25.96B, representing a 12.4% YoY increase. Both segments contributed to revenue growth: KeePerLABOOperation (52.6% of total revenue) increased by 10.5%, while KeePerProductsAndOthersRelated (47.4% of total revenue) increased by 15.2%.

【Profit and Loss】Operating income was ¥6.91B, down 2.6% YoY. The gross profit margin of 48.4% declined by approximately 3.9pt from the previous year, while the SG&A ratio rose slightly to 21.8%, preventing the Company from fully capturing the benefit of higher revenue. By segment, LABO’s operating income declined by 20.1%, with its margin falling to 15.5%, while Products and Others maintained a high margin of 37.7% and supported Company-wide earnings. Net income was ¥9.83B (+101.1%), owing to extraordinary income including a ¥6.79B gain on the sale of investment securities. In conclusion, the period saw higher revenue but lower operating income, while net income increased substantially due to one-time factors.

Segment Analysis

KeePerLABOOperation generated revenue of ¥14.03B (+10.5%) and operating income of ¥2.17B (-20.1%), with its margin deteriorating to 15.5%. KeePerProductsAndOthersRelated generated revenue of ¥12.59B (+15.2%) and operating income of ¥4.74B (+8.3%), with a margin of 37.7%, making it the largest driver of Company-wide earnings. The margin gap between the two segments (15.5% versus 37.7%) has widened, and the decline in LABO’s profitability is pushing down the Company-wide margin.

Key Financial Indicators

【Profitability】The operating margin was 26.6%, down approximately 4.1pt from 30.7% in the previous year, while the net profit margin rose to 37.9% from 21.2%. This increase was attributable to the recognition of extraordinary income and must be evaluated separately from underlying operating performance.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥4.39B, representing only 0.45x net income of ¥9.83B, as increases in accounts receivable and inventories delayed cash conversion.【Investment Efficiency】ROE was high at 39.2%; however, a considerable portion was attributable to the uplift in net income from extraordinary income and should be distinguished from underlying earnings power based on operating income. Total asset turnover was 0.774x.【Financial Soundness】The equity ratio was extremely high at 74.8%, while long-term borrowings were reduced by 50.3% YoY to ¥0.47B. Cash and deposits increased sharply to ¥14.28B (+242% YoY), while investment securities decreased to ¥0.06B (-98.7%), indicating a substantial improvement in liquidity through the reallocation of assets.

Cash Flow Analysis

OCF was ¥4.39B, down 25.0% YoY, providing limited support for net income of ¥9.83B. In terms of working capital, trade receivables and inventories increased by ¥0.50B and ¥0.19B, respectively, while income taxes and other taxes paid of ¥2.64B also weighed on OCF. Investing Cash Flow was positive at ¥8.95B, mainly due to the sale of investment securities (¥11.06B), while capital expenditures were limited to ¥1.68B. Financing Cash Flow was negative at ¥3.24B due to debt repayments and dividend payments. Free cash flow was substantial at ¥13.34B; however, it depended on a one-time cash inflow from asset sales and should be distinguished from cash-generating capacity based solely on ordinary operating activities.

Earnings Quality

The Company’s recurring earnings power during the period was reflected in operating income of ¥6.91B and a small amount of non-operating income (dividends received of ¥0.06B, interest received of ¥0.02B, etc.), which were largely flat from the previous year. In contrast, net income of ¥9.83B was boosted by extraordinary income, primarily the ¥6.79B gain on the sale of investment securities, resulting in a gap of approximately 42% compared with ordinary income of ¥6.93B. This gap resulted from the non-recurring sale of assets, and a similar level of earnings is unlikely to be repeated from the following period onward. The fact that OCF was only 0.45x net income is also an important consideration in evaluating earnings quality, with the expansion of accruals due to increases in trade receivables and inventories serving as the underlying factor.

Earnings Forecast and Guidance

Against the Company’s plan (revenue of ¥29.38B, operating income of ¥9.01B, and net income of ¥6.22B), the achievement rates for actual results were 88.4% for revenue, 76.7% for operating income, and 158.0% for net income. Revenue and operating income were progressing relatively slowly against the plan, while net income substantially exceeded the plan due to the recognition of extraordinary income. This excess net income resulted from a one-time factor, and it should be noted that the full-year plan may have been established on the assumption that the relevant extraordinary income would be excluded.

Shareholder Returns

The annual dividend was ¥100 (¥40 interim and ¥60 year-end), resulting in a payout ratio of 27.8% (total dividends of ¥2.73B ÷ net income of ¥9.83B). Although this was down from the previous year’s payout ratio of 33.5%, the decline was due to the sharp increase in net income, and the dividend amount itself increased YoY. Share buybacks were effectively zero, indicating a dividend-centered shareholder return policy. Free cash flow of ¥13.34B significantly exceeded dividends and capital expenditures; however, it should be considered that the current period’s FCF included a one-time inflow from asset sales.

Risk Factors

1. Widening gap in segment profitability: KeePerLABOOperation’s operating income declined by 20.1%, and its margin fell to 15.5%, widening the gap with Products and Others (37.7%). The Company-wide margin has become structurally more susceptible to LABO’s profitability.

2. Insufficient cash support for earnings: OCF was only 0.45x net income, while increases in trade receivables and inventories delayed cash conversion. The expansion of working capital accompanying top-line growth represents a structural factor.

3. Non-recurring nature of net income: A considerable portion of current-period net income of ¥9.83B depended on the ¥6.79B gain on the sale of investment securities, creating a substantial gap with ordinary income of ¥6.93B. The removal of this earnings uplift is expected from the following period onward.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

The Company’s profitability substantially exceeds the industry median, with both operating and net profit margins ranking at high levels within the industry.

Growth and Capital Efficiency

The revenue growth rate was slightly above the industry median and positioned from the middle to the upper range of the IQR.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. While the top line expanded steadily by +12.4%, operating income declined due to deterioration in the gross profit margin and lower profitability at KeePerLABOOperation, creating a divergence between revenue growth and operating profitability.

2. The substantial increase in current-period net income was primarily attributable to the non-recurring gain on the sale of investment securities. The fact that ordinary income remained at approximately the previous year’s level must be distinguished when evaluating the Company’s underlying earnings power.

3. The financial foundation is extremely robust, supported by an equity ratio of 74.8% and a substantial reduction in long-term borrowings. However, cash flow quality will require monitoring, as OCF remained at only 0.45x net income.

Theoretical Share Price (For Reference)

Sensitivity: ¥1,344–¥1,423 at ±1% for the cost of equity, and ¥1,371–¥1,400 at ±0.1 for ω.

(Calculation model: Residual income model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated values based solely on publicly disclosed data; these figures are not forecasts of the market share price or recommendations of any specific investment action, and do not predict or guarantee future share prices.)

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This report is an automatically generated earnings analysis document produced 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 discretion and responsibility, after consulting with a professional advisor as necessary.

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