Quick View
| Metric | Current Period | Same Period Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥223.3B | ¥200.5B | +11.4% |
| Operating Income | ¥24.2B | ¥17.5B | +38.3% |
| Ordinary Income | ¥24.6B | ¥18.8B | +30.8% |
| Net Income | ¥16.5B | ¥12.7B | +29.5% |
| ROE (Annualized) | 15.4% | 12.3% | - |
Executive Summary
In addition to higher revenue, improvements in the gross margin and the containment of SG&A expense growth resulted in increases in both operating income and net income that exceeded revenue growth. Revenue was ¥223.3B (+11.4% YoY), operating income was ¥24.2B (+38.3%), ordinary income was ¥24.6B (+30.8%), and net income was ¥16.5B (+29.5%). The primary driver of revenue growth was the expansion of the NursingCare Business, while the primary driver of earnings growth was operating leverage resulting from improvements in the cost ratio and SG&A ratio.
Factors Affecting Performance
【Revenue】Revenue was ¥223.3B, representing an 11.4% increase YoY. The NursingCare segment is the core business, accounting for ¥213.4B of revenue, and drove overall revenue growth.
【Profit and Loss】Gross profit was ¥42.4B, with a gross margin of 19.0%, improving from 17.4% in the same period of the previous year. SG&A expenses were ¥18.2B, up 4.4% YoY, remaining below the pace of revenue growth. As a result, the operating margin expanded to 10.9% from 8.7% in the previous year, and operating income increased 38.3%. Ordinary income increased 30.8% as non-operating income and expenses were broadly balanced. Extraordinary losses were limited to a loss on disposal of fixed assets of ¥0.02B, indicating that temporary factors were minor. The net profit margin improved to 7.4% from 6.3% in the previous year, supporting the conclusion that the Company achieved both revenue and profit growth.
Segment Analysis
The NursingCare segment recorded revenue of ¥213.4B, operating income of ¥30.2B, and a profit margin of 14.1%, exceeding the Company-wide operating margin of 10.9%. The segment accounts for 95.6% of total Company revenue, representing a single-business structure in which overall business performance is highly dependent on the segment’s utilization rate and cost trends.
Key Financial Metrics
【Profitability】The operating margin of 10.9% improved by +2.1pt from 8.7% in the same period of the previous year, while the net profit margin of 7.4% improved by +1.0pt from 6.3%. These improvements were supported by the increase in the gross margin to 19.0% from 17.4% and the containment of SG&A expense growth (+4.4%, below revenue growth of +11.4%).【Cash Flow Quality】Operating cash flow (OCF) was ¥23.7B, 1.4 times net income of ¥16.5B, indicating strong cash backing of earnings. This represented a significant improvement from OCF of negative ¥20.0B in the same period of the previous year.【Investment Efficiency】Annualized ROE was 15.4% and the equity ratio was 40.2%. Capital expenditures of ¥20.2B were approximately 3.8 times depreciation and amortization of ¥5.4B, indicating that growth investment is being prioritized.【Financial Soundness】Current assets of ¥210.8B were below current liabilities of ¥240.9B, resulting in a current ratio below 1x; however, current liabilities include contract liabilities of ¥126.5B. The equity ratio of 40.2% improved slightly from 39.4% in the previous year.
Cash Flow Analysis
OCF was ¥23.7B, a significant improvement from negative ¥20.0B in the same period of the previous year. The primary factor was the reduction in cash outflows related to the increase in inventories, from ¥38.9B in the previous year to ¥5.0B. Investing cash flow was negative ¥21.8B, primarily reflecting capital expenditures of ¥20.2B. Free cash flow, calculated as OCF less capital expenditures, was limited to ¥1.9B. Financing cash flow was negative ¥17.1B, with dividend payments of ¥11.1B and repayment of long-term borrowings of ¥5.6B being the primary cash outflows. As a result, cash and deposits decreased from ¥91.5B in the previous year to ¥76.3B. Capital expenditures are currently absorbing nearly all OCF generation capacity, making the expansion of cash flow through higher utilization rates following investment a key challenge going forward.
Quality of Earnings
OCF of ¥23.7B exceeded net income of ¥16.5B, indicating strong cash backing of earnings. Extraordinary income and expenses consisted only of a loss on disposal of fixed assets of ¥0.02B. Non-operating income of ¥0.9B and non-operating expenses of ¥0.6B were also both small relative to revenue, indicating that ordinary income of ¥24.6B was largely derived from the core business and was of a recurring nature. Comprehensive income was ¥17.8B, and the ¥1.4B difference from net income of ¥16.5B was attributable to valuation differences on securities. The difference was limited, and earnings quality can therefore be assessed as generally sound.
Earnings Forecast and Guidance
Progress against the Company’s full-year forecast was 46.0% for revenue, calculated as ¥223.3B/¥485.9B; 54.4% for operating income, calculated as ¥24.2B/¥44.6B; and 53.3% for ordinary income, calculated as ¥24.6B/¥46.1B. Compared with the standard Q2 progress rate of 50%, revenue was slightly below the benchmark, while profit metrics exceeded it, indicating that margin improvement was ahead of plan in the first half. The full-year plan assumes revenue growth of +4.1% and operating income growth of +16.0%, implying that margin improvement will continue during the second half and thereafter.
Shareholder Returns
The Q2 dividend was ¥20.00 per share, while the full-year dividend forecast is ¥37.00. Based on cumulative Q2 net income of ¥16.5B, the payout ratio is calculated at approximately 39.7% based on the relationship between total dividends and net income using the average number of shares outstanding during the period, remaining below 60%. No disclosure has been made regarding share repurchases; therefore, the total return ratio is identical to the payout ratio based solely on dividends.
Risk Factors
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Liquidity and refinancing risk: The current ratio is 87.5%, below 1x, and working capital is negative ¥30.1B. Short-term borrowings amount to ¥58.1B, representing a high 50.5% of current liabilities. Even taking into account contract liabilities of ¥126.5B, careful liquidity management remains important.
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Cost volatility risk from the low gross-margin structure: Although the gross margin improved from the previous year, it remains below 20% at 19.0%. If costs such as labor, food materials, and utilities increase, the impact on profit margins is likely to be relatively significant.
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Risk of monetizing capital expenditures: Capital expenditures of ¥20.2B reached approximately 3.8 times depreciation and amortization of ¥5.4B, while free cash flow remained limited to ¥1.9B. If utilization rates and occupancy progress at new facilities fall below expectations, both FCF and profit margins could come under pressure.
Industry Benchmark (Reference; Compiled by the Company)
Industry Benchmark (it_telecom)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 10.9% | 17.3% (4.1%–24.5%) | −6.4pt |
| Net Profit Margin | 7.4% | 13.0% (2.0%–16.2%) | −5.6pt |
Compared with the industry median, both the operating margin and net profit margin rank toward the lower end of the industry.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 11.4% | 22.5% (16.2%–26.8%) | −11.1pt |
The revenue growth rate was below the industry median, placing the Company toward the lower end of the industry in terms of growth as well.
※Source: Compiled by the Company
Key Takeaways from the Earnings Results
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Operating income increased +38.3% against revenue growth of +11.4%, clearly demonstrating operating leverage from gross-margin improvement and the containment of SG&A expense growth.
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The full-year operating income progress rate of 54.4% exceeded the Q2 standard of 50%, indicating that first-half results are progressing smoothly against the Company’s plan.
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OCF was 1.4 times net income, indicating good earnings quality; however, free cash flow was limited to ¥1.9B due to large-scale capital expenditures, and the current ratio remains below 1x, both of which warrant monitoring from a cash management perspective.
Theoretical Share Price (Reference Value)
| Scenario | Theoretical Share Price |
|---|---|
| bear | ¥756 |
| base | ¥777 |
| bull | ¥803 |
| Calculation Assumptions | Value |
|---|---|
| Book Value per Share (BPS) | ¥654 |
| Adjusted Forecast EPS | ¥105.8 |
| Cost of Equity r | 9.77% (10-year government bond 2.77% + equity risk premium 6.00% + size premium 1.00%) |
| Residual Income Persistence Factor ω / Explicit Forecast Period | 0.62 / 5 years |
| Assumed Payout Ratio | 39.1% |
| Forecast EPS Confidence Adjustment | ×1.049 (based on the track record of guidance achievement for comparable companies) |
| Implied PBR / PER | 1.19x / 7.3x |
Sensitivity: ¥756–¥800 at ±1% for the cost of equity, and ¥774–¥782 at ±0.1 for ω.
Notes:
- Goodwill amortization of ¥6.7 per share has been added back to earnings (due to its status as a non-cash expense and to facilitate comparability with IFRS companies).
- Net assets as of the quarter-end have been used (there is a timing difference from the full-year forecast).
- As 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 / 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.)
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 a professional as necessary.
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