CHARM CARE (6062) FY2026 Q3 Earnings Report

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Executive Summary

For the cumulative Q3 of the fiscal year ending June 2026, the Company recorded higher revenue and earnings, primarily driven by revenue growth and improved profitability in the Care Services Business. The results were characterized by an earnings growth rate exceeding the revenue growth rate. Revenue was ¥338.9B (+11.8% YoY), Operating Income was ¥36.0B (+43.9%), Ordinary Income was ¥38.1B (+42.9%), and Net Income was ¥25.6B (+39.0%). The gross profit margin improved to 18.8% from 16.6% in the same period of the previous year, while the 9.2% increase in SG&A expenses was below the 11.8% increase in Revenue, resulting in positive operating leverage.

Factors Behind Changes in Performance

【Revenue】Revenue was ¥338.9B, up +11.8% YoY. The core Care Services Business drove growth, with external Revenue of ¥323.5B (+12.5%), accounting for 95.4% of consolidated Revenue. Other Businesses recorded external Revenue of ¥15.4B (△0.2%), a slight decline, and made a limited contribution to growth.

【Profit and Loss】Operating Income was ¥36.0B (+43.9%), Ordinary Income was ¥38.1B (+42.9%), and Net Income was ¥25.6B (+39.0%), with earnings growth exceeding revenue growth in each case. Segment profit in the Care Services Business was ¥45.3B (+33.8%), and its profit margin improved by approximately 2.2pt to 14.0% from 11.8% in the same period of the previous year. The earnings increase therefore resulted from both revenue growth and improved profitability. Non-operating income and expenses made a net contribution of ¥2.0B, including ¥1.9B in subsidy income. Extraordinary loss consisted solely of a ¥0.02B loss on disposal of fixed assets, and the impact of extraordinary income and losses was immaterial. Against Profit Before Tax of ¥38.0B, ¥12.4B in corporate income taxes and other taxes was recorded, resulting in Net Income of ¥25.6B. In conclusion, the Company achieved higher revenue and earnings, and the earnings growth rate exceeding the revenue growth rate indicates high-quality growth accompanied by improved profitability.

Segment Analysis

The Care Services Business accounts for 99.3% of segment profit, reflecting a structure dependent on a single business. The Care Services Business recorded external Revenue of ¥323.5B (+12.5%), segment profit of ¥45.3B (+33.8%), and a profit margin of 14.0% (11.8% in the same period of the previous year), achieving higher revenue and earnings alongside improved profitability. Other Businesses recorded external Revenue of ¥15.4B (△0.2%), segment profit of ¥0.3B (△11.8%), and a profit margin of 1.5%, representing a significant profitability gap versus the Care Services Business. Adjustments for Company-wide expenses and other items expanded to △¥9.6B from △¥9.2B in the same period of the previous year; however, the ¥9.5B increase in profit from the Care Services Business absorbed this impact and supported consolidated Operating Income of ¥36.0B.

Key Financial Indicators

【Profitability】The Operating Income margin was 10.6%, improving by approximately 2.4pt from 8.3% in the same period of the previous year. The Net Income margin also improved to 7.5% from 6.1%, an improvement of approximately 1.5pt. The gross profit margin improved to 18.8% from 16.6% in the same period of the previous year, but remains below 20%, indicating relatively high sensitivity to cost increases such as personnel expenses and food costs.【Cash Flow Quality】Accounts receivable were ¥40.0B, up 6.3% YoY, below the 11.8% increase in Revenue. At least from the perspective of accounts receivable, there are limited signs of deterioration in collections. However, figures for Operating, Investing, and Financing Cash Flows have not been disclosed, and the degree to which earnings have been converted into cash cannot be confirmed from the available data.【Investment Efficiency】Annualized ROE was 15.8%, consisting of a Net Income margin of 7.5%, total asset turnover of 0.83x, and financial leverage of 2.53x.【Financial Soundness】The Equity Ratio was 39.5%, generally unchanged from 39.4% in the same period of the previous year. The current ratio was 87.1%, below 100%, with current liabilities of ¥255.0B exceeding current assets of ¥222.1B. Short-term borrowings were ¥73.8B, up 27.5% YoY, indicating a shift toward shorter-term financing, while interest coverage remained robust at 38.3x.

Cash Flow Analysis

As the disclosed information does not include figures from the statement of cash flows, fund movements are analyzed based on changes in the balance sheet. Cash and deposits were ¥75.0B, down ¥16.5B YoY, while short-term borrowings increased by ¥15.9B over the same period. This suggests the possibility of fund requirements for facility investments, working capital, debt repayments, and other uses of funds. Property, plant and equipment increased by ¥18.9B YoY, of which land increased by ¥13.3B, indicating progress in the acquisition of facility-related assets. The combined balance of long-term borrowings due for repayment within one year and long-term borrowings decreased from the same period of the previous year, suggesting that a portion of long-term funding shifted to short-term funding.

Quality of Earnings

Against Operating Income of ¥36.0B, Ordinary Income was ¥38.1B, with net non-operating income and expenses contributing ¥2.0B to the increase. Non-operating income of ¥3.0B represented only 0.9% of Revenue, but its main component was subsidy income of ¥1.9B, indicating a certain degree of reliance on income outside the core business. The ¥12.4B difference between Profit Before Tax of ¥38.0B and Net Income of ¥25.6B was primarily attributable to the recognition of corporate income taxes and other taxes, while the impact of extraordinary income and losses—a ¥0.02B loss on disposal of fixed assets only—was immaterial. Comprehensive income was ¥26.6B, with only a small difference from Net Income of ¥25.6B, and no significant fluctuations attributable to other comprehensive income, such as valuation differences on securities, were observed. Overall, the increase in earnings for the current period was based on recurring factors—operating leverage and improved profitability in the Care Services Business—with limited reliance on temporary factors.

Performance Forecast and Guidance

The cumulative Q3 progress rates against the full-year forecast were 69.8% for Revenue, 80.8% for Operating Income, 82.5% for Ordinary Income, and 82.8% for Net Income. Compared with the standard progress rate of 75%, Revenue was 5.2pt below, while each profit item was 5.8–7.8pt above; none represented a significant deviation. To achieve the full-year forecast, the Company needs Revenue of ¥146.9B and Operating Income of ¥8.6B in Q4. The implied Q4 Operating Income margin is approximately 5.8%, below the 10.6% recorded for cumulative Q3, indicating a conservative plan. The Company has not revised its performance or dividend forecasts from the most recently announced forecasts.

Shareholder Returns

The dividend payable at the end of Q2 was ¥20.00 per share, of which ¥3.00 was a commemorative dividend marking the 20th anniversary of the opening of the facilities. The full-year dividend forecast is ¥37.00 per share. Based on forecast full-year Net Income of ¥30.9B and estimated total dividends of approximately ¥12.1B calculated using the average number of shares outstanding during the period, the forecast Payout Ratio is approximately 39.1%. This Payout Ratio is calculated solely on the basis of dividends. As there is no information regarding share buybacks, the Total Return Ratio has not been calculated. The forecast Payout Ratio is below 60%, indicating that the dividend burden relative to accounting profit is within a certain range. However, as the dividend includes a commemorative dividend, the sustainability of the regular dividend requires confirmation through future disclosures.

Risk Factors

1. Liquidity and Refinancing Risk: The current ratio is 87.1%, with current liabilities of ¥255.0B exceeding current assets of ¥222.1B. Short-term borrowings increased to ¥73.8B, up +27.5% YoY, indicating a shift toward shorter-term financing and heightened sensitivity to refinancing conditions and changes in the financial environment.

2. Cost Inflation Risk: Although the gross profit margin improved from the same period of the previous year to 18.8%, it remains below 20%. The business structure is therefore susceptible to margin pressure if costs increase, including costs associated with shortages of care personnel, wage inflation, food expenses, and utility expenses.

3. Business Concentration Risk: The Care Services Business accounts for 99.3% of segment profit, while Other Businesses recorded a 0.2% decline in external Revenue and an 11.8% decline in segment profit YoY. The benefits of revenue diversification are currently limited. Fluctuations in the utilization rate and personnel availability of the Care Services Business are difficult to absorb through other businesses.

Industry Benchmark (For Reference; Based on Company Research)

Profitability and Returns

The Company's Operating Income margin and Net Income margin both exceed the industry median, indicating that its profitability is relatively strong within the industry.

Growth and Capital Efficiency

The Revenue growth rate also exceeds the industry median, but does not reach the IQR upper bound of 19.9%, placing the Company at a mid-to-slightly-upper level of growth within the industry.

※Source: Based on Company research

Key Points from the Earnings

1. Operating Income increased 43.9% against an 11.8% increase in Revenue. As demonstrated by the improvement in the Care Services Business segment profit margin from 11.8% to 14.0%, improved profitability in addition to revenue growth supported the earnings increase in this period.

2. The full-year plan assumes a Q4 Operating Income margin of approximately 5.8%, below the 10.6% recorded for cumulative Q3. The fact that the improvement in cumulative Q3 profitability is not assumed to continue at the same level through the full year is a point that should be monitored in future disclosures.

3. The current ratio of 87.1% and the 27.5% increase in short-term borrowings represent a financial structural characteristic involving a shift toward shorter-term financing, separate from the favorable profit and loss trends.

Theoretical Share Price (Reference Value)

Sensitivity: ¥741–¥784 at ±1% for the cost of equity, and ¥759–¥765 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing gap relative to 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 value based solely on publicly disclosed data; it is not a forecast of the market share price or a recommendation of any specific investment action, and 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 available earnings data. Investment decisions should be made at your own responsibility, after consulting a professional as necessary.

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