MIDAC HOLDINGS CO.,LTD. FY2027 Q1 Earnings Report

Quick View

Executive Summary

FY2027 Q1 resulted in higher revenue and earnings, with expanded operations in the core waste disposal business driving performance. Revenue was ¥32.8B (¥27.0B in the previous year, YoY +21.3%), Operating Income was ¥13.6B (¥11.5B in the previous year, YoY +18.2%), Ordinary Income was ¥13.1B (¥11.2B in the previous year, YoY +17.0%), and Net Income (net income attributable to owners of the parent) was ¥8.0B (¥7.0B in the previous year, YoY +14.2%). Although both revenue and earnings increased year on year, the higher effective tax rate (39.0%) restrained Net Income growth relative to Operating Income growth.

Factors Affecting Results

【Revenue】Revenue was ¥32.8B (YoY +21.3%). By segment, waste disposal grew to ¥29.0B (85.8% of total, YoY +27.7%), with the core business driving overall growth. Collection and transportation declined to ¥4.3B (YoY -8.6%), while brokerage and management posted modest growth to ¥0.5B (YoY +6.1%). Revenue sources remain concentrated in waste disposal.

【Profit and Loss】Operating Income was ¥13.6B (YoY +18.2%), and the Operating Income margin remained high at 41.5%, although it declined by approximately 1.1pt from 42.6% in the previous year. The gross profit margin improved to 62.6%, but higher SG&A expenses slightly weighed on the Operating Income margin. Ordinary Income was ¥13.1B (YoY +17.0%), mainly because interest expense increased from ¥0.33B to ¥0.59B, resulting in higher non-operating expenses. Net Income was ¥8.0B (YoY +14.2%), below the growth rate of Ordinary Income due to the burden of the 39.0% effective tax rate. Revenue and earnings both increased.

Segment Analysis

Waste disposal generated Revenue of ¥29.0B (YoY +27.7%) and Operating Income of ¥15.8B (YoY +16.0%), with a margin of 54.4%, making it the highest-profitability core business and the primary driver of consolidated earnings growth. Collection and transportation recorded lower Revenue of ¥4.3B (YoY -8.6%), but Operating Income improved to ¥1.3B (YoY +27.0%) and the margin improved to 30.2%, apparently benefiting from project selection and efficiency improvements. Brokerage and management posted modest Revenue growth to ¥0.5B (YoY +6.1%), but Operating Income declined to ¥0.2B (YoY -17.9%), with its margin also decreasing. Corporate expense adjustments were △¥3.5B, reconciling with consolidated Operating Income of ¥13.6B. The company relies on waste disposal for more than 85% of both Revenue and earnings, indicating a high degree of business portfolio concentration.

Key Financial Metrics

【Profitability】The Operating Income margin of 41.5% and Net Income margin of 24.3% both declined slightly from the previous year but remained at high levels. The gross profit margin improved to 62.6%, while the SG&A expense ratio declined to 21.1% (23.3% in the previous year), indicating improved cost efficiency.【Cash Quality】Cash and deposits were ¥56.9B and accounted for a significant proportion of current assets of ¥78.8B, while investment securities increased to ¥7.6B.【Investment Efficiency】ROE was 4.3% and the Equity Ratio was 45.7%; the low total asset turnover ratio is constraining capital efficiency.【Financial Soundness】Against fixed liabilities of ¥150.6B, including long-term borrowings of ¥90.6B, the Equity Ratio was 45.7%, indicating that the capital base maintains a certain level of stability.

Cash Flow Analysis

As the Company has not provided detailed disclosure of its cash flow statement in this earnings report, cash flow trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥56.9B, down from ¥65.0B in the previous year. This was attributable to a substantial increase in investment securities to ¥7.6B (¥2.6B in the previous year) and an increase in short-term borrowings to ¥35.0B (¥25.0B in the previous year). Long-term borrowings decreased slightly to ¥90.6B, indicating a modest shift toward shorter-term interest-bearing debt. Accounts receivable and notes receivable were ¥12.7B, slightly down from ¥13.0B in the previous year, with no significant change in collection conditions. Fixed assets increased to ¥321.8B, indicating continued investment in tangible fixed assets, including construction in progress, and suggesting that the Company is in an investment-led phase.

Earnings Quality

Current-period earnings arose from recurring business activities, and the impact of temporary factors was limited. Non-operating income was ¥0.1B, equivalent to approximately 0.02% of Revenue, indicating an extremely low degree of dependence. Non-operating expenses were ¥0.6B, most of which consisted of interest expense, increasing from ¥0.3B in the previous year in line with the increase in interest-bearing debt. No major temporary items equivalent to extraordinary gains or losses were identified. The difference between Ordinary Income of ¥13.1B and Net Income of ¥8.0B was primarily attributable to income taxes of ¥5.1B (effective tax rate of 39.0%). Comprehensive income was ¥7.9B, almost in line with Net Income of ¥8.0B. The impact of valuation differences on securities was minor, the divergence from Net Income was limited, and earnings quality was stable.

Earnings Forecast and Guidance

The Q1 progress rates against the full-year plan were 24.3% for Revenue (¥32.8B/¥134.9B), 24.8% for Operating Income (¥13.6B/¥54.9B), 24.8% for Ordinary Income (¥13.1B/¥52.7B), and 23.8% for Net Income (¥8.0B/¥33.4B). These figures were broadly consistent with even quarterly progress of 25%, and no significant deviation from the full-year plan was observed. There were no revisions to the earnings forecast or dividend forecast during the quarter, suggesting that the Company anticipates progress in line with its plan.

Shareholder Returns

The full-year dividend forecast is ¥20 per share, implying a Payout Ratio of approximately 16.6% based on full-year forecast EPS of ¥120.67. There was no revision to the dividend forecast as of the end of the quarter. On the balance sheet, treasury stock had increased from the previous year, indicating flexibility in capital policy in addition to dividends; however, no specific amount of treasury stock repurchases was disclosed. Given cash and deposits of ¥56.9B and the high Operating Income margin, no significant constraints on securing funds for dividends are apparent.

Risk Factors

1. Segment concentration risk: The Company depends on the waste disposal segment for 85.8% of Revenue and the majority of Operating Income. As a result, changes in operating conditions and disposal unit prices in this business directly affect consolidated performance.

2. Low capital efficiency: ROE is 4.3%, and the ratio of Revenue to total assets is also low. The investment burden associated with fixed assets of ¥321.8B is constraining capital efficiency. The timing of the commencement of operations for tangible fixed assets, including construction in progress, will be key to future efficiency improvements.

3. Rising interest expense: Interest expense increased from ¥0.33B in the previous year to ¥0.59B, while short-term borrowings increased from ¥25.0B to ¥35.0B. If interest-bearing debt continues to increase, sensitivity to changes in the interest-rate environment may rise.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

Profitability metrics are substantially above the industry median, placing the Company among the top performers in the industry.

Growth and Capital Efficiency

Revenue growth is also expanding at a pace above the industry median.

※Source: Compiled by the Company

Key Takeaways from the Earnings Report

1. Although the Operating Income margin of 41.5% and Net Income margin of 24.3% declined slightly from the previous year, the Company maintained a high level of profitability within the industry. The more efficient cost structure indicated by the improvement in the gross profit margin and decline in the SG&A expense ratio provides a foundation supporting higher revenue and earnings.

2. The high degree of dependence on the waste disposal segment (85.8% of Revenue) is the primary driver of earnings growth, but from the perspective of business diversification, it should be noted as a concentration risk in the earnings base.

3. The expansion of fixed asset investment and increase in interest-bearing debt are proceeding simultaneously, indicating that the Company is in an investment-led phase. Future operating conditions will determine the pace of improvements in asset efficiency and capital efficiency, making this a key structural area of focus.

Theoretical Share Price (Reference Value)

Sensitivity: ¥833–¥885 at Cost of Equity ±1%, and ¥853–¥866 at ω ±0.1.

Notes:

• Net assets as of the end of the quarter are 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 forecast or guarantee future share prices.)

---

This report is an earnings analysis document automatically generated by AI through analysis of 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.

---End of Report---