QB Net Holdings Co.,Ltd. FY2026 FY Earnings Report

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Executive Summary

The period was characterized by higher revenue but lower earnings, with insufficient pass-through of cost inflation to prices being the primary factor. Revenue increased to ¥271.5B (+6.3% YoY), securing revenue growth, while Operating Income declined to ¥14.9B (-11.4%) and Net Income to ¥8.0B (-21.4%). Both the gross margin of 21.6% (-0.8pt YoY) and the SG&A ratio of 16.0% (+0.2pt YoY) deteriorated, causing the operating margin to narrow to 5.5% from 6.6% in the previous year. In addition to higher finance costs, the decline in Net Income exceeded the decline in Operating Income.

Factors Affecting Performance

【Revenue】Revenue increased to ¥271.5B (+6.3% YoY), apparently maintaining an expansionary trend for six or more consecutive periods. As right-of-use assets increased to ¥82.9B (+16.1% YoY), top-line expansion centered on new store openings is likely progressing.

【Profit and Loss】Cost of sales increased to ¥213.0B (+7.5% YoY), exceeding the revenue growth rate (+6.3%), and the gross margin declined to 21.6% (equivalent to approximately 22.4% in the previous year). SG&A expenses also increased to ¥43.6B (+7.5%), reducing Operating Income to ¥14.9B (-11.4% YoY) and resulting in an operating margin of 5.5% versus 6.6% in the previous year. Finance costs increased to ¥2.65B from ¥2.28B in the previous year, further compressing Profit Before Tax to ¥12.6B (-15.1%) and Net Income to ¥8.0B (-21.4%). In conclusion, this was a case of higher revenue but lower earnings, driven by negative operating leverage in which cost increases exceeded revenue growth.

Key Financial Metrics

【Profitability】The operating margin was 5.5%, down 1.1pt from 6.6% in the previous year, while the net margin was 3.0%, down 1.0pt from 4.0%. The gross margin was 21.6%, representing a decline of approximately 0.8pt from the previous year, while the SG&A ratio increased slightly to 16.0%.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥51.0B, approximately 6.4 times Net Income of ¥8.0B, indicating sound cash support for earnings.【Investment Efficiency】ROE was 5.3%, down 1.8pt from 7.1% in the previous year, while EPS declined to ¥60.22 from ¥77.84. BPS increased to ¥1,141.40 from ¥1,113.9, reflecting the accumulation of net assets.【Financial Soundness】The Equity Ratio was 43.3%, a slight improvement from 43.0% in the previous year. Long-term borrowings declined to ¥74.4B from ¥81.3B, indicating progress in reducing liabilities.

Cash Flow Analysis

Cash flow from operating activities increased to ¥51.0B (+18.7%), compared with ¥43.0B in the previous year, despite the decline in Net Income. The decrease in Profit Before Tax was offset by an increase in depreciation and amortization expense to ¥40.6B from ¥35.7B. Cash flow from investing activities was -¥17.4B, primarily consisting of ¥13.2B in expenditures for the acquisition of property, plant and equipment. Cash flow from financing activities was -¥41.4B, with lease liability repayments of ¥34.1B and dividend payments of ¥4.6B serving as the main outflows. As a result, free cash flow (OCF + investing CF) was ¥33.6B, maintaining a level sufficient to cover capital expenditures and dividends. Cash and cash equivalents at period-end were ¥46.6B, a decrease of ¥6.1B YoY, mainly due to lease-related cash outflows; the business’s underlying cash-generation capacity appears to remain solid.

Earnings Quality

OCF of ¥51.0B substantially exceeded Net Income of ¥8.0B, indicating a small accrual—the difference between earnings and cash flow—and generally good earnings quality. Changes in working capital were limited: accounts receivable +¥0.18B, inventories +¥0.21B, and accounts payable +¥0.24B. No signs of working-capital manipulation aimed at artificially boosting earnings were observed. Meanwhile, comprehensive income was ¥10.4B, exceeding Net Income of ¥8.0B, with the difference primarily attributable to foreign currency translation adjustments for foreign operations of +¥2.23B, indicating a significant impact from temporary and non-recurring foreign-exchange fluctuations. Outside operating activities, finance costs increased to ¥2.65B from ¥2.28B in the previous year. The rising interest burden remains a structural factor pressuring Profit Before Tax and requires ongoing monitoring.

Earnings Forecast and Guidance

For the next period, the company plans Revenue of ¥289.5B (+6.6% versus the current period), Operating Income of ¥17.0B (+13.8%), and Net Income of ¥9.5B (+18.3%). The plan assumes not only revenue growth but also a recovery in the operating margin from the current period’s 5.5%. Achieving this plan will depend on halting the decline in the gross margin and controlling the increase in SG&A expenses, which exceeded revenue growth during the current period. Forecast EPS is ¥69.90, representing an expected increase of approximately 16% from the current-period actual EPS of ¥60.22.

Shareholder Returns

The annual dividend was ¥40 at fiscal year-end, with no interim dividend. The total dividend amount increased to ¥4.61B from ¥3.54B in the previous year, which was effectively a no-dividend year despite a stated payout ratio equivalent to 45%. The Payout Ratio was 66.4% against Net Income of ¥8.0B, representing an increase from the previous year. No share buybacks were conducted during the current period, and dividends remain the primary form of shareholder returns. Free cash flow of ¥33.6B substantially exceeded total dividends of ¥4.61B, and there appears to be no cash flow-related issue with the sustainability of dividends at present.

Risk Factors

1. High goodwill ratio: Goodwill of ¥154.3B was nearly equivalent to net assets of ¥154.5B, representing a ratio of 99.9%, and accounted for 43.2% of total assets. If the KPIs of existing businesses deteriorate in the future, the relative risk of capital impairment through impairment losses is high.

2. Tight short-term liquidity: Current liabilities of ¥67.8B exceeded current assets of ¥62.8B, resulting in a current ratio of approximately 0.93x, below 1x. The primary cause is the repayment burden of current lease liabilities of ¥32.1B, while cash of ¥46.6B and OCF of ¥51.0B provide a buffer.

3. Negative cost leverage: Cost of sales increased by +7.5%, exceeding revenue growth (+6.3%), while SG&A expenses also increased by +7.5%. If structural cost increases in personnel expenses, rent, and other areas continue, margin pressure may persist.

Industry Benchmark (For Reference; Company Analysis)

Industry Benchmark (it_telecom)

Profitability and Returns

Return on Equity, Operating Margin, and Net Margin were all below the industry median, indicating relatively weak profitability within the industry.

Growth and Capital Efficiency

The Revenue Growth Rate was also below the industry median, indicating that top-line expansion is proceeding more slowly than the industry average.

※Source: Company analysis

Key Points from the Earnings Results

1. The higher-revenue, lower-earnings result was driven by negative operating leverage, with the growth rates of cost of sales and SG&A expenses (both +7.5%) exceeding the revenue growth rate (+6.3%). The operating margin declined to 5.5% from 6.6% in the previous year, making improvement in the cost structure a key focus from the next period onward.

2. OCF was ¥51.0B, approximately 6.4 times Net Income of ¥8.0B. In contrast to the decline in earnings, cash-generation capacity was maintained. Free cash flow of ¥33.6B substantially exceeded capital expenditures and dividends, indicating financial stability.

3. The fact that goodwill of ¥154.3B was approximately equal to net assets and that the current ratio was 0.93x, below 1x, are structural balance-sheet characteristics requiring attention. The company’s plan for the next period assumes a recovery in the operating margin, making trends in the gross margin and SG&A ratio decisive factors in achieving the plan.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,010–¥1,067 at ±1% for the cost of equity, and ¥1,035–¥1,040 at ±0.1 for ω.

Notes:

• As forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• The goodwill-to-net-assets ratio is high, and the assumptions would change significantly if impairment were recognized.

(Calculation model: Residual Income Model (Ohlson-type; explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated using only publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, nor does it predict or guarantee future share prices.)

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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 discretion and responsibility, after consulting with a professional as necessary.

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