NIHON TRIM CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

In Q1, in addition to increased revenue from the core Water Healthcare Business, progress in SG&A efficiency led to higher revenue and income, with Operating Income growing at a faster pace than Revenue. Revenue was ¥6.73B (+13.1% YoY), Operating Income was ¥0.86B (+48.4%), Ordinary Income was ¥0.92B (+45.8%), and Net Income attributable to owners of the parent was ¥0.53B (+32.7%). The Operating Margin improved to 12.7%, up from 9.7% in the previous year, a +3.0pt improvement, with the decline in the SG&A ratio, in addition to the effect of higher revenue, driving improved profitability.

Factors Affecting Performance

【Revenue】Revenue of ¥6.73B (+13.1%) was driven by the core Water Healthcare Business, which accounts for 88.9% of total revenue and achieved double-digit growth to ¥5.98B (+15.2%). The Medical-Related Business was almost flat at ¥0.75B (-1.0%), making only a limited contribution to overall growth.

【Profit and Loss】The gross profit margin declined to 67.3% from 67.99% in the previous year, a decrease of -0.7pt, suggesting the impact of product mix or higher costs. Meanwhile, the SG&A ratio improved to 54.6% from 58.3%, a -3.7pt improvement. This SG&A efficiency was the primary factor behind the +3.0pt improvement in the Operating Margin, from 9.7% to 12.7%. Ordinary Income was approximately balanced, with non-operating income of ¥0.07B and non-operating expenses of ¥0.01B. Extraordinary items were also immaterial, consisting only of extraordinary losses of ¥0.001B, indicating that the impact of temporary factors was limited. Net Income attributable to owners of the parent of ¥0.53B was reduced from Ordinary Income of ¥0.92B by the effective tax rate of 30.2% and Net Income attributable to non-controlling interests of ¥0.11B. In conclusion, the Company achieved higher revenue and income.

Segment Analysis

The Water Healthcare Business is the core business, generating approximately 92% of consolidated profit, with Revenue of ¥5.98B (+15.2%), Operating Income of ¥0.79B (+43.5%), and a profit margin of 13.1%, up +2.6pt from 10.5% in the previous year. Revenue and profitability improved simultaneously. The Medical-Related Business posted a slight decline in Revenue to ¥0.75B (-1.0%), but Operating Income rose substantially to ¥0.07B (+144.7%), with the profit margin improving to 9.2% from 3.7% in the previous year, a +5.5pt improvement. Profit margins increased year on year in both segments, indicating qualitative improvement in the earnings structure.

Key Financial Indicators

【Profitability】The Operating Margin was 12.7%, improving by +3.0pt from 9.7% in the previous year. The Net Profit Margin based on income attributable to owners of the parent also improved to 7.9%, up +1.2pt from 6.7% in the previous year. 【Cash Flow Quality】Comprehensive Income was ¥0.64B, almost equal to Consolidated Net Income, including the portion attributable to non-controlling interests, of ¥0.64B. Changes in other comprehensive income were limited, at approximately ¥0.01B in foreign currency translation adjustments, indicating good earnings quality. 【Investment Efficiency】ROE was 2.5% for the quarter, before annualization. Comparison with full-year results is necessary when evaluating the level of capital efficiency. 【Financial Soundness】The Equity Ratio remained high at 68.4%, down -2.3pt from approximately 70.7% in the previous year. Against Cash and Deposits of ¥14.04B, Long-Term Borrowings were limited to ¥1.00B, indicating that the financial foundation remains strong.

Cash Flow Analysis

Cash and Deposits remained almost flat at ¥14.04B, compared with ¥14.21B in the same period of the previous year (-1.2%). Accounts Receivable of ¥7.56B (+6.1%) and inventories of products, raw materials, and other items of ¥1.80B (+3.6%) both increased at rates below the +13.1% growth in Revenue. The restrained expansion of working capital relative to revenue growth can be viewed positively from the perspective of funding efficiency. Meanwhile, Accounts Payable increased significantly to ¥0.93B (+50.2%), indicating increased utilization of payment terms with suppliers. Retained Earnings included in Net Assets declined to ¥24.83B from ¥25.35B in the previous year, likely due to dividend payments exceeding the quarterly Net Income attributable to owners of the parent of ¥0.53B. As a result, equity attributable to owners of the parent declined from the previous year, and Book Value Per Share (BPS) also decreased to ¥3,125.38 from ¥3,193.56 in the previous year.

Earnings Quality

Non-operating income was small at ¥0.07B, approximately 1.0% of Revenue, and consisted mainly of interest and dividend income, indicating a high degree of reliance on the core business. Extraordinary items were extremely limited, consisting only of extraordinary losses of ¥0.001B, so the impact of temporary factors on profit was immaterial. In terms of the tax burden, the effective tax rate was 30.2% (¥0.28B in income taxes and other taxes ÷ ¥0.91B in profit before tax), while Net Income attributable to non-controlling interests of ¥0.11B further reduced final profit. Against Ordinary Income of ¥0.92B, Consolidated Net Income, including the portion attributable to non-controlling interests, was ¥0.64B, while Net Income attributable to owners of the parent was ¥0.53B. The primary causes of the gap were tax expenses and non-controlling interests. Comprehensive Income of ¥0.64B was almost equal to Consolidated Net Income of ¥0.64B, and changes in valuation differences on available-for-sale securities and retirement benefit adjustments were immaterial. Accordingly, earnings quality, including accrual factors, is considered good.

Earnings Forecast and Guidance

Against the full-year Company plan of Revenue of ¥27.00B, Operating Income of ¥3.30B, Ordinary Income of ¥3.50B, and EPS of ¥292.06, Q1 progress rates were 24.9% for Revenue, 25.9% for Operating Income, 26.1% for Ordinary Income, and 24.2% for Net Income attributable to owners of the parent, against the full-year plan of ¥2.20B. These figures were broadly within the 25% range indicative of even quarterly progress, with progress in Operating Income and Ordinary Income slightly ahead of schedule. No revisions were made to the earnings forecast or dividend forecast during the quarter, and no significant divergence from the full-year plan is currently apparent.

Shareholder Returns

The full-year dividend forecast is ¥130.00, with no revision to the dividend forecast as of the end of the quarter. Based on the full-year EPS forecast of ¥292.06, the Payout Ratio is approximately 44.5% (¥130 ÷ ¥292.06). Based on an estimated effective share count of approximately 7.436 million shares after deducting treasury shares from issued shares, total annual dividends are estimated at approximately ¥0.97B. Given Cash and Deposits of ¥14.04B and low interest-bearing debt, including Long-Term Borrowings of ¥1.00B, there are no significant constraints on securing dividend funding from internal resources.

Risk Factors

1. Segment concentration risk: The Water Healthcare Business accounts for 88.9% of Revenue and 91.9% of segment profit. Changes in demand trends or the competitive environment in this business could therefore have a significant impact on consolidated performance.

2. Gross margin contraction trend: The gross profit margin declined to 67.3% from 67.99% in the previous year, a decrease of -0.7pt. If changes in product mix or higher costs continue, the scope for offsetting these effects through SG&A efficiency may become limited.

3. Compression of final profit due to the tax burden and non-controlling interests: In addition to the effective tax rate of 30.2%, Net Income attributable to non-controlling interests amounted to ¥0.11B. Net Income attributable to owners of the parent of ¥0.53B was therefore significantly below Ordinary Income of ¥0.92B. Changes in the tax rate or the ownership composition of consolidated subsidiaries could become a source of volatility in final profit.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The Company's Operating Margin and Net Profit Margin both exceed the industry median and are positioned in the upper range.

Growth and Capital Efficiency

The Revenue growth rate is well above the industry median and is in the upper range of growth rates.

※Source: Compiled by the Company

Key Points in the Earnings Results

1. The background to the improvement in the Operating Margin from 9.7% in the previous year to 12.7%, a +3.0pt improvement, was the -3.7pt decline in the SG&A ratio. Whether this improvement reflects temporary cost containment or structural efficiency gains will need to be confirmed through performance trends in subsequent quarters.

2. While the growth rates of Accounts Receivable and inventories (+6.1% and +3.6%, respectively) were below the +13.1% Revenue growth rate, Accounts Payable increased by +50.2%. Funding efficiency in terms of working capital has therefore been improving from the previous year.

3. Progress against the full-year plan was broadly even at 24.9% for Revenue, 25.9% for Operating Income, 26.1% for Ordinary Income, and 24.2% for Net Income. Both the earnings forecast and dividend forecast remain unchanged.

Theoretical Share Price (Reference Value)

This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade period). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥3,067–¥3,243 at ±1% for the cost of equity, and ¥3,152–¥3,154 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used; there is a timing difference relative to the full-year forecast.

(Calculation model: Residual income model / Interest rate reference month: 2026-07 / This figure does not predict or guarantee future share prices)

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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 disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting with professionals as necessary.

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