Amvis Holdings (7071) FY2026 Q1 Earnings Report

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Executive Summary

The quarter was characterized by higher revenue but lower earnings. While revenue expansion continued, the key point was the decline in profit margins due to rising costs. Revenue was ¥12.94B (¥11.77B in the previous year, YoY +9.9%), Operating Income was ¥1.60B (¥2.01B in the previous year, YoY -20.5%), Ordinary Income was ¥1.58B (¥1.91B in the previous year, YoY -17.4%), and Net Income was ¥1.08B (¥1.35B in the previous year, YoY -19.7%). The primary cause of margin deterioration was the increase in cost of sales at a pace exceeding revenue growth, while the SG&A ratio improved.

Factors Affecting Business Results

【Revenue】Revenue increased 9.9% YoY to ¥12.94B. The core Ishinkan Business drove growth with revenue of ¥12.74B (+9.2% YoY), accounting for 98.5% of consolidated revenue. Comprehensive Medical Support showed strong growth of 88.6% YoY to ¥0.20B, but remains small in scale.

【Profit and Loss】Operating Income declined 20.5% YoY to ¥1.60B, Ordinary Income declined 17.4% YoY to ¥1.58B, and Net Income declined 19.7% YoY to ¥1.08B. Gross profit margin fell 555bp to 28.7% from 34.2% in the previous year, which was the primary cause of margin deterioration. The SG&A ratio improved to 16.3% from 17.1%, indicating that cost control is functioning effectively. The Ishinkan segment profit margin declined to 12.6% from the equivalent of 17.2% in the previous year, becoming the main driver of the deterioration in consolidated earnings. Comprehensive Medical Support recorded a segment loss of ¥0.01B, and upfront costs associated with business expansion weighed on consolidated earnings. In conclusion, the quarter saw higher revenue but lower earnings.

Segment Analysis

Ishinkan generated revenue of ¥12.74B (+9.2% YoY), segment profit of ¥1.61B, and a profit margin of 12.6%, making it the substantive source of consolidated earnings, with a scale exceeding consolidated Operating Income of ¥1.60B. Comprehensive Medical Support achieved high growth, with revenue of ¥0.20B (+88.6% YoY), but recorded a segment loss of ¥0.01B, and remained in the red. There is a substantial profitability gap between the two businesses; the decline in Ishinkan’s profit margin and the improvement in Comprehensive Medical Support’s profit and loss will be key inflection points for future consolidated performance.

Key Financial Indicators

【Profitability】The Operating Income margin was 12.3%, down 471bp from 17.1% in the previous year, while the Net Income margin narrowed to 8.4% from 11.4%, a decline of 307bp. The decline in the gross profit margin to 28.7% from 34.2% was the initial driver, and could not be offset by the improvement in the SG&A ratio to 16.3% from 17.1%.【Cash Flow Quality】Non-operating income was ¥0.14B, equivalent to only 1.1% of revenue. It included ¥0.04B in subsidy income and ¥0.05B in miscellaneous income, but its impact on Ordinary Income was limited. The ¥0.49B difference between Ordinary Income and Net Income was primarily attributable to income taxes and other taxes (effective tax rate: 31.3%), and no distortion from extraordinary gains or losses was observed.【Investment Efficiency】Annualized ROE was 11.7%, supported by the combination of the Net Income margin, total asset turnover, and financial leverage. Given that tangible fixed assets account for 69.6% of total assets, asset turnover is low, creating a structure in which leverage supplements ROE.【Financial Soundness】The Equity Ratio improved to 44.2% from 43.0% in the previous year. The current ratio was 109.7%, exceeding 100%; however, it included short-term borrowings of ¥7.44B and current portion of long-term borrowings of ¥4.93B, so the importance of short-term funding management remains.

Cash Flow Analysis

As detailed disclosure of the cash flow statement is not available, fund movements are reviewed based on changes in the balance sheet. Cash and deposits totaled ¥9.16B, down ¥1.67B from ¥10.83B in the previous year. Interest-bearing debt consisted of short-term borrowings of ¥7.44B, current portion of long-term borrowings of ¥4.93B, and long-term borrowings of ¥18.86B, for a total of ¥26.30B. Accounts receivable increased to ¥9.59B, suggesting that a lengthening collection cycle may be affecting capital efficiency. Construction in progress increased to ¥3.23B, indicating that investment in facility expansion is continuing. Overall, the data indicate that funding efficiency is becoming tighter due to continued investment and the maintenance of borrowings.

Quality of Earnings

The decrease from Operating Income of ¥1.597B to Ordinary Income of ¥1.576B was limited to ¥0.021B, indicating that the impact of non-operating income and expenses was small. Non-operating income of ¥0.138B represented 1.1% of revenue and included subsidy income of ¥0.042B and miscellaneous income of ¥0.045B; neither was sufficient in scale to supplement the core business. No impact from extraordinary gains or losses on profit before tax was observed, and the ¥0.495B difference between Ordinary Income and Net Income was attributable to income taxes and other taxes of ¥0.494B. The primary fluctuation in profit and loss resulted from the underlying business factor of a higher cost-of-sales ratio, while distortion from temporary factors was limited.

Earnings Forecast and Guidance

Progress against the full-year forecast was 25.0% for revenue (standard), 42.0% for Operating Income, 47.8% for Ordinary Income, and 51.5% for Net Income, all substantially exceeding the standard progress level of 25%. However, the company plans for full-year declines of 38.3% YoY in Operating Income and 48.0% YoY in Ordinary Income, suggesting that the forecast assumes profit levels in subsequent quarters will be lower than in Q1. Therefore, it would not be appropriate to judge the potential for full-year outperformance based solely on the high Q1 progress ratios; monitoring the cost ratio and the trend in Ishinkan’s profit margin is necessary. There were no revisions to either the full-year earnings forecast or the dividend forecast during the quarter.

Shareholder Returns

The full-year dividend forecast is ¥4.00 per share, implying a forecast Payout Ratio of 18.6% against full-year forecast EPS of ¥21.53. This figure is based solely on dividends and does not represent the Total Return Ratio, which includes share repurchases. The Payout Ratio is well below the 60% cautionary level, and dividend capacity is also secured based on retained earnings of ¥25.88B and net assets of ¥36.83B. There was no revision to the dividend forecast during the quarter.

Risk Factors

1. Business concentration risk: Ishinkan accounts for 98.5% of consolidated revenue, while its segment profit margin has declined to 12.6% (a deterioration of approximately 454bp YoY). The company has a high dependence on a single business, and operating conditions and cost trends in this business directly affect consolidated performance.

2. Accounts receivable collection cycle: Accounts receivable totaled ¥9.59B, accounting for 46.9% of current assets, and DSO was calculated at 68 days. A lengthening collection period accompanying revenue growth could affect short-term funding efficiency.

3. Profitability of new businesses: While Comprehensive Medical Support revenue grew 88.6% YoY, the business recorded a segment loss of ¥0.01B. The timing of monetization during the business expansion phase remains uncertain.

Industry Benchmark (For Reference; Based on Company Research)

Industry Benchmark (it_telecom)

Profitability and Returns

The Operating Income margin is broadly in line with the industry median, while the Net Income margin is slightly below the median.

Growth and Capital Efficiency

The revenue growth rate is slightly below the industry median and is positioned around the middle of the IQR.

※Source: Based on company research

Key Points in the Financial Results

1. The gross profit margin declined 555bp YoY, while the Operating Income margin declined 471bp. The pace of increase in the cost ratio is the most important observation point for confirming whether profit margins have bottomed.

2. Operating Income progress against the full-year plan was 42.0%, above the standard progress level; however, the company’s full-year plan itself assumes a 38.3% YoY decline in earnings, making it necessary to monitor the degree of margin deterioration in subsequent quarters.

3. Two structural factors—the decline in Ishinkan’s profit margin and the continued losses in Comprehensive Medical Support—are affecting consolidated earnings. Trends in the profit and loss of both businesses will determine the quality of future performance.

Theoretical Share Price (Reference Value)

Sensitivity: ¥331–¥351 at ±1% for the cost of equity, and ¥339–¥341 at ±0.1 for ω.

Notes:

• Since Net Income progress against the full-year forecast (51%) exceeds the standard level (25%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies with leading progress tend to outperform their forecasts; the adjustment may be excessive for businesses with strong seasonality).
• Since forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the end of the quarter are used (there is a timing difference from the full-year forecast).
• Since 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, nor does it predict or guarantee future share prices.)

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This report is automatically generated by AI through analysis of XBRL earnings release data. It does not recommend investment in any specific security. 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 professionals as necessary.

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