| Metric | Current Period | Previous Year Period | YoY |
|---|---|---|---|
| Revenue | ¥11.77B | ¥11.48B | +2.5% |
| Operating Income | ¥7.72B | ¥7.71B | +0.1% |
| Ordinary Income | ¥9.33B | ¥8.65B | +7.9% |
| Net Income | ¥6.56B | ¥6.00B | +9.4% |
| ROE | 2.7% | 2.4% | - |
Although operating income remained almost unchanged from the previous year, the Company achieved higher ordinary income and net income, driven by increases in non-operating revenue, including interest income and equity in earnings of affiliates. Revenue was ¥11.77B (+2.5% YoY), operating income was ¥7.72B (+0.1%), ordinary income was ¥9.33B (+7.9%), and net income was ¥6.56B (+9.4%). EPS increased 10.9% to ¥49.39 from ¥44.53 in the previous year. The key feature of these results is that financial income drove profit growth while core operating growth remained modest.
【Revenue】The Company operates the credit guarantee business as a single reportable segment and does not disclose a segment-by-segment breakdown. Revenue (including guarantee fee income and other items) increased 2.5% YoY to ¥11.77B.
【Profit and Loss】Operating income was ¥7.72B, essentially flat at +0.1% YoY. The operating margin declined to 65.6% from 67.2% in the previous year, down 1.6pt, suggesting that selling, general and administrative expenses may have increased at a faster pace than revenue growth (+2.5%). Meanwhile, non-operating income increased substantially to ¥1.85B from ¥1.17B in the previous year, with interest income of ¥1.41B (¥1.07B in the previous year) and equity in earnings of affiliates of ¥0.27B contributing to ordinary income. As a result, ordinary income increased 7.9% to ¥9.33B, and the ordinary income margin improved to 79.3% from 75.4%, up 3.9pt. Extraordinary income of ¥0.16B (gain on sales of investment securities) was a temporary factor with a limited impact. After deducting income taxes and other taxes of ¥2.93B (effective tax rate: 30.8%) from pretax income of ¥9.50B, net income increased 9.4% to ¥6.56B, and the net margin improved to 55.7% from 52.3%, up 3.4pt. In conclusion, operating performance was flat, but the Company recorded higher revenue and profit supported by non-operating income.
【Profitability】The operating margin was 65.6%, down 1.6pt from 67.2% in the previous year; the ordinary income margin was 79.3%, up 3.9pt from 75.4%; and the net margin was 55.7%, up 3.4pt from 52.3%. While operating-level margins deteriorated modestly, non-operating income lifted overall profitability.【Cash Flow Quality】Non-operating income of ¥1.85B represented 15.7% of revenue. The primary components were interest income of ¥1.41B, dividend income of ¥0.11B, and equity in earnings of affiliates of ¥0.27B, indicating a fairly high degree of dependence on financial income.【Investment Efficiency】ROE was 2.7%. As investment securities account for 64.6% of total assets, the Company has an asset-intensive structure, and total asset turnover has remained low.【Financial Soundness】The equity ratio was 49.2%, up 0.3pt from 48.9% in the previous year. Current assets were ¥123.02B against current liabilities of ¥35.80B, resulting in a current ratio of 343.7%. Interest-bearing debt consisted solely of ¥30.0B in long-term borrowings, indicating a conservative capital structure.
As the Company does not disclose a cash flow statement, funding trends are assessed based on changes in the balance sheet. Cash and deposits decreased 4.5% to ¥69.29B from ¥72.55B in the previous year, a decrease of ¥3.25B, while investment securities increased 3.2% to ¥319.02B from ¥309.15B, an increase of ¥9.88B. This suggests that funds shifted from cash and deposits to securities. Current liabilities decreased ¥5.24B to ¥35.80B from ¥41.04B in the previous year, including a ¥5.15B decrease in income taxes payable due to progress in tax payments. Total assets decreased modestly by 1.4% to ¥493.71B from ¥500.83B in the previous year. However, the current ratio remained high at 343.7%, and no concerns were identified regarding short-term liquidity.
Recurring earnings are generated through a combination of core credit guarantee-related revenue and non-operating financial income, with the latter driving ordinary income. Total non-operating income of ¥1.85B represented 15.7% of revenue, exceeding a generally accepted threshold. Its components included interest income of ¥1.41B, dividend income of ¥0.11B, and equity in earnings of affiliates of ¥0.27B. Extraordinary income of ¥0.16B (gain on sales of investment securities) was a temporary factor with low repeatability. The effective tax rate on income taxes and other taxes of ¥2.93B against pretax income of ¥9.50B was 30.8%, stable with no significant change from the previous year. Comprehensive income was ¥7.81B, ¥1.25B higher than net income of ¥6.56B. This difference was attributable to a ¥1.25B increase in valuation difference on securities, consisting primarily of unrealized valuation gains. Although operating-level profit growth was modest, the increasing dependence on non-operating income and valuation gains is an important consideration in assessing earnings quality.
Progress against the full-year plan was 19.4% for revenue (¥11.77B / ¥60.60B), 18.4% for operating income (¥7.72B / ¥42.00B), 19.8% for ordinary income (¥9.33B / ¥47.20B), and 20.1% for net income (¥6.56B / ¥32.70B). All were below the simple quarterly allocation of 25%, and as of Q1, no revisions had been made to the earnings forecast or dividend forecast.
Under the Company’s plan, the annual dividend forecast is ¥123 and the EPS forecast is ¥246.12, resulting in a payout ratio of approximately 50.0% (¥123 / ¥246.12). The Company holds 4,882 thousand treasury shares, equivalent to 3.5% of the 137,744 thousand issued shares. With an equity ratio of 49.2% and a current ratio of 343.7%, the financial foundation is robust, and constraints on dividend funding are considered limited.
Credit and Economic Cycle Risk: Given the nature of the credit guarantee business, an increase in guarantee payments (subrogation payments) during an economic downturn could pressure earnings. Total provisions have remained at ¥1.07B, and changes in the credit environment could affect core earnings.
Dependence on Financial Income Risk: The increase in ordinary income depends substantially on non-operating income, which represents 15.7% of revenue. Interest income of ¥1.41B and equity in earnings of affiliates of ¥0.27B are susceptible to fluctuations in interest rates and market conditions.
Securities Price Volatility Risk: Investment securities of ¥319.02B account for 64.6% of total assets, while valuation difference on securities increased to +¥1.25B from +¥0.30B in the previous year. If market conditions fluctuate, a reversal of these valuation gains could affect comprehensive income.
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 65.6% | 5.0% (-0.8%–23.5%) | +60.6pt |
| Net Margin | 55.7% | 3.4% (-1.2%–24.6%) | +52.4pt |
Due to the high-margin structure unique to the credit guarantee business, the Company’s profitability metrics are significantly above the industry median.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 2.5% | 9.3% (2.0%–17.3%) | -6.8pt |
The revenue growth rate was below the industry median, indicating relatively modest top-line growth.
※Source: Compiled by the Company
While operating income was almost flat (+0.1%), ordinary income and net income increased in the 7–9% range due to higher non-operating income. A key characteristic is the high dependence of profit growth on financial income.
The operating margin declined to 65.6% from 67.2% in the previous year, down 1.6pt, confirming that the pace of core cost increases exceeded revenue growth.
The financial foundation is robust, with an equity ratio of 49.2% and a current ratio of 343.7%. Progress against the earnings forecast remained in the 19–20% range, representing a modest pace for Q1.
This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary 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, and you should consult a professional adviser as necessary.
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