KYOKUTO KAIHATSU KOGYO CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

Revenue and profit increased, driven by growth in the Special-Purpose Vehicle Business and Environmental Business, while the Company returned to profitability from the net loss recorded in the same period of the previous year due to the recognition of extraordinary losses. Revenue was ¥386.6B (+15.6% YoY), Operating Income was ¥13.4B (+38.2%), Ordinary Income was ¥15.1B (+39.2%), and Net Income attributable to owners of the parent was ¥8.9B (a loss of ¥49.8B in the same period of the previous year). The primary drivers of revenue growth were the continued strong growth of the core Special-Purpose Vehicle Business (83.7% of revenue), up +10.9%, and the Environmental Business (11.0%), up +70.6%. Profit growth reflected improved earnings quality resulting from the absorption of fixed costs accompanying revenue expansion and the absence of the extraordinary losses recorded in the previous year.

Factors Affecting Earnings

【Revenue】Revenue of ¥386.6B increased +15.6% YoY. Revenue from the Special-Purpose Vehicle Business increased by ¥32.4B to ¥323.8B (+10.9%), while the Environmental Business grew substantially by ¥17.7B to ¥42.7B (+70.6%). The Parking Business also contributed to revenue growth, increasing +17.0% to ¥18.1B. The composition remained largely unchanged, with the Special-Purpose Vehicle Business accounting for 83.7% of total revenue, while the rapid expansion of the Environmental Business pushed up the overall revenue growth rate.

【Profit and Loss】Operating Income was ¥13.4B (+38.2% YoY), and the Operating Margin improved to 3.5% from 2.9% in the same period of the previous year. By segment, Operating Income increased +40.0% in the Special-Purpose Vehicle Business and +28.3% in the Environmental Business, with both exceeding their respective revenue growth rates and demonstrating operating leverage. Ordinary Income of ¥15.1B (+39.2% YoY) was boosted by ¥3.95B in non-operating income, including ¥1.22B in foreign exchange gains and ¥2.06B in interest and dividend income. Net Income attributable to owners of the parent of ¥8.9B reflected a return to profitability, as extraordinary losses of ¥59.4B related mainly to investment securities recorded in the same period of the previous year were almost entirely absent in the current period, with only ¥0.05B in extraordinary losses. Revenue and profit increased.

Segment Analysis

The Special-Purpose Vehicle Business generated revenue of ¥324.0B (83.7% of total revenue, +10.9% YoY) and Operating Income of ¥10.8B (+40.0% YoY, 3.3% margin), making it the core contributor to both Company-wide revenue and profit. The Environmental Business generated revenue of ¥42.7B (11.0% of total revenue, +70.6% YoY) and Operating Income of ¥4.0B (+28.3% YoY, 9.4% margin), exhibiting high growth and profitability and serving as the primary pillar of earnings diversification. The Parking Business increased revenue to ¥18.1B (4.7% of total revenue, +17.0% YoY), but Operating Income declined to ¥1.3B (-17.2% YoY, 6.9% margin, compared with 9.8% in the previous year), leaving its margin below those of the other businesses. Beginning in Q1 of the current period, the Leasing Business and other operations previously included in the Parking Business were reclassified to the “Other” category, and the figures for the same period of the previous year have been restated and disclosed under the revised classification. Company-wide expense adjustments were negative ¥3.5B, representing the difference between segment-reported profit of ¥16.1B and consolidated Operating Income of ¥13.4B.

Key Financial Metrics

【Profitability】Operating Margin was 3.5% (2.9% in the same period of the previous year), Ordinary Income Margin was 3.9% (3.2%), and Net Income Margin, based on income attributable to owners of the parent, was 2.3% (negative 14.9%), indicating margin improvement at each stage.【Cash Flow Quality】As data from the Operating Cash Flow statement has not been disclosed, an assessment based on balance sheet movements shows that accounts receivable and notes receivable declined to ¥234.8B, down -35.7% YoY, while cash and deposits decreased to ¥152.4B, down -32.2%. Inventories, consisting of raw materials of ¥130.3B, work in process of ¥182.1B, and finished goods of ¥47.9B, totaling ¥360.3B, increased +12.3% YoY. Funds appear to have shifted from accounts receivable to work in process.【Investment Efficiency】ROE was 0.8% (quarterly result, before annualization), while total assets decreased -5.1% YoY to ¥1930.0B.【Financial Soundness】The Equity Ratio was 58.3% (55.7% in the same period of the previous year), total interest-bearing debt was approximately ¥408.8B, consisting of short-term debt of ¥107.6B, long-term debt of ¥273.2B, bonds of ¥28.0B, and other items, the Interest Coverage Ratio was 7.3x (EBIT of ¥13.4B ÷ interest expense of ¥1.8B), and the Current Ratio was 224.4%, indicating that the financial foundation remains solid.

Cash Flow Analysis

As data from the Operating, Investing, and Financing Cash Flow statements has not been disclosed, cash flow trends are analyzed based on changes in the balance sheet. Cash and deposits decreased by ¥72.6B (-32.2%) from the end of the same period of the previous year to ¥152.4B, while accounts receivable and notes receivable decreased by ¥130.1B (-35.7%) to ¥234.8B, indicating progress in collections. Meanwhile, inventories increased +12.3% YoY to ¥360.3B, comprising raw materials of ¥130.3B, work in process of ¥182.1B, and finished goods of ¥47.9B, with work in process accounting for more than half of total inventories. As made-to-order production progresses in the Special-Purpose Vehicle Business, working capital appears to be shifting from accounts receivable to work in process, indicating that future cash-generation capacity will depend on the progress of project deliveries.

Earnings Quality

Against Ordinary Income of ¥15.1B, Net Income attributable to owners of the parent was ¥8.9B, with the primary difference attributable to income taxes of ¥6.2B (effective tax rate of 41.3%). In the same period of the previous year, the Company recorded extraordinary income, including a gain on the sale of investment securities of ¥4.0B, but also recognized extraordinary losses of ¥59.4B, resulting in a net loss. In the current period, extraordinary gains and losses were almost entirely absent, with only ¥0.05B in extraordinary losses, indicating a return to recurring earnings levels. Non-operating income of ¥3.95B (1.0% of revenue) consisted mainly of foreign exchange gains of ¥1.22B and interest and dividend income of ¥2.06B, and was limited in amount. Comprehensive Income was ¥18.3B, exceeding Net Income of ¥8.9B. The difference primarily reflected foreign currency translation adjustments of ¥4.9B and valuation differences on securities of ¥4.8B, among other changes in the valuation of other securities and foreign exchange items. The divergence from Net Income was attributable to these valuation-related items.

Earnings Forecast and Guidance

Progress against the full-year plan in Q1 was 21.5% for Revenue (¥386.6B/¥1800.0B), 15.7% for Operating Income (¥13.4B/¥85.0B), 19.2% for Ordinary Income (¥15.1B/¥79.0B), and 17.7% for Net Income (¥8.9B/¥50.0B). Although all were below the simple 25% benchmark, the full-year plan anticipates declines in Operating Income (YoY-4.3%) and Ordinary Income (YoY-16.6%), which differs in direction from the substantial profit growth recorded in Q1. No revisions were made to the earnings or dividend forecasts during the current quarter.

Shareholder Returns

The annual dividend forecast is ¥120, representing an increase from the previous year's actual dividend of ¥70. The Payout Ratio against forecast EPS of ¥129.85 is approximately 92.4% (also at a similar level based on the full-year Net Income forecast of ¥50.0B), indicating a high relative level of dividends compared with earnings. Given the financial foundation represented by an Equity Ratio of 58.3% and total interest-bearing debt of approximately ¥408.8B, there is little concern regarding short-term payment capacity. However, the sustainability of the dividend will depend on future trends in Operating Income and cash-generation capacity and therefore requires monitoring. No disclosure regarding share repurchases has been identified.

Risk Factors

1. Business Segment Concentration Risk: The Special-Purpose Vehicle Business accounts for 83.7% of revenue (¥323.8B), indicating a high degree of dependence on a single business. Fluctuations in demand for this business could have a relatively significant impact on Company-wide performance.

2. Working Capital Expansion Risk: Inventories, consisting of raw materials of ¥130.3B, work in process of ¥182.1B, and finished goods of ¥47.9B, totaling ¥360.3B, increased +12.3% YoY. Work in process accounted for more than half of total inventories at ¥182.1B. The timing of cash generation will depend on the progress of made-to-order production.

3. Tax Burden and Foreign Exchange Sensitivity: The effective tax rate is high at 41.3%, resulting in a substantial reduction from Ordinary Income to Net Income. In addition, non-operating income includes foreign exchange gains of ¥1.22B, indicating that foreign exchange fluctuations affect earnings.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Both the Operating Margin and Net Income Margin are below the industry median, indicating that profitability is relatively low within the industry.

Growth and Capital Efficiency

The Revenue Growth Rate exceeds both the industry median and the upper quartile, indicating that top-line growth is high within the industry.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. The details of the revenue and profit growth show that the Environmental Business, with revenue growth of +70.6% YoY and a 9.4% profit margin, has higher profitability than the Special-Purpose Vehicle Business, which has a 3.3% profit margin. Changes in the business mix have therefore contributed to the improvement in the Company-wide margin.

2. The net loss in the same period of the previous year was attributable to the temporary factor of extraordinary losses of ¥59.4B. As extraordinary gains and losses were almost entirely absent in the current period, a return to recurring earnings capacity can be confirmed.

3. The upward trend in inventories, totaling ¥360.3B, including work in process of ¥182.1B, reflects the progress of customer orders and is a key factor affecting the timing of future revenue recognition and cash collection.

Theoretical Share Price (Reference Value)

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

Sensitivity: ¥2,513–¥2,650 at ±1% for the cost of equity, and ¥2,569–¥2,587 at ±0.1 for ω.

Notes:

• As forecast ROE is below the cost of equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end are used, resulting in a time-period mismatch with the full-year forecast.
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Model: Residual Income Model / Interest Rate Reference Month: 2026-07 / This value does not forecast 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 a professional adviser as necessary.

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