Hakuto Co.,Ltd. FY2027 Q1 Earnings Report

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Executive Summary

Revenue and earnings increased on the rapid expansion of the core ElectronicParts Business, resulting in a high-quality earnings performance in which profit growth outpaced revenue growth. Revenue was ¥545.4B (+35.2% YoY), Operating Income was ¥23.2B (+167.3%), Ordinary Income was ¥22.9B (+219.1%), and Net Income was ¥15.6B (+137.3%). The Operating Income margin improved to 4.3% (2.2% in the same period last year), as SG&A expense growth was relatively contained compared with revenue growth, resulting in operating leverage.

Factors Affecting Performance

【Revenue】Revenue was ¥545.4B, representing a substantial 35.2% YoY increase. By segment, ElectronicParts led overall performance with revenue of ¥448.7B (82.3% of total revenue, YoY +43.1%), while ElectricAndElectricalEquipment generated ¥61.7B (+15.6%) and IndustrialChemical generated ¥26.4B (-3.6%), both showing relatively soft performance. A key characteristic is the high concentration, with more than 80% of the revenue mix dependent on ElectronicParts.

【Profit and Loss】Operating Income was ¥23.2B (YoY +167.3%), with an Operating Income margin of 4.3% (2.2% in the same period last year). Operating Income from ElectronicParts surged to ¥20.2B (YoY +287.9%), accounting for approximately 87% of total Company profit and serving as the primary driver of earnings growth. Among non-operating items, a foreign exchange gain of ¥1.6B boosted Ordinary Income, while interest expense increased to ¥2.8B, expanding the interest burden. A gain on the sale of investment securities of ¥2.9B was recorded as extraordinary income, contributing to Profit Before Tax of ¥25.8B; however, the effective tax rate was high at approximately 39.4%, limiting growth in Net Income to ¥15.6B. In conclusion, both revenue and earnings increased.

Segment Analysis

ElectronicParts was the largest growth driver, with revenue of ¥448.7B (82.3% of total revenue, YoY +43.1%) and Operating Income of ¥20.2B (YoY +287.9%, margin 4.5%). ElectricAndElectricalEquipment generated revenue of ¥61.7B (YoY +15.6%) and Operating Income of ¥4.3B (YoY +2.9%, margin 7.0%), maintaining the highest profit margin among the three segments. IndustrialChemical generated revenue of ¥26.4B (YoY -3.6%) and Operating Income of ¥1.4B (YoY -9.9%, margin 5.2%), making it the only segment to experience both revenue and earnings declines. Although ElectronicParts’ profit margin is improving as the segment rapidly expands in scale, it remains relatively low compared with the other segments, leaving room for improvement in pricing and product mix.

Key Financial Indicators

【Profitability】The Operating Income margin improved to 4.3% (2.2% in the same period last year), while the gross margin also edged up to 14.6% (14.2% in the same period last year), and the Net Income margin improved to 2.9% (1.6% in the same period last year). 【Cash Flow Quality】Operating Cash Flow (OCF) was ¥31.3B, exceeding Net Income of ¥15.6B, indicating solid cash backing for earnings. 【Investment Efficiency】ROE remained low at 2.2%, while EPS doubled to ¥77.67 (¥35.03 in the same period last year). 【Financial Soundness】The Equity Ratio was 42.1%, remaining roughly unchanged from 41.6% in the same period last year; however, the Company has a relatively high dependence on short-term liabilities, with short-term borrowings of ¥347.3B compared with long-term borrowings of ¥223.9B.

Cash Flow Analysis

Operating Cash Flow was ¥31.3B, down 29.4% YoY, but remained approximately twice Net Income of ¥15.6B, indicating that the Company’s ability to convert earnings into cash was maintained. In terms of working capital, an increase in trade receivables was a negative factor of ¥19.5B, but this was offset by a ¥27.3B increase in trade payables and a ¥3.5B decrease in inventories. After subtotaling OCF at ¥46.6B and deducting ¥12.8B in income taxes paid, among other items, the Company arrived at final OCF. Investing Cash Flow was ¥0.6B, or nearly neutral, and capital expenditures were limited to ¥1.4B, resulting in ample Free Cash Flow of ¥31.8B. Financing Cash Flow was -¥23.5B and was used for debt repayments and dividend payments. Overall, cash generation remains sufficient to support business operations, although the decline in OCF from the previous year reflects the impact of increased income tax payments and working capital fluctuations.

Quality of Earnings

Recurring earnings power is supported by Operating Income of ¥23.2B, together with non-operating income such as the ¥1.6B foreign exchange gain. At the same time, the Company recorded a ¥2.9B gain on the sale of investment securities as extraordinary income, a temporary factor that contributed to Profit Before Tax of ¥25.8B. Even excluding this temporary factor, underlying earnings power improved substantially from the previous year. The gap between Ordinary Income of ¥22.9B and Net Income of ¥15.6B was primarily attributable to ¥10.2B in income taxes (effective tax rate of approximately 39.4%); the high tax burden, rather than temporary factors, was the main cause of the gap. The fact that OCF exceeded Net Income suggests high accrual quality.

Earnings Forecast and Guidance

Progress against the full-year plan was 24.0% for Revenue (¥545.4B/¥2,275.0B), 24.2% for Operating Income (¥23.2B/¥96.0B), and 26.7% for Ordinary Income (¥22.9B/¥86.0B), broadly in line with the standard quarterly progress rate of 25%. While progress at the Ordinary Income level is slightly ahead, partly due to the contribution from foreign exchange gains, Net Income growth has been relatively constrained by the high tax rate. No revisions have been made to either the earnings forecast or the dividend forecast, and the full-year plan remains unchanged at its current level.

Shareholder Returns

Cash dividends paid during Q1 amounted to ¥17.9B. In addition, a stock split at a ratio of 1 share for 3 shares, with September 30, 2026 as the record date, has been approved. No revision has been made to the dividend forecast.

Risk Factors

1. Segment concentration risk: ElectronicParts accounts for 82.3% of Revenue and approximately 87% of Operating Income, resulting in a significant impact of supply and demand fluctuations in this segment on overall performance.

2. Interest rate and funding structure risk: The Company has a high dependence on short-term liabilities, with short-term borrowings of ¥347.3B compared with long-term borrowings of ¥223.9B. Interest expense increased from ¥0.8B in the same period last year to ¥2.8B, raising sensitivity to changes in the interest rate environment.

3. Working capital expansion: Trade receivables of ¥537.1B and inventories of ¥443.1B have accumulated at a pace exceeding revenue growth (+35.2%), requiring monitoring from the perspectives of credit management and inventory valuation.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (trading)

Profitability and Returns

The Operating Income margin is at the same level as the industry median, while the Net Income margin is slightly below the industry median due to factors including the tax burden.

Growth and Capital Efficiency

The Revenue growth rate is significantly above the industry median, representing a high growth pace within the industry.

※Source: Compiled by the Company

Key Takeaways from the Earnings

1. The rapid growth of ElectronicParts (Revenue +43.1%, Operating Income +287.9%) is driving overall Company performance, creating a structure in which future performance will depend on the sustainability of demand trends and pricing and product mix in this segment.

2. OCF is approximately twice Net Income, indicating solid cash backing for earnings; however, trade receivables and inventories are accumulating at a pace exceeding revenue growth, making trends in working capital efficiency a key area of focus.

3. The effective tax rate is high at approximately 39.4%, and the relatively restrained growth in Net Income (+137.3%) compared with Ordinary Income growth (+219.1%) indicates potential for normalization of the tax burden structure.

Theoretical Share Price (Reference Value)

Sensitivity: ¥3,099–¥3,279 at ±1% Cost of Equity, and ¥3,171–¥3,198 at ω±0.1.

Notes:

• Goodwill amortization of ¥64.2 per share has been added back to earnings (for non-cash expense treatment and comparability with IFRS companies).
• As 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).

(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; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee the future share price.)

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This report is an earnings analysis document automatically generated by AI through analysis of XBRL earnings summary 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 as necessary.

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