NAGAILEBEN (7447) FY2026 FY Earnings Report

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Executive Summary

Revenue and earnings increased, although growth was modest. Higher non-operating income and a stable corporate tax burden contributed to the increase in net income. Revenue was ¥17.21B (+1.3% YoY), and Operating Income was ¥3.62B (+1.2% YoY). Ordinary Income rose 3.5% YoY to ¥3.84B, outpacing Operating Income growth. Net income attributable to owners of the parent was ¥2.65B (+3.0% YoY), and EPS was 88.21 (+6.0% YoY); the reduction in shares outstanding from share buybacks lifted per-share metrics. Non-operating income was ¥0.26B, including interest income of ¥0.14B, up from ¥0.06B in the prior year, contributing to higher Ordinary Income.

Factors Affecting Results

【Revenue】Revenue was ¥17.21B, a modest increase of +1.3% YoY (+¥0.22B). The Company operates in a single segment, manufacturing and selling medical wear and related products, with domestic sales accounting for more than 90% of total revenue. Sales to major customer Watakyu Seimoa were ¥3.49B, up approximately 6.3% from ¥3.29B in the prior year, and accounted for approximately 20.3% of Revenue. Growth in sales to this customer supported the Company’s overall revenue increase.

【Profit and Loss】The gross margin improved by approximately 0.5pt to 40.0% from 39.5% in the prior year. Meanwhile, SG&A expenses increased 4.3% to ¥3.26B from ¥3.13B, raising the SG&A ratio to 19.0%. As a result, the Operating Income margin remained at 21.1%, in line with the prior year. Ordinary Income grew 3.5%, driven by higher non-operating income. Extraordinary items were limited, comprising extraordinary income of ¥0.01B (gain on sale of investment securities) and extraordinary losses of ¥0B. In summary, Revenue and earnings increased.

Key Financial Metrics

【Profitability】ROE rose 0.7pt to 6.8% from 6.1% in the prior year. The Operating Income margin was 21.1%, and the gross margin was 40.0%. The Company has a substantial equity base, and its high profit margins are not translating fully into capital efficiency. 【Cash Quality】Operating Cash Flow (OCF) was ¥3.53B, up 61.8% YoY, or approximately 1.33x Net Income. However, a ¥1.35B cash inflow from the reduction in trade receivables contributed to OCF, while a ¥0.71B increase in inventory absorbed cash. 【Investment Efficiency】Capital expenditures were ¥0.22B, below depreciation and amortization of ¥0.3B. Total assets declined to ¥42.19B, and the total asset turnover ratio relative to Revenue was approximately 0.41x. 【Financial Soundness】The Equity Ratio was 92.6%, and cash and deposits were ¥22.4B (approximately 53% of total assets). The current ratio was approximately 1,464%, indicating an exceptionally strong short-term ability to meet obligations. Inventory was ¥7.76B (¥7.05B in the prior year), equivalent to approximately 274 days of cost of sales.

Cash Flow Analysis

OCF increased substantially to ¥3.53B from ¥2.18B in the prior year. The subtotal before working capital changes was ¥4.5B, and income taxes paid were ¥1.1B. The increase was partly attributable to a ¥1.35B reduction in trade receivables; the sustainability of this contribution is a key consideration. Investing Cash Flow was +¥1.67B, including net time-deposit withdrawals of ¥2B, representing the difference between ¥34.7B in withdrawals and ¥32.7B in deposits. Accordingly, FCF of ¥5.2B should be distinguished from recurring surplus cash generation. Deducting capital expenditures of ¥0.22B and intangible asset acquisitions of ¥0.11B from OCF results in approximately ¥3.2B. Financing Cash Flow was △¥5.05B, mainly comprising dividend payments of ¥3.05B and share buybacks of ¥2B. Total shareholder returns exceeded OCF less investment expenditures, contributing to a decline in cash on hand (cash and deposits decreased △¥1.85B YoY).

Earnings Quality

Earnings quality is good in that OCF exceeded Net Income. OCF/Net Income was approximately 1.33x, confirming cash backing for earnings from an accrual perspective as well. However, the reduction in trade receivables boosted OCF, so it includes a temporary working capital contribution. Of non-operating income of ¥0.26B, interest income was ¥0.14B, up from ¥0.06B in the prior year. This was close to the ¥0.13B increase in Ordinary Income, indicating a meaningful contribution from sources outside the core business. Extraordinary income was ¥0.01B and extraordinary losses were ¥0B, both small. Comprehensive income was ¥2.75B, ¥0.1B above Net Income of ¥2.65B. The difference was mainly attributable to valuation differences on securities of ¥0.08B and adjustments related to retirement benefits of ¥0.02B, and was limited.

Earnings Forecast and Guidance

For the following fiscal year, the Company forecasts Revenue of ¥17.5B (+1.7% versus the current period) and Operating Income of ¥3.6B (△0.7%). Ordinary Income is forecast at ¥3.89B (+1.5%), Net Income at ¥2.62B (+1.1%), and EPS at 90.48. The forecast calls for higher Revenue but lower Operating Income, making trends in costs and SG&A expenses key areas to watch. The forecast for higher Ordinary Income suggests that it assumes non-operating income will remain at a similar level.

Shareholder Returns

The annual dividend for the current period was ¥70 per share, with no interim dividend and only a year-end dividend. The Payout Ratio was 79.4%, down from 120.1% in the prior year. The year-end dividend for the previous period totaled ¥100, comprising an ordinary dividend of ¥60 and a commemorative dividend of ¥40. Dividend payments for the current period were ¥3.05B, and share buybacks were ¥2B, bringing total cash returns to ¥5.05B, above Net Income of ¥2.65B. The Equity Ratio of 92.6% and cash of ¥22.4B support the Company’s capacity to return capital. The dividend forecast for the following fiscal year is also ¥70 per share.

Risk Factors

1. Prolonged inventory holding period: Inventory was ¥7.76B, up 10.0% YoY, equivalent to approximately 274 days of turnover. This increase exceeded Revenue growth of +1.3%; any mismatch with demand could lead to higher storage costs or inventory write-downs.

2. Customer concentration: Revenue from Watakyu Seimoa was ¥3.49B, accounting for approximately 20.3% of total Revenue. In the prior year, it was ¥3.29B (approximately 19.4%), indicating a slight increase in concentration. The customer’s procurement policies could have a significant impact on results.

3. Higher SG&A expenses and funding burden from shareholder returns: SG&A expenses increased 4.3%, exceeding Revenue growth and limiting improvement in the Operating Income margin. Total returns of ¥5.05B also exceeded approximately ¥3.2B, representing OCF less investment expenditures. Continuing returns at this level would increase reliance on cash on hand.

Industry Benchmark (Reference; Company Estimates)

Profitability and Returns

Both the Operating Income margin and Net Income margin are substantially above the industry median and the upper end of the IQR.

Growth and Capital Efficiency

Revenue growth is below the median but remains within the IQR.

Source: Company estimates

Key Takeaways from the Results

1. The Operating Income margin of 21.1% is substantially above the industry median of 3.4%, and OCF is approximately 1.33x Net Income. However, OCF includes a temporary contribution from the reduction in trade receivables.

2. The Equity Ratio is 92.6% and cash is ¥22.4B, indicating a strong financial position, while ROE is 6.8%. Profitability relative to the Company’s asset base is a key point to consider.

3. Inventory increased 10.0% to ¥7.76B, equivalent to approximately 274 days of turnover. Inventory trends and SG&A growth outpacing Revenue growth warrant attention, alongside the forecast 0.7% decline in Operating Income for the following fiscal year.

Theoretical Share Price (Reference)

Sensitivity: ¥1,197–¥1,263 for a ±1% change in the Cost of Equity; ¥1,226–¥1,231 for a ±0.1 change in ω.

Notes:

• As forecast ROE is below the Cost of Equity, the theoretical value is below Book Value Per Share.

(Valuation model: Residual Income Model (Ohlson-style, explicit 5-year fade) / Interest rate reference month: 2026-08 / Mechanically calculated using only publicly disclosed data; this is not a forecast of market prices or a recommendation to take any specific investment action, nor does it 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. Industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own responsibility and, where necessary, after consulting with a professional.

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