AS ONE (7476) FY2026 Q3 Earnings Report

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Executive Summary

The Company achieved profit growth exceeding revenue growth, with operating leverage working effectively. Revenue was ¥792.0B (+5.1% YoY), Operating Income was ¥94.3B (+12.4%), Ordinary Income was ¥97.2B (+12.2%), and Net Income was ¥67.2B (+12.4%). The primary drivers of the increase in profit growth were an improvement in the gross margin and the containment of SG&A expense growth relative to revenue growth. Progress against the full-year company forecast was broadly in line with the standard run rate, at 72.7% for Revenue and 75.4% for Operating Income.

Factors Affecting Business Performance

【Revenue】Revenue was ¥792.0B, an increase of +5.1% YoY. Progress against the full-year forecast of ¥1,089.0B was 72.7%, slightly below the standard 75% level.

【Profit and Loss】Operating Income was ¥94.3B (+12.4% YoY), Ordinary Income was ¥97.2B (+12.2%), and Net Income was ¥67.2B (+12.4%), with all three exceeding the revenue growth rate. The gross margin improved to 30.6% from 30.3% in the same period last year, while SG&A expenses increased by +2.6%, below the revenue growth rate. Consequently, the operating margin expanded to 11.9% from 11.1% in the prior-year period. Non-operating income and expenses comprised ¥0.1B in interest income and ¥0.08B in dividend income, offset by ¥0.07B in foreign exchange losses, resulting in a net surplus of ¥0.29B; its contribution to Ordinary Income was limited. The Company achieved both revenue and profit growth, with the quality of profitability also improving.

Key Financial Indicators

【Profitability】The 11.9% operating margin improved by approximately 0.8pt from 11.1% in the same period last year, while the 8.5% net profit margin also improved from 7.9% in the same period last year, indicating that incremental gross profit is being reliably converted into earnings.【Cash Quality】Accounts receivable were ¥20.67B, and the scale of trade receivables, including electronically recorded monetary claims, is substantial. DSO is believed to be above the 60-day benchmark. Inventories were ¥12.91B, an increase of +10.1% YoY, accumulating at a pace exceeding the 5.1% revenue growth rate.【Investment Efficiency】Annualized ROE was 13.1%, achieved through a combination of net profit margin, total asset turnover, and financial leverage, without reliance on excessive leverage.【Financial Soundness】With an equity ratio of 68.5%, current assets of ¥70.96B, and current liabilities of ¥25.88B, the financial foundation is strong. Long-term borrowings declined substantially from ¥4.75B in the same period last year to ¥2.93B, indicating progress in reducing financial leverage.

Cash Flow Analysis

As the Company does not disclose a cash flow statement, an examination of funding trends based on changes in the balance sheet shows that cash and deposits were ¥19.73B, down from ¥22.57B in the same period last year. Meanwhile, treasury stock decreased by ¥4.71B YoY (a reduction in the deduction from book value), suggesting that treasury stock disposals or the use of funds related to capital policy may have occurred. Long-term borrowings decreased by ¥1.83B, from ¥4.75B to ¥2.93B, suggesting that funds were used to repay interest-bearing debt. Inventories increased by 10.1%, while accounts receivable declined and electronically recorded monetary claims increased, indicating an overall increase in working capital. Although the Company is in a phase of profit growth, it should be noted that the accumulation of working capital may restrain the pace of cash generation.

Quality of Earnings

Operating Income is the core source of profit, while non-operating income and expenses, represented by the difference between Operating Income and Ordinary Income, remained a net surplus of ¥0.29B, and no extraordinary gains or losses were identified. Non-operating income consisted primarily of ¥0.08B in dividend income and other items, while non-operating expenses included ¥0.07B in foreign exchange losses and ¥0.03B in interest expenses, causing financial and foreign exchange factors to slightly affect Ordinary Income. Comprehensive Income was ¥7.32B, exceeding Net Income of ¥6.72B, with the difference attributable to a +¥0.69B contribution from valuation differences on securities. Foreign currency translation adjustments made a negative contribution of -¥0.09B; however, the gap between Comprehensive Income and Net Income was primarily due to changes in the market value of other securities, which should be distinguished from the earnings power of the core business. The accumulation of inventories growing faster than revenue also requires monitoring from an accrual perspective.

Earnings Forecast and Guidance

The full-year earnings forecast calls for Revenue of ¥1,089.0B (+5.0% YoY), Operating Income of ¥12.51B (+7.9%), and Ordinary Income of ¥12.95B (+7.3%). Cumulative progress was 72.7% for Revenue, 75.4% for Operating Income, and 75.1% for Ordinary Income, meaning that profit progress was in line with or slightly above the standard 75% run rate. The cumulative operating margin of 11.9% exceeds the implied level in the full-year plan (an operating margin of approximately 11.5%); if the Q4 revenue build-up is achieved as planned, this will provide a buffer toward achieving the profit plan.

Shareholder Returns

The full-year dividend forecast is ¥63.00. Compared with the ¥28 interim dividend paid in the same period last year, the dividend for Q2 of the current period was ¥31, representing an increase. Based on the full-year forecast EPS of ¥124.77, the forecast payout ratio is approximately 50.5%, which is within a sustainable range. Retained earnings of ¥60.88B, cash and deposits of ¥19.73B, and a substantial equity base provide financial support for continued dividend payments. Treasury stock decreased YoY, indicating movement in the capital policy relating to treasury stock.

Risk Factors

1. Lengthening accounts receivable collection cycle: In addition to accounts receivable of ¥20.67B, electronically recorded monetary claims have increased, and DSO is believed to be above the 60-day level considered a warning benchmark. Delayed cash collection relative to revenue growth may place pressure on working capital.

2. Increase in inventories: Inventories were ¥12.91B, an increase of +10.1% YoY, exceeding the revenue growth rate of 5.1%. If demand trends change, the risks of inventory write-downs and funds being tied up may increase.

3. Foreign exchange fluctuations: The Company recorded ¥0.07B in foreign exchange losses during the current period, with foreign exchange movements related to overseas transactions and procurement serving as factors that fluctuate non-operating income and expenses.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Both the operating margin and net profit margin substantially exceed the industry median, placing the Company in the high-profitability group within the industry.

Growth and Capital Efficiency

The revenue growth rate is approximately at the industry median, positioning the Company at an average level within the industry in terms of growth rate.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. Against Revenue growth of +5.1% YoY, Operating Income and Net Income grew by +12.4%, indicating profit growth exceeding revenue growth. This demonstrates the effects of operating leverage from the improved gross margin and the containment of SG&A expense growth relative to revenue growth.

2. The 11.9% operating margin and 8.5% net profit margin substantially exceed the industry median. Financially, the Company also demonstrates a conservative and sound structure, with an equity ratio of 68.5% and a substantial reduction in long-term borrowings.

3. On the other hand, inventories increased at a pace exceeding revenue growth. Trends in working capital, including accounts receivable and electronically recorded monetary claims, should be monitored when assessing the conversion of profit growth into cash.

Theoretical Stock Price (Reference Values)

Sensitivity: ¥1,046–¥1,106 at a cost of equity of ±1%, and ¥1,073–¥1,079 at ω of ±0.1.

Notes:

• Net assets as of the quarter-end are used (there is a timing difference relative to the full-year forecast).
• As 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 / These are mechanical calculations based solely on publicly disclosed data and do not constitute a forecast of the market stock price or a recommendation of any specific investment action, nor do they forecast or guarantee future stock prices.)

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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. 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 professionals as necessary.

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