DOSHISHA (7483) FY2026 Q3 Earnings Report

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Executive Summary

In addition to higher revenue, operating leverage from improved gross margin and controlled SG&A expenses resulted in significant increases in both revenue and earnings. Revenue was ¥956.4B (+6.5% YoY), Operating Income was ¥105.6B (+37.8%), Ordinary Income was ¥108.5B (+37.9%), and Net Income was ¥75.1B (+39.0% YoY; ¥74.4B attributable to owners of the parent, +39.7%). Gross profit margin expanded to 30.4% (28.4% in the same period last year), while Operating Income margin increased to 11.0% (8.5% in the same period last year), resulting in earnings growth exceeding the revenue growth rate.

Factors Affecting Business Performance

【Revenue】Revenue was ¥956.4B (+6.5% YoY). By segment, the DevelopmentOrientedBusinessModel generated ¥536.0B (56.1% of total), while the WholesaleBusinessModel generated ¥400.4B (41.9% of total); both segments contributed to revenue growth.

【Profit and Loss】Operating Income was ¥105.6B (+37.8%), and the Operating Income margin improved by approximately 2.5pt from 8.5% in the same period last year to 11.0%. Against an increase of ¥35.9B in gross profit, SG&A expenses increased by only ¥7.9B, indicating progress in fixed-cost absorption. Non-operating income and expenses made a net profit contribution of ¥2.9B, and Ordinary Income of ¥108.5B (+37.9%) largely reflected the increase in Operating Income. Extraordinary income was a minor ¥0.04B, and the impact of one-time factors on Net Income was limited. Accordingly, the results are judged to represent increases in both revenue and earnings.

Segment Analysis

The DevelopmentOrientedBusinessModel recorded Revenue of ¥536.0B and Operating Income of ¥68.6B, representing a margin of 12.8%. The WholesaleBusinessModel recorded Revenue of ¥400.4B and Operating Income of ¥39.7B, representing a margin of 9.9%. Although the former accounts for more than half of the revenue mix, its margin exceeds that of the latter by approximately 2.9pt, making it the main driver of profitability.

Key Financial Indicators

【Profitability】Operating Income margin of 11.0% (8.5% in the same period last year) and Net Income margin of 7.8% (5.9% in the same period last year) both improved, primarily due to the increase in gross profit margin to 30.4% (28.4% in the same period last year). 【Cash Quality】Operating Cash Flow (OCF) was ¥22.4B, and its ratio to Net Income attributable to owners of the parent was only 0.30x; the increase in accounts receivable to ¥224.7B (+51.4% YoY) constrained cash conversion. 【Investment Efficiency】ROE (annualized) was 10.6%; Capital Expenditures were ¥0.3B compared with Depreciation and Amortization of ¥4.6B, resulting in a low Capital Expenditures/Depreciation and Amortization ratio of 0.06x. 【Financial Soundness】The Equity Ratio was 86.5%, while the Current Ratio was approximately 638%, based on current assets of ¥883.99B/current liabilities of ¥138.63B. The Debt-to-Equity ratio was approximately 0.16x, indicating a conservative financial base.

Cash Flow Analysis

OCF was ¥22.4B, improving from ¥3.5B in the same period last year, but cash conversion relative to Net Income remained weak. OCF before changes in working capital was ¥52.2B; however, an ¥83.4B cash outflow arose from the increase in trade receivables, which could not be offset by the decrease in inventories (+¥8.4B) or the increase in trade payables (+¥7.8B). Investing Cash Flow was an outflow of ¥149.0B, primarily due to the placement of ¥150.0B in time deposits; Capital Expenditures were a minor ¥0.3B. Financing Cash Flow was an outflow of ¥26.6B, mainly reflecting dividend payments. Reported Free Cash Flow was negative ¥126.6B, but excluding the change in the classification of time-deposit operations, the business’s underlying cash-generation capacity has been maintained.

Quality of Earnings

The earnings increase for the current period was driven primarily by recurring factors centered on Operating Income and Ordinary Income, while Extraordinary Income was a minor ¥0.04B, limiting the impact of one-time factors. Non-operating income totaled ¥3.2B, including ¥0.6B in dividend income, exceeding non-operating expenses of ¥0.2B; consequently, Ordinary Income remained slightly above Operating Income. Meanwhile, Comprehensive Income was ¥80.3B, a ¥5.9B gap versus Net Income attributable to owners of the parent of ¥74.4B. Increases in foreign currency translation adjustments and other securities-related items, including valuation differences on securities, contributed to this gap. From an accrual perspective, the sharp increase in trade receivables (+51.4% YoY) was the primary cause of the divergence between OCF and Net Income (0.30x), indicating that the cash backing for the accounting earnings increase was relatively weak.

Earnings Forecast and Guidance

The Company’s full-year forecast is Revenue of ¥1200.0B (+5.3% YoY), Operating Income of ¥113.0B (+25.6%), and Ordinary Income of ¥116.0B (+24.1%). As of cumulative Q3, progress rates were 79.7% for Revenue, 93.4% for Operating Income, and 93.5% for Ordinary Income, substantially exceeding the standard 75% level for earnings. Forecast EPS is ¥226.04, and progress is also solid compared with cumulative Q3 actual EPS of ¥210.46. Operating Income of approximately ¥7.4B is required in Q4; given the earnings capacity demonstrated through Q3, the hurdle for achieving the forecast appears low.

Shareholder Returns

The dividend forecast is ¥100.00 annually, assuming equal distributions of ¥50.00 for Q2 and ¥50.00 at year-end, representing a significant increase from ¥40 in the previous year. Based on forecast full-year Net Income of ¥80.0B and an average number of shares outstanding during the period of 35.35 million shares, the forecast Payout Ratio is approximately 44.2%, within the sustainable range based on a guideline of 60%. Given retained earnings of ¥827.5B, cash and deposits of ¥545.7B, and a low Debt-to-Equity ratio, the balance-sheet capacity to pay dividends is strong. However, as OCF was only ¥22.4B, progress in collecting operating receivables should be monitored to confirm the cash backing for the dividend.

Risk Factors

1. Collection risk for operating receivables: Trade receivables increased to ¥224.7B (+51.4% YoY), substantially exceeding the revenue growth rate of +6.5%. OCF/Net Income remained at 0.30x, confirming a decline in cash conversion capacity during the earnings growth phase.

2. Sustainability of profitability: The improvement in gross profit margin to 30.4% (28.4% in the same period last year) was the primary driver of earnings growth. If the product mix, procurement profitability, or pricing conditions change, this could affect the ability to maintain an Operating Income margin of 11.0%.

3. Limited Capital Expenditures: Capital Expenditures of ¥0.3B were only 0.06x Depreciation and Amortization of ¥4.6B. The level of maintenance and replacement investment for property, plant and equipment of ¥171.0B should be monitored going forward.

Industry Benchmark (Reference; Company Analysis)

Industry Benchmark (trading)

Profitability and Returns

Both the Operating Income margin and Net Income margin substantially exceed the industry median, indicating high profitability within the industry.

Growth and Capital Efficiency

The Revenue growth rate is slightly above the industry median, indicating an approximately standard level of growth within the industry.

※Source: Company analysis

Key Points from the Financial Results

1. The Operating Income margin improved by approximately 2.5pt YoY to reach 11.0%. The increase in gross profit margin and the low growth rate of SG&A expenses (+3.9% YoY) occurred concurrently, indicating a qualitative improvement in the earnings structure.

2. Progress rates for Operating Income and Ordinary Income against the full-year Company forecast reached the 93% range, a high level for cumulative Q3. Meanwhile, OCF was ¥22.4B, low relative to Net Income of ¥74.4B, and the gap between earnings growth and cash generation was observed as a characteristic feature of the current period.

3. The dividend forecast was increased from ¥40 in the previous year to ¥100, resulting in a forecast Payout Ratio of approximately 44.2%. The conservative financial base, including an Equity Ratio of 86.5% and cash and deposits of ¥545.7B, supports the dividend increase.

Theoretical Share Price (Reference Value)

Sensitivity: ¥2,524–¥2,669 at ±1% for the Cost of Equity, and ¥2,594–¥2,595 at ±0.1 for ω.

Notes:

• Since cumulative Q3 progress for Net Income against the full-year forecast (93%) exceeds the standard level (75%), forecast EPS has been adjusted upward within an upper limit of +10% (because companies with progress ahead of schedule tend to exceed their forecasts; the adjustment may be excessive for businesses with strong seasonality).
• Since 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 (there is a timing difference versus the full-year forecast).

(Model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest Rate Reference Month: 2026-07 / Mechanically calculated solely from 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 future share prices.)

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This report is an automatically generated earnings analysis document produced by AI analysis of 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 discretion and responsibility, after consulting a professional as necessary.

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