Ledax (7602) FY2026 Q3 Earnings Report

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Executive Summary

For the cumulative Q3 period, both the operating loss and net loss attributable to owners of the parent widened amid lower revenue, making a substantial improvement in profitability during Q4 necessary to achieve the full-year profit forecast. Revenue was ¥139.99B (-3.9% YoY), operating income was ¥-1.89B (deteriorating from ¥-1.33B in the same period of the previous year), ordinary income was ¥-1.74B (deteriorating from ¥-0.47B in the same period of the previous year), and the quarterly net loss attributable to owners of the parent was ¥1.71B (widening from a ¥0.90B loss in the same period of the previous year). Although the gross profit margin improved to 15.6%, the increase in the SG&A expense ratio exceeded this improvement, resulting in deterioration in operating results.

Factors Affecting Performance

【Revenue】Revenue was ¥139.99B, a 3.9% decrease YoY. Revenue from the core Automotive Distribution Business declined 4.1% YoY to ¥138.76B (99.1% of total revenue), while revenue from the Leaseback-Related Business increased 27.6% YoY to ¥1.23B. The structure of the business is such that demand and pricing trends in the Automotive Distribution Business, which accounts for the majority of consolidated revenue, determine overall increases or decreases.

【Profit and Loss】The gross profit margin improved to 15.6% from 14.7% in the same period of the previous year, but the SG&A expense ratio rose to 16.9% from 15.7%, offsetting the benefit of the improved gross margin. As a result, the operating loss widened to ¥1.89B (compared with ¥-1.33B in the same period of the previous year), and the operating margin deteriorated to -1.4% from -0.9%. Ordinary loss amounted to ¥1.74B, reflecting the operating loss as well as an equity-method investment loss of ¥0.37B and non-operating expenses of ¥0.63B. Loss before tax narrowed to ¥1.29B due to extraordinary income of ¥0.46B, including a gain on the sale of investment securities of ¥0.42B; however, this was attributable to a temporary factor and does not indicate a recovery in operating earnings power. The net loss attributable to owners of the parent widened to ¥1.71B after the burden of income taxes of ¥0.29B. Overall, the results represent lower revenue and lower earnings.

Segment Analysis

The Automotive Distribution Business reported revenue of ¥138.76B (-4.1% YoY), a segment loss of ¥1.85B (deteriorating from ¥-1.76B in the same period of the previous year), and a margin of -1.3%, indicating deterioration in the profitability of the core business, which accounts for 99.1% of consolidated revenue. The Leaseback-Related Business increased revenue by 27.6% YoY to ¥1.23B, but segment results shifted from a profit of ¥0.43B in the same period of the previous year to a loss of ¥0.05B, meaning that it was unable to maintain profitability despite higher revenue. Both segments posted negative operating results, and the primary cause of the consolidated operating loss of ¥1.90B was deterioration in the profitability of the larger Automotive Distribution Business.

Key Financial Indicators

【Profitability】The operating margin deteriorated to -1.4% from -0.9% in the same period of the previous year, as the increase in the SG&A expense ratio to 16.9% from 15.7% exceeded the improvement in the gross profit margin to 15.6% from 14.7%. ROE (annualized) was -4.5%, with the recorded loss depressing capital efficiency. 【Cash Flow Quality】The narrowing of loss before tax depended on extraordinary income of ¥0.46B, including a gain on the sale of investment securities of ¥0.42B, and does not represent recurring earnings improvement. 【Investment Efficiency】Although total asset turnover remains at a high level, inventories of ¥25.70B account for 40.3% of total assets, making the monetization of inventory a prerequisite for improving investment efficiency. 【Financial Soundness】The equity ratio remained high at 73.7%, and liquidity was sufficiently secured, with current assets of ¥48.8B against current liabilities of ¥13.4B. However, cash and deposits declined substantially to ¥8.8B from the same period of the previous year, indicating a reduction in the funding buffer.

Cash Flow Analysis

Although detailed disclosure of the cash flow statement is not available, an analysis of funding trends based on changes in the balance sheet shows that cash and deposits declined significantly to ¥8.8B from ¥16.5B in the same period of the previous year. At the same time, inventories increased to ¥25.7B, while accounts payable declined substantially to ¥1.6B, suggesting that inventory accumulation and the reduction of trade payables were the primary causes of cash outflows. Net assets were ¥47.0B, declining slightly from ¥48.6B in the same period of the previous year, with cumulative losses placing pressure on capital. Total assets declined to ¥63.8B, placing the Company in a phase where improvements in capital efficiency are required while assets are being compressed.

Earnings Quality

Loss before tax began with an operating loss of ¥1.89B and widened to an ordinary loss of ¥1.74B due to an equity-method investment loss of ¥0.37B and non-operating expenses, before narrowing to ¥1.29B through extraordinary income of ¥0.46B, primarily comprising a gain on the sale of investment securities of ¥0.42B. This improvement was attributable not to a recovery in the earnings power of the core business but to the temporary factor of asset sales; accordingly, deterioration in operating results should be emphasized when assessing the recurring earnings base. The ¥0.8B in non-operating income mainly comprised small items such as dividend income and foreign exchange gains, and its effect in boosting ordinary income was limited. Comprehensive income was ¥-1.6B, while comprehensive income attributable to owners of the parent was ¥-1.7B, broadly consistent with the net loss, with no significant divergence arising from other comprehensive income.

Earnings Forecast and Guidance

The full-year forecasts are revenue of ¥220.0B (+9.8% YoY), operating income of ¥3.5B, ordinary income of ¥3.5B, and EPS of ¥11.82. The revenue progress rate against cumulative actual results was 63.6%, 11.4 percentage points below the standard Q3 progress rate of 75%. While cumulative operating income and ordinary income were both negative, the full-year forecasts are positive. Accordingly, achieving the forecasts would require the generation of approximately ¥5.39B in operating income and ¥4.16B in profit attributable to owners of the parent in Q4 alone, meaning that substantial earnings improvement is required based on the current progress.

Shareholder Returns

The Q2 dividend was ¥0 per share, while the full-year forecast dividend is ¥3.0 per share. The forecast payout ratio against forecast full-year EPS of ¥11.82 is approximately 25.4%. However, the cumulative period recorded a net loss attributable to owners of the parent of ¥1.71B, and payment of the forecast dividend depends on a return to profitability in Q4 and the securing of sufficient cash balances. Cash and deposits have declined substantially YoY, and both future earnings progress and funding conditions must be monitored when assessing the dividend policy.

Risk Factors

1. Deterioration in the profitability of the core business: The Automotive Distribution Business, which accounts for 99.1% of consolidated revenue, reported revenue of ¥138.76B (-4.1% YoY) and a segment loss that widened to ¥1.85B. Changes in supply and demand for used vehicles and sales prices directly affect consolidated earnings.

2. Increase in inventories and tied-up funds: Inventories were ¥25.70B, accounting for 40.3% of total assets, and increased from the same period of the previous year. Cash and deposits declined to ¥8.8B, and a slowdown in inventory turnover could affect both capital efficiency and profitability.

3. Difficulty of achieving the full-year forecast: Against the full-year operating income forecast of ¥3.5B, cumulative operating loss was ¥1.89B, requiring a substantial return to profitability in Q4. The narrowing of loss before tax depended on the temporary factor of a gain on the sale of investment securities, making the presence or absence of improvement at the operating level a key focus.

Industry Benchmark (Reference; Company Analysis)

Industry Benchmark (trading)

Profitability and Returns

Both the operating margin and net profit margin were substantially below the industry median, placing profitability at a low level within the industry.

Growth and Capital Efficiency

The revenue growth rate was also substantially below the industry median, lagging peers that are on a growth trajectory.

※Source: Company analysis

Key Points from the Financial Results

1. Although the gross profit margin improved YoY, the increase in the SG&A expense ratio exceeded this improvement, causing the operating loss to widen. The inability to absorb fixed costs during a period of declining revenue is a key structural point of concern.

2. Against the full-year operating income forecast of ¥3.5B, cumulative results showed a loss of ¥1.89B, requiring substantial earnings improvement in Q4. Given that the narrowing of loss before tax depended on the temporary factor of a gain on the sale of investment securities, the degree of recovery at the operating level will be a key focus going forward.

3. While the equity ratio was 73.7% and the current ratio remained high, cash and deposits declined substantially YoY, and inventories accounted for 40% of total assets. Although the financial base is relatively solid, trends in inventory and capital efficiency will require monitoring.

Theoretical Share Price (Reference Value)

Sensitivity: ¥188–¥199 at ±1% for the cost of equity, and ¥192–¥194 at ±0.1 for ω.

Notes:

• Because 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 gap 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: 2026-08 / 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 the future share price）

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings briefing 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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