Hakudo Co.,Ltd. FY2027 Q1 Earnings Report

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Executive Summary

This quarter was characterized by higher revenue and profit, as well as a sharp improvement in profit margins, clearly indicating a recovery in profitability. Revenue was ¥21.93B (+28.6% YoY), Operating Income was ¥1.38B (+257.7%), Ordinary Income was ¥1.48B (+210.7%), and Net Income was ¥1.02B (+250.2%). Operating leverage resulting from improved gross margin and a lower SG&A ratio was the primary driver of profit growth, while growth in the Japan Business and rapid expansion in the China Business drove the increase in revenue.

Factors Affecting Earnings

【Revenue】Revenue was ¥21.93B, representing a 28.6% YoY increase. By region, Japan accounted for the majority at ¥19.69B (88.2% of the total, +32.5% YoY), while China posted strong growth at ¥0.69B (+62.3% YoY). North America, meanwhile, declined to ¥1.36B (-15.6% YoY). Growth in Japan and China offset the slowdown in North America, resulting in strong overall revenue growth.

【Profit and Loss】The gross margin was 16.4%, improving by +2.5pt from 13.9% in the previous year. The SG&A ratio declined by -1.5pt to 10.1% from 11.6%, resulting in a +4.0pt improvement in the Operating Income margin to 6.3% from 2.3% in the previous year. Non-operating income was positive at ¥0.10B, including ¥0.05B in dividend income and ¥0.01B in foreign exchange gains, thereby boosting Ordinary Income. The gap between Ordinary Income and Net Income was attributable to a ¥0.46B income tax burden; the effective tax rate was approximately 31% against pre-tax income of ¥1.48B. The company achieved higher revenue and profit, and the effectiveness of operating leverage from price revisions and cost discipline improved the quality of earnings growth.

Segment Analysis

Segment profit totaled ¥1.42B, comprising Japan at ¥1.27B (approximately 86% of the total), North America at ¥0.08B, China at ¥0.06B, and Other at ¥0.06B (total for reportable segments). After adding the elimination of intersegment transactions and other adjustments, Ordinary Income was ¥1.476B. North America reported a segment loss of ¥-0.11B in the same period of the previous year but turned profitable at ¥0.08B this period, contributing to the improvement in profitability. China’s segment profit also expanded from ¥0.004B to ¥0.06B, indicating improved profitability. Profit remains highly concentrated in Japan, and sensitivity to domestic supply-and-demand conditions remains a structural characteristic.

Key Financial Metrics

【Profitability】The Operating Income margin improved significantly from the previous year to 6.3% (2.3% in the previous year), the Net Income margin improved to 4.6% (1.7% in the previous year), and ROE was 3.9%. These figures indicate the effectiveness of operating leverage resulting from improved gross margin and a lower SG&A ratio.【Cash Quality】Accounts receivable of ¥13.21B and inventories of ¥13.23B indicate that working capital has accumulated alongside revenue growth. The timing gap between the pace of profitability improvement and cash conversion warrants attention.【Investment Efficiency】Against total assets of ¥51.13B, Revenue was ¥21.93B. Total asset turnover increased from the previous year, indicating an improving trend in asset efficiency.【Financial Soundness】The Equity Ratio was 51.2% (53.5% in the previous year). With current assets of ¥40.01B and current liabilities of ¥24.84B, liquidity was secured, and the capital structure remained relatively sound even amid the expansion of working capital.

Cash Flow Analysis

As no cash flow statement has been disclosed, cash trends are analyzed based on changes in the balance sheet. Accounts receivable increased by +¥1.80B from ¥11.40B in the previous year to ¥13.21B, and inventories increased by ¥0.72B from ¥12.50B to ¥13.23B. Accounts payable, meanwhile, increased by +¥0.92B from ¥8.72B to ¥9.64B, indicating that working capital expanded overall. Cash and deposits were ¥8.09B, up +¥0.42B from ¥7.67B in the previous year. However, the increase was limited relative to the magnitude of profit growth, as working capital requirements associated with higher revenue partially offset cash generation. Investment securities increased by +¥0.42B (+22.3%), indicating that funds were also allocated to investment activities.

Earnings Quality

Non-operating income of ¥0.10B included ¥0.05B in dividend income, ¥0.01B in foreign exchange gains, and ¥0.01B in interest income. Each was small relative to Operating Income of ¥1.38B, and its impact on Ordinary Income was limited. Foreign exchange gains were partly attributable to market conditions and are considered less sustainable in terms of repeatability than the improvement in core gross margin. Comprehensive income was ¥1.37B, exceeding Net Income of ¥1.02B. The difference was attributable to +¥0.28B in valuation difference on securities and +¥0.07B in foreign currency translation adjustments, indicating that non-operating asset valuation factors supported earnings. Increases in accounts receivable and inventories represent accrual factors affecting future cash flow, and cash-based profit growth may be somewhat slower than the improvement in reported earnings.

Earnings Forecast and Guidance

The full-year company forecasts are Revenue of ¥92.20B (+35.4% YoY), Operating Income of ¥5.06B (+76.2% YoY), and Ordinary Income of ¥5.19B (+62.7% YoY). Progress for the current quarter was 23.8% for Revenue, 27.2% for Operating Income, and 28.5% for Ordinary Income. The company is progressing at a pace exceeding a simple one-quarter benchmark of 25%, with progress particularly ahead on the profit front. It should be noted that the company revised its earnings and dividend forecasts during the current quarter, reflecting its latest results.

Shareholder Returns

The company’s forecast EPS is ¥316.53, and forecast DPS is ¥143.00, implying a Payout Ratio of approximately 45.2% (¥143 ÷ ¥316.53). Against forecast Net Income of ¥3.59B, the estimated total dividend amount (approximately ¥143 × 11,343 thousand shares outstanding) is covered within forecast annual Net Income, and based on currently available information, no significant concerns regarding dividend sustainability are apparent. There is no disclosure regarding share repurchases, and shareholder returns are centered on dividends.

Risk Factors

1. Working Capital Expansion Risk: Accounts receivable of ¥13.21B (+15.8%) and inventories of ¥13.23B (+5.8%) have increased at a pace exceeding revenue growth, potentially delaying cash conversion and placing pressure on Operating Cash Flow.

2. Regional Concentration Risk: Japan accounts for 88.2% of Revenue, while North America has slowed by -15.6% YoY. The business structure is therefore relatively sensitive to domestic supply-and-demand conditions and economic fluctuations in specific regions.

3. Dependence on Non-Recurring Income: Non-operating income of ¥0.10B includes market-dependent items such as ¥0.01B in foreign exchange gains, and repeatability from the next fiscal year onward is not guaranteed. The sustainability of the +2.5pt improvement in core gross margin will be a key focus going forward.

Industry Benchmark (For Reference; Company Research)

The company’s Operating Income margin and Net Income margin both exceed the industry median, placing its profitability in a relatively favorable position within the industry.

The Revenue growth rate substantially exceeds the industry median, representing an exceptional pace of revenue growth within the industry.

※Source: Company research

Key Points from the Earnings Results

1. The improvement in the Operating Income margin to 6.3% resulted from operating leverage driven by improved gross margin (+2.5pt) and a lower SG&A ratio (-1.5pt). The results indicate that the improvement was achieved through both price revisions and cost discipline.

2. The pace of increase in accounts receivable and inventories exceeds revenue growth, creating a timing gap in cash conversion relative to the pace of earnings improvement. Future working capital turnover will be a key metric for assessing cash-generating capacity.

3. Full-year progress is broadly on track at 23.8% for Revenue and 27.2% for Operating Income, with progress particularly ahead on the profit front. The revision of the earnings and dividend forecasts during the current quarter should be noted as a plan review reflecting recent results.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type model with an explicit five-year fade period). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥2,531–¥2,677 at ±1% for the cost of equity, and ¥2,595–¥2,612 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference relative to the full-year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

（Calculation model: Residual Income Model / Interest rate reference month: 2026-07 / This value 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 release 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 discretion and responsibility, after consulting a professional as necessary.

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