Quick View
| Metric | Current Period | Same Period Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥25.1B | ¥18.9B | +32.3% |
| Operating Income | ¥6.1B | ¥6.2B | −1.5% |
| Ordinary Income | ¥6.2B | ¥6.4B | −3.8% |
| Net Income | ¥4.2B | ¥5.2B | −19.0% |
| ROE | 8.2% | 10.2% | - |
Executive Summary
In Q1 FY2026, revenue increased while profit declined, with revenue growth failing to translate into profit growth. Revenue rose significantly to ¥25.1B (+32.3% YoY), while Operating Income declined to ¥6.1B (△1.5% YoY), Ordinary Income to ¥6.2B (△3.8% YoY), and Net Income to ¥4.2B (△19.0% YoY). Despite the increase in revenue, selling, general and administrative expenses expanded from ¥6.3B in the previous year to ¥10.8B, putting pressure on profit margins. Net Income declined more sharply than Operating Income due in part to the impact of the tax burden.
Factors Affecting Performance
【Revenue】Revenue increased significantly to ¥25.1B, up +32.3% YoY, and is progressing at a pace exceeding the full-year company forecast (+15.6%). Although cost of sales also increased to ¥8.2B (¥6.4B in the previous year), the gross profit margin remained at 67.4% (improving compared with the previous year), indicating that pricing competitiveness has been maintained.
【Profit and Loss】Selling, general and administrative expenses increased by more than +70% to ¥10.8B from ¥6.3B in the previous year, putting pressure on profit at a pace exceeding gross profit growth. As a result, Operating Income declined to ¥6.1B (△1.5% YoY), while the Operating Income margin, although still high at 24.5%, contracted significantly from the previous year. Ordinary Income was ¥6.2B (△3.8% YoY), effectively close to Operating Income because non-operating income was limited to ¥0.1B. Net Income declined to ¥4.2B (△19.0% YoY), also affected by an effective tax rate of 31.4%. While revenue increased by 32.3%, profit declined across all indicators, resulting in higher revenue but lower profit.
Key Financial Indicators
【Profitability】The Operating Income margin was 24.5% and the Net Income margin was 16.9%. Both remained at high levels but contracted significantly from the same period of the previous year. ROE was 8.2%, comprising the product of a Net Income margin of 16.9%, total asset turnover of 0.36x, and financial leverage of 1.35x, indicating that ROE is not being boosted through debt financing.【Cash Quality】Operating Cash Flow (OCF) cannot be evaluated directly because it has not been disclosed. However, total inventory reached ¥16.1B, including finished goods inventory of ¥9.4B, suggesting that a longer inventory turnover period may be tying up cash.【Investment Efficiency】Total asset turnover was 0.36x (annualized), indicating room for improvement in asset efficiency.【Financial Soundness】The Equity Ratio was 74.3%, the current ratio was 283.4%, and the debt-to-equity ratio was 0.35x, all indicating a conservative financial structure.
Cash Flow Analysis
Because the statement of cash flows has not been disclosed, cash trends are analyzed based on changes in the balance sheet. Cash and deposits declined to ¥17.8B from ¥21.8B in the previous year, while finished goods inventory increased significantly from ¥8.8B to ¥9.4B and accounts receivable and notes receivable increased from ¥6.8B to ¥12.7B. These movements suggest that the expansion of sales activities accompanying higher revenue involved an accumulation of trade receivables and inventory, tying up a portion of cash in working capital. Current assets of ¥50.3B substantially exceeded current liabilities of ¥17.8B, indicating limited concern regarding short-term liquidity. However, the progress of inventory turnover and accounts receivable collection will be important factors to monitor as they affect future cash efficiency.
Quality of Earnings
The difference between Ordinary Income and Operating Income was limited to ¥0.1B, and the fact that most profit was generated by the core business is favorable. Non-operating income was small at ¥0.1B, primarily consisting of a foreign exchange gain of ¥0.1B, a temporary factor that is difficult to regard as a recurring source of earnings. The 19.0% decline in Net Income significantly exceeded the 1.5% decline in Operating Income, and changes in the effective tax rate of 31.4% (tax burden coefficient of 0.686x) from the previous year may have amplified fluctuations in Net Income. The accumulation of accounts receivable and inventory accompanying the increase in revenue indicates an expansion of accruals, suggesting that there may be a certain timing gap between accounting revenue growth and cash collection.
Earnings Forecast and Guidance
The Q1 progress ratios against the full-year earnings forecast were 31.3% for revenue (¥25.1B against the forecast of ¥80.0B), 32.3% for Operating Income (¥6.1B against the forecast of ¥19.0B), and 32.7% for Net Income (¥4.2B against the forecast of ¥13.0B), all exceeding the simple benchmark progress rate of 25%. The full-year forecast assumes revenue growth of +15.6%, Operating Income growth of +5.0%, and Net Income decline of △2.1%, with the company indicating a plan for limited profit growth toward the second half of the fiscal year. Q1 progress was solid, but if the contraction in the Operating Income margin from the previous year continues, an improvement in profitability during the second half will be necessary to achieve the full-year profit growth plan.
Shareholder Returns
The full-year forecast dividend is ¥44.00 per share. Based on forecast full-year EPS of ¥142.98, the Payout Ratio is approximately 30.8%, a sustainable level below 60%. Given the financial base consisting of an Equity Ratio of 74.3% and cash and deposits of ¥17.8B, the company has sufficient financial capacity to pay the forecast dividend. No information regarding share repurchases has been disclosed.
Risk Factors
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Inventory accumulation risk: Finished goods inventory was ¥9.4B, accounting for approximately 58.6% of total inventory of ¥16.1B, and annualized inventory days were approximately 180 days. A mismatch with demand forecasts or prolonged sales periods could lead to discounting and a decline in the gross profit margin.
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Working capital expansion risk: Accounts receivable and notes receivable increased from ¥6.8B in the previous year to ¥12.7B, with funds being tied up in trade receivables and inventory as revenue increased. Operating Cash Flow (OCF) may fail to keep pace with profit growth, necessitating monitoring of cash efficiency.
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Profit margin contraction risk: The Operating Income margin remained high at 24.5% but contracted significantly from the same period of the previous year. Selling, general and administrative expenses are increasing at a pace exceeding revenue growth, and if this trend continues, it could affect achievement of the full-year profit growth plan (Operating Income +5.0%).
Industry Benchmark (For Reference; Company Analysis)
Industry Benchmark (manufacturing)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Income margin | 24.5% | 7.2% (3.2%–12.5%) | +17.3pt |
| Net Income margin | 17.0% | 5.9% (2.9%–12.5%) | +11.1pt |
The company’s profitability is significantly above the industry median and ranks among the top levels.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue growth rate (YoY) | 32.3% | 5.6% (1.1%–13.9%) | +26.7pt |
The revenue growth rate also significantly exceeds the industry median, representing a high growth pace within the industry.
※Source: Company analysis
Key Takeaways from the Earnings Results
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Revenue grew +32.3% YoY, significantly exceeding the industry average, while both Operating Income and Net Income declined. The balance between growth and profitability is therefore a key point of focus in the earnings data.
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The lengthening inventory turnover period (finished goods inventory of ¥9.4B) and substantial increase in accounts receivable (¥6.8B→¥12.7B) indicate an expansion of working capital accompanying higher revenue. Inventory disposal and collection progress will be important areas to monitor regarding cash efficiency.
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The conservative financial structure, including an Equity Ratio of 74.3% and a current ratio of 283.4%, provides a foundation supporting the company’s ability to pay the full-year forecast dividend (¥44, Payout Ratio of approximately 30.8%).
This report is an earnings analysis document automatically generated by AI through analysis of XBRL earnings summary data. It does not constitute a recommendation to invest 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 with professionals as necessary.
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AI Financial Analysis
Executive Summary
FY2026 Q1 was a strong top-line quarter but a margin-reset quarter, with earnings growth lagging revenue materially. Revenue rose 32.3% YoY to JPY2.507bn. Gross profit increased 34.7% YoY to JPY1.691bn, exceeding sales growth. Gross margin improved by approximately 110bp YoY to 67.4%, demonstrating continued pricing power and/or favorable product mix. However, SG&A expenses rose 70.3% YoY to JPY1.077bn. The SG&A ratio consequently increased by approximately 960bp YoY to 43.0% of revenue. Operating income declined 1.5% YoY to JPY614m despite the sharp sales expansion. Operating margin contracted approximately 840bp YoY to 24.5% from 32.9%. Ordinary income decreased 3.8% YoY to JPY619m. Net income fell 19.0% YoY to JPY425m, and net margin declined approximately 1,080bp YoY to 16.9%. The effective tax rate increased to 31.4% from approximately 18.5% in the prior-year quarter, amplifying the decline in net income relative to operating income. Non-operating income was immaterial at JPY6m, including JPY5m of foreign-exchange gains, so earnings remain principally operating-profit driven. Annualized ROE remained very high at 32.6%, supported by a 16.9% net margin, 1.430x asset turnover, and 1.35x financial leverage. Liquidity is robust, with a 283.4% current ratio and JPY3.256bn of working capital. The principal operating issue is working-capital intensity, as inventory days of 180 and a cash conversion cycle of 200 days are well above manufacturing benchmarks. Against full-year guidance, Q1 achieved 31.3% of revenue guidance, 32.3% of operating-income guidance, and 32.7% of net-income guidance, all moderately ahead of the standard 25% first-quarter run rate. The outlook therefore depends on whether elevated selling and promotional investment can translate into sustained revenue growth without further SG&A-rate deterioration and whether inventory can be converted into cash efficiently.
Profitability Analysis
Annualized DuPont ROE of 32.6% decomposes into a 16.9% net profit margin, 1.430x asset turnover, and 1.35x financial leverage. The dominant YoY change was margin compression rather than balance-sheet leverage: operating margin fell to 24.5% from 32.9%, while the company retains a low-leverage capital structure. Gross margin expanded to 67.4% from approximately 66.3%, indicating that product-level economics remained favorable. The earnings shortfall therefore stems from operating-expense growth, with SG&A increasing 70.3% YoY versus 32.3% revenue growth. This created negative operating leverage in Q1 despite strong sales momentum. The SG&A ratio rose to 43.0% from approximately 33.4%, more than offsetting the gross-margin gain. Net margin also fell to 16.9% from approximately 27.7%, reflecting both the operating-margin decline and a higher 31.4% effective tax rate. The five-factor analysis indicates a 0.686 tax burden, slightly below the 0.70 normal benchmark, whereas the 1.010 interest burden confirms that interest costs are not a constraint. The JPY5m foreign-exchange gain was less than 1% of operating income and does not materially alter the recurring-profit interpretation. Annualized ROA is approximately 24.8%, calculated using annualized Q1 net income and average total assets, which remains a high return level. Sustainability of the currently high ROE depends primarily on restoring SG&A discipline; margin recovery is more important than additional financial leverage.
Growth Assessment
Revenue growth of 32.3% YoY is substantial and was accompanied by a 34.7% increase in gross profit, supporting the view that underlying demand and gross-profit generation remained strong in Q1. The 67.4% gross margin is particularly favorable for a consumer product manufacturer and improved by roughly 110bp YoY. Finished goods rose 7.8% YoY to JPY944m, while total reported inventories of raw materials, work in process, and finished goods were broadly stable at approximately JPY1.611bn. The mix shifted toward finished goods, with work in process declining 19.3% YoY to JPY242m and raw materials declining 5.0% YoY to JPY425m. This may reflect inventory conversion into saleable products, but finished-goods inventory remains substantial relative to the cost base. Full-year company guidance calls for revenue of JPY8.0bn, operating income of JPY1.9bn, ordinary income of JPY1.9bn, and net income of JPY1.3bn. Q1 progress rates of 31.3% for revenue, 32.3% for operating income, and 32.7% for net income are 6-8 percentage points above a standard 25% Q1 pace, but are not more than 10 percentage points above that benchmark. The implied full-year operating margin is 23.8%, slightly below Q1's 24.5%, suggesting guidance allows for some further cost intensity or normal seasonal variation. The implied full-year net margin is 16.3%, broadly consistent with Q1's 16.9%. Revenue sustainability should be assessed through the relationship between sales growth, finished-goods inventory turnover, and the SG&A ratio in subsequent quarters.
Financial Health
Financial health is strong from a liquidity and capital-structure perspective. Current assets of JPY5.031bn covered current liabilities of JPY1.775bn by 2.83x, producing a current ratio of 283.4%. The quick ratio was also 283.4%, indicating that reported liquid current assets alone substantially cover short-term obligations. Working capital totaled JPY3.256bn. Cash and deposits of JPY1.785bn represented 25.5% of total assets and exceeded total noncurrent liabilities by a wide margin. Total liabilities were JPY1.801bn versus equity of JPY5.211bn, corresponding to a reported debt-to-equity ratio of 0.35x. This is well below the 2.0x level associated with aggressive leverage, and there is no apparent short-term maturity mismatch given the current-asset coverage. Equity represented 74.3% of total assets, although this declined from 76.9% in the prior-year quarter as liabilities grew faster than equity. Trade receivables increased 87.4% YoY to JPY1.274bn, and electronically recorded monetary claims were JPY255m. The receivables build materially outpaced revenue growth and warrants attention as a collection and working-capital risk. Electronically recorded obligations increased to JPY385m from JPY163m, partly offsetting the receivables increase through greater supplier financing. Property, plant and equipment increased 8.1% YoY to JPY1.479bn, led by other PPE, while land remained JPY731m. Asset retirement obligations increased to JPY17m from JPY12m but remain immaterial relative to JPY1.801bn of liabilities.
Notable B/S Changes
Accounts receivable: +JPY594m (+87.4%) to JPY1.274bn - growth materially exceeded the 32.3% revenue increase, increasing collection and working-capital risk. Electronically recorded obligations: +JPY222m (+136.7%) to JPY385m - greater use of supplier-payment obligations partly finances working capital, but should be monitored alongside the cash conversion cycle. Electronically recorded monetary claims: +JPY11m (+4.5%) to JPY255m - together with trade receivables, total reported operating receivables reached approximately JPY1.529bn. Finished goods: +JPY68m (+7.8%) to JPY944m - the largest inventory component remains elevated and is consistent with the 180-day inventory alert. Asset retirement obligations: +JPY5m (+41.4%) to JPY17m - the percentage increase is notable, but the absolute balance remains immaterial relative to total liabilities.
Cash Flow Quality
Reported working-capital indicators point to a cash-conversion risk despite strong accounting profitability. Inventory days of 180 exceed the 90-day warning threshold by a wide margin. The root cause is the sizable inventory base of approximately JPY1.611bn relative to the annualized Q1 cost of sales base. The 200-day cash conversion cycle also exceeds the 120-day warning threshold, indicating that cash is tied up for an extended period between inventory procurement and customer collection. This is a material concern because the company combines high finished-goods inventory of JPY944m with a sharp 87.4% YoY increase in trade receivables to JPY1.274bn. The context is somewhat mitigated by strong liquidity and the increase in electronically recorded obligations to JPY385m, which provides supplier-payment funding. Nevertheless, the impact on the investment case is that reported profit growth and strong gross margins will be less valuable if inventory and receivables do not convert into cash on a timely basis. The concentration in finished goods elevates demand-forecasting, markdown, and obsolescence risk for branded consumer products. Subsequent-quarter trends in inventories, receivables, supplier obligations, and operating cash generation should determine whether the long cash cycle is temporary growth investment or a persistent efficiency issue.
Dividend Sustainability
The full-year forecast dividend of JPY44 per share implies a dividend payout ratio of approximately 30.8% against forecast EPS of JPY142.98. This is comfortably below the 60% sustainability benchmark and leaves a substantial portion of forecast earnings for retained capital. Based on 9.092m issued shares, the indicated annual cash dividend is approximately JPY400m, compared with forecast net income of JPY1.3bn. Retained earnings stood at JPY4.246bn at Q1-end, providing a sizeable accounting buffer. The conservative 0.35x debt-to-equity ratio and 283.4% current ratio further support balance-sheet capacity for the indicated dividend. Dividend resilience will nevertheless depend on working-capital discipline because the 200-day cash conversion cycle can delay cash availability despite reported profits. There is no reported treasury-share activity of financial significance, so the dividend payout ratio is the appropriate shareholder-return measure.
Risk Assessment
Business risks include Inventory and demand risk: the supplied DIO alert of 180 days is double the 90-day warning threshold. High finished-goods inventory of JPY944m raises the risk of slower sell-through, markdowns, product obsolescence, or inventory valuation pressure if demand moderates., Cost-control risk: SG&A increased 70.3% YoY, far above 32.3% revenue growth, reducing operating margin by approximately 840bp. Sustained promotional, personnel, or selling investment without corresponding sales productivity would further dilute earnings., Consumer-product and brand-execution risk: revenue growth and gross-margin maintenance depend on consumer demand, product appeal, channel execution, and the ability to protect pricing in a discretionary wellness-product market., Foreign-exchange risk: Q1 included a JPY5m FX gain. The amount is immaterial to operating income, but procurement or overseas exposure could make future gross margins sensitive to exchange-rate changes..
Financial risks include Working-capital risk: the supplied CCC alert of 200 days exceeds the 120-day warning threshold. Combined inventory and receivables investment can absorb liquidity and weaken cash conversion if sales momentum slows., Receivables-collection risk: trade receivables increased 87.4% YoY to JPY1.274bn, materially faster than sales. This requires monitoring for payment-term extensions, customer concentration, or delayed collection., Capital-ratio dilution risk: the equity ratio declined to 74.3% from 76.9%, though absolute leverage remains conservative at 0.35x debt-to-equity and liquidity remains strong..
Key concerns include The highest-priority issue is whether high inventory days and the long cash conversion cycle normalize as sales scale; failure to do so could undermine cash generation and lead to inventory markdown risk., The second priority is SG&A productivity. Gross-margin expansion is positive, but the current sales growth rate has not covered the increase in operating expenses., The third priority is the unusually sharp receivables increase relative to revenue growth, which should be evaluated alongside subsequent collection trends and customer-credit quality..
Investment Implications
Key takeaways include Q1 revenue growth of 32.3% and gross-margin expansion to 67.4% demonstrate strong commercial momentum and favorable product economics., Operating income declined 1.5% because SG&A growth of 70.3% substantially exceeded sales growth, causing operating margin to fall to 24.5%., Annualized ROE of 32.6% remains excellent and is driven primarily by high profitability and asset turnover rather than financial leverage., The balance sheet is conservatively financed, with a 283.4% current ratio, 74.3% equity ratio, and 0.35x debt-to-equity ratio., The key counterweight to strong profitability is weak working-capital efficiency, highlighted by 180 inventory days and a 200-day cash conversion cycle., Q1 progress against full-year guidance is ahead of a standard first-quarter pace, although the degree of outperformance is not sufficient by itself to establish a guidance revision case..
Metrics to watch include SG&A growth relative to revenue growth and the SG&A-to-sales ratio, Operating margin versus the 23.8% full-year guided margin, Finished-goods inventory and inventory days, Trade receivables, electronically recorded monetary claims, and collection efficiency, Cash conversion cycle and operating cash generation, Quarterly progress toward JPY8.0bn revenue and JPY1.9bn operating-income guidance.
Regarding relative positioning, The company combines unusually high gross margin, operating margin, annualized ROE, and liquidity for a small consumer-oriented manufacturer. Its relative weakness is not balance-sheet leverage but operating-expense discipline and a working-capital cycle that is materially longer than standard manufacturing benchmarks.