Eidai (7822) FY2026 Q3 Earnings Report

Quick View

Executive Summary

For the nine months ended Q3 of the fiscal year ending March 2026, the key development was the return to operating profitability, driven by revenue growth and improved profitability in the Housing Materials Business. Revenue was ¥54.73B (+2.9% year on year), Operating Income was ¥0.29B (versus a ¥0.42B loss in the same period last year), and Ordinary Income was ¥0.18B (versus a ¥0.47B loss in the same period last year). Net Income attributable to owners of the parent was ¥0.20B, turning profitable from a ¥0.27B loss in the same period last year. In addition to higher revenue, an improved gross margin and restrained SG&A expenses drove the earnings recovery; however, the Operating Margin remained at 0.5%, while interest expense burden continued to weigh on Ordinary Income.

Factors Affecting Performance

【Revenue】Revenue was ¥54.73B, up +2.9% year on year. By segment, the Housing Materials Business generated ¥46.24B in revenue (84.5% composition ratio, +1.6% year on year), while the Wood-Based Panels Business generated ¥9.41B (15.5% composition ratio, +10.6% year on year), with both businesses contributing to revenue growth.

【Profitability】The gross margin improved by approximately 1.0pt to 21.4% from 20.4% in the same period last year, while the SG&A ratio declined by approximately 0.3pt to 20.8%. As a result, Operating Income turned positive at ¥0.29B (versus a ¥0.42B loss in the same period last year). Segment profit in the Housing Materials Business improved to ¥3.14B (6.8% margin, versus 6.3% in the prior year), leading the overall recovery, while the Wood-Based Panels Business continued to report a loss of ¥1.36B (margin of -14.5%). Ordinary Income was ¥0.18B, declining from Operating Income due to ¥0.29B in interest expense. Against Profit Before Tax of ¥0.25B, including ¥0.08B in extraordinary income, the Company recorded ¥0.51B in income taxes and other taxes; after a ¥0.46B loss attributable to non-controlling interests, Net Income attributable to owners of the parent was ¥0.20B. Although the overall structure was one of revenue and earnings growth, the absolute level of profitability remains thin.

Segment Analysis

The Housing Materials Business reported revenue of ¥46.24B (84.5% composition ratio, +1.6% year on year) and Operating Income of ¥3.14B (6.8% margin, versus 6.3% in the prior year), achieving both revenue and earnings growth. Profit growth exceeded revenue growth, making this business the core driver of the Company-wide earnings improvement. The Wood-Based Panels Business reported revenue of ¥9.41B (15.5% composition ratio, +10.6% year on year) and an Operating Loss of ¥1.36B (margin of -14.5%). Although the loss narrowed by ¥0.45B from a loss of ¥1.81B in the same period last year, the business remained in the red. Other Businesses (effective use of real estate and solar power generation) secured a profit of ¥0.054B on revenue of ¥0.095B, remaining profitable despite their small scale.

Key Financial Indicators

【Profitability】The Operating Margin improved by approximately 1.3pt to 0.5% from negative 0.8% in the same period last year, but remains thin, making earnings highly sensitive to slight fluctuations in raw material costs, logistics expenses, and selling prices. The gross margin of 21.4% (20.4% in the prior year) and Net Income attributable to owners of the parent margin of 0.4% (negative 0.5% in the prior year) also improved. 【Cash Quality】The net amount of extraordinary income and losses of ¥0.068B was equivalent to approximately 33% of Net Income attributable to owners of the parent of ¥0.20B, indicating that current-period earnings include a certain level of one-off factors. The effective tax rate was high at 201.6%, based on ¥0.51B in income taxes and other taxes against Profit Before Tax of ¥0.25B. Together with the ¥0.46B loss attributable to non-controlling interests, this warrants attention regarding the sustainability of Net Income attributable to owners of the parent. 【Investment Efficiency】Annualized ROE is estimated at approximately 0.7%, while ROIC is also believed to be below 1%, indicating that the Company’s earnings-generating capacity relative to invested capital remains low. 【Financial Soundness】The Equity Ratio was 46.5%, essentially unchanged from 46.5% in the same period last year. Cash and deposits stood at ¥7.33B, while interest-bearing debt, including ¥19.25B in long-term borrowings, accounted for slightly more than 20% of total assets. Operating Income (EBIT) of ¥0.29B was approximately equal to interest expense of ¥0.29B, indicating an extremely limited capacity to service interest payments.

Cash Flow Analysis

Although the Company does not disclose a statement of cash flows, an analysis of balance sheet trends indicates that Cash and deposits were ¥7.33B, a decrease of ¥0.41B from ¥7.74B in the same period last year. Operating receivables, comprising accounts receivable and electronically recorded monetary claims, increased year on year, while raw materials and products also accumulated, indicating an increasing amount of cash tied up in working capital. Meanwhile, accounts payable and electronically recorded obligations declined slightly from the same period last year. The simultaneous contraction of operating liabilities and increases in operating receivables and inventories have increased the funding burden associated with working capital. Long-term borrowings were ¥19.25B, down ¥0.61B from ¥19.86B in the same period last year, indicating gradual deleveraging, although the balance remains substantial. Net assets were ¥41.76B, essentially unchanged from ¥41.79B in the same period last year, indicating that the Company has maintained its equity base.

Earnings Quality

The earnings improvement for the current period comprised both recurring factors, such as improved profitability in the Housing Materials Business, and a one-off factor in the form of ¥0.08B in extraordinary income. The net amount of extraordinary income and losses, ¥0.068B, was equivalent to approximately 33% of Net Income attributable to owners of the parent of ¥0.20B, somewhat reducing the recurring nature of current-period earnings. Non-operating income was primarily composed of ¥0.14B in dividend income received, while non-operating expenses were largely comprised of ¥0.29B in interest expense. This was approximately equal to Operating Income of ¥0.29B, creating a structure in which financial costs weigh on Ordinary Income. Income taxes and other taxes of ¥0.51B exceeded Profit Before Tax of ¥0.25B, resulting in an effective tax rate exceeding 200%. This was largely attributable to the consolidated structure, which included a ¥0.46B loss attributable to non-controlling interests; caution is therefore warranted when assessing profitability based solely on Net Income attributable to owners of the parent.

Earnings Forecast and Guidance

The full-year Company forecast is revenue of ¥74.50B (+4.6% year on year), Operating Income of ¥0.80B, Ordinary Income of ¥0.60B, EPS of ¥11.31, and annual dividends of ¥10.00 per share. The nine-month cumulative progress rates were 73.5% for revenue, 36.5% for Operating Income, and 40.8% for Net Income attributable to owners of the parent (against the full-year forecast of ¥0.50B). While revenue is progressing at approximately a standard pace, the earnings outlook is highly dependent on Q4. To achieve the forecast, approximately ¥0.51B in Operating Income and approximately ¥0.30B in Net Income attributable to owners of the parent will be required in Q4. The key focus will be whether improved profitability in the Housing Materials Business continues and whether the loss in the Wood-Based Panels Business can be further reduced.

Shareholder Returns

The Q2 dividend was ¥5.00 per share. The full-year forecast calls for annual dividends of ¥10.00 per share and forecast EPS of ¥11.31, implying an estimated forecast Payout Ratio of approximately 88%. When measured against cumulative current-period Net Income attributable to owners of the parent of ¥0.20B, the interim dividend alone represents a Payout Ratio exceeding the earnings level, indicating that cumulative current-period earnings alone do not sufficiently cover the dividend. Dividend sustainability is therefore dependent on the extent to which earnings can be accumulated in Q4.

Risk Factors

1. Interest burden and interest-servicing capacity risk: Interest expense of ¥0.29B was approximately equal to Operating Income (EBIT) of ¥0.29B, leaving interest coverage at approximately 1.0x. A slight deterioration in Operating Income could result in the Company being unable to cover its interest burden.

2. Wood-Based Panels Business profitability risk: Against revenue of ¥9.41B, the segment reported a loss of ¥1.36B and a margin of negative 14.5%. The business has a structure in which fluctuations in raw material and energy costs or supply and demand can readily lead to the continuation or expansion of losses.

3. Dependence on housing materials demand risk: Because Housing Materials account for 84.5% of revenue, changes in housing starts, construction costs, and interest rates are likely to have a substantial impact on consolidated performance.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The Company’s profitability is substantially below the industry median and ranks in the lower tier within the industry.

Growth and Capital Efficiency

The Company’s revenue growth rate is approximately in line with the industry median, placing it in a standard position within the industry in terms of growth.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. The return to operating profitability was largely attributable to improved profitability in the Housing Materials Business (6.8% margin, versus 6.3% in the prior year). Together with the reduced loss in the Wood-Based Panels Business (-14.5%), this indicates that the improvement of the earnings structure remains at an early stage.

2. Interest expense of ¥0.29B was approximately equal to Operating Income of ¥0.29B, confirming from the earnings data that the Company has a financial structure in which earnings improvements are readily offset by financial cost burdens.

3. Progress against the full-year forecast was 73.5% for revenue, compared with 36.5% for Operating Income and 40.8% for Net Income attributable to owners of the parent. Earnings are therefore progressing slowly, making the accumulation of earnings in Q4 a key point to monitor in future earnings results.

Theoretical Share Price (Reference Value)

Sensitivity: ¥696–¥733 at ±1% for the Cost of Equity, and ¥708–¥718 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 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 (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-08 / This is a mechanically calculated value based solely on publicly disclosed data; it is not a forecast of the market share price or a recommendation of any specific investment action, and does not forecast or guarantee the future share price.)

---

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 discretion and responsibility, after consulting a professional as necessary.

---End of Report---