YONEX (7906) FY2026 Q3 Earnings Report

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Executive Summary

Yonex achieved higher revenue and earnings driven by the expansion of its sporting goods business, primarily in Asia; however, the earnings growth rate fell below revenue growth and margins declined slightly. Revenue was ¥120.47B (+18.4% YoY), Operating Income was ¥12.93B (+13.5%), Ordinary Income was ¥12.70B (+11.0%), and Net Income was ¥9.62B (+3.9%). Cost of sales increased by 21.6%, exceeding revenue growth, resulting in a lower gross margin. This was the primary reason for the sluggish earnings growth relative to revenue growth.

Factors Affecting Performance

【Revenue】Revenue was ¥120.47B, maintaining strong growth of +18.4% YoY. The Sporting Goods Business, which accounted for 99.6% of total revenue, was the main growth driver, increasing by +18.5%. By region, Asia recorded the largest revenue increase at ¥63.48B (+25.7%). Japan at ¥46.15B (+10.4%), North America at ¥5.80B (+19.8%), and Europe at ¥4.54B (+10.9%) also recorded higher revenue, while the Sports Facilities Business was nearly flat at ¥0.49B (▲0.4%).

【Profit and Loss】Operating Income was ¥12.93B (+13.5%), and the Operating Income margin declined to 10.7%, approximately 46bp below 11.2% in the same period of the prior year. The primary factor was the increase in the cost-of-sales ratio, with the gross margin declining to 44.2%, approximately 147bp below the prior-year level of 45.7%. However, the SG&A ratio improved to 33.5% from 34.5%, partially offsetting the decline in profitability. Ordinary Income was limited to ¥12.70B (+11.0%) due to a foreign exchange loss of ¥0.24B and interest expense of ¥0.20B. Despite including extraordinary income of ¥0.85B, primarily consisting of ¥0.82B in government subsidies, Net Income growth slowed to ¥9.62B (+3.9%) as extraordinary income fell below the prior-year ¥0.93B and the effective tax rate increased to 29.0%. Revenue and earnings both increased, but earnings growth remained below revenue growth.

Segment Analysis

The Sporting Goods Business is the core business, accounting for segment profit of ¥12.62B, or 99.7% of the total. By region, Asia was the largest source of revenue and earnings and had the highest profit margin, with revenue of ¥71.34B, profit of ¥9.07B, and a profit margin of 12.7%. Japan continued to exhibit a low-profitability structure, with revenue of ¥71.62B, profit of ¥2.71B, and a profit margin of 3.8%. North America generated profit of ¥0.42B on revenue of ¥5.81B, for a profit margin of 7.2%; despite revenue growth of +19.8% YoY, profit declined by ▲28.5%, suggesting the impact of its cost structure and promotional expenses. Europe remained stable, with revenue of ¥4.57B, profit of ¥0.42B, and a profit margin of 9.2%. The Sports Facilities Business was small in scale, with revenue of ¥0.52B, profit of ¥0.04B, and a profit margin of 7.5%. Overall, the high dependence of the earnings structure on Asia is evident.

Key Financial Metrics

【Profitability】The Operating Income margin of 10.7% and Net Income margin of 8.0% both declined from 11.2% and 9.1%, respectively, in the same period of the prior year, but remained at favorable levels for a manufacturer. Annualized ROE of 16.7% was high and supported by a balance among the Net Income margin, total asset turnover of approximately 1.30x, and financial leverage of approximately 1.61x. 【Cash Flow Quality】Pre-tax income of ¥13.56B includes extraordinary income of ¥0.85B, primarily consisting of ¥0.82B in government subsidies, representing a temporary factor equivalent to 8.9% of Net Income of ¥9.62B. 【Investment Efficiency】Against total assets of ¥123.67B, annualized revenue generation was secured at approximately 1.30x in total asset turnover, indicating favorable asset efficiency. 【Financial Soundness】The Equity Ratio was 62.0%, the current ratio was approximately 327.7%, and cash and deposits were ¥35.37B, indicating a strong liquidity position and capital base. Meanwhile, long-term borrowings increased to ¥15.38B, up +85.9% from ¥8.27B at the end of the prior-year period, when they stood at ¥6.943B; confirming the use of funds will be an issue going forward.

Cash Flow Analysis

Although detailed disclosure of the cash flow statement is unavailable, an analysis of funding trends based on changes in the balance sheet indicates that cash and deposits increased by ¥5.89B (+20.0%) YoY to ¥35.37B. At the same time, long-term borrowings increased by ¥7.11B (+85.9%) to ¥15.38B, suggesting that the company may have expanded its funding base through external financing. Property, plant and equipment increased by ¥5.79B (+18.9%) to ¥35.98B, indicating progress in investments in land and buildings. Retained earnings increased by ¥7.64B to ¥64.71B, reflecting the continued accumulation of capital through retained earnings. The concurrent increase in borrowings and cash holdings can be interpreted as proactive funding to support business expansion.

Earnings Quality

Ordinary Income was ¥12.70B compared with Operating Income of ¥12.93B. The primary reason for the difference was that the foreign exchange loss of ¥0.24B and interest expense of ¥0.20B exceeded non-operating income, including interest income, of ¥0.27B. Non-operating income amounted to only approximately 0.2% of revenue, indicating low dependence on non-core income. Pre-tax income of ¥13.56B exceeded Ordinary Income by ¥0.85B due to extraordinary income of ¥0.85B, primarily consisting of ¥0.82B in government subsidies; this was a temporary factor. The extraordinary income was equivalent to 8.9% of Net Income of ¥9.62B. Although this was below the 20% threshold generally regarded as a warning level, the decline from extraordinary income of ¥0.93B in the same period of the prior year, together with the increase in the effective tax rate to 29.0%, caused Net Income growth of +3.9% to fall significantly below Operating Income growth of +13.5%. The gap between Ordinary Income and Net Income was primarily attributable to income taxes of ¥3.93B. In assessing earnings quality, recurring earnings power and temporary factors should therefore be evaluated separately.

Earnings Forecasts and Guidance

The Q3 cumulative progress rates against the full-year company forecasts of revenue of ¥162.00B, Operating Income of ¥16.20B, Ordinary Income of ¥15.60B, and Net Income of ¥11.60B were 74.4%, 79.8%, 81.4%, and 82.9%, respectively. Revenue was broadly in line with the standard progress rate of 75%, while all profit measures exceeded the standard progress rate. However, the advance in profit progress was partly supported by the recognition of extraordinary income of ¥0.85B, so the progress should be assessed somewhat conservatively when viewed on a recurring earnings basis. To achieve the full-year forecasts, Q4 revenue of ¥41.53B and Operating Income of ¥3.27B are required. This corresponds to a required Q4 Operating Income margin of 7.9%, compared with a Q3 cumulative Operating Income margin of 10.7%, indicating that the forecasts are not difficult to achieve.

Shareholder Returns

The Q2 dividend was ¥12.00 per share, representing half of the full-year dividend forecast of ¥24.00 at the interim stage. The dividend was increased from ¥11.00 per share in the same period of the prior year, indicating a gradual enhancement of shareholder returns. Based on forecast EPS of ¥135.76 and the annual dividend forecast of ¥24.00, the forecast Payout Ratio is 17.7%, remaining at a sustainable level below 60%. Retained earnings increased to ¥64.71B, up ¥7.64B YoY, providing a sufficient source of funds for continued dividend payments. Although Net Income includes extraordinary income of ¥0.85B, the Payout Ratio itself is low, so this temporary factor is not likely to materially affect dividend sustainability.

Risk Factors

1. Asia-dependent growth structure: External revenue in Asia was ¥63.48B, up +25.7% YoY, accounting for approximately 71.9% of segment profit in the Sporting Goods Business. Changes in demand trends and the competitive environment in the region could have a significant impact on overall performance.

2. Decline in gross margin: The gross margin was 44.2%, approximately 147bp below 45.7% in the same period of the prior year. This resulted from cost of sales increasing by +21.6%, exceeding revenue growth of +18.4%. If this trend continues, revenue growth may be less likely to translate into earnings growth.

3. Increase in long-term borrowings: Long-term borrowings increased by +85.9% YoY to ¥15.38B. Although near-term financial risk is limited by the increase in cash and deposits and the high Equity Ratio of 62.0%, the use of funds raised and the status of investment returns require monitoring.

Industry Benchmark (For Reference; Company Analysis)

Industry Benchmark (manufacturing)

Profitability and Returns

Both profitability metrics exceeded the industry median and were at favorable levels.

Growth and Capital Efficiency

The revenue growth rate significantly exceeded the industry median, placing the company among the high-growth companies in the industry.

※Source: Company analysis

Key Points from the Financial Results

1. Cost of sales increased by 21.6% against revenue growth of 18.4%, resulting in a decline in gross margin of approximately 147bp. This is a key point to monitor when assessing future profitability trends. The improvement in the SG&A ratio to 33.5% from 34.5% in the prior year partially offset the decline in the profit margin.

2. Although full-year progress rates exceeded the standard level of 75% on the profit side, part of the progress in Net Income was supported by extraordinary income of ¥0.85B, including government subsidies. Distinguishing this factor from recurring earnings growth is important when assessing earnings quality.

3. Long-term borrowings increased by +85.9% YoY, while cash and deposits also increased by +20.0%. Financing and asset investment, with property, plant and equipment increasing by +18.9%, are progressing in parallel. The efficiency of capital allocation will be an important monitoring point going forward.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,004–¥1,065 at ±1% for the cost of equity, and ¥1,030–¥1,039 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 (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated solely from publicly available 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 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 adviser where necessary.

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