TAKARA STANDARD CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

In Q1 of the fiscal year ending March 2027, revenue increased, but operating income declined due to higher SG&A expenses. Revenue was ¥624.7B (+1.8% YoY), operating income was ¥36.1B (-14.2%), ordinary income was ¥39.1B (-12.5%), and net income attributable to owners of the parent was ¥26.1B (-15.4%). Although the gross margin improved by 22bp from the previous year to 35.1%, the SG&A ratio rose by 132bp to 29.4%, causing the operating margin to decline to 5.8% from 6.8% in the previous year. The primary factor behind the decline in operating income was the increase in SG&A expenses, which exceeded the effect of higher revenue.

Factors Affecting Performance

【Revenue】Revenue of ¥624.7B increased +1.8% YoY. The Housing Equipment-Related segment, the core business, accounted for 99.9% of revenue, reflecting a single-business structure. Revenue from this segment was ¥624.0B (+1.8%). By breakdown, merchandise and products accounted for ¥547.1B and construction work for ¥76.9B, with both increasing from the previous year.

【Profit and Loss】Gross profit was ¥219.6B (+2.4%), and the gross margin improved slightly to 35.1% (+22bp), indicating modest improvement in cost management. Meanwhile, SG&A expenses increased +6.5% to ¥183.5B, expanding at a pace faster than the revenue growth rate (+1.8%). This was the primary factor behind the decline in operating income to ¥36.1B (-14.2%). Non-operating income remained stable at ¥3.6B, primarily consisting of dividend income of ¥2.4B, while ordinary income stood at ¥39.1B (-12.5%). Extraordinary gains and losses were limited, with a net amount of -¥0.8B, including a ¥0.8B loss on disposal of fixed assets, and had a limited impact on performance. In conclusion, the company recorded higher revenue but lower profit.

Segment Analysis

The Housing Equipment-Related segment recorded revenue of ¥624.0B (+1.8% YoY), operating income of ¥35.5B (-14.4%), and a profit margin of 5.7% (down YoY). While the segment generated the vast majority of company-wide profit, its profit margin deteriorated. Other segments, including the Real Estate Leasing Business, generated revenue of ¥0.7B (-30.1%). Although small in scale, these segments maintained high profitability, with operating income of ¥0.6B (+7.5%) and a profit margin of 87.7%. The Housing Equipment-Related segment accounts for an extremely large proportion of company-wide profit, creating a structure in which deterioration in the segment’s profitability is directly reflected in overall company performance.

Key Financial Indicators

【Profitability】The operating margin declined to 5.8% from 6.8% in the previous year, while the net profit margin also fell below the previous year’s 5.0% to 4.2%. The gross margin improved slightly to 35.1% from 34.9% in the previous year, indicating an improving trend in cost management itself. 【Cash Flow Quality】Operating cash flow (OCF) was ¥99.3B, approximately 3.8 times net income of ¥26.1B, indicating strong cash backing for earnings. 【Investment Efficiency】ROE remained low at 1.3%, while capital expenditures reached ¥82.0B, approximately 4.1 times depreciation and amortization of ¥20.1B, indicating an active investment phase. 【Financial Soundness】The equity ratio was 68.8%, unchanged from the previous year, while cash and deposits remained at a substantial level of ¥588.0B.

Cash Flow Analysis

Operating cash flow was ¥99.3B, up +77.2% from ¥56.1B in the previous year, indicating strong cash-generation capacity relative to profit before income taxes and other adjustments. In terms of working capital, a decrease in trade receivables contributed ¥82.5B positively, while inventories increased by ¥18.5B and absorbed cash. Investing cash flow was -¥88.6B, of which capital expenditures accounted for ¥82.0B, representing an expansion in investment scale from the previous year. Financing cash flow was -¥36.8B, primarily due to dividend payments of ¥36.8B. The company covered most of investing cash flow through operating cash flow and secured positive free cash flow of ¥10.7B.

Earnings Quality

Non-operating income was ¥3.6B, including dividend income of ¥2.4B, equivalent to 0.6% of revenue and relatively small in scale, indicating that the earnings structure is centered on recurring revenue. Extraordinary gains and losses remained limited at a net amount of -¥0.8B, comprising extraordinary income of ¥0.3B and extraordinary losses of ¥1.1B, suggesting a limited impact from temporary factors on performance. The gap between ordinary income of ¥39.1B and net income of ¥26.1B was approximately ¥13.0B, primarily attributable to the ¥12.4B burden from income taxes and other taxes; no structural issues were identified. Comprehensive income was ¥36.0B, exceeding net income of ¥26.1B. This difference was primarily due to a ¥10.0B increase in valuation difference on securities and does not directly indicate the earning power of the core business.

Earnings Forecast and Guidance

Progress toward the full-year plan was 24.1% for revenue (¥624.7B/¥2590.0B), 18.9% for operating income (¥36.1B/¥191.0B), and 19.7% for ordinary income (¥39.1B/¥198.0B). Revenue is progressing generally in line with plan, but progress in operating income and ordinary income is somewhat behind, suggesting that cost pressures continued as of Q1. The full-year plan assumes virtually flat growth, with revenue at +2.5%, operating income at +0.1%, and ordinary income at +0.6%; improvement in cost efficiency toward the second half of the fiscal year appears to be a prerequisite for achieving the plan. The company revised its earnings forecast during the quarter.

Shareholder Returns

The annual dividend forecast is ¥62, representing an increase from the previous year’s actual dividend of ¥50. The payout ratio against forecast EPS of ¥226.15 is approximately 27.4%, remaining at a conservative level. Dividend payments in financing cash flow during Q1 were ¥36.8B. Given cash and deposits of ¥588.0B and free cash flow of ¥10.7B for the current period, there appears to be no significant constraint on securing funds for dividends. No share repurchase was confirmed, and shareholder returns are expected to remain centered on dividends for the time being. The company did not revise its dividend forecast during the quarter.

Risk Factors

1. Business concentration risk: The Housing Equipment-Related segment accounts for 99.9% of revenue and nearly all operating income, creating a single-business structure in which company-wide performance is highly susceptible to demand fluctuations and changes in the competitive environment affecting this business.

2. Profitability pressure from higher SG&A expenses: SG&A expenses increased +6.5% YoY, exceeding the revenue growth rate of +1.8%, and the SG&A ratio rose to 29.4% (+132bp). If this trend continues, it could lead to a sustained decline in the operating margin.

3. Working capital fluctuations: Inventories have been trending upward from the end of the previous fiscal year and absorbed ¥18.5B of cash even in Q1. Inventory trends could affect cash flow efficiency going forward.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

Both the operating margin and net profit margin were below the industry median, placing the company’s profitability somewhat toward the lower end of the industry.

Growth and Capital Efficiency

The revenue growth rate was below the industry median, indicating a relatively moderate pace of revenue growth within the industry.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. While the gross margin improved to 35.1% (+22bp), the SG&A ratio rose to 29.4% (+132bp), causing operating leverage to work in the opposite direction and serving as the primary factor behind the decline in operating income (-14.2%). Whether the pattern of expenses growing faster than revenue continues will determine the direction of the full-year profit margin.

2. Operating cash flow was ¥99.3B, approximately 3.8 times net income, indicating strong cash conversion of earnings. Capital expenditures reached ¥82.0B, approximately 4.1 times depreciation and amortization, confirming that the company is in an active investment phase.

3. The financial foundation remains stable, with an equity ratio of 68.8% and cash of ¥588.0B. The annual dividend forecast was increased to ¥62 from ¥50 in the previous year. The payout ratio remains at a conservative level of approximately 27.4%.

Theoretical Stock 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 5-year fade). It is not a forecast of the market price or a recommendation to take any specific investment action.

Sensitivity: ¥2,840–¥3,007 for ±1% in the cost of equity, and ¥2,916–¥2,926 for ±0.1 in 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 were used; there is a timing difference relative to the full-year forecast.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-06 / This value does not forecast or guarantee the future stock 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 responsibility, after consulting with professionals as necessary.

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