CHORI CO.,LTD. FY2026 FY Earnings Report

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Executive Summary

The current period produced a qualitatively notable result, with net income increasing despite declines in revenue and profit at other levels. Revenue was ¥299.29B (-3.9% YoY), Operating Income was ¥13.06B (-9.9%), and Ordinary Income was ¥14.19B (-12.4%), indicating a slowdown in the core business. In contrast, Net Income increased substantially to ¥12.04B (+32.3%). The primary driver of the increase in Net Income was a decline in the effective tax rate, which did not offset the declines in Operating Income and Ordinary Income. The gross margin improved to 13.7% (13.0% in the previous year), but the SG&A ratio increased from 8.4% to 9.4%, pushing the Operating Margin down to 4.4% (4.7% in the previous year).

Factors Affecting Performance

【Revenue】Revenue was ¥299.29B, down -3.9% YoY, with declines across all reported segments. The Textile Business (48.7% of composition) generated ¥145.78B (-4.6%), the Chemicals Business (51.0% of composition) generated ¥152.67B (-3.3%), and the Machinery Business generated ¥0.77B (-10.1%). By region, domestic revenue was ¥187.3B (-0.5%) and China revenue was ¥47.5B (-1.5%), while revenue from other overseas regions declined significantly to ¥64.4B (-14.1%), with weakening overseas demand driving the overall revenue decline.

【Profit and Loss】Operating Income declined to ¥13.06B (-9.9%), while Ordinary Income declined to ¥14.19B (-12.4%). Although the gross margin improved by 70bp, this was offset by a 103bp increase in the SG&A ratio, resulting in lower operating profit. Segment profit (on a pre-tax basis) was ¥7.95B for Chemicals (-10.4%), ¥7.05B for Textiles (-8.3%), and ¥0.35B for Machinery (-43.5%); all segments recorded profit declines exceeding their revenue declines, indicating broad-based weakening in business profitability. Net Income increased to ¥12.04B (+32.3%), but this was attributable to the decline in the effective tax rate from approximately 28% in the previous year to 15.1%. Extraordinary gains and losses were largely offset (extraordinary gain of ¥0.10B and extraordinary loss of ¥0.11B), and the impact of one-time factors was limited. In conclusion, the current period was characterized by declines in revenue and profit, with Net Income increasing due to a lower tax burden.

Segment Analysis

The Chemicals Business is the core business, accounting for 51.0% of revenue composition, with Revenue of ¥152.67B (-3.3% YoY) and segment profit of ¥7.95B (-10.4%). The Textile Business accounted for 48.7% of revenue composition, with Revenue of ¥145.78B (-4.6%) and segment profit of ¥7.05B (-8.3%). Both businesses experienced profit declines exceeding their revenue declines, with their profit margins falling to 5.2% and 4.8%, respectively. Although the Machinery Business is small in scale (Revenue of ¥0.77B), its profit declined significantly to ¥0.35B (-43.5%). As the two core businesses simultaneously experienced declines in revenue and profit, the performance-offsetting effect between businesses did not operate during the current period.

Key Financial Metrics

【Profitability】The Operating Margin was 4.4%, down from 4.7% in the previous year, as the 9.4% SG&A ratio (8.4% in the previous year) increased more than the 13.7% gross margin (13.0% in the previous year) improved. The Net Profit Margin improved YoY to 4.0%, but this was attributable to the lower effective tax rate and does not indicate improved core-business profitability.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥11.54B, representing 0.96x Net Income of ¥12.04B. The accrual ratio, which indicates reliance on accrual-based earnings, was low, and earnings quality was generally sound. Accounts receivable of ¥70.20B accounted for 45.8% of total assets, while DSO was relatively long at 86 days, requiring monitoring of collection efficiency.【Investment Efficiency】ROE was 11.7%, down from 13.4% in the previous year. Total asset turnover was approximately 1.95x and financial leverage was 1.50x; the decline in ROE was primarily attributable to deterioration in the operating margin. Capital expenditures of ¥0.55B were only 0.32x depreciation of ¥1.75B, reflecting an asset-light business model.【Financial Soundness】The Equity Ratio was 66.8% and the current ratio was approximately 270%, indicating a strong financial position. Interest-bearing debt was only ¥0.47B, substantially outweighed by cash and deposits of ¥29.54B, resulting in a net cash position.

Cash Flow Analysis

OCF was ¥11.54B, up +61.6% YoY, representing 0.96x Net Income of ¥12.04B. A decrease in accounts receivable generated a cash inflow of ¥2.21B, while a decrease in accounts payable resulted in a cash outflow of ¥2.19B, largely offsetting each other. Investing Cash Flow was limited to an outflow of ¥1.82B, including capital expenditures of ¥0.55B, reflecting the asset-light nature of the business. Free Cash Flow was strong at ¥9.72B, covering dividend payments of ¥3.79B by approximately 2.6x. Financing Cash Flow was an outflow of ¥5.01B, mainly due to dividend payments and the reduction of short-term borrowings (-66.1% YoY). Cash and deposits increased +29.5% YoY to ¥29.54B, further strengthening the company’s net cash position.

Earnings Quality

The increase in Net Income (+32.3% YoY) contrasted with declines in Operating Income (-9.9%) and Ordinary Income (-12.4%), primarily because the effective tax rate declined from approximately 28% in the previous year to 15.1%. Accordingly, Operating Income and Ordinary Income should be prioritized when evaluating core earnings power. Extraordinary income of ¥0.10B and extraordinary loss of ¥0.11B were approximately offset, and the contribution of one-time factors to Net Income was limited. Among non-operating income of ¥1.64B, the main components were dividend income of ¥0.36B, foreign exchange gains of ¥0.19B, and equity-method investment gains of ¥0.27B. Foreign exchange gains are non-recurring in nature and may fluctuate depending on market conditions. Comprehensive Income was ¥14.16B, exceeding Net Income of ¥12.04B, with valuation changes in available-for-sale securities and overseas assets, including ¥1.09B in valuation differences on securities and ¥0.55B in foreign currency translation adjustments, contributing to the result. OCF was slightly below Net Income, accrual elements were limited, and the correspondence between accounting earnings and cash flow was generally sound.

Earnings Forecast and Guidance

For the next fiscal year (FY2027), the company forecasts Revenue of ¥320.0B (+6.9% YoY), Operating Income of ¥14.50B (+11.1%), and Ordinary Income of ¥15.00B (+5.7%). The forecast assumes a modest recovery in the Operating Margin to approximately 4.5% and is based on a plan to absorb the profit decline caused by the increase in SG&A expenses during the current period. Meanwhile, forecast EPS is ¥426.04, indicating a decline from current-period Net Income of ¥12.04B (EPS of ¥487.36). This can be interpreted as incorporating the reversal of the temporary boost to Net Income provided by the lower effective tax rate. The normalization of the tax burden and the degree of recovery in core-business margins during the next fiscal year will be the key points for assessing achievement of the forecast.

Shareholder Returns

The annual dividend for the current period was ¥147 per share (interim dividend of ¥72 and year-end dividend of ¥75), resulting in a Payout Ratio of 30.2%. Share repurchases were minimal at ¥0.00B, leaving the Total Return Ratio at approximately the same level as the Payout Ratio. Total dividend payments of ¥3.79B were covered approximately 2.6x by Free Cash Flow of ¥9.72B, indicating sound cash-based dividend sustainability. The forecast dividend for the next fiscal year is ¥171, an increase of ¥24 (+16.3%) YoY. The forecast Payout Ratio based on forecast EPS of ¥426.04 will rise to approximately 40.1%, but will remain below 60%. Retained earnings of ¥84.28B and the company’s net cash position also support its capacity for shareholder returns.

Risk Factors

1. Simultaneous declines in revenue and profit at the two core businesses: The Chemicals Business (51.0% of composition) recorded revenue of -3.3% and profit of -10.4%, while the Textile Business (48.7% of composition) recorded revenue of -4.6% and profit of -8.3%. The performance-offsetting effect of the business portfolio did not operate during the current period.

2. Slowing overseas demand: Revenue from other overseas regions declined significantly by -14.1% YoY, making it the weakest area within the regional revenue mix. Foreign exchange gains of ¥0.19B contributed to non-operating income during the current period, but are not a recurring source of earnings.

3. Accounts receivable collection efficiency: Accounts receivable totaled ¥70.20B, accounting for 45.8% of total assets, and DSO was 86 days. Lengthening collection periods or changes in the creditworthiness of counterparties could affect OCF, requiring continuous monitoring.

Industry Benchmark (For Reference; Company Research)

Profitability and Returns

Profitability is above the industry median.

Growth and Capital Efficiency

Revenue growth was substantially below the industry median, contrasting with peers maintaining a revenue-growth trend.

※Source: Company research

Key Takeaways from the Results

1. The fact that the 103bp increase in the SG&A ratio (+103bp) exceeded the 70bp improvement in the gross margin (+70bp YoY), resulting in a decline in the Operating Margin to 4.4%, is a structural characteristic of the current-period performance. The forecast recovery in Operating Income for the next fiscal year presupposes absorption of this increase in SG&A expenses.

2. The increase in Net Income (+32.3%) was attributable to the lower effective tax rate and moved in the opposite direction from the declines in Operating Income and Ordinary Income. When evaluating earnings quality, core-business metrics—Operating Income and Ordinary Income—excluding the impact of the tax burden should be emphasized.

3. The net cash structure, comprising an Equity Ratio of 66.8%, interest-bearing debt of ¥0.47B, and cash and deposits of ¥29.54B, demonstrates financial resilience against fluctuations in the business environment.

Theoretical Share Price (Reference Value)

Sensitivity: ¥4,158–¥4,399 at ±1% for the cost of equity, and ¥4,273–¥4,280 at ±0.1 for ω.

Notes:

• Goodwill amortization of ¥7.9 per share has been added back to earnings (to account for a non-cash expense and comparability with IFRS companies).

(Calculation model: Residual Income Model (Ohlson-type model with an 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, and you should consult a professional adviser as necessary.

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