CHORI (8014) FY2026 Q3 Earnings Report

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Executive Summary

For the cumulative Q3 period of the fiscal year ending March 2026, revenue and earnings declined, with reduced cost absorption capacity weighing on performance. Revenue was ¥221.61B (down ¥8.65B, or △3.8% YoY), Operating Income was ¥9.99B (down ¥0.53B, or △5.0%), Ordinary Income was ¥10.75B (down ¥1.25B, or △10.4%), and Net Income was ¥7.62B (down ¥1.52B, or △16.7%). The expansion of the earnings decline rate at each successive profit level was primarily attributable to the reversal of temporary gains recorded in the previous year, including the reversal of the allowance for doubtful accounts and gains on the sale of investment securities.

Factors Affecting Performance

【Revenue】Revenue was ¥221.61B, down 3.8% YoY. Both the core Textile Business (down 4.5% YoY) and Chemicals Business (down 3.0%) reported lower revenue, reflecting slowing textile demand in the Middle East and China and sluggish performance in the materials and industrial supplies fields.

【Profit and Loss】Operating Income was ¥9.99B (down 5.0% YoY). Although the gross profit margin improved to 13.8% from the previous year, the SG&A ratio increased to 9.3%, offsetting the benefit of the improvement. Ordinary Income was ¥10.75B (down 10.4%), while Net Income was ¥7.62B (down 16.7%), with the decline rate expanding at lower levels of the income statement. This was due to the reversal of temporary factors recorded in the previous year, including the reversal of the allowance for doubtful accounts (¥0.807B) and gains on the sale of investment securities (¥0.770B); net extraordinary gains and losses amounted to only ¥0.029B in the current period. In conclusion, the company reported lower revenue and lower earnings.

Segment Analysis

The Chemicals Business has the highest revenue mix at 51.5%, while the Textile Business accounts for 48.2%, creating an almost two-pillar structure. On a pre-tax income basis, the Chemicals Business generated ¥6.12B (down 8.7% YoY, profit margin 5.4%), while the Textile Business generated ¥5.17B (down 14.8%, profit margin 4.8%). Both reported lower earnings, although the decline was greater in the Textile Business. The decline in earnings in the Textile Business was primarily attributable to sluggish performance in the materials and industrial supplies fields and the reversal of the previous year's gain on the sale of investment securities. The decline in the Chemicals Business was mainly due to the reversal of the previous year's allowance for doubtful accounts. The Machinery Business is small, with revenue of ¥0.59B, but has an extremely high profit margin of 49.2%; pre-tax income was limited to ¥0.29B (down 34.5%). The simultaneous decline in earnings in both core businesses, Chemicals and Textiles, drove the overall downward earnings trend.

Key Financial Indicators

Profitability: ROE was 7.9%, and the Operating Income margin was 4.5% (down from the previous year's estimated 4.6%). Financial soundness: The Equity Ratio was 64.8% (up from 63.0% in the previous year), and the current ratio was 255.3%. Per-share indicators: EPS was ¥308.42 (¥370.23 in the previous year, down 16.7% YoY). Other: Against interest-bearing debt of ¥1.05B, cash and deposits totaled ¥23.28B, indicating a financial structure that is effectively close to debt-free.

Cash Flow Analysis

Cash and deposits totaled ¥23.28B, up from ¥22.81B in the previous year. Interest-bearing debt consisted solely of ¥1.05B in short-term borrowings, providing a buffer of approximately 22 times cash and deposits. While accounts receivable increased to ¥75.42B (up ¥3.26B from ¥72.16B in the previous year), accounts payable declined to ¥40.22B (from ¥40.597B in the previous year), indicating an expansionary trend in working capital. Because the expansion of working capital may absorb cash flow in the short term, continued monitoring is necessary.

Quality of Earnings

The ¥3.13B difference between Ordinary Income of ¥10.75B and Net Income of ¥7.62B was primarily attributable to income taxes and other taxes of ¥3.16B, implying an effective tax rate of approximately 29.3%. Of ¥1.11B in non-operating income, dividends received of ¥0.34B and financial income, including interest income, were the main components; these were not significant at approximately 0.5% of revenue. In the previous-year period, temporary factors—namely the ¥0.807B reversal of the allowance for doubtful accounts and the ¥0.770B gain on the sale of investment securities—boosted profit at the Ordinary Income and extraordinary income levels. In the current period, the reversal of these factors has increased the dependence of earnings on the core business relative to the previous year. Net extraordinary gains and losses were small at ¥0.029B in the current period, indicating limited dependence of current-period profit on temporary factors.

Earnings Forecast and Guidance

Progress toward the full-year forecast (after the downward revision) was 73.9% for revenue (¥300.00B), 74.0% for Operating Income (¥13.50B), and 74.1% for Ordinary Income (¥14.50B), all broadly in line with the standard 75% progress level. Meanwhile, the progress rate for Net Income was 69.1% (full-year forecast of ¥11.00B), lower than the other indicators, making the accumulation of profit after tax in Q4 the key to achieving the plan. This earnings forecast revision was a downward revision based on Q3 results and the recent business environment; the revenue forecast was revised downward by ¥30.0B from the initial forecast.

Shareholder Returns

The annual dividend forecast is ¥144.00 (¥72.00 paid for Q2 and ¥72.00 scheduled for year-end), unchanged from the previous forecast. The company's dividend policy targets a consolidated Payout Ratio of at least 30% and DOE of at least 3.5%. Based on the full-year Net Income forecast of ¥11.00B and EPS forecast of ¥446.32, the Payout Ratio is approximately 32.3%. No share repurchases were identified in the reported data, and shareholder returns consist solely of dividends; accordingly, the term “Payout Ratio” is used.

Catalysts

【Short Term】Progress in accumulating profit after tax in Q4 (recovery from the Net Income progress rate of 69.1%) and achievement of the full-year earnings forecast.

【Long Term】Progress of the new medium-term management plan development project, which is being examined through five working groups covering business strategy, financial strategy, non-financial strategy, human capital, and digital transformation; and stronger cost discipline through measures to improve the gross profit margin and enhance SG&A efficiency.

Industry Benchmark (For Reference; Company Analysis)

Profitability and Returns

Within the industry, both the Operating Income margin and Net Profit margin exceed the median; however, the Net Profit margin does not reach the upper end of the industry range (6.3%).

Growth and Capital Efficiency

Revenue growth is significantly below the industry median, placing the company among industry peers experiencing declining revenue.

※Source: Company analysis

Risk Factors

1. Demand slowdown risk: In the Textile Business, slowing textile demand in the Middle East and China and sluggish performance in the materials and industrial supplies fields are weighing on revenue. Performance chemicals are also sluggish in the Chemicals Business. As the two businesses together account for approximately 99.8% of revenue, demand trends directly affect overall performance.

2. Profitability risk: The Operating Income margin of 4.5% and gross profit margin of 13.8% reflect a low-margin transaction structure, meaning that even small fluctuations in prices and procurement costs have a relatively significant impact on profit margins. The fact that Operating Income declined more sharply than revenue (△5.0%) indicates challenges in cost absorption capacity.

3. Working capital risk: Accounts receivable of ¥75.42B (up ¥3.26B YoY) increased while accounts payable declined, creating the possibility that expanded working capital will absorb cash flow. Interest-bearing debt consists solely of ¥1.05B in short-term borrowings and is entirely short term; however, cash and deposits are approximately 22 times this amount, so practical financing constraints are limited.

Key Takeaways from the Earnings Report

1. The primary cause of the earnings decline was the reversal of temporary gains recorded in the previous year, namely the reversal of the allowance for doubtful accounts and gains on the sale of investment securities. Net extraordinary gains and losses were small at ¥0.029B in the current period. The structure in which the decline rates for Ordinary Income and Net Income exceed that for Operating Income indicates that the impact of non-core, one-off factors has diminished.

2. Although the gross profit margin improved YoY, the increase in the SG&A ratio offset this improvement, and the Operating Income margin declined slightly from approximately the previous-year level. The effects of measures to improve the gross profit margin and strengthen cost discipline will determine future margin trends.

3. Full-year progress for revenue, Operating Income, and Ordinary Income was broadly standard, at around 74%, while Net Income progress was somewhat low at 69.1%. Progress in accumulating after-tax profit in Q4 will be an important factor in assessing achievement of the full-year plan.

Theoretical Share Price (Reference Value)

Sensitivity: ¥4,022–¥4,258 at ±1% for the cost of equity, and ¥4,132–¥4,146 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 five-year fade) / Interest-rate reference month: 2026-07 / 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 predict or guarantee the future share price.)

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This report is an earnings analysis document automatically generated through an AI-integrated analysis of XBRL earnings summary data and PDF earnings presentation materials. It does not recommend investment in any specific security. 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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