CHORI CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

The Company posted higher revenue and earnings for the quarter, with solid results driven by revenue growth and improved gross profit margins in the Chemicals Business, together with normalization of non-operating gains and losses. Revenue was ¥758.5B (+6.0% year on year), Operating Income was ¥36.5B (+11.2%), Ordinary Income was ¥41.0B (+25.0%), and Net Income attributable to owners of the parent was ¥30.9B (+23.5%), securing earnings growth across all measures. In addition to the gross profit margin improving to 14.4% (14.1% in the prior year), a reduction in foreign exchange losses and an increase in equity-method investment gains boosted the increase in earnings at the non-operating level.

Factors Affecting Performance

【Revenue】Revenue was ¥758.5B, representing a 6.0% year-on-year increase. The Chemicals Business, the largest segment, led growth with revenue of ¥403.7B (53.2% composition ratio, +7.1%), while the Textiles Business also remained solid at ¥351.9B (46.4% composition ratio, +4.4%). The Other Businesses were small in scale at ¥4.4B but recorded strong growth of +43.8%.

【Earnings】Operating Income was ¥36.5B (+11.2%), mainly due to the gross profit margin improving to 14.4% (14.1% in the prior year). Segment profit in the Chemicals Business increased to ¥22.4B (+12.9%), while the Textiles Business declined slightly to ¥15.7B (-5.5%), resulting in divergent performance across businesses. Ordinary Income grew faster than Operating Income, rising to ¥41.0B (+25.0%), supported by a reduction in foreign exchange losses (¥3.3B in the prior year → ¥0.5B in the current period) and an increase in equity-method investment gains (¥0.8B → ¥2.0B). Extraordinary gains and losses were immaterial, and Net Income attributable to owners of the parent was ¥30.9B (+23.5%). Overall, the Company delivered higher revenue and earnings with improvements in both operating and non-operating results.

Segment Analysis

The segments comprise the Textiles Business and Chemicals Business, while the former Machinery Business has been integrated into the “Other” category in consideration of its materiality. The Chemicals Business is the core business, with revenue of ¥403.7B (+7.1%), segment profit of ¥22.4B (+12.9%), and a profit margin of 5.6% (5.2% in the prior year), accounting for more than half of total segment profit. The Textiles Business secured revenue growth at ¥351.9B (+4.4%), but segment profit declined to ¥15.7B (-5.5%) and its profit margin decreased to 4.5% (4.9% in the prior year), resulting in higher revenue but lower earnings. The Other Businesses expanded despite their small scale, with segment profit of ¥1.2B (¥0.6B in the prior year). On a consolidated basis, the increase in profit from the Chemicals Business exceeded the decline in the Textiles Business, bringing Operating Income to ¥36.5B (+11.2%).

Key Financial Indicators

【Profitability】The Operating Income margin improved to 4.8% from 4.6% in the prior year, while the Net Income margin, based on income attributable to owners of the parent, rose to 4.1% from 3.5% in the prior year. ROE was 3.0%. 【Cash Quality】Cash and deposits were ¥269.2B, down ¥26.2B from ¥295.4B at the end of the previous fiscal year. Working capital, comprising trade receivables, inventories, and trade payables, increased by +6.4% to ¥358.4B (¥336.8B at the end of the previous fiscal year), broadly in line with the revenue growth rate (+6.0%). 【Investment Efficiency】Total assets were ¥1513.9B (¥1533.7B at the end of the previous fiscal year), and total asset turnover was broadly flat. Improving asset efficiency remains an issue in enhancing capital efficiency. 【Financial Soundness】The Equity Ratio remained high at 69.0% (66.7% at the end of the previous fiscal year), while interest-bearing debt was limited to ¥5.3B in short-term borrowings, indicating an extremely low level of reliance on debt.

Cash Flow Analysis

As the statement of cash flows has not been disclosed, cash trends are assessed based on changes in the balance sheet. Cash and deposits were ¥269.2B, down ¥26.2B (-8.9%) from ¥295.4B at the end of the previous fiscal year. Factors included trade payables, which declined by ¥28.9B (-7.5%) to ¥355.9B from ¥384.8B at the end of the previous fiscal year, indicating that payments preceded collections, as well as inventories, which increased by ¥13.3B (+7.7%) to ¥185.9B from ¥172.6B, reflecting the use of funds to build up inventory. Conversely, trade receivables declined by ¥20.7B (-3.8%) to ¥528.4B from ¥549.0B at the end of the previous fiscal year, providing a source of funds through collections. Overall, working capital (trade receivables + inventories - trade payables) increased by +6.4% to ¥358.4B from ¥336.8B at the end of the previous fiscal year, broadly in line with the revenue growth rate (+6.0%), and no sharp deterioration in liquidity was observed.

Quality of Earnings

Earnings for the current quarter were generated by recurring business activities, with extraordinary gains of ¥0.0B and extraordinary losses of ¥0.0B, indicating virtually no impact from one-time factors. Non-operating income was ¥6.6B (0.9% of revenue), consisting of dividend income of ¥1.7B, interest income of ¥1.6B, and equity-method investment gains of ¥2.0B (¥0.8B in the prior year). Non-operating expenses were ¥2.1B, including foreign exchange losses of ¥0.5B (¥3.3B in the prior year) and interest expenses of ¥0.3B. Against Profit Before Tax of ¥41.0B, income taxes were ¥9.9B (effective tax rate of 24.1%), and Net Income attributable to owners of the parent was ¥30.9B. The difference from Profit Before Tax was within the range of the tax burden and was consistent. Comprehensive income was ¥38.5B, exceeding Net Income, mainly due to foreign currency translation adjustments of +¥5.5B. Differences in the yen conversion of overseas assets generated the divergence from Net Income. As working capital continues to build, attention should be paid to a potential widening gap between earnings and cash flow (accruals).

Earnings Forecast and Guidance

Progress against the full-year plan was 23.7% for Revenue, 25.2% for Operating Income, 27.3% for Ordinary Income, and 29.5% for Net Income. Compared with the standard quarterly progress rate of 25%, all profit measures are progressing at a faster pace. Revenue progress is somewhat slower relative to the plan, but Operating Income, Ordinary Income, and Net Income are progressing above the standard pace, indicating that earnings progress is leading. No revisions were made to either the earnings forecast or the dividend forecast. The full-year plan calls for Revenue of ¥3200B (+6.9%), Operating Income of ¥145.0B (+11.1%), and Ordinary Income of ¥150.0B (+5.7%).

Shareholder Returns

The dividend forecast is ¥85 per share for the full year, representing a planned dividend increase of +18.1% from the previous fiscal year’s actual dividend of ¥72. Based on the Company’s forecast Net Income attributable to owners of the parent of ¥105.0B and forecast EPS of ¥426.04, the Payout Ratio is approximately 20.0%. With interest-bearing debt extremely low at ¥5.3B and ample liquidity on hand, including cash and deposits of ¥269.2B, there is little concern regarding the availability of funds for dividends. No revision was made to the dividend forecast.

Risk Factors

1. Segment concentration risk: The Chemicals Business accounts for 53.2% of revenue and approximately 57.0% of segment profit (¥22.4B/¥39.3B), indicating a high degree of dependence on a specific segment. The business structure is susceptible to fluctuations in market conditions and raw material prices.

2. Accumulation of working capital: Inventories were ¥185.9B, up +7.7% from the end of the previous fiscal year, while working capital comprising trade receivables, inventories, and trade payables was ¥358.4B, up +6.4%. Although the pace of increase was broadly in line with the revenue growth rate (+6.0%), inventory valuation loss risk requires monitoring.

3. Impact of foreign exchange fluctuations: Foreign exchange losses were ¥0.5B, down from ¥3.3B in the prior year, but foreign exchange sensitivity remains, particularly in the Chemicals Business, which includes overseas transactions. Foreign currency translation adjustments in comprehensive income were +¥5.5B, indicating that fluctuations in yen-denominated gains and losses are affecting the financial statements.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Profitability exceeds the industry median, placing the Company in the middle to upper tier of the trading company sector.

Growth and Capital Efficiency

The revenue growth rate exceeds the industry median but does not reach the upper bound of the IQR (11.7%), placing the Company in the middle tier of the industry.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. Operating Income, Ordinary Income, and Net Income all posted double-digit earnings growth. The combination of improved gross profit margins (14.1%→14.4%) and normalization of non-operating gains and losses (reduced foreign exchange losses and increased equity-method investment gains) suggests a qualitative improvement in the earnings structure.

2. By segment, the Chemicals Business was the growth driver, with segment profit up +12.9%, while the Textiles Business recorded a decline in segment profit of -5.5%, resulting in a performance gap between the businesses.

3. Full-year progress is led by Net Income at 29.5%, and whether the tailwind from non-operating factors continues will be key to achieving the full-year plan. Working capital is increasing at nearly the same pace as revenue growth, making its future rate of increase an important point for monitoring capital efficiency.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly available data using a residual income model (Ohlson-type model with an explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥4,210–¥4,461 at ±1% for the cost of equity, and ¥4,330–¥4,336 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference from the full-year forecast).
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-06 / This value does not predict or guarantee the future share 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 professionals as necessary.

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