KAMEI (8037) FY2026 Q3 Earnings Report

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Executive Summary

For the cumulative Q3 period of the fiscal year ending March 2026, revenue and profits increased; however, profit margins remained low, and progress toward the full-year Operating Income plan was somewhat behind schedule. Revenue was ¥4217.8B (+3.2% year on year), Operating Income was ¥108.4B (+5.6%), Ordinary Income was ¥120.2B (+3.2%), and Net Income attributable to owners of the parent was ¥73.4B (+3.1%). While the growth rate of Operating Income exceeded the rate of Revenue growth, indicating limited positive operating leverage, the decline in profit from the Overseas and Trading Business and the Pharmacy Business turning loss-making offset some of the overall growth despite the strong contribution from the Automotive-Related Business.

Factors Affecting Performance

【Revenue】Revenue was ¥4217.8B, up +3.2% year on year. By segment, the Energy Business, the largest segment, generated ¥1980.7B (46.9% of total, +1.0% year on year), followed by the Overseas and Trading Business at ¥646.3B (15.3% of total, +1.9%) and the Automotive-Related Business at ¥614.5B (14.6% of total, +10.3%). The Automotive-Related Business and the Food Business (¥311.5B, +9.0%) drove revenue growth, while the Energy and Construction-Related Businesses remained low-growth.

【Profit and Loss】Operating Income was ¥108.4B (+5.6% year on year). By segment profit, the Automotive-Related Business made the largest contribution at ¥42.2B (+15.1%), followed by the Energy Business at ¥28.0B (+17.6%) and the Food Business at ¥7.6B, a substantial increase from ¥0.7B in the previous year. Meanwhile, the Overseas and Trading Business generated ¥33.2B, down -13.5% year on year, while the Pharmacy Business turned to an Operating Loss of ¥1.1B, limiting the breadth of profit growth. Ordinary Income reached ¥120.2B, boosted by non-operating income and expenses of ¥11.9B (including dividend income of ¥5.3B and interest income of ¥2.4B), while extraordinary gains and losses were limited to a net ¥1.5B. Net Income was ¥73.4B after a tax burden (effective tax rate of approximately 35%). Overall, both revenue and profits increased.

Segment Analysis

The Automotive-Related Business reported Revenue of ¥614.5B (14.6% of total) and Operating Income of ¥42.2B (6.9% margin), the highest profit margin among all segments, and was the primary driver of company-wide profit growth with a +15.1% year-on-year increase. The Energy Business was the largest segment at ¥1980.7B in Revenue, but its 1.4% profit margin was low, reflecting a structure highly sensitive to price and supply-demand fluctuations. The Overseas and Trading Business had a relatively high profit margin of 5.1%, but Operating Income declined by -13.5% year on year, making the recovery of this core profit source a key area of focus. The Pharmacy Business reported Revenue of ¥152.1B and an Operating Loss of ¥1.1B (profit margin of -0.7%), making improvement in store profitability a challenge. The Pet-Related Business and the Construction-Related Business remained small and low-profit segments, with profit margins of 1.1% and 2.9%, respectively.

Key Financial Indicators

【Profitability】The Operating Income margin was 2.6%, a slight improvement from 2.5% in the same period of the previous year, but remained low in absolute terms. The Net Income margin was 1.7%, broadly unchanged. The gross profit margin was 17.0% and the SG&A ratio was 14.4%; the small gap between gross profit and SG&A expenses indicates a structure in which profits are susceptible to cost fluctuations. ROE remained at 4.6%.【Cash Flow Quality】Comprehensive Income attributable to owners of the parent was ¥80.0B, slightly above Net Income of ¥73.4B. The increase of ¥26.1B in valuation differences on securities was a contributing factor, while the foreign currency translation adjustment of -¥19.6B was a negative factor.【Investment Efficiency】The Equity Ratio was high at 52.7%, indicating a structure that prioritizes financial stability over capital efficiency. EPS was ¥239.77 (+11.5% year on year), exceeding the growth rate of Net Income.【Financial Soundness】Cash and deposits of ¥624.6B exceeded interest-bearing debt, resulting in a net cash position, while the current ratio was approximately 154%, indicating sound liquidity. Short-term borrowings of ¥380.9B accounted for the majority of interest-bearing debt, and the concentration of liabilities in the short term remains an item requiring ongoing monitoring.

Cash Flow Analysis

Although this report does not include direct data from the cash flow statement, fund movements can be assessed from changes in the balance sheet. Cash and deposits were ¥624.6B, remaining broadly unchanged from ¥622.6B at the end of the same period of the previous year. Accounts receivable and notes receivable decreased slightly to ¥742.3B from ¥760.4B in the previous year, while inventories increased to ¥340.4B from ¥320.1B, potentially indicating that inventory accumulation is placing pressure on working capital. Accounts payable and notes payable increased to ¥588.7B from ¥568.4B, suggesting that the use of trade payables is mitigating the working capital burden to some extent. Property, plant and equipment increased to ¥1016.7B from the previous year, indicating continued capital investment. Total assets and net assets increased from the previous year to ¥3277.7B and ¥1726.4B, respectively, with accumulated retained earnings supporting the funding base.

Earnings Quality

Of Ordinary Income of ¥120.2B, non-operating income was ¥21.0B, primarily consisting of dividend income of ¥5.3B and interest income of ¥2.4B, both of which are stable recurring items. Of non-operating expenses of ¥9.1B, interest expense was ¥5.2B, resulting in interest coverage of approximately 21 times based on Operating Income and indicating ample debt-servicing capacity. Extraordinary gains and losses consisted of extraordinary gains of ¥1.9B (primarily ¥1.8B in gains on sales of fixed assets) and extraordinary losses of ¥0.4B, producing a slight net gain and representing only a limited, temporary impact on Profit Before Tax. Comprehensive Income attributable to owners of the parent was ¥80.0B, slightly above Net Income of ¥73.4B. This difference resulted from the offsetting effects of a ¥26.1B increase in valuation differences on securities and a -¥19.6B foreign currency translation adjustment, and is therefore subject to market conditions. Overall, earnings are centered on operating activities, with limited dependence on temporary or non-operating factors.

Earnings Forecast and Guidance

The full-year plan calls for Revenue of ¥5863.0B (+2.1% year on year), Operating Income of ¥157.1B (-1.3%), and Ordinary Income of ¥169.5B (-4.5%). The cumulative Q3 progress rates were 71.9% for Revenue, 69.0% for Operating Income, and 70.9% for Ordinary Income. Although all were below the standard progress rate of 75%, the deviations remained within 10pt. Achieving the company’s Operating Income plan requires approximately ¥48.7B of profit in Q4. Given that the full-year plan itself incorporates a decline in profit from the previous year, the second half appears to be based on cautious assumptions.

Shareholder Returns

The Q2 dividend was ¥50 per share, and the full-year dividend forecast is ¥105. After deducting the interim dividend, the year-end dividend is expected to be ¥55. Based on the full-year Net Income plan of ¥110.0B and an average number of shares outstanding during the period of 30.60 million shares, the projected annual dividend payout is approximately ¥32.1B and the Payout Ratio is approximately 29.2%, below the general guideline of 60%. Given retained earnings of ¥1326.6B and cash and deposits of ¥624.6B, the company has considerable capacity to fund dividend payments.

Risk Factors

1. Deterioration in the profitability of the Overseas and Trading Business: Operating Income was ¥33.2B and the profit margin was 5.1%, making this a relatively highly profitable segment; however, profit declined by -13.5% year on year. Foreign exchange movements and overseas demand trends have a significant impact on company-wide profits, making the presence or absence of a recovery a key focus.

2. Short-term concentration of financing: Short-term borrowings of ¥380.9B account for the majority of interest-bearing debt. Although the company is in a net cash position, with cash and deposits of ¥624.6B exceeding interest-bearing debt, providing a buffer, continued monitoring of changes in refinancing conditions is necessary.

3. Low-margin structure and the Pharmacy Business turning loss-making: In addition to the low-profitability structure represented by a gross profit margin of 17.0% and an Operating Income margin of 2.6%, the Pharmacy Business has turned to an Operating Loss of ¥1.1B. The company therefore faces challenges in its resilience to cost and price fluctuations and in improving the loss-making business.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (trading)

Profitability and Returns

The company’s profitability is below the industry median on both measures, with its Operating Income margin and Net Income margin both relatively low within the industry.

Growth and Capital Efficiency

The Revenue growth rate is also below the industry median, but exceeds the lower bound of the IQR (-4.1%) and is not an extreme laggard within the industry.

※Source: Compiled by the Company

Key Takeaways from the Results

1. The Operating Income growth rate (+5.6%) exceeded the Revenue growth rate (+3.2%), and the Operating Income margin improved slightly from the same period of the previous year. However, the level of 2.6% remains below the industry median of 3.3%, indicating that profitability improvement is still in progress.

2. The Automotive-Related Business (Operating Income of ¥42.2B, +15.1% year on year) was the primary driver of company-wide profit growth, while the Overseas and Trading Business (Operating Income of ¥33.2B, -13.5%) and the Pharmacy Business (Operating Loss of ¥1.1B) were offsetting factors, limiting the breadth of profit growth.

3. The full-year Operating Income progress rate was 69.0%, slightly below the standard progress rate of 75%. However, the full-year plan itself incorporates a decline in profit from the previous year, and the deviation is limited. The fact that short-term borrowings account for 88.6% of interest-bearing debt remains an item requiring ongoing monitoring when assessing financial soundness.

Theoretical Stock Price (Reference Value)

Sensitivity: ¥5,002–¥5,294 at Cost of Equity ±1%, and ¥5,128–¥5,156 at ω±0.1.

Notes:

• As forecast ROE is below the Cost of Equity, the theoretical value is below Book Value Per Share.
• Net assets as of the quarter-end are used (there is a timing difference from 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 disclosed data; this is not a forecast of the market stock price or a recommendation of any specific investment action, nor does it forecast or guarantee future stock prices.)

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This report is an earnings analysis document automatically generated by AI through analysis of 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 discretion and responsibility, after consulting with a professional advisor as necessary.

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