YAMAZEN CORPORATION FY2027 Q1 Earnings Report

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Executive Summary

Amid double-digit revenue growth, the operating income growth rate increased substantially to +66.8%, marking a strong start to the fiscal year with higher revenue and income. Revenue was ¥1458.6B (+15.6% YoY), operating income was ¥28.9B (+66.8%), ordinary income was ¥31.6B (+76.6%), and net income was ¥20.4B (+9.2%). Expanding demand and an improved mix in the core Production Goods-Related Business drove income growth, while the absence of the gain on the sale of investment securities recorded in the previous year restrained net income growth.

Factors Affecting Performance

【Revenue】Revenue was ¥1458.6B, up +15.6% YoY. By segment, the Production Goods-Related Business (64.5% of revenue composition, ¥940.8B, +21.5%) posted the strongest growth and led overall performance. The Housing and Building Materials Business (¥237.6B, +13.2%) also expanded steadily, while the Home Appliances Business (¥270.3B, +1.4%) remained nearly flat.

【Profit and Loss】The gross margin was 15.4%, the SG&A expense ratio was 13.4%, and the operating margin improved to 2.0% from the previous year. Operating income in the Production Goods-Related Business surged to ¥28.4B (+136.6%), with its margin rising to 3.0%, which was the primary driver of company-wide income growth. Conversely, the Home Appliances Business recorded operating income of ¥10.2B (-26.6%), resulting in lower income and leaving challenges in the earnings mix. The “Other and Adjustments” category reported an operating loss of ¥17.7B, with the loss widening, indicating that higher company-wide expenses are limiting the ceiling on the operating margin. In addition to higher operating income, ordinary income increased significantly by +76.6%, due to the reversal from a foreign exchange loss in the previous year to a gain (¥0.9B) and an increase in interest income (¥2.2B). Extraordinary gains and losses were minimal, consisting only of an extraordinary gain of ¥0.02B. The primary reason net income growth was limited to +9.2% was that the gain on the sale of investment securities recorded in the previous year (approximately ¥10.1B) did not recur in the current period. Overall, the results showed higher revenue and income, with a clear improvement in the profitability of the core business.

Segment Analysis

The Production Goods-Related Business is the largest segment, accounting for 64.5% of revenue composition and the majority of profit composition. It recorded substantial growth in both revenue and income, with revenue of ¥940.8B (+21.5%), operating income of ¥28.4B (+136.6%), and a margin of 3.0%. The Housing and Building Materials Business also achieved higher revenue and income, with revenue of ¥237.6B (+13.2%), operating income of ¥7.6B (+39.5%), and a margin of 3.2%. The Home Appliances Business was nearly flat in revenue at ¥270.3B (+1.4%), but operating income declined to ¥10.2B (-26.6%); although its margin was the highest at 3.8%, it is trending downward. The Other and Adjustments category reported an operating loss of ¥17.7B (loss widening of 24.2% YoY), reflecting increased company-wide expenses not attributable to reportable segments. Company-wide profit growth is highly dependent on the Production Goods-Related Business, making the recovery of profitability in the Home Appliances Business a key future issue.

Key Financial Indicators

【Profitability】The operating margin was 2.0%, improving from 1.4% in the previous year (previous-year operating income of ¥17.3B / revenue of ¥1261.4B), while the net profit margin was 1.4%. ROE was 1.4%, and the equity ratio was 40.4% (39.3% in the previous year). 【Cash Quality】Cash and deposits were ¥779.4B, accounting for 21.7% of total assets. Including current securities of ¥229.9B, the company maintains substantial liquid assets. Accounts receivable and notes receivable of ¥800.0B and inventories of ¥529.5B indicate that working capital is trending upward, with expansion occurring at a pace exceeding revenue growth. 【Investment Efficiency】Total asset turnover was approximately 0.406x (revenue of ¥1458.6B / total assets of ¥3592.2B), a standard level for a distributor. 【Financial Soundness】The equity ratio was 40.4%, and long-term borrowings were minimal at ¥0.2B. Most of the ¥436.1B in non-current liabilities consisted of retirement benefit-related liabilities, lease obligations, and similar items. EPS was ¥21.57 (¥21.37 in the previous year, +0.9%), while BPS was ¥1621.34 (¥1612.56 in the previous year), both showing moderate increases.

Cash Flow Analysis

Because detailed cash flow statement information was not disclosed in these results, cash trends are analyzed based on changes in the balance sheet. Cash and deposits decreased to ¥779.4B from ¥881.4B in the same period of the previous year, while inventories increased to ¥529.5B (equivalent to +20.6% YoY) and investment securities increased to ¥395.9B (equivalent to +22.1% YoY). This suggests inventory accumulation associated with project progress and increased allocation of funds to operating assets. Contract liabilities increased significantly from the previous year to ¥175.5B, suggesting that higher customer advances helped alleviate part of the working capital burden. Accounts receivable and notes receivable remained high at ¥800.0B, indicating room for improvement in collection efficiency. Overall, the expansion of working capital accompanying business growth was the defining feature of cash trends, with the change in cash levels representing the reverse side of this development.

Earnings Quality

Current-period profit consisted primarily of recurring earnings, with extraordinary gains remaining minimal at ¥0.02B. Because approximately ¥10.1B was recorded as a gain on the sale of investment securities in the same period of the previous year, the absence of this gain was the primary reason net income growth was limited to +9.2%. Conversely, this indicates that current-period profit is of higher quality and more strongly derived from the core business. Non-operating income of ¥4.8B was small in scale at approximately 0.33% of revenue, but dividends received of ¥1.5B, a foreign exchange gain of ¥0.9B, and interest income of ¥2.2B contributed to earnings, with the reversal from a foreign exchange loss in the previous year supporting ordinary income. The increase from operating income to ordinary income was limited, and earnings quality can generally be considered sound. However, comprehensive income of ¥67.7B substantially exceeded net income of ¥20.4B, with the difference attributable to an evaluation difference on investment securities of ¥35.8B and foreign currency translation adjustments of ¥11.9B. Accordingly, caution is warranted because asset valuation factors, rather than business operations, accounted for a significant portion of the difference. In addition, the high levels of accounts receivable and inventories indicate the accumulation of accruals and entail a risk that operating cash flow may lag behind net income.

Earnings Forecast and Guidance

The full-year forecast calls for revenue of ¥5850.0B (+8.0% YoY), operating income of ¥150.0B (+24.6%), and ordinary income of ¥154.0B (+18.4%), representing a plan for higher revenue and income. While Q1 progress was approximately standard at 25.0% of the revenue forecast, operating income progress was 19.3% and ordinary income progress was 20.5%, both below the simple progress benchmark of 25%. This may reflect a plan weighted toward the second half of the fiscal year or the early recognition of company-wide expenses, including losses in the Other and Adjustments category. The standard level of revenue progress suggests that demand in the core Production Goods-Related Business is expected to remain solid throughout the year. Although the earnings forecast was revised during the quarter, there was no revision to the dividend forecast.

Shareholder Returns

The full-year dividend forecast is ¥56.00, and forecast EPS is ¥115.92, implying a payout ratio of approximately 48.3% based on these figures. The dividend in the previous year was ¥20 (on a prior-period basis), while the full-year forecast of ¥56 represents the annual level. Interest-bearing liabilities, including short-term borrowings of ¥200.9B and long-term borrowings of ¥0.2B, are limited relative to cash and deposits of ¥779.4B. In light of the company’s financial soundness, dividend safety is considered reasonably secured. No disclosure regarding share repurchases was made, and this report evaluates only the payout ratio as a shareholder-return metric.

Risk Factors

1. Demand Cycle Risk: Dependence on the Production Goods-Related Business is high, accounting for 64.5% of revenue composition. If the capital expenditure cycle in the manufacturing sector slows, the impact on performance could be significant.

2. Working Capital Accumulation Risk: Inventories of ¥529.5B and accounts receivable and notes receivable of ¥800.0B remain high, with asset expansion occurring at a pace exceeding revenue growth (+15.6%). There is a risk that cash generation may fail to keep pace with profit growth.

3. Product Mix Deterioration Risk: Operating income in the Home Appliances segment declined by -26.6% YoY. If this situation continues, it could constrain improvement in the company-wide profit margin.

Industry Benchmark (For Reference; Prepared by the Company)

Industry Benchmark (trading)

Profitability and Return

Profitability indicators were below the industry median, with both the operating margin and net profit margin ranking toward the lower end of the industry.

Growth and Capital Efficiency

The revenue growth rate substantially exceeded the industry median, indicating a high level of growth within the industry.

※Source: Prepared by the Company

Key Points from the Earnings Results

1. Double-digit revenue growth and a +61bp improvement in the operating margin resulted in a strong start, with operating income growth of +66.8%. Expanding demand in the Production Goods-Related Business was the primary driver of company-wide performance.

2. Q1 profit progress against the earnings forecast was 19–21%, below the simple progress benchmark of 25%, suggesting either a plan weighted toward the second half of the fiscal year or the early recognition of company-wide expenses. Monitoring quarterly progress going forward is considered useful.

3. High inventory and accounts receivable levels reflect increased working capital accompanying business expansion. The balance between revenue growth and cash generation will be an important point to monitor in future earnings results.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,475–¥1,559 at ±1% for the cost of equity, and ¥1,513–¥1,519 at ±0.1 for 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 end of the quarter are used (there is a timing discrepancy relative to the full-year forecast).

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated values based solely on publicly disclosed data; these are not forecasts of the market share price or recommendations for any specific investment action, and do 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 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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