TSUBAKIMOTO KOGYO CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

The Q1 of the fiscal year ending March 2027 was a quarter of lower revenue and lower profit, as slowing demand at the core East Japan Headquarters and an increase in selling, general and administrative expenses pressured profitability. Revenue was ¥294.2B (-3.5% YoY), Operating Income was ¥13.3B (-12.7%), Ordinary Income was ¥16.0B (-9.0%), and Net Income attributable to owners of the parent was ¥10.8B (-10.1%). Although the gross profit margin improved to 15.7% from the previous year, the increase in SG&A expenses (+5.3%) offset the benefit, causing the Operating Income margin to decline to 4.5%. Meanwhile, the Development Strategy Headquarters maintained high growth, with Revenue up +20.5% and Operating Income up +50.0%, resulting in divergent performance across the portfolio.

Factors Affecting Performance

【Revenue】Consolidated Revenue was ¥294.2B, down -3.5% YoY (-¥10.8B). By segment, the East Japan Headquarters, which accounts for approximately 30% of company-wide Revenue, declined significantly to ¥89.0B (-17.3%), becoming the primary factor weighing on overall performance. The West Japan Headquarters also posted lower Revenue at ¥115.9B (-8.3%), while the Development Strategy Headquarters at ¥51.8B (+20.5%) and the Central Japan Headquarters at ¥45.2B (+11.9%) recorded higher Revenue, partially offsetting the slowdown at the East and West Japan Headquarters.

【Profit and Loss】The gross profit margin improved by +0.5pt to 15.7% (15.2% in the previous year), but SG&A expenses increased to ¥32.9B (¥31.3B in the previous year, +5.3%), causing the SG&A ratio to rise to 11.2% (+0.9pt). As a result, Operating Income declined to ¥13.3B (-12.7% YoY), and the Operating Income margin fell to 4.5% (5.0% in the previous year), indicating a reversal of operating leverage in which the increase in SG&A expenses outweighed the benefit of gross margin improvement. Non-operating income of ¥2.9B, including ¥2.7B in dividend income, provided support, limiting the decline in Ordinary Income to ¥16.0B (-9.0%), a smaller decrease than that of Operating Income. No extraordinary gains or losses were recorded. Following an effective tax rate of approximately 32.6% on Profit Before Tax of ¥16.0B, Net Income attributable to owners of the parent was ¥10.8B (-10.1%). Overall, the quarter is assessed as one of lower revenue and lower profit.

Segment Analysis

Profit margin disparities were clear across segments. The West Japan Headquarters maintained its position as the company’s largest earnings contributor, with Revenue of ¥115.9B, the largest revenue mix, Operating Income of ¥7.7B, and a profit margin of 6.6%. The East Japan Headquarters experienced the most pronounced slowdown, with Revenue of ¥89.0B (-17.3% YoY), Operating Income of ¥5.1B (-26.5%), and a profit margin of 5.7%, making it the primary cause of the company-wide decline in profit. In contrast, the Development Strategy Headquarters achieved high growth, with Revenue of ¥51.8B (+20.5%) and Operating Income of ¥1.8B (+50.0%); however, its profit margin was 3.5%, the lowest among the four segments, making the simultaneous achievement of growth and profitability an issue. The Central Japan Headquarters performed steadily, with Revenue of ¥45.2B (+11.9%), Operating Income of ¥2.5B (+25.7%), and a profit margin of 5.6%. The combined contribution of the West and East Japan Headquarters to company-wide Operating Income remains high, meaning that demand trends in these two regions continue to determine the direction of overall performance.

Key Financial Indicators

【Profitability】Although the gross profit margin improved to 15.7% (15.2% in the previous year), the Operating Income margin declined to 4.5% (5.0% in the previous year) due to the higher SG&A ratio. The Ordinary Income margin and Net Income margin also contracted to 5.4% (5.8% in the previous year) and 3.7% (4.0% in the previous year), respectively. 【Cash Quality】Accounts receivable declined by ¥44.2B (-13.3%) from the previous year to ¥288.5B, while accounts payable also declined by ¥215.6B (-12.5%), indicating that the contraction in the distribution flow accompanying the slowdown in Revenue was reflected on both sides of working capital. 【Investment Efficiency】ROE was 2.1%, a restrained level primarily due to the decline in the Net Income margin. 【Financial Soundness】Total assets expanded to ¥1,019.0B (¥1,000.6B in the previous year, +1.8%), while net assets increased to ¥514.8B (+2.5%), improving the Equity Ratio to 50.5% (49.9% in the previous year). Cash and deposits increased to ¥272.9B (¥241.0B in the previous year, +13.2%), maintaining liquidity at a sound level.

Cash Flow Analysis

Although an individual disclosure of the cash flow statement is not available, changes in balance sheet items provide insight into cash trends. Cash and deposits increased by ¥31.9B (+13.2%) from the previous year to ¥272.9B, indicating an increase in on-hand liquidity. Meanwhile, accounts receivable declined to ¥288.5B (-¥44.2B YoY, -13.3%), and accounts payable declined to ¥215.6B (-¥30.9B YoY, -12.5%), indicating that the contraction in the distribution flow accompanying the slowdown in Revenue was reflected on both sides of working capital. Advances received increased by ¥18.8B (+32.1%) from the previous year to ¥77.3B, suggesting that advance receipts from projects contributed to the increase in cash holdings. Investment securities increased by ¥22.6B from the previous year to ¥211.2B, reflecting an increase in fair value on the asset side. Overall, cash generation through operating activities can be interpreted as having received some support from the increase in advances received.

Earnings Quality

There were no extraordinary gains or losses recorded during the quarter, and earnings were generally recurring in nature. Dividend income accounted for ¥2.7B of non-operating income of ¥2.9B, equivalent to approximately 20% of Operating Income of ¥13.3B, and represented a structurally stable source of income supporting Ordinary Income. The divergence between Ordinary Income of ¥16.0B and Net Income attributable to owners of the parent of ¥10.8B was largely attributable to income taxes of ¥5.2B, corresponding to an effective tax rate of approximately 32.6%, rather than to temporary non-operating factors. Comprehensive income was ¥25.8B, including ¥26.0B attributable to owners of the parent, exceeding Net Income. The primary reason was the increase in the valuation difference on available-for-sale securities (+¥15.0B). This difference was attributable to market conditions and does not directly reflect recurring earnings power; this point warrants attention.

Earnings Forecast and Guidance

Progress against the full-year forecast was 22.3% for Revenue (¥294.2B/¥1,320.0B), 19.8% for Operating Income (¥13.3B/¥67.0B), 21.9% for Ordinary Income (¥16.0B/¥73.0B), and 20.4% for Net Income (¥10.8B/¥53.0B), all below the simple pro rata benchmark of 25%. Operating Income progress was particularly slow, primarily due to slowing demand at the East Japan Headquarters and higher SG&A expenses. Neither the earnings forecast nor the dividend forecast had been revised as of the quarter, and management maintained its current plan. The increase in advances received of +32.1% YoY suggests potential for Revenue recognition in the second half of the fiscal year, although the pace of recovery in progress will need to be monitored in subsequent quarters.

Shareholder Returns

The company’s full-year dividend forecast is ¥90 per share, resulting in a Payout Ratio of approximately 31.2% based on forecast EPS of ¥288.57. The year-end dividend for the previous fiscal year, the fiscal year ending March 2026, included a commemorative dividend of ¥10, and the current dividend forecast has been set at a level reflecting this reversal effect. Given the financial foundation represented by an Equity Ratio of 50.5% and cash and deposits of ¥272.9B, the dividend forecast has been maintained despite the decline in profit during the quarter, suggesting an intention to continue stable dividends.

Risk Factors

1. Regional Mix Concentration: The East Japan Headquarters, which accounts for 30% of company-wide Revenue, experienced a significant slowdown, with Revenue down -17.3% and Operating Income down -26.5%. Differences in demand by region therefore have a substantial impact on company-wide performance.

2. Profitability Pressure from Higher SG&A Expenses: SG&A expenses increased to ¥32.9B (+5.3%) despite the decline in Revenue (-3.5%), reducing the Operating Income margin by 0.5pt. If this trend continues, the structure in which the benefit of gross margin improvement is offset by higher SG&A expenses may become entrenched.

3. Sensitivity to Valuation Changes in Securities: Investment securities of ¥211.2B account for approximately 20.7% of Total Assets, and the increase in Comprehensive Income during the quarter to ¥25.8B was heavily dependent on the increase in the valuation difference on available-for-sale securities (+¥15.0B). The company has a structure in which Equity and Comprehensive Income are susceptible to market fluctuations.

Industry Benchmark (Reference; Compiled by the Company)

Profitability and Returns

The Operating Income margin is slightly above the industry median, while the Net Income margin remains at nearly the same level.

Growth and Capital Efficiency

The Revenue growth rate is significantly below the industry median, placing the company among those showing notable deceleration within the industry.

※Source: Compiled by the Company

Key Points in the Earnings Results

1. Progress against the full-year forecast was 22.3% for Revenue and 19.8% for Operating Income, below the simple pro rata benchmark of 25%, with the delay particularly pronounced on the profit side. The pace of recovery in the second half of the fiscal year is a key point that can be assessed from the earnings data.

2. The divergence among segments has widened. While the Development Strategy Headquarters, with Revenue up +20.5% and Operating Income up +50.0%, is driving growth, the East Japan Headquarters, with Revenue down -17.3% and Operating Income down -26.5%, is weighing on company-wide profit.

3. Advances received increased by +32.1% YoY, indicating potential for future Revenue recognition. At the same time, the extent to which the improvement in the gross profit margin (+0.5pt) can absorb the increase in SG&A expenses will determine future trends in profit margins.

Theoretical Share Price (Reference Value)

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

Sensitivity: ¥2,804–¥2,969 at ±1% for the Cost of Equity, and ¥2,883–¥2,888 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 forecast or guarantee the future share price)

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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 as necessary.

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