Inabata & Co.,Ltd. FY2027 Q1 Earnings Report

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Executive Summary

The company reported higher revenue and earnings, with Revenue, Operating Income, and Ordinary Income each increasing by double digits. Operating efficiency improved, primarily due to higher volumes and improved spreads in the Plastics segment. Revenue was ¥243.66B (+19.4% YoY), Operating Income was ¥9.83B (+48.8%), and Ordinary Income was ¥10.17B (+38.0%). Meanwhile, Net Income attributable to owners of the parent was limited to ¥6.38B (+5.6%), as the absence of gains on the sale of investment securities recorded in the previous year, an investment securities impairment loss of ¥0.43B in the current period, and the increase in the effective tax rate (29.8% versus 26.4% in the previous year) weighed on the earnings growth rate. The fact that growth in final profit moderated relative to growth at the operating and ordinary income levels requires separating the improvement in core earnings from the effects of extraordinary items and the tax burden.

Factors Affecting Performance

【Revenue】Plastics is the core segment, accounting for 51.1% of the revenue mix, and led company-wide growth with a 25.3% increase in revenue, driven by higher volumes and improved spreads. Chemicals (15.0% of the revenue mix) increased 21.4%, Life Industry (6.9%) increased 15.9%, and Information & Electronics (27.1%) increased 9.5%. All reported segments secured revenue growth, indicating broad-based expansion.

【Profit and Loss】The gross profit margin improved to 10.3% from 9.9% in the previous year, while the SG&A ratio declined to 6.2% from 6.7%, resulting in an expansion of the Operating Income margin to 4.0% from 3.2%, or +0.8pt. The Ordinary Income margin also improved to 4.2% from 3.6%, whereas the Net Income margin attributable to owners of the parent declined to 2.6% from 3.0%. This divergence was attributable to the absence of the gain on the sale of investment securities recorded in the previous year (¥1.14B), the investment securities impairment loss recorded in the current period (¥0.43B, a temporary factor), and the increase in the effective tax rate (29.8% versus 26.4% in the previous year). Thus, the improvement in core profitability was not fully reflected in final profit. Overall, this was a report of higher revenue and earnings at the Operating Income and Ordinary Income levels, confirming the emergence of operating leverage.

Segment Analysis

Plastics generated Revenue of ¥124.52B (51.1% of the total, YoY +25.3%) and Operating Income of ¥5.43B (+65.1%, 4.4% margin), accounting for more than 55% of total company profit and serving as the central driver of earnings growth. Chemicals generated Revenue of ¥36.42B (+21.4%) and Operating Income of ¥1.37B (+76.3%, 3.8% margin), recording the highest profit growth rate among the segments. Information & Electronics generated Revenue of ¥65.92B (+9.5%) and Operating Income of ¥2.18B (+11.5%, 3.3% margin), with relatively moderate revenue growth and profitability and the lowest margin among the segments. Life Industry generated Revenue of ¥16.74B (+15.9%) and Operating Income of ¥0.82B (+49.2%, 4.9% margin), maintaining the highest margin among the segments. The earnings structure is highly dependent on Plastics, making market conditions and supply-demand trends in this business the key determinants of company-wide earnings sensitivity.

Key Financial Indicators

【Profitability】The Operating Income margin was 4.0% (3.2% in the previous year), and the Ordinary Income margin was 4.2% (3.6% in the previous year), with both improving year on year. In contrast, the Net Income margin attributable to owners of the parent declined to 2.6% from 3.0%, indicating that the improvement in core operating efficiency was not fully passed through to final profit due to the effects of extraordinary items and the tax burden. 【Cash Quality】Trade receivables increased to ¥199.32B (¥179.47B in the previous year, +11.0%) and inventories increased to ¥100.96B (¥89.10B in the previous year, +13.3%), both outpacing the increase in trade payables (¥138.61B, +10.9%), indicating an accumulation of working capital during the revenue growth phase. 【Investment Efficiency】ROE was 2.7%. As total assets increased relatively slowly (+6.0%) compared with Revenue growth (+19.4%), asset turnover efficiency is trending upward, although the decline in the Net Income margin acted as a downward factor. 【Financial Soundness】The Equity Ratio declined slightly to 45.7% from 47.3% (-1.6pt), but liquidity remained strong, with a current ratio of 203.1% and a quick ratio of 154.5%.

Cash Flow Analysis

Although the cash flow statement has not been disclosed, changes in the balance sheet indicate an expansion of working capital during the revenue growth phase. Trade receivables increased to ¥199.32B (¥179.47B in the previous year, +11.0%), while inventories increased to ¥100.96B (¥89.10B in the previous year, +13.3%), both exceeding the increase in trade payables (¥138.61B, +10.9%). This difference indicates an expansion in funds tied up in working capital and is consistent with the increase in short-term borrowings to ¥47.46B from ¥37.10B in the previous year (+27.9%). Cash and deposits declined slightly to ¥67.90B from ¥76.84B in the previous year (-11.6%), but total current assets of ¥422.15B substantially exceeded current liabilities of ¥207.81B, and no concerns are apparent regarding near-term payment capacity. Going forward, improving the turnover of trade receivables and inventories will be a key focus for limiting reliance on working capital funding.

Quality of Earnings

Non-operating income and expenses consisted mainly of dividend income of ¥0.34B, interest income of ¥0.26B, interest expense of ¥0.42B, and foreign exchange losses of ¥0.09B. These items were small relative to Revenue, indicating that the increase in Ordinary Income (+38.0%) was attributable to improved core earnings power. However, between Profit Before Tax and Net Income, the investment securities impairment loss recorded in the current period (¥0.43B, an extraordinary loss and temporary factor) contrasted with the absence of the gain on the sale of investment securities recorded in the previous year (¥1.14B, an extraordinary gain). In addition, the increase in the effective tax rate to 29.8% from 26.4% caused the growth rate of Net Income attributable to owners of the parent (+5.6%) to fall substantially below the growth rate of Ordinary Income (+38.0%). Comprehensive income was ¥9.80B (¥9.15B attributable to owners of the parent), exceeding Net Income attributable to owners of the parent of ¥6.38B. The primary factor behind this difference was foreign currency translation adjustments of ¥2.55B, reflecting the increase in the yen-converted net assets of overseas subsidiaries rather than recurring core earnings power.

Earnings Forecast and Guidance

The Q1 progress rates against the Full-Year plan were 27.4% for Revenue (¥243.66B/¥890B), 35.8% for Operating Income (¥9.83B/¥27.5B), 37.0% for Ordinary Income (¥10.17B/¥27.5B), and 30.4% for Net Income attributable to owners of the parent (¥6.38B/¥21B). All exceeded the simple quarterly allocation benchmark of 25%, indicating particularly front-loaded progress on the earnings side. This was driven by higher volumes and improved spreads in Plastics and Chemicals, as well as the lower SG&A ratio. As of the current quarter, there were no revisions to the earnings forecast or dividend forecast. The Full-Year Ordinary Income plan of ¥27.5B (-0.9% YoY) is set slightly below the previous year’s actual result, and whether the high Q1 progress rate can be sustained throughout the year will depend on market conditions and inventory turnover trends from the second half onward.

Shareholder Returns

The annual dividend forecast is ¥143.00 per share, with no revision as of the current quarter. Based on the average number of shares outstanding during the period (approximately 53.38 million shares), the estimated annual total dividend is approximately ¥7.63B, resulting in a Payout Ratio of approximately 36% against the Full-Year Net Income plan of ¥21B (attributable to owners of the parent). With a sound financial base, including a current ratio of 203.1% and an Equity Ratio of 45.7%, this Payout Ratio is considered reasonable relative to the current earnings level and financial strength.

Risk Factors

1. Concentration in the Plastics segment: Plastics accounts for 51.1% of the revenue mix and more than 55% of the Operating Income mix, resulting in high sensitivity of company-wide earnings to market conditions and supply-demand fluctuations in this business.

2. Working capital expansion and reliance on short-term funding: The increases in trade receivables and inventories (+11.0% and +13.3%, respectively) exceeded the increase in trade payables (+10.9%), while short-term borrowings increased to ¥47.46B (+27.9%). Greater reliance on short-term funding could increase sensitivity to changes in the financing environment.

3. Volatility in extraordinary gains and losses: The company recorded an investment securities impairment loss of ¥0.43B in the current period, and the absence of the previous year’s ¥1.14B gain on the sale of investment securities also weighed on the Net Income growth rate. Valuation gains and losses arising from market conditions may continue to cause fluctuations in Net Income.

Industry Benchmark (Reference, Compiled by the Company)

Profitability and Returns

Both the Operating Income margin and Net Income margin were slightly below the industry median, placing profitability at a mid-to-slightly-below-mid level within the industry.

Growth and Capital Efficiency

The Revenue growth rate was substantially above the industry median, representing an outstanding growth rate within the industry.

※Source: Compiled by the Company

Key Takeaways from the Earnings Release

1. The Operating Income margin improved to 4.0% (3.2% in the previous year, +0.8pt), confirming the emergence of operating leverage through a higher gross profit margin and lower SG&A ratio. In contrast, the Net Income margin attributable to owners of the parent declined to 2.6% (3.0% in the previous year, -0.3pt), creating a divergence between improved core profitability and the movement in final profit. This is an important consideration in assessing the quality of the earnings results.

2. Progress against the Full-Year plan was 35.8% for Operating Income and 37.0% for Ordinary Income, exceeding the 27.4% progress rate for Revenue and indicating front-loaded progress on the earnings side. Whether this pace can be maintained from the second half onward will depend on volume and spread trends in Plastics and Chemicals.

3. Trade receivables and inventories increased faster than trade payables, while short-term borrowings also expanded by +27.9%. The accumulation of working capital during the revenue growth phase will remain an important monitoring point for assessing seasonality in funding needs and the timing of cash generation.

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: ¥4,446–¥4,704 at ±1% for the cost of equity, and ¥4,567–¥4,576 at ±0.1 for ω.

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, resulting in a timing difference relative to 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: 2026-07 / 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 based on XBRL earnings release data. It is not a recommendation to invest 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 and, where necessary, after consulting with a professional advisor.

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