NAGAHORI (8139) FY2026 Q3 Earnings Report

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Executive Summary

For the cumulative Q3 period of the fiscal year ending March 2026, profitability improved substantially, driven by revenue growth in the Jewelry Business and the realization of operating leverage. Revenue was ¥208.8B (+21.7% YoY), Operating Income was ¥11.3B (+136.7%), Ordinary Income was ¥10.4B (+138.9%), and Net Income was ¥7.0B (+335.9%). Profit growth exceeding the rate of revenue growth was attributable to the 10.0% increase in SG&A expenses being significantly below the 21.7% increase in Revenue. Cumulative Q3 Net Income has already exceeded the full-year company forecast of ¥6.0B.

Factors Affecting Business Performance

【Revenue】Revenue increased 21.7% YoY to ¥208.8B. The Jewelry Business, which accounts for more than 99% of consolidated Revenue, led performance with ¥207.7B (99.5% composition ratio). The Office Building Leasing Business generated ¥0.9B (+40.8% YoY), while the Solar Power Generation Business generated ¥0.4B (-4.5% YoY), making only limited contributions to consolidated performance.

【Profit and Loss】Operating Income increased 136.7% YoY to ¥11.3B, substantially exceeding the rate of revenue growth. The gross profit margin improved from 24.8% in the same period of the previous year to 25.3%, while the SG&A expense ratio was also relatively contained, resulting in operating leverage. Ordinary Income was ¥10.4B (+138.9% YoY). In non-operating items, interest expenses of ¥1.2B exceeded non-operating income of ¥0.6B, becoming a factor reducing income from Operating Income to Ordinary Income. The recognition of an extraordinary loss of ¥0.4B (temporary factor) limited Profit Before Tax to ¥10.1B. Net Income was ¥7.0B (+335.9% YoY), also benefiting from the reversal of the corporate tax burden in the same period of the previous year. Both Revenue and Profit increased.

Segment Analysis

The Jewelry Business is the core business, generating Revenue of ¥207.7B (+21.7% YoY) and segment profit of ¥10.6B (+156.0% YoY), equivalent to 94.5% of consolidated Operating Income. Profit growth significantly exceeded revenue growth due to revenue expansion accompanied by an improvement in the gross profit margin. The Office Building Leasing Business is highly profitable, with Revenue of ¥0.9B and a profit margin of 52.2%, but is small in scale. The Solar Power Generation Business contracted slightly, with Revenue of ¥0.4B (-4.5% YoY) and profit of ¥0.2B (-9.4% YoY). Consolidated performance is highly dependent on sales trends in the Jewelry Business.

Key Financial Metrics

【Profitability】The Operating Income margin was 5.4%, improving by +2.6pt from 2.8% in the same period of the previous year. The Net Income margin also improved by +2.4pt, from 0.9% to 3.3%. Annualized ROE was 6.8%. 【Cash Flow Quality】Inventories were ¥119.0B, accounting for 39.2% of total assets, while the inventory efficiency metric, inventory days, had lengthened to 209 days. 【Investment Efficiency】Annualized ROIC remained at 4.3%, and the total asset turnover ratio was 0.917x, a level that is not high relative to the degree of asset intensity. 【Financial Soundness】The Equity Ratio was 45.0%, down from 49.5% in the previous year. Short-term borrowings of ¥128.2B accounted for the majority of interest-bearing debt, and the ratio of short-term liabilities to cash and deposits of ¥25.3B remained at a limited level.

Cash Flow Analysis

Although a cash flow statement was not disclosed, analysis of funding trends based on changes in the balance sheet shows that, along with revenue growth, inventories increased by ¥7.97B (+7.6%) and accounts receivable increased by more than ¥0.5B, respectively, raising funding needs through the expansion of working capital. To finance this expansion, short-term borrowings increased by ¥26.5B (+26.1%), while accounts payable also increased by ¥3.71B (+45.7%). Despite profit growth, inventories and trade receivables are increasing rapidly, suggesting a structure in which the expansion of accounting profits is not easily translated into cash generation. Cash and deposits were ¥25.3B, increasing moderately from ¥22.9B in the previous year, but remained thin relative to the balance of short-term liabilities.

Earnings Quality

The core of profit growth in the recurring earnings base is operating leverage resulting from improved gross margins and control of SG&A expenses in the Jewelry Business, incorporating structural rather than one-time factors. Meanwhile, the extraordinary loss of ¥0.4B reduced Profit Before Tax as a temporary factor, and even after offsetting the gain on the sale of investment securities of ¥0.04B, it impaired profit on a net basis. In non-operating items, interest expenses of ¥1.25B exceeded non-operating income of ¥0.60B, including dividends received, indicating that the increase in costs associated with the expansion of interest-bearing debt is beginning to exert recurring pressure on profit. Comprehensive income of ¥8.0B slightly exceeded Net Income of ¥7.0B, reflecting a ¥1.2B increase in the valuation difference on securities. The divergence between Net Income and Comprehensive Income is not large. In view of the pace of increases in inventories and trade receivables, the support from cash generation appears somewhat weak relative to accounting profit growth, and earnings quality can be assessed as still improving.

Earnings Forecast and Guidance

The full-year forecasts are Revenue of ¥265.0B (+15.8% YoY), Operating Income of ¥13.0B (+79.8%), Ordinary Income of ¥12.0B (+84.4%), and Net Income of ¥6.0B. The cumulative Q3 progress rates are 78.8% for Revenue, 86.6% for Operating Income, and 86.8% for Ordinary Income, all exceeding the standard progress rate of 75%. The Net Income progress rate is already 115.9%, exceeding the full-year forecast, indicating a conservative plan that incorporates normalization of profit levels in Q4. This time, the company raised its full-year earnings forecast and also revised its dividend forecast.

Shareholder Returns

The Q2 dividend was ¥0 per share, while the full-year dividend forecast is ¥15 per share. The Payout Ratio based on the full-year forecast EPS of ¥39.13 is 38.3%. The company has revised its dividend forecast this time. Retained earnings were ¥28.4B, up +23.6% YoY, indicating continued accumulation of internal reserves. The Payout Ratio, using dividends alone as the numerator, remains below the 60% level considered an indicator of sustainability.

Risk Factors

1. Business concentration risk: The Jewelry Business accounts for more than 99% of consolidated Revenue and 94.5% of segment profit, creating a structure in which fluctuations in jewelry demand, selling prices, and gross margins directly affect consolidated performance.

2. Inventory and working capital risk: Inventories were ¥119.0B, accounting for 39.2% of total assets, and inventory days had lengthened to 209 days. Inventory accumulation increases the risk of valuation losses, discount sales, and cash being tied up.

3. Short-term funding risk: Short-term borrowings account for 99.2% of interest-bearing debt of ¥129.3B and have increased +26.1% YoY. The ratio relative to cash and deposits of ¥25.3B is limited, and changes in refinancing terms could affect liquidity management.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (trading)

Profitability and Returns

The Operating Income margin exceeds the industry median and is positioned at a high level within the industry.

Growth and Capital Efficiency

The Revenue growth rate significantly exceeds the industry median, representing exceptional growth within the industry.

Source: Compiled by the Company

Key Points from the Earnings Results

1. Revenue increased 21.7%, while Operating Income increased 136.7%, demonstrating operating leverage driven by SG&A expense control and gross margin improvement. Cumulative Q3 Operating Income and Ordinary Income progress exceeded 86% against the full-year forecasts, surpassing the standard progress rate.

2. The Operating Income margin of 5.4%, Net Income margin of 3.3%, and ROE of 6.8% improved substantially from the same period of the previous year. However, annualized ROIC of 4.3% remains at a level with room for improvement from the perspective of invested capital efficiency.

3. The combination of short-term borrowings of ¥128.2B (99.2% of interest-bearing debt) and inventories of ¥119.0B (39.2% of total assets) should be monitored as a funding structure issue on the balance sheet alongside the period of increasing Revenue and Profit.

Theoretical Share Price (Reference Value)

Sensitivity: ¥729–¥770 at ±1% in the Cost of Equity, and ¥745–¥752 at ±0.1 in ω.

Notes:

• Because the progress rate of Net Income against the full-year forecast, 116%, exceeds the standard rate of 75%, forecast EPS has been adjusted upward within a maximum range of +10% (because companies whose performance is ahead of schedule tend to exceed forecasts. The adjustment may be excessive for businesses with strong seasonality).
• Net Income is substantially compressed relative to Operating Income due to the tax burden, acquisition-related expenses, and non-controlling interests (Net Income ÷ Operating Income: 46%). This value reflects that compression at face value; if the factors are temporary, the underlying earnings power may be higher.
• Because forecast ROE is below the Cost of Equity, the theoretical value is below Book Value Per Share.
• Net assets as of the quarter-end have been used (there is a timing difference 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 value based solely on publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not forecast or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary 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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