| Metric | Current Period | Prior Year Period | YoY |
|---|
| Revenue / Net Sales | ¥3438.6B | ¥3100.7B | +10.9% |
| Operating Income / Operating Profit | ¥555.4B | ¥471.8B | +17.7% |
| Profit Before Tax | ¥911.9B | ¥927.9B | -1.7% |
| Net Income / Net Profit | ¥636.0B | ¥673.5B | -5.6% |
| ROE | 8.2% | 9.4% | - |
FY2026 results: Revenue ¥3,438.6B (YoY +¥337.9B +10.9%), Operating Income ¥555.4B (YoY +¥83.6B +17.7%), Ordinary Income ¥620.6B (YoY +¥72.8B +13.3%), Net Income attributable to owners of the parent ¥627.5B (YoY -¥39.0B -5.6%). Revenue and profit growth were maintained for the third consecutive period driven by expanded interest income and growth in the Finance Business, but Net Income declined due to increased financial expenses (¥510.9B, YoY +¥113.2B) and larger impairments on financial assets (¥624.2B, YoY +¥191.4B). Special gains of ¥145.2B (including gains on sale of marketable securities ¥105.7B) supported pre-tax profit, but valuation losses on assets held for sale of ¥51.2B and losses related to the sale of equity in affiliates of ¥26.6B among other one-off costs pressured final profit.
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Revenue: Revenue ¥3,438.6B (YoY +10.9%) remained robust. By segment, revenue comprised Payment Business ¥2,749.7B, Finance Business ¥844.9B, Real Estate-related Business ¥709.9B, Global Business ¥624.4B, and Entertainment Business ¥386.2B. Interest income was ¥2,158.4B (YoY +15.5%) and served as a core growth driver. Finance Business revenue grew +14.7%, Real Estate-related Business revenue grew +5.1%, and Global Business revenue expanded +23.7%. Payment Business maintained solid growth at +9.0%. Financial income increased to ¥70.8B (+23.3% YoY), and on a net revenue basis totalled ¥4,727.7B (+11.8%), achieving double-digit growth.
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Income Statement: Cost of sales was ¥735.0B (YoY +5.9%), SG&A was ¥2,742.6B (YoY +4.8%), resulting in an SG&A ratio of 79.8%, an improvement of 4.6pt from 84.4% a year earlier. Because SG&A growth lagged revenue growth, operating leverage worked in the company’s favor and Operating Income rose to ¥555.4B (+17.7%), with an Operating Margin of 16.2% (YoY +0.9pt). Ordinary Income was ¥620.6B (+13.3%), but financial expenses increased significantly to ¥510.9B (YoY +28.5%). Equity-method investment income was ¥127.7B (-2.0%). Special gains of ¥145.2B (gains on sale of marketable securities ¥105.7B, gains on sale of equity in affiliates ¥39.5B, etc.) lifted pre-tax profit, while special losses of ¥27.2B (loss on sale of fixed assets ¥11.0B, impairment losses on marketable securities ¥4.6B, etc.) were recorded. Additionally, Other expenses increased by ¥83.2B to ¥125.9B from ¥42.8B the prior year, including valuation losses on assets held for sale ¥51.2B, losses related to sale of equity in affiliates ¥26.6B, and impairment of equity-method investments ¥16.8B. Profit Before Tax was ¥911.9B (-1.7%); after income taxes of ¥275.9B, Net Income attributable to owners of the parent was ¥627.5B (-5.6%), and Net Income Margin decreased to 18.2% from 21.4% a year earlier (down 3.2pt). The result was higher revenue but lower net profit.
- Payment Business: Segment profit ¥306.3B (YoY +1.9%), a slight increase—providing stable earnings as a core segment though growth moderated.
- Leasing Business: ¥46.7B (YoY +13.6%), double-digit growth.
- Finance Business: ¥473.1B (YoY +21.5%), the largest growth driver, accumulating high-margin income centered on credit guarantee operations.
- Real Estate-related Business: ¥192.4B (YoY +18.2%), maintained high growth supported by accumulation of investment properties.
- Entertainment Business: ¥25.9B (YoY +82.4%), rapid recovery but limited scale.
- Global Business: turned to a loss of -¥14.3B from +¥3.4B in the prior year; monetization of Lending and Investment businesses remains a challenge.
- Profitability: Operating Margin improved to 16.2% (up 1.0pt from 15.2%) and exceeds the company’s three-year historical average. ROE was 8.6%, down from 9.4% a year earlier but mid-range relative to historical performance. Net Income Margin was 18.2%, down 3.2pt from 21.4%, compressed by higher financial and credit costs.
- Cash Quality: Operating Cash Flow / Net Income was -2.19x due to a large increase in trade receivables (-¥2,588.1B) which expanded working capital and materially worsened cash conversion.
- Investment Efficiency: Total Asset Turnover was 0.069x, a slight improvement from 0.066x a year earlier, but asset efficiency remains low. Trade receivables of ¥3.87T comprise a large portion of total assets of ¥4.95T and weigh on asset turnover.
- Financial Soundness: Equity Ratio was 15.4% (prior year 15.1%), a marginal increase but low even within the industry context. D/E ratio was 5.38x, Debt/Capital ratio 68.4% indicating high leverage; interest-bearing debt was ¥3.58T versus equity of ¥761.66B, reflecting a debt-dependent capital structure. Current Ratio was 296.2% but short-term liabilities are significant: Cash and cash equivalents ¥1136.5B vs. short-term borrowings ¥2,752.7B and bonds maturing within one year ¥1,300B, resulting in a Cash/Short-term Debt ratio of 0.22x and tight liquidity. Interest Coverage was approximately 1.1x (EBIT ¥555.4B / Financial Expenses ¥510.9B), thin and indicating limited tolerance to rising interest rates.
- Operating Cash Flow: OCF was -¥1,376.6B, an improvement from -¥2,491.7B a year earlier, but still a large negative, driven primarily by an increase in trade receivables of -¥2,588.1B and consequent working capital expansion. EBITDA adjustments (Profit Before Tax ¥911.9B plus Depreciation & Amortization ¥338.0B) produced an OCF subtotal of -¥564.4B; increases in provision for points +¥45.3B, interest payments -¥471.3B, and income taxes paid -¥432.1B absorbed cash.
- Investing Cash Flow: -¥259.7B, led by acquisition of investment properties -¥331.1B and capital expenditures -¥181.3B; partially offset by proceeds from sale of marketable securities +¥147.6B and sale of equity in affiliates +¥68.1B.
- Free Cash Flow: -¥1,636.3B, a large negative as buildup in trade receivables exceeded growth investments.
- Financing Cash Flow: +¥1,400.9B, funded by long-term borrowings +¥4,277.7B and bond issuance +¥1,120.4B to support working capital and shareholder returns; outflows included long-term borrowings repayment -¥3,107.5B, bond redemptions -¥650.0B, share buybacks -¥215.1B, dividend payments -¥180.6B, and decrease in commercial paper -¥1,053.1B. Including foreign exchange effects -¥9.8B, Cash and Cash Equivalents decreased from ¥1,393.9B at the beginning of the period to ¥1,136.5B at period-end (decline of ¥245.2B), compressing liquidity.
- Ordinary Income ¥620.6B vs. Net Income attributable to owners of the parent ¥627.5B: Special gains ¥145.2B (gains on sale of marketable securities ¥105.7B, gains on sale of equity in affiliates ¥39.5B) lifted pre-tax profit, while special losses ¥27.2B and Other expenses ¥125.9B (valuation losses on assets held for sale ¥51.2B, losses related to sale of equity in affiliates ¥26.6B, impairment of equity-method investments ¥16.8B, etc.) were recorded, indicating one-off factors on both sides. Segment profit (sum of segment profits) was ¥1,030.1B, exceeding Profit Before Tax ¥911.9B; adjustment items totaled -¥108.1B (including interest method adjustments -¥16.2B and other adjustments) which reduced reported profit. Impairments on financial assets of ¥624.2B were recorded as credit costs, and the YoY increase of ¥191.4B signals an uptick in credit costs, leaving concerns over earnings quality stability. Non-operating income was ¥70.9B (2.1% of Revenue), primarily financial income ¥70.8B. Accrual quality is weak with OCF/Net Income at -2.19x, as the large increase in trade receivables has materially eroded cash backing for reported profits. The small gap between Ordinary Income and Net Income indicates appropriate tax burden, but core earnings are being offset by one-off gains and losses, requiring caution when judging sustainability of core profitability.
- Full-year forecast: Revenue ¥3,645.0B, Operating Income ¥595.0B (YoY +7.1%), Ordinary Income ¥660.0B (YoY +6.3%), Net Income attributable to owners of the parent ¥440.0B (YoY +20.3%). Progress against full-year forecasts: Revenue 94.3%, Operating Income 93.3%, Ordinary Income 94.0%, Net Income attributable to owners of the parent 142.6% (actual ¥627.5B exceeded full-year forecast ¥440.0B). However, the Net Income beat may reflect one-off gains; the full-year forecast incorporated substantial profit decline in H2. H1 progress for Revenue, Operating Income and Ordinary Income was in the 90% range, but the Net Income upside appears driven by one-off gains such as gains on sale of marketable securities. Confirm alignment with the company plan which factors in increased credit costs and financial expenses in H2. Dividend forecast is maintained at ¥130 per share for the year.
- Year-end dividend: ¥130, total dividends ¥180.6B, Payout Ratio 28.4%, maintaining a conservative level. Share buybacks totaled ¥215.1B; combined with dividends total shareholder returns amounted to ¥395.7B, implying a Total Return Ratio of approximately 63.1%. Relative to Net Income attributable to owners of the parent ¥627.5B, dividends are at a sustainable level, but Free Cash Flow was -¥1,636.3B, so shareholder returns were not covered by internally generated cash and were financed through borrowings and bond issuance (Financing CF +¥1,400.9B). Payout Ratio is low but FCF coverage is negative, so sustained shareholder returns depend on recovery of internally generated Operating CF. Cash on hand ¥1,136.5B vs. total shareholder returns ~¥395.7B is within available liquidity, but considering working capital and growth investment needs, the reliance on external financing for returns presents a risk.
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Interest Rate Rise / Increased Financial Expense Risk: Financial expenses ¥510.9B (YoY +¥113.2B, +28.5%) increased significantly, and with interest-bearing debt of ¥3.58T the Interest Coverage is approximately 1.1x—thin. In a rising rate environment interest payments could outpace operating profit and rising funding costs would directly compress Net Income Margin. Conditions at interest-rate resets or rollover for long-term borrowings ¥1.40T and bonds ¥6,071.9B may increase earnings volatility depending on terms.
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Increase in Credit Costs / Financial Asset Impairment Risk: Impairments on financial assets ¥624.2B (YoY +¥191.4B, +44.2%) indicate rapidly rising credit costs; continued deterioration in credit conditions or higher delinquency rates could impair core earnings. With trade receivables ¥3.87T comprising a large portion of assets, increases in allowance for doubtful accounts or write-offs would impede profit growth. Delays in loan recoveries or higher loss rates on personal and corporate credit guarantees represent downside scenarios.
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Liquidity / Funding Risk: Cash and cash equivalents ¥1,136.5B vs. short-term borrowings ¥2,752.7B and bonds maturing within one year ¥1,300B create a heavy short-term liability profile and a Cash/Short-term Debt ratio of 0.22x, tightening liquidity. With negative Operating CF and ongoing working capital expansion, deterioration in CP market or ABS (securitization) market liquidity, or tightening credit markets could worsen funding conditions, making management of maturity mismatches and rollovers difficult and exposing the company to rollover risk.
- Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|------|------:|-------------:|-------:|
| ROE | 8.6% | 3.8% (1.1%–16.8%) | +4.8pt |
| Operating Margin | 16.2% | 8.8% (4.0%–20.0%) | +7.3pt |
| Net Income Margin | 18.5% | 4.3% (0.6%–11.3%) | +14.2pt |
Profitability substantially exceeds the industry median; both Operating Margin and Net Income Margin rank in the upper range.
- Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|------|------:|-------------:|-------:|
| Revenue Growth Rate (YoY) | 10.9% | 2.1% (-4.5%–6.9%) | +8.8pt |
Revenue growth significantly outpaces the industry median, indicating superior top-line expansion capability within the industry.
※ Source: Company aggregation
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Finance and Real Estate-related businesses have driven profit growth and segment profits remain solid, but increasing financial expenses and credit costs are compressing Net Income Margin. In a rising rate environment the thin Interest Coverage of approximately 1.1x presents a risk that higher funding costs will cap profit growth. Conversely, one-off gains such as gains on sale of marketable securities have supported pre-tax profit, and it is necessary to assess the sustainability of core earnings.
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Operating Cash Flow was a large negative at -¥1,376.6B driven by a substantial increase in trade receivables (-¥2,588.1B), causing working capital expansion and materially deteriorating cash conversion. Free Cash Flow of -¥1,636.3B vs. shareholder returns of approximately ¥395.7B were funded by Financing CF (long-term borrowings and bond issuance +¥1,400.9B), indicating internal cash generation is insufficient to cover returns. The reliance on external funding for returns creates sustainability risk amid tighter credit markets or rising interest rates. Improving working capital efficiency and optimizing receivables collection are keys to restoring cash generation.
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Net Income attributable to owners of the parent exceeded the full-year forecast, but the contribution of one-off gains was significant and alignment with the company plan—which anticipates higher financial and credit costs in H2—should be confirmed. Global Business swung to a loss of -¥14.3B and needs to achieve monetization. With an Equity Ratio of 15.4%, D/E ratio 5.38x, and Cash/Short-term Debt 0.22x, the company is highly leveraged and funding is tight, limiting resilience to changes in interest and credit conditions or to deterioration in funding market liquidity.
This report is an earnings analysis document automatically generated by AI from XBRL financial statement data. It does not constitute investment advice for any specific security. Industry benchmark figures are reference information compiled by the company based on public financial statements. Investment decisions are your responsibility; please consult a professional advisor as needed.
