| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥217.2B | ¥188.5B | +15.2% |
| Operating Income / Operating Profit | ¥53.8B | ¥35.6B | +51.0% |
| Ordinary Income | ¥59.2B | ¥41.1B | +44.0% |
| Net Income / Net Profit | ¥50.1B | ¥45.2B | +10.8% |
| ROE | 9.7% | 9.5% | - |
The interim results for the fiscal year ending March 2026 delivered revenue of ¥217.2B (YoY +¥28.8B +15.2%), Operating Income of ¥53.8B (YoY +¥18.2B +51.0%), Ordinary Income of ¥59.2B (YoY +¥18.1B +44.0%), and Net Income of ¥50.1B (YoY +¥4.9B +10.8%), achieving growth in both revenue and profit. The operating margin improved to 24.7% (prior year 18.9%), a 5.8pt improvement, driven by expanded fee income and trading income amid an active securities market. The SG&A ratio improved to 75.0% (prior year 80.8%), a 5.8pt improvement; revenue growth (+15.2%) significantly outpaced expense growth (+7.0%), demonstrating favorable operating leverage. Net income growth lagged operating profit growth due to the contraction of non-recurring gains to ¥10.9B (prior year ¥19.6B).
[Revenue] Revenue of ¥217.2B (+15.2%) was primarily driven by expansion in fee income and trading income against a backdrop of higher market trading volumes and heightened investor activity. Given the Company’s revenue structure—where custody/handling fees and trading P/L constitute the bulk of operating revenue—strength in equity and bond markets directly translated into top-line growth. FX effects or breakdowns by specific client segments are not disclosed, but the broad increase in market trading activity likely lifted the top line.
[Profitability] Operating Income of ¥53.8B (+51.0%) was achieved because revenue growth (+¥28.8B +15.2%) substantially exceeded SG&A increases (+¥10.6B +7.0%). The SG&A ratio improved 5.8pt to 75.0%, with operating leverage from revenue expansion manifesting within a largely fixed-cost structure. Ordinary Income of ¥59.2B (+44.0%) was approximately 10% higher than operating income due to non-operating income of ¥5.5B (2.5% of revenue) and minimized non-operating expenses. Non-recurring gains fell to ¥10.9B (including ¥0.4B on sale of investment securities) from ¥19.6B a year earlier, which compressed net income growth to ¥50.1B (+10.8%). After deducting corporate taxes of ¥19.8B (effective tax rate 28.3%), the net margin remained high at 23.1%, down 0.7pt from 23.8% in the prior year. In conclusion, improved market conditions drove revenue and profit growth and confirmed strengthening of core earnings power.
[Profitability] Operating margin 24.7% (prior year 18.9%, +5.8pt) and net margin 23.1% (prior year 23.8%, -0.7pt) remain at high levels. ROE of 9.7% is explained by Net Margin 23.1% × Total Asset Turnover 0.246 × Financial Leverage 1.72x, improving from 9.2% the prior year. The marked expansion in operating margin was the main driver, with revenue growth (+15.2%) outpacing SG&A growth (+7.0%), demonstrating favorable operating leverage. [Cash Quality] Operating Cash Flow (OCF) ¥92.9B is 1.85x Net Income ¥50.1B; OCF/EBITDA (EBITDA = Operating Income + Depreciation = ¥59.0B) is 1.58x, indicating very strong cash conversion. Free Cash Flow (FCF) ¥87.4B comfortably covers total dividends (FCF coverage 1.85x), indicating high capacity for shareholder returns. [Investment Efficiency] Total Asset Turnover is low at 0.246, reflecting the typical securities firm structure with abundant liquid assets. EPS 75.66円 (prior year 68.40円, +10.6%), BPS 773.66円 (prior year 718.96円, +7.6%)—per-share value has steadily increased. [Financial Soundness] Equity Ratio 58.1% (prior year 66.4%) remains robust; interest-bearing debt ¥9.0B (all short-term borrowings) versus Cash and Deposits ¥355.9B provides overwhelming liquidity. Current Ratio 207.7%, Debt/EBITDA 0.15x — financial risk is very low.
OCF ¥92.9B is high-quality, equivalent to 1.85x Net Income ¥50.1B after deducting corporate tax payments of ¥14.9B etc. from the OCF subtotal before working capital changes of ¥100.2B. Breakdown: interest & dividend income received ¥8.1B and interest paid ¥0.5B contributed positively to finance income; working capital changes such as increase in bonus reserve ¥3.4B and increase in retirement benefit reserve ¥0.1B modestly boosted OCF. Investing CF -¥5.5B was mainly acquisition of tangible/intangible assets ¥12.4B, indicating active investment in buildings, land, and software, partially offset by proceeds from sale of investment securities ¥0.8B. Financing CF -¥48.9B comprised dividend payments ¥40.9B and net repayment of short-term borrowings ¥8.8B; no share buybacks were conducted. FCF ¥87.4B (= OCF + Investing CF) covers total dividends 1.85x, and cash circulation is very healthy. Ending cash ¥355.9B increased ¥41.4B from the beginning of the period, further strengthening liquid resources via accumulated OCF.
Of Ordinary Income ¥59.2B, non-operating income ¥5.5B represents only 2.5% of revenue; the majority of earnings are generated from core operations. The breakdown of non-operating income is not disclosed, but historical patterns suggest financial income and dividend income are primary components, providing a degree of recurring sustainment. Non-recurring gains ¥10.9B (prior year ¥19.6B) include ¥0.4B on sale of investment securities, while gains on disposal of fixed assets were limited; compared with the prior year’s investment securities gains of ¥12.97B, one-off profits have shrunk materially. The divergence between OCF ¥92.9B and Net Income ¥50.1B (+¥42.8B) cannot be fully explained by depreciation ¥5.2B; working capital movements (bonus reserve +¥3.4B, etc.) and timing differences in corporate tax payments are the primary causes. Accrual (Net Income - OCF) is -¥42.8B, a significant negative, indicating very strong cash backing of profits and high-quality earnings. The recurring earnings base is generated from core operations, dependence on one-off profits has declined versus the prior year, and the sustainability of earnings has strengthened.
A mid-term dividend of ¥32 (regular ¥17 + special ¥15) and year-end dividend of ¥38 (regular ¥23 + special ¥15) are planned for a full-year dividend of ¥70. The payout ratio is high at 87.7%, but FCF ¥87.4B covers total dividends 1.85x, and the gap between Cash and Deposits ¥355.9B and interest-bearing debt ¥9.0B is overwhelmingly large, supporting dividend sustainability. Total dividend outlays are roughly flat compared with prior-year actuals ¥39.7B, but the increase to DPS ¥70 (prior year ¥30) largely reflects the addition of special dividends. Notes on dividends indicate continuation of special dividends of ¥10 at interim and year-end from FY2027 onward, with a planned phased reduction to ¥5 each in FY2028; ordinary dividends remain undecided, but the use of special dividends suggests a policy of flexible shareholder returns. No share buybacks were conducted; total return ratio equals payout ratio. Given abundant FCF and strong cash holdings, short-term dividend continuity is not a concern, but because special dividends form a large portion of payouts, a market downturn could prompt adjustments between ordinary and special dividends.
Market Sensitivity Risk: As the majority of operating revenue is composed of fee income and trading P/L from equity and bond markets, performance is directly linked to market trading volume, volatility, and investor sentiment. Revenue growth of +15.2% was supported by market vigor; in a market reversal, operating leverage could work in reverse, exposing the risk of contracting operating margins.
Price Volatility Risk of Investment Securities: Investment securities ¥173.7B (19.6% of total assets) increased ¥38.9B YoY, with valuation differences of ¥10.4B recorded in equity. Deferred tax liabilities ¥47.4B (YoY +¥13.7B) increased with valuation gains; in a market downturn, valuation losses would be recognized and both equity and deferred tax liabilities would contract, exerting downward pressure on Equity Ratio and ROE.
Elevated Payout Ratio Risk: The payout ratio at 87.7% is high, and with a large proportion coming from special dividends, a significant drop in earnings could rapidly erode dividend capacity. While current FCF coverage 1.85x provides buffer, if market deterioration reduces OCF, special dividends might need to be cut or ordinary dividends adjusted.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 24.7% | 19.9% (6.5%–38.3%) | +4.8pt |
| Net Margin | 23.1% | 5.6% (3.8%–22.2%) | +17.4pt |
Both operating and net margins substantially exceed industry medians, placing the Company near the top in profitability within the sector.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 15.2% | -0.5% (-0.9%–13.1%) | +15.8pt |
Revenue growth exceeds the industry median by 15.8pt, indicating a clearly superior top-line expansion within the sector.
※ Source: Company compilation based on public financial statements
Marked improvement in operating margin: Operating margin improved to 24.7% (+5.8pt) and SG&A ratio declined to 75.0% (prior year 80.8%), demonstrating effective operating leverage. Revenue growth +15.2% significantly outpaced expense growth +7.0%, confirming the ability to convert market improvements into earnings while maintaining cost discipline. Barring a major market downturn, a high-margin profile is expected to persist.
Strengthened cash generation: OCF ¥92.9B is 1.85x net income, and FCF ¥87.4B covers total dividends 1.85x, providing very strong cash backing of profits. The gap between Cash and Deposits ¥355.9B and interest-bearing debt ¥9.0B is overwhelmingly large, indicating high financial resilience. Even with active investments in investment securities, tangible assets, and software (≈¥12.4B), FCF remains ample, enabling both shareholder returns and growth investment.
Flexible use of special dividends and dividend policy: Although the payout ratio is high at 87.7%, the sizable share of special dividends and the disclosure that special dividends will be continued in a phased manner from FY2027 indicate a policy of using special dividends flexibly. Ordinary dividends remain undecided, but abundant FCF and cash holdings support short-term dividend continuity, with room to adjust returns responsively to market conditions.
This report was automatically generated by AI analyzing XBRL financial statement data and is a financial analysis document. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company from public financial statements. Investment decisions are your responsibility; consult a professional advisor as necessary before making investment decisions.
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