Quick View
| Metric | Current Period | Previous-Year Period | YoY |
|---|---|---|---|
| Revenue | ¥193.9B | ¥186.8B | +3.8% |
| Operating Income | - | - | - |
| Profit Before Tax | ¥22.8B | ¥29.4B | −22.4% |
| Net Income | ¥17.5B | ¥16.1B | +8.5% |
| ROE | 1.3% | 1.2% | - |
Executive Summary
Although Profit Before Tax declined as SG&A expenses grew faster than revenue, Net Income increased as a result of higher equity-method investment income and a lower tax burden. Revenue (operating revenue) was ¥193.9B, representing a +3.8% YoY increase. Profit Before Tax was ¥22.8B, down 22.4% YoY; however, as income taxes and other taxes decreased to ¥5.3B (¥13.2B in the previous-year period), Net Income (consolidated quarterly profit) increased 8.5% YoY to ¥17.5B, while quarterly net income attributable to owners of the parent increased 3.6% YoY to ¥19.2B. The primary factor behind the decline in profit was the 10.2% YoY increase in SG&A expenses to ¥166.6B, which exceeded the pace of revenue growth. The increase in profit was supported by the expansion of equity-method investment income to ¥14.9B (+55.2% YoY) and the decline in the effective tax rate.
Factors Affecting Performance
【Revenue】Revenue was ¥193.9B, representing a +3.8% YoY increase. By segment, the Securities Business grew to ¥138.4B (+7.9% YoY), while the Asset Management and Wealth Management Business increased to ¥14.6B (+13.4% YoY), driving overall growth. In contrast, the Digital Asset Business declined to ¥32.0B (-6.1% YoY). The overall structure was one in which revenue growth in the Securities Business and the AM and WM Business offset the decline in the Digital Asset Business.
【Profit and Loss】SG&A expenses increased to ¥166.6B (+10.2% YoY), and the SG&A ratio deteriorated to 85.9% from 80.9% in the previous-year period, a deterioration of approximately 5.0pt. Meanwhile, financial expenses decreased to ¥24.2B (-11.8% YoY), reducing the burden. Equity-method investment income expanded to ¥14.9B (+55.2% YoY), accounting for approximately 65.5% of Profit Before Tax of ¥22.8B. As a result, Profit Before Tax declined 22.4% YoY to ¥22.8B, and the Profit Before Tax margin decreased to 11.8% from 15.7% in the previous-year period, a decline of approximately 4.0pt. Nevertheless, in addition to income taxes and other taxes declining significantly to ¥5.3B (¥13.2B in the previous-year period; effective tax rate of 23.1% versus 45.0% in the previous-year period), losses attributable to non-controlling interests also narrowed (▲¥1.7B in the current period versus ▲¥2.4B in the previous-year period). Consequently, Net Income increased 8.5% YoY to ¥17.5B, and net income attributable to owners of the parent increased 3.6% YoY to ¥19.2B. The defining feature of this earnings period was the stepwise divergence whereby revenue increased, Profit Before Tax declined, and final profit increased due to the lower tax burden. Core earnings power, or earning capacity after SG&A expenses, has weakened slightly.
Segment Analysis
Segment profit is disclosed on a Profit Before Tax basis. The core Securities Business recorded revenue of ¥138.4B (+7.9% YoY) but segment profit declined 21.1% YoY to ¥29.7B. Although financial expenses decreased and equity-method investment income increased, the rise in SG&A expenses was greater. The Digital Asset Business recorded revenue of ¥32.0B (-6.1% YoY), while its segment loss widened to ¥12.1B, compared with ▲¥11.6B in the previous-year period. The Asset Management and Wealth Management Business increased revenue 13.4% YoY to ¥14.6B, but segment profit declined 25.8% YoY to ¥6.5B. The Investment Business recorded revenue of ▲¥1.3B and a segment loss of ¥1.7B, compared with ▲¥1.5B in the previous-year period. The Securities Business remains the largest source of profit, but profit declined, while the widening loss in the Digital Asset Business is weighing on total segment profit.
Key Financial Indicators
【Profitability】The Net Income margin, based on consolidated quarterly profit, was 9.0%, showing a slight improvement from 8.6% in the previous-year period. However, the Profit Before Tax margin was 11.8%, down approximately 4.0pt from 15.7% in the previous-year period, indicating stagnant profitability growth due to higher costs. ROE was 1.3%, remaining at approximately the same level as the previous-year period on a quarterly basis. 【Cash Flow Quality】Depreciation and amortization increased 18.9% YoY to ¥14.2B, consistent with progress in investment in property, plant and equipment. 【Investment Efficiency】Investments in equity-method affiliates amounted to ¥681.6B, while equity-method investment income expanded 55.2% YoY to ¥14.9B, increasing its contribution to profit. 【Financial Soundness】The Equity Ratio was 16.7%, declining slightly from 16.9% in the previous-year period. Total assets were ¥7788.3B, and net assets were ¥1392.9B. Loans secured by securities increased 38.3% YoY to ¥788.7B, while the corresponding borrowings secured by securities increased 33.1% YoY to ¥725.0B. Both expanded in parallel, indicating that the matching of assets and liabilities has generally been maintained.
Cash Flow Analysis
Cash and cash equivalents amounted to ¥463.7B, decreasing by ¥64.2B (-12.2%) from ¥527.9B at the end of the previous fiscal year. Meanwhile, money trusts increased from ¥3785.6B to ¥3896.6B. Loans secured by securities expanded +38.3% from ¥570.4B to ¥788.7B, and the corresponding borrowings secured by securities also expanded +33.1% from ¥544.7B to ¥725.0B, suggesting an expansion in working capital accompanying the growth of transactions in the Securities and Digital Asset Businesses. Retained earnings declined from ¥455.5B to ¥436.1B, apparently reflecting dividend payments. Property, plant and equipment increased 25.4% to ¥85.5B from ¥68.2B at the end of the previous fiscal year, indicating that progress in investments in facilities and systems accounted for part of the use of funds. No share repurchases were conducted during the current period (¥10.5B in the previous-year period), helping to limit cash outflows.
Quality of Earnings
The recurring earnings pillars are financial revenue and commission income from the Securities Business. In this earnings period, however, the contribution of equity-method investment income expanded to ¥14.9B (¥9.6B in the previous-year period, +55.2% YoY), accounting for approximately 65.5% of Profit Before Tax of ¥22.8B. This increased weighting indicates greater dependence on factors that are susceptible to the performance of investee companies and market conditions, resulting in a profit structure that cannot be fully explained by core earnings alone, such as commission and asset management revenue from the Securities and AM Businesses. Other income of ¥3.8B and other expenses of ¥0.2B were relatively small, limiting their impact as sudden or temporary factors. Comprehensive income was ¥26.9B, including ¥28.7B attributable to owners of the parent, exceeding Net Income of ¥17.5B by ¥9.4B. The primary factor was the fluctuation in foreign exchange valuation resulting from the improvement in translation adjustments of foreign operations from ▲¥14.0B in the previous-year period to +¥10.3B in the current period. This divergence reflects valuation-related factors that do not appear in Net Income on the income statement and fluctuate independently of sustainable earnings power.
Shareholder Returns
The dividend policy adopts an earnings-linked approach under which the annual dividend per share has a floor of ¥30, and dividends equivalent to 50% of profit attributable to owners of the parent are paid when that amount exceeds the floor. The dividend forecast for the current fiscal year is ¥30.8 per share, with no revision. Dividend payments during Q1 amounted to ¥38.7B (¥63.7B in the previous-year period); however, a simple comparison is not possible due to differences in payment timing. No treasury share acquisitions were conducted during the current period (¥10.5B in the previous-year period), and the Company has indicated a policy of implementing them flexibly depending on the circumstances. As returns are provided solely through dividends, the Payout Ratio is the appropriate return metric. However, as the full-year earnings forecast has not been disclosed, the Payout Ratio has not been calculated.
Risk Factors
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Digital Asset Business earnings volatility risk: Revenue declined to ¥32.0B (-6.1% YoY), while the segment loss widened to ¥12.1B (from ¥11.6B in the previous-year period), indicating a structure in which fluctuations in cryptocurrency market conditions directly affect earnings.
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Highly leveraged financial structure: The Equity Ratio remains low at 16.7%, while loans and borrowings secured by securities expanded in parallel to ¥788.7B (+38.3% YoY) and ¥725.0B (+33.1% YoY), respectively. During periods of market stress, fluctuations in collateral values could affect liquidity and funding.
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Dependence on equity-method investment income: Equity-method investment income of ¥14.9B accounted for approximately 65.5% of Profit Before Tax of ¥22.8B, meaning that the performance of investee companies and fluctuations in foreign exchange rates and market conditions have a relatively significant impact on consolidated profit.
Industry Benchmark (For Reference; Compiled by the Company)
Industry Benchmark (utilities)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Net Income Margin | 9.0% | 8.3% (3.4%–32.0%) | +0.7pt |
The Company's Net Income margin is slightly above the industry median.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 3.8% | 6.4% (-2.5%–14.4%) | −2.6pt |
The Revenue growth rate is below the industry median, indicating relatively moderate growth within the industry.
※Source: Compiled by the Company
Key Takeaways from the Earnings Results
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SG&A expenses increased at a faster pace (+10.2%) than revenue growth (+3.8%), causing the Profit Before Tax margin to decline to 11.8% from 15.7% in the previous-year period, a decrease of approximately 4.0pt. The trend in cost efficiency warrants monitoring as a factor that will influence future profitability.
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Equity-method investment income accounts for approximately 65.5% of Profit Before Tax, making the performance of businesses outside the scope of consolidation and market fluctuations more influential on overall profit.
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The loss in the Digital Asset Business widened to ¥12.1B, and the profitability gap between the Securities Business and the AM/WM Business has persisted across segments.
This report is an earnings analysis document automatically generated by AI based on 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 available earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting with professionals as necessary.
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AI Financial Analysis
Executive Summary
Monex Group delivered modest top-line and owner-attributable earnings growth in FY2027 Q1, but underlying pre-tax profitability weakened materially. Operating revenue rose 3.8% year on year to ¥19.39bn. Profit attributable to owners of the parent increased 3.6% to ¥1.92bn, and basic EPS rose to ¥7.65 from ¥7.38. Consolidated quarterly profit increased 8.5% to ¥1.75bn because the loss attributable to non-controlling interests narrowed to ¥0.17bn from ¥0.24bn. Pre-tax profit, however, fell 22.4% to ¥2.28bn. The pre-tax margin contracted by 390bp to 11.8% from 15.7%. The owner-attributable net margin was broadly stable at 9.9%, declining only around 2bp, as the effective tax rate fell sharply to 23.1% from approximately 45.0% in the prior-year quarter. SG&A expenses increased 10.3% to ¥16.66bn, substantially outpacing revenue growth and limiting operating leverage. Depreciation and amortization increased 18.8% to ¥1.42bn, adding to the cost-base pressure. Equity-method investment income rose 55.1% to ¥1.49bn and represented 65.5% of pre-tax profit, making affiliate earnings a central support for reported profitability. Securities was the largest revenue and profit-generating segment, although its segment profit declined despite higher revenue. Digital assets remained loss-making, with both revenue and segment profit deteriorating. Asset management and wealth management achieved double-digit revenue growth but lower segment profit. Total assets increased 4.3% from the March 2026 year-end to ¥778.83bn, principally alongside client-related trust assets, securities-collateral lending and related funding balances. Equity increased 7.2% to ¥139.29bn, while the equity ratio edged down to 16.7% from 16.9% at March 2026 because asset growth remained balance-sheet intensive. The key forward implication is that sustained earnings expansion will require expense discipline and improvement in digital-asset profitability, while the contribution and volatility of equity-method earnings remain important determinants of group profit.
Profitability Analysis
The reported annualized ROE was 5.5%, below the 8% threshold generally associated with an adequate return profile. The DuPont decomposition is annualized and comprises a 9.9% net profit margin, 0.100x asset turnover and 5.59x financial leverage. The relatively solid net margin is offset by very low asset turnover, which is characteristic of a large financial-services balance sheet containing client-related and financing assets. Financial leverage is the main mechanical support for ROE, rather than superior operating efficiency. Revenue growth of 3.8% did not translate into pre-tax profit growth: pre-tax profit declined 22.4% and the pre-tax margin fell to 11.8% from 15.7%. SG&A growth of 10.3%, versus 3.8% revenue growth, indicates negative operating leverage during the quarter. Depreciation and amortization also rose 18.8%, to ¥1.42bn, reinforcing the increase in fixed and technology-related cost intensity. The lower 23.1% effective tax rate protected net income, with the tax burden at 0.843 remaining normal, but this tax benefit does not remove the deterioration in pre-tax earnings. Equity-method investment income of ¥1.49bn was equivalent to 65.5% of pre-tax profit, compared with 32.8% in the prior-year quarter, increasing dependence on investee performance. Securities generated ¥13.84bn of external revenue, up 7.9%, but segment pre-tax profit fell 21.1% to ¥2.97bn; its segment margin declined to 21.4% from 29.3%. Digital assets generated ¥3.20bn of revenue, down 6.1%, and recorded a ¥1.21bn segment loss, marginally wider than the ¥1.16bn loss a year earlier. Asset management and wealth management revenue rose 13.4% to ¥1.46bn, but segment profit fell 25.8% to ¥0.65bn and margin compressed to 44.7% from 68.2%. The securities business remains the core business by both external revenue and segment-profit contribution, but its declining profit conversion is the principal operational issue.
Growth Assessment
Group revenue growth was positive but modest at 3.8%, with growth concentrated in securities and asset management and wealth management. Securities revenue increased by ¥1.01bn year on year, more than offsetting a ¥0.21bn decline in digital-asset revenue. Asset management and wealth management added ¥0.17bn of revenue, supporting business diversification. The quality of growth is constrained by lower pre-tax profit and by SG&A increasing faster than revenue. The digital-asset segment's continued loss means its revenue base has not yet translated into positive segment earnings. Securities profitability remains important because the segment supplied the group's principal operating profit pool, but its profit decline signals that higher client activity or revenue alone has not offset cost and financial-expense pressures. Equity-method income growth of ¥0.53bn was material to the quarter's reported result and may be less controllable than wholly owned operating earnings. Other comprehensive income was positive at ¥0.94bn, led by ¥1.03bn of foreign-currency translation gains and ¥0.41bn of equity-method OCI, lifting comprehensive income to ¥2.70bn. These OCI movements increased equity but should not be treated as recurring operating earnings. The company has disclosed a FY2027 dividend-per-share forecast of ¥30.8, but it has not provided a full-year earnings forecast in the supplied figures; earnings progress against a full-year profit target therefore cannot be calculated.
Financial Health
The balance sheet is highly leveraged, with a reported debt-to-equity ratio of 4.59x, well above the 2.0x warning benchmark. This is a material financial-risk flag: a relatively small equity base supports a large financial-services balance sheet, making capital resilience sensitive to market volatility, counterparty exposures and valuation movements. The context is important because liabilities include ¥326.45bn of customer deposits, ¥121.11bn of margin deposits and ¥72.50bn of securities-collateral borrowings, which are integral to brokerage and financing operations rather than directly comparable with conventional corporate operating debt. Nevertheless, total liabilities represented 82.1% of assets and the equity ratio was only 16.7%, leaving limited balance-sheet loss absorption relative to total assets. Assets rose ¥32.06bn from March 2026, while liabilities rose ¥22.74bn and equity rose ¥9.32bn. Cash and cash equivalents declined ¥6.42bn from March 2026 to ¥46.37bn. The decline was accompanied by a ¥21.83bn increase in securities-collateral lending, a ¥11.10bn increase in money held in trust and a ¥9.68bn increase in other financial assets, illustrating continued funding and liquidity-management sensitivity. Corporate bonds and borrowings declined modestly by ¥0.89bn to ¥56.84bn. Intangible assets were ¥42.87bn, or 5.5% of total assets, a moderate asset concentration below the 20% benchmark. PPE increased 25.4% to ¥8.55bn, indicating elevated investment in tangible operating infrastructure from a low base. Investments accounted for under the equity method remained substantial at ¥68.16bn, equivalent to approximately 49.0% of total equity, creating meaningful exposure to investee valuations and earnings.
Notable B/S Changes
Property, plant and equipment: +¥1.73bn (+25.4%) to ¥8.55bn - higher tangible infrastructure investment from a low base; monitor whether associated depreciation growth is matched by revenue productivity. Securities-collateral lending: +¥21.83bn from March 2026 to ¥78.87bn - balance-sheet expansion linked to financing activity, increasing secured-funding and market-liquidity sensitivity. Money held in trust: +¥11.10bn from March 2026 to ¥389.66bn - reflects growth in client-related balances and underscores the importance of custody, segregation and liquidity management. Other financial assets: +¥9.68bn from March 2026 to ¥94.69bn - increased financial-asset exposure requires continued monitoring of composition, liquidity and valuation risk. Securities-collateral borrowings: +¥18.03bn from March 2026 to ¥72.50bn - funding increased alongside collateral-lending activity, reinforcing the balance-sheet leverage profile. Customer deposits: +¥12.50bn from March 2026 to ¥326.45bn - expanded customer funding supports operations but is sensitive to client activity and confidence. Non-controlling interests: +¥5.43bn from March 2026 to ¥9.01bn - principally associated with ownership-interest changes; this increased the portion of consolidated equity not attributable to parent shareholders.
Cash Flow Quality
Depreciation and amortization was ¥1.42bn in FY2027 Q1, equal to 7.3% of operating revenue and up from ¥1.20bn in the prior-year quarter. The higher non-cash charge is consistent with a growing fixed-asset and intangible-asset base. Earnings quality is mixed on an accrual basis because owner-attributable earnings growth was supported by a ¥0.53bn increase in equity-method investment income, while pre-tax profit declined by ¥0.66bn. The positive ¥0.94bn other comprehensive income primarily reflected foreign-currency translation and equity-method OCI movements rather than cash operating performance. Cash and cash equivalents declined by ¥6.42bn from March 2026, while securities-collateral lending and money held in trust increased. These movements are consistent with a financial-services model in which customer funds, collateral and financing balances can drive period-end liquidity movements. The disclosed quarterly owner dividend payment was ¥3.87bn, exceeding the quarter's ¥1.92bn profit attributable to owners and contributing to the ¥1.95bn quarter-on-quarter reduction in retained earnings. The cash flow profile should therefore be assessed in conjunction with the scale and funding stability of client-related assets and liabilities.
Dividend Sustainability
The company’s shareholder-return policy sets a minimum annual dividend of ¥30 per share and provides that dividends should be at least 50% of annual profit attributable to owners per share when that amount exceeds ¥30. The disclosed FY2027 dividend-per-share forecast is ¥30.8, only modestly above the stated floor. Based on Q1 EPS of ¥7.65, the annualized Q1 EPS run rate is ¥30.60; the ¥30.8 forecast would therefore imply a payout ratio of approximately 100.7% against that annualized run rate. This is an annualized comparison rather than a full-year earnings forecast and should not be interpreted as the final full-year payout ratio. The policy's 50% earnings-linked component indicates that the planned dividend is designed to be supported by higher full-year earnings than the Q1 run rate, or by the fixed minimum-return commitment. During Q1, ¥3.87bn of dividends were paid to owners, compared with ¥1.92bn of profit attributable to owners, reducing retained earnings. No meaningful share repurchase was recorded in the quarter. Dividend sustainability is consequently most sensitive to normalization of pre-tax earnings, the durability of equity-method income and the group's ability to preserve capital within its leveraged financial-services balance sheet.
Risk Assessment
Business risks include Digital-asset business risk: revenue declined 6.1% to ¥3.20bn and the segment recorded a ¥1.21bn pre-tax loss. Crypto-asset prices, trading volumes, regulatory requirements, cybersecurity events and competitive conditions can cause substantial volatility in customer activity and earnings., Securities earnings risk: the core securities segment increased revenue 7.9% but segment profit fell 21.1%, demonstrating sensitivity to transaction volumes, interest-rate and funding conditions, and cost absorption., Affiliate-performance risk: equity-method income of ¥1.49bn represented 65.5% of pre-tax profit. This reliance raises earnings volatility because investee results, distributions and valuation conditions are not wholly controlled by the group., Cost-inflation and execution risk: SG&A rose 10.3% and depreciation and amortization rose 18.8%, faster than revenue, requiring improved monetization of technology, platforms and growth investments..
Financial risks include High leverage: the 4.59x debt-to-equity ratio exceeds the 2.0x warning benchmark. While customer deposits and collateral-related balances are inherent to the business model, the 16.7% equity ratio provides a narrower capital buffer than a lower-leverage structure., Liquidity and funding risk: cash declined ¥6.42bn from March 2026 while collateral lending increased ¥21.83bn. Stable access to customer funding, secured financing and market liquidity is important to maintain balance-sheet flexibility., Market and currency risk: total comprehensive income included a ¥1.03bn positive translation difference, illustrating that exchange-rate movements can have a meaningful effect on equity and reported comprehensive income., Investment-value risk: equity-method investments were ¥68.16bn, approximately 49.0% of total equity, exposing capital to investee valuation changes and potential performance deterioration..
Key concerns include The HIGH_LEVERAGE alert is material: D/E of 4.59x indicates a balance sheet that depends on prudent collateral, liquidity and risk management. This structure is common to some extent in brokerage and financial-intermediary models, but it amplifies the effect of adverse market, counterparty or funding conditions on equity resilience., The EQUITY_METHOD_DEPENDENCY alert is material: equity-method income accounted for 65.5% of pre-tax profit, above the 50% alert threshold. The increase in affiliate income supported reported earnings, but it also reduces visibility into the recurring profitability of wholly owned operating businesses., Pre-tax margin fell 390bp despite revenue growth, with SG&A expanding faster than revenue. A recovery in pre-tax earnings requires either stronger revenue monetization or a moderation in the cost-growth rate., The digital-asset segment remained loss-making and experienced lower revenue, making a turnaround in this business an important determinant of consolidated earnings quality..
Investment Implications
Key takeaways include Revenue and owner-attributable profit increased, but the 22.4% decline in pre-tax profit indicates weaker underlying profit conversion., The annualized 5.5% ROE is supported by 5.59x financial leverage rather than high asset turnover, and remains below an 8% return threshold., Securities is the core business, contributing ¥13.84bn of external revenue and ¥2.97bn of segment pre-tax profit, but its segment margin declined sharply., Equity-method income was a major earnings support at ¥1.49bn, or 65.5% of pre-tax profit., The FY2027 dividend forecast of ¥30.8 per share maintains the company’s minimum-return framework, but its coverage depends on full-year earnings improving from the annualized Q1 EPS run rate..
Metrics to watch include Securities segment revenue growth and segment pre-tax margin, Digital-asset segment revenue, losses and path to profitability, SG&A and depreciation-and-amortization growth relative to revenue, Equity-method investment income as a percentage of pre-tax profit, Equity ratio, debt-to-equity ratio, customer deposits, collateral lending and secured funding balances, Cash and cash equivalents relative to balance-sheet expansion, Dividend coverage relative to full-year EPS.
Regarding relative positioning, Monex Group combines a profitable securities franchise with growth exposure to digital assets and asset management. Its operating diversification is an advantage, but current relative positioning is constrained by a low annualized ROE, high balance-sheet leverage, negative digital-asset segment earnings and unusually high reliance on equity-method income versus a more consistently profitable, internally generated earnings profile.