FUJI KYUKO (9010) FY2026 Q3 Earnings Report

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Executive Summary

In addition to higher revenue and earnings, progress against the full-year plan is favorable, indicating a solid earnings result in terms of both quality and sustainability. Revenue was ¥407.1B (+3.2% YoY), Operating Income was ¥69.9B (+4.6%), Ordinary Income was ¥69.1B (+5.4%), and Net Income attributable to owners of the parent was ¥45.1B (+2.9%). The growth rate of Operating Income exceeded the revenue growth rate, indicating positive operating leverage. Progress against the full-year plan was 79.9% for Operating Income and 85.1% for Net Income, both exceeding the standard Q3 progress rate of approximately 75%, indicating favorable progress toward achieving the plan.

Factors Affecting Earnings

【Revenue】Revenue increased 3.2% YoY to ¥407.1B. By segment, LeisureService was the largest at ¥194.2B (47.7% of total), followed by Transportation at ¥155.1B (38.1%) and RealEstate at ¥16.1B (4.0%). In terms of profit margins, Transportation was highest at 25.3%, followed by RealEstate at 21.7% and LeisureService at 11.8%, indicating that the earnings structure is driven by the Transportation Business.

【Profit and Loss】Operating Income increased 4.6% YoY to ¥69.9B, while Ordinary Income increased 5.4% to ¥69.1B, with the earnings growth rate exceeding revenue growth. The Operating Income margin expanded to 17.2% (approximately 16.9% in the same period of the prior year). Special income was ¥3.0B, including a ¥1.3B gain on the sale of investment securities, while special losses were ¥4.1B, including a ¥2.5B loss on disposal of fixed assets, resulting in a net loss of approximately ¥1.0B. Due to this temporary factor, Net Income growth (+2.9%) remained modest compared with growth at the Operating Income and Ordinary Income levels. Overall, the company posted higher revenue and earnings.

Segment Analysis

Transportation generated revenue of ¥155.1B and Operating Income of ¥39.2B, with the highest profit margin at 25.3%, making it the core contributor to company-wide profits. LeisureService generated the largest revenue at ¥194.2B, but its profit margin of 11.8% was approximately half that of Transportation, indicating variation in the earnings structure. RealEstate was small in scale, with revenue of ¥16.1B, but had a relatively high profit margin of 21.7%. Overall, improving the efficiency of LeisureService, which is large in scale but has a low profit margin, represents an observed opportunity to improve the company-wide profit margin going forward.

Key Financial Indicators

【Profitability】The Operating Income margin was 17.2%, the Ordinary Income margin was approximately 17.0%, and the Net Income margin was approximately 11.1%, each showing a slight improvement from the same period of the prior year.【Cash Flow Quality】Comprehensive Income was ¥61.7B, exceeding Net Income of ¥45.9B, with the primary reason for the difference being a ¥15.9B increase in the valuation difference on other securities.【Investment Efficiency】Annualized ROE was 14.8%. Against non-operating income of ¥3.3B, interest expenses were ¥3.7B, and the interest coverage ratio remained at a high level.【Financial Soundness】The Equity Ratio was 41.0%, improving from the prior year. Current assets of ¥294.0B exceeded current liabilities of ¥177.8B, indicating sound working capital. Short-term borrowings declined significantly from the prior year, reducing reliance on short-term funding.

Cash Flow Analysis

As individual disclosures from the cash flow statement are not available, funding trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥131.7B, down from ¥167.8B in the prior year, suggesting that funds were used to reduce short-term borrowings (¥79.6B, a significant decrease YoY). While investment in fixed assets continued, investment securities increased to ¥110.7B, indicating that funds were deployed both for business investments and securities investments. Net assets increased by ¥46.2B from the prior year to ¥414.1B, with accumulated retained earnings and the increase in the valuation difference on securities strengthening the capital base. Overall, funds were allocated to reducing borrowings and investment activities, indicating progress toward stabilizing the financial foundation.

Quality of Earnings

Growth in Operating Income and Ordinary Income reflects an improvement in the profitability of the core business, indicating good recurring earnings quality. However, Net Income growth was constrained by the impact of special income and losses, with special income of ¥3.0B, including a ¥1.3B gain on the sale of investment securities, and special losses of ¥4.1B, including a ¥2.5B loss on disposal of fixed assets, offsetting each other as temporary factors. Most of the ¥3.3B in non-operating income comprised interest and dividend income, while non-operating expenses were primarily the ¥3.7B in interest expenses, leaving net financial income and expenses modestly negative. Comprehensive Income of ¥61.7B exceeding Net Income of ¥45.9B was attributable to the increase in the valuation difference on securities, and no expansion of accruals arising from business activities themselves was observed.

Earnings Forecast and Guidance

The full-year plan calls for Revenue of ¥548.5B, Operating Income of ¥87.5B (+5.2% YoY), Ordinary Income of ¥84.5B (+4.0%), EPS of ¥99.81, and dividends of ¥30.0. Cumulative progress was 74.2% for Revenue, 79.9% for Operating Income, 81.8% for Ordinary Income, and 85.1% for Net Income, all exceeding the standard Q3 progress rate of approximately 75%. In particular, progress on earnings exceeded progress on Revenue, with earnings growth accompanied by cost management being the primary reason for progress above plan. Going forward, the seasonality of Transportation and Leisure demand and cost trends will be factors determining the second-half outcome.

Shareholder Returns

The full-year dividend forecast is ¥30.0 per share, representing an expected increase from the prior-year result of ¥29. The Payout Ratio based on full-year forecast EPS of ¥99.81 is approximately 30.1%, significantly below the 60% level generally regarded as an indicator of sustainability. Retained earnings were ¥242.9B, an increase of +13.9% YoY, and the accumulation of retained earnings supports the capacity to maintain dividends. No disclosure was made regarding the amount of share repurchases conducted during the current period, and the Total Return Ratio has not been calculated.

Risk Factors

1. Demand fluctuation risk: Revenue from Transportation, tourism, and Leisure-related businesses is affected by domestic economic conditions, inbound visitor trends, weather, and other factors. As tangible fixed assets account for 55.0% of total assets, the asset-intensive structure means that fixed-cost burdens are likely to affect profit margins when demand slows.

2. Leverage and interest-rate risk: Interest-bearing debt is approximately ¥375B, including long-term borrowings of ¥295.3B and bonds of ¥50.0B. Interest expenses are ¥3.7B, but the interest burden could increase if refinancing rates rise. The Equity Ratio is improving at 41.0%.

3. Fixed-asset renewal and disposal risk: The company recorded a ¥2.5B loss on disposal of fixed assets during the current period. Tangible fixed assets of ¥556.1B account for more than half of total assets, and future renewal investments and reviews of asset efficiency will remain ongoing factors causing earnings fluctuations.

Industry Benchmark (For Reference; Company Analysis)

Industry Benchmark (transport)

Profitability and Return

The Operating Income margin is significantly above the industry median, while the Net Income margin remains approximately at the same level as the industry median.

※Source: Company compilation

Key Takeaways from the Financial Results

1. Revenue increased +3.2%, while Operating Income increased +4.6%, resulting in an expanded Operating Income margin. The pace of earnings growth exceeding revenue growth indicates the effects of cost management.

2. Progress against the full-year plan was 79.9% for Operating Income and 85.1% for Net Income, exceeding the standard Q3 progress rate, with progress above plan particularly evident on the earnings side.

3. Short-term borrowings were significantly reduced from the prior year, and the Equity Ratio improved to 41.0%. While the financial foundation is stabilizing, the increase in investment securities should be noted as a factor that heightens the impact of valuation fluctuations on Net Assets.

Theoretical Share Price (Reference Value)

Sensitivity: ¥854–¥905 at ±1% for the cost of equity, and ¥876–¥882 at ±0.1 for ω.

Notes:

• Because progress of Net Income against the full-year forecast (85%) exceeds the standard level (75%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies ahead of plan tend to outperform forecasts; the adjustment may be excessive for businesses with strong seasonality).
• Net Assets as of the end of the quarter are used (there is a timing difference from the full-year forecast).
• Because Net Assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(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 predict 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. 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 a professional where necessary.

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