Tokyo Metro Co.,Ltd. FY2027 Q1 Earnings Report

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Executive Summary

Despite higher revenue, net income declined significantly due to the combined impact of the reversal of special gains recognized in the previous year and rising costs. Revenue was ¥1090.5B (+2.8% YoY), Operating Income was ¥277.8B (-3.9%), Ordinary Income was ¥247.2B (-4.9%), and Net Income was ¥168.1B (-24.7%). The main reason net income declined by a substantially larger amount than Operating Income was the reversal of special gains (net gain of +¥64.6B), including a gain from the revision of the retirement benefit plan, recognized in the same period of the previous year, in addition to transportation expenses and SG&A expenses increasing at a faster pace than revenue growth.

Factors Affecting Performance

【Revenue】The core Transportation Business accounted for 90.8% of the revenue mix and led the Company with revenue growth of +2.2%. ConsumerAndCorporateServices (+10.4%) and RealEstate (+5.8%) grew faster than Transportation, indicating the relative expansion of non-transportation segments. As a result, total Company revenue was ¥1090.5B (+2.8%).

【Profit and Loss】Operating Income was limited to ¥277.8B (-3.9%), as transportation expenses of ¥670.9B (+4.8%) and SG&A expenses of ¥141.7B (+7.6%) both increased at rates exceeding the +2.8% revenue growth rate. The Operating Income margin declined to 25.5% from 27.2% in the previous year, a decrease of 1.7pt. Ordinary Income was ¥247.2B (-4.9%), as non-operating expenses of ¥33.5B, primarily interest expenses of ¥31.1B, resulted in a net burden of ¥30.6B. Net Income fell to ¥168.1B (-24.7%), as special gains and losses moved from a net gain of +¥64.6B in the previous year to a net loss of ▲¥0.3B in the current period. In conclusion, the Company recorded higher revenue but lower profit.

Segment Analysis

Transportation recorded revenue of ¥989.7B (+2.2%), Operating Income of ¥235.4B (-7.1%), and a margin of 23.8% (25.9% in the previous year), resulting in lower profit. ConsumerAndCorporateServices increased revenue to ¥63.0B (+10.4%) and Operating Income to ¥25.8B (+25.2%), while maintaining a high margin of 41.0%. RealEstate demonstrated stable growth, with revenue of ¥37.0B (+5.8%), Operating Income of ¥15.0B (+10.2%), and a margin of 40.6%. Transportation accounted for 84.7% of total Company Operating Income, and the segment’s margin decline (-2.1pt) was the primary cause of the 3.9% decline in total Company Operating Income. The structure in which the high-margin businesses of the two non-transportation segments support total Company profit became more evident.

Key Financial Indicators

【Profitability】The Operating Income margin was 25.5%, down 1.7pt from 27.2% in the previous year, while the Net Income margin was 15.4%, down 5.6pt from 21.0% in the previous year. The decline was larger for the Net Income margin. This reflects the impact of rising costs at the operating level, combined with the reversal of special gains and losses at the Net Income level.【Cash Quality】Cash and deposits were ¥429.0B, down 19.5% from ¥529.3B in the previous year, while current securities were ¥300.0B, nearly double the previous year’s ¥149.9B, suggesting that a portion of funds shifted to short-term investment assets.【Investment Efficiency】ROE was 2.3%, below the approximately 3.0% level calculated based on Net Income for the same period of the previous year. Total assets were ¥2 trillion 466.6B, broadly unchanged, while net assets were ¥7389.6B, up +0.6% from the previous year.【Financial Soundness】The Equity Ratio was 36.1%, a slight improvement from 35.9% in the previous year. Interest-bearing debt consisted primarily of bonds of ¥6070.0B and long-term borrowings of ¥2587.1B, reflecting a capital-intensive business structure together with property, plant and equipment of ¥1 trillion 7275.0B.

Cash Flow Analysis

As individual disclosures for the cash flow statement are not available, cash trends are assessed based on changes in balance sheet items. Cash and deposits were ¥429.0B, a decrease of ¥100.9B from ¥529.3B in the same period of the previous year, while short-term investment securities were ¥300.0B, an increase of ¥150.1B from ¥149.9B in the previous year, suggesting that a portion of cash on hand may have been allocated to investment assets. Accounts receivable were ¥19.3B (¥37.9B in the previous year), and accounts payable were ¥2.8B (¥5.0B in the previous year), with both balances declining. The contraction in working capital items appears to have had a temporary impact on cash management characteristic of the beginning of the fiscal year. Non-current investment securities were ¥109.1B, an increase of ¥33.9B from ¥75.2B in the previous year, confirming an increase in the investment of surplus funds. Overall, a decline in cash and deposits and a shift of funds into securities were observed, making changes in the asset composition more prominent than cash generation from the core business itself during the quarter.

Earnings Quality

Recurring earnings remained stable, centered on the Transportation Business, but the current period’s profit level was significantly affected by temporary factors. Non-operating income of ¥2.9B and non-operating expenses of ¥33.5B, including interest expenses of ¥31.1B, resulted in a net burden of ¥30.6B, causing Ordinary Income to fall by ¥30.6B from Operating Income to ¥247.2B. Special gains and losses comprised special gains of ¥12.6B and special losses of ¥12.8B, resulting in a net loss of ▲¥0.3B. However, the same period of the previous year included a net gain of +¥64.6B, including a special gain associated with the revision of the retirement benefit plan. The reversal of this gain was the primary reason the decline in Net Income (-24.7%) exceeded the decline in Operating Income (-3.9%). The effective tax rate was 31.9%, calculated as income taxes of ¥78.8B divided by profit before tax of ¥246.9B, broadly unchanged from 31.2% in the previous year. Comprehensive Income was ¥164.1B, slightly below Net Income of ¥168.1B. The primary difference was an adjustment related to retirement benefits of ▲¥3.9B, but the divergence was small and no significant distortion in earnings quality was observed.

Earnings Forecast and Guidance

Progress toward the full-year forecast was 24.9% for revenue (¥1090.5B / ¥4372.0B), 34.1% for Operating Income (¥277.8B / ¥814.0B), and 35.8% for Ordinary Income (¥247.2B / ¥690.0B). Profit items are progressing at a pace exceeding the simple 25% progress rate. The Company expects full-year declines of 9.1% in Operating Income and 12.9% in Ordinary Income, suggesting that the plan incorporates an assumption that the impact of rising costs will become more pronounced in the second half of the fiscal year. As of Q1, no revisions had been made to the earnings forecast or dividend forecast.

Shareholder Returns

The full-year dividend forecast is ¥44.00 per share, implying a Payout Ratio of approximately 51.1% based on the Company’s full-year EPS forecast of ¥86.12. As of Q1, no revision had been made to the dividend forecast. Treasury shares totaled 403 thousand shares, equivalent to only 0.07% of the 581,000 thousand issued shares, and no large-scale share repurchase was confirmed.

Risk Factors

1. Earnings pressure from cost inflation: Transportation expenses of ¥670.9B (+4.8%) and SG&A expenses of ¥141.7B (+7.6%) both increased at rates exceeding the +2.8% revenue growth rate. The fact that cost increases could not be fully absorbed by revenue expansion is reflected in the 1.7pt decline in the Operating Income margin.

2. Segment concentration risk: The Transportation segment accounts for 90.8% of revenue and 84.7% of Operating Income, creating a structure in which changes in demand and costs in the segment have a direct impact on total Company performance.

3. Capital efficiency and interest burden: ROE was 2.3%, below the previous year’s level of approximately 3.0%, while interest expenses increased 4.7% to ¥31.1B from ¥29.7B in the previous year. Given the scale of bonds of ¥6070.0B and long-term borrowings of ¥2587.1B, changes in the interest-rate environment could affect future profit levels.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The Company’s profitability significantly exceeds the industry median, maintaining high profit margins even within the railway and transportation industry.

Growth and Capital Efficiency

The revenue growth rate was slightly below the industry median, indicating that top-line expansion is proceeding at a more moderate pace than that of peers.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. The Operating Income margin of 25.5% remains significantly above the industry median of 7.1%, but declined 1.7pt from the previous year, indicating a slowdown in profitability momentum due to rising costs.

2. The decline in Net Income (-24.7%) significantly exceeded the decline in Operating Income (-3.9%) due to the reversal of the special gain recognized in the previous year, namely the gain from the revision of the retirement benefit plan. This should be distinguished from changes in the earnings power of the core business.

3. While full-year progress was 34.1% for Operating Income and 35.8% for Ordinary Income, both exceeding the 25% simple pro rata benchmark, the Company’s plan itself is conservatively set, with lower profit expected for the full year.

Theoretical Share Price (Reference Value)

This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson model with an explicit five-year fade). It is not a forecast of the market share price or a recommendation to take any specific investment action.

Sensitivity: ¥1,170–¥1,237 at Cost of Equity ±1%; ¥1,200–¥1,204 at ω±0.1.

Notes:

• As forecast ROE is below the Cost of Equity, the theoretical value is below book value per share.
• Net assets as of the quarter-end are used; there is a timing gap relative to the full-year forecast.
• Because net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model / Interest Rate Reference Month: 2026-06 / This value 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 with professionals as necessary.

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