SG HOLDINGS CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

Although revenue and profit increased in Q1, the key point is that the rate of operating income growth fell below revenue growth, with higher expenses putting pressure on margins. Revenue was ¥447.31B (+21.8% YoY), operating income was ¥20.06B (+14.9%), ordinary income was ¥20.55B (+15.0%), and net income was ¥12.37B (+20.4%). The primary driver of revenue growth was the sharp expansion in segment revenue in the Global Logistics Business due to M&A, including the consolidation of Morrison Express Worldwide Corporation and others. The operating margin was 4.5%, slightly lower than in the previous year.

Factors Affecting Earnings

【Revenue】Revenue was ¥447.31B, representing a 21.8% YoY increase. By segment, the core Delivery Business accounted for the largest share of revenue at ¥268.46B (60.0% of total, +6.7% YoY), while the Global Logistics Business expanded sharply to ¥112.73B (+127.9% YoY) due to the impact of M&A. The Logistics Business was ¥51.10B (-0.5% YoY), essentially flat, while the Real Estate Business declined slightly to ¥1.75B (-2.0% YoY).

【Profit and Loss】Operating income was ¥20.06B (+14.9% YoY), below the rate of revenue growth, and the operating margin declined to 4.5% from approximately 4.75% in the previous year. By segment, profit in the Delivery Business declined to ¥12.69B (-7.4% YoY), while the Global Logistics Business recorded a substantial increase to ¥2.72B (+1948.1% YoY), reflecting the impact of the expanded consolidation scope. In non-operating items, foreign exchange gains of ¥0.92B contributed to ordinary income of ¥20.55B (+15.0% YoY). Although extraordinary losses of ¥1.28B, including losses on the disposal and sale of fixed assets, were recorded, net income increased to ¥12.37B (+20.4% YoY). Overall, the company achieved higher revenue and profit, although the profitability of existing businesses excluding the M&A contribution was generally flat or trending downward.

Segment Analysis

The Delivery Business accounted for the largest share of segment profit at ¥12.69B, but profit declined 7.4% YoY, suggesting the impact of higher costs and changes in business classifications. Global Logistics increased sharply to ¥2.72B from ¥0.13B in the previous year, primarily due to the apparent expansion resulting from the broader consolidation scope, including the acquisition of Morrison Express and 33 other companies as subsidiaries. This was accompanied by an increase in goodwill of ¥81.9B. Logistics generated ¥1.94B (-2.0% YoY), while Real Estate generated ¥1.24B (+1.1% YoY), with a high-profitability margin of 71.3% but a small scale. The business portfolio combines stable earnings from Delivery with high growth in Global Logistics, and the margin gap between the two businesses (4.7% versus 2.4%) indicates potential for monetization as PMI progresses.

Key Financial Metrics

【Profitability】The operating margin was 4.5% and the net profit margin was 2.8%, remaining broadly at the same levels as in the same period of the previous year.【Cash Quality】Non-operating income was ¥1.97B, mainly consisting of foreign exchange gains of ¥0.92B, and represented only 0.4% of revenue. While most profit was generated by the core business, extraordinary losses of ¥1.28B weighed on net income.【Investment Efficiency】ROE was low at 2.3%, while an improvement in total asset turnover, as revenue growth exceeded total asset growth, supported capital efficiency.【Financial Soundness】The equity ratio was 44.0%, slightly down from 44.4% in the previous year, while net assets of ¥546.73B were maintained against total assets of ¥1,241.43B.

Cash Flow Analysis

As detailed data from the statement of cash flows could not be confirmed in this report, funding trends are analyzed based on changes in the balance sheet. Cash and deposits declined to ¥94.61B from ¥96.71B in the previous year, while short-term borrowings remained high at ¥207.26B. The provision for bonuses increased substantially to ¥34.21B, up 69.7% from ¥20.16B in the previous year, and cash outflows are expected to increase in the upcoming payment period. Income taxes payable declined significantly from the previous year, providing a temporary reduction in the cash burden due to progress in tax payments. Interest expenses of ¥1.33B were incurred as non-operating expenses, and the interest burden on interest-bearing debt, including long-term borrowings of ¥122.08B, remained at a level absorbable relative to operating income.

Quality of Earnings

A high proportion of current-period profit was generated by the core business. Foreign exchange gains accounted for ¥0.92B of non-operating income of ¥1.97B, representing a temporary tailwind that cannot readily be considered recurring income. Extraordinary income of ¥0.07B and extraordinary losses of ¥1.28B, including losses on the disposal and sale of fixed assets, were recorded, resulting in a net difference of ¥1.14B that weighed on net income. Comprehensive income was ¥14.52B, of which ¥14.41B was attributable to owners of the parent, exceeding net income attributable to owners of the parent of ¥12.26B. This divergence was primarily due to increases of ¥1.31B in foreign currency translation adjustments and ¥0.88B in valuation differences on securities. It should be noted that the upside was attributable to factors separate from the earnings power of the underlying business.

Earnings Forecast and Guidance

Progress against the full-year plan in Q1 was 25.7% for revenue, based on ¥447.31B / ¥1,740.00B; 20.7% for operating income, based on ¥20.06B / ¥97.00B; and 21.6% for ordinary income, based on ¥20.55B / ¥95.00B. Revenue progress was slightly above the simple 25% benchmark, while progress for both profit measures was below 25%, suggesting that the plan is weighted toward the second half. The company has not revised its earnings or dividend forecasts and, as of Q1, continues to maintain its existing plan.

Shareholder Returns

The company forecasts an annual dividend of ¥54, implying a payout ratio of approximately 54.2% based on forecast full-year EPS of ¥99.72. The dividend in the previous year was ¥26, representing data for the interim period or part of the fiscal period, and therefore cannot be directly compared with the annual level. Based on the full-year plan, however, the payout ratio is expected to remain in the 50% range. No revision to the dividend forecast had been made as of Q1.

Risk Factors

1. Short-term liquidity risk: Cash and deposits of ¥94.61B compared with short-term borrowings of ¥207.26B, with the current ratio below 100% at 86.2%, calculated as current assets of ¥397.47B / current liabilities of ¥461.33B. Dependence on short-term funding is high, and sensitivity to changes in the refinancing environment is relatively elevated.

2. Goodwill and M&A integration risk: Goodwill related to M&A in the Global Logistics Business has accumulated to ¥144.58B, equivalent to 26.4% of net assets. If PMI, or integration activities, following the consolidation of Morrison Express Worldwide Corporation and 33 other companies is delayed, the timing of monetization could be pushed back and goodwill impairment could occur.

3. Concentration of segment profit: The core Delivery Business accounts for 60.0% of revenue, but operating profit declined 7.4% YoY. Dependence on a single business for earnings is high, and trends in unit prices and costs in this business have a significant impact on company-wide performance.

Industry Benchmark (For Reference; Company Analysis)

Industry Benchmark (transport)

Profitability and Returns

Both the operating margin and net profit margin were below the industry median, placing profitability at the lower end of the industry.

Growth and Capital Efficiency

The revenue growth rate was significantly above the industry median, and the growth rate accompanied by M&A was exceptional within the industry.

※Source: Company analysis

Key Points from the Earnings Results

1. The revenue growth rate of +21.8% significantly exceeded the industry median of 3.3%, but both the operating margin of 4.5% and net profit margin of 2.8% were below their respective industry medians, leaving room to improve the efficiency of converting growth into profit.

2. Goodwill increased to ¥144.58B as a result of M&A in the Global Logistics Business. The timing of the realization of integration synergies and progress in improving profitability will be key monitoring points going forward.

3. Progress toward the full-year plan for profit remained in the low 20% range, below revenue progress of 25.7%. Cost control in the second half and the recovery trend in margins by business will be closely watched from the perspective of achieving the full-year plan.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade period). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥927–¥980 for a ±1% change in the cost of equity, and ¥953–¥955 for a ±0.1 change in ω.

Notes:

• Net assets as of the quarter-end are used (there is a timing difference from the full-year forecast).
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Model used: Residual income model / Interest rate reference month: 2026-07 / This value does not forecast or guarantee the future share price)

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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 disclosed earnings data. Investment decisions should be made at your own responsibility, and after consulting a professional where necessary.

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