OKINAWA CELLULAR TELEPHONE COMPANY (9436) FY2026 Q3

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Executive Summary

The cumulative results for 2026 fiscal year Q3 represented a high-quality earnings performance, with both revenue and earnings growth, and operating income growth outpacing revenue growth. Revenue was ¥64.36B (+3.1% YoY), operating income was ¥14.35B (+4.5%), ordinary income was ¥14.46B (+4.9%), and consolidated net income was ¥10.34B (¥9.66B in the same period last year). Of this amount, net income attributable to owners of the parent was ¥10.10B (¥9.48B in the same period last year, +6.6% YoY). The operating margin of 22.3% improved from the previous year, and profit growth exceeding revenue growth demonstrates the effectiveness of cost management. Meanwhile, operating cash flow (OCF) was limited to ¥9.18B (+4.8% YoY), indicating that cash generation was somewhat slower than the pace of earnings growth.

Factors Affecting Performance

【Revenue】Revenue increased 3.1% YoY to ¥64.36B. Despite the domestic telecommunications market being in a mature phase, the Company secured stable revenue growth, and no facts indicating a major change in its business structure have been identified.

【Profit and Loss】Operating income was ¥14.35B (+4.5% YoY), ordinary income was ¥14.46B (+4.9%), and net income attributable to owners of the parent was ¥10.10B (+6.6%), with all three posting earnings growth rates above the revenue growth rate. Non-operating income and expenses resulted in net income of ¥0.11B, including interest and dividend income, contributing to ordinary income exceeding operating income. The main driver of earnings growth was the containment of expense increases relative to revenue growth, resulting in earnings growth accompanied by revenue growth.

Key Financial Indicators

【Profitability】The Company maintained high levels of profitability, with an operating margin of 22.3%, a net profit margin attributable to owners of the parent of 15.7%, and an EBITDA margin of 29.6%, all improving from the same period last year. Annualized ROE was 13.8%, and the equity ratio was 85.5%. 【Cash Flow Quality】Operating cash flow was ¥9.18B, representing 0.91x net income attributable to owners of the parent of ¥10.10B. The cash conversion rate (OCF/EBITDA) relative to EBITDA of ¥19.05B was approximately 0.48x. Accounts receivable of ¥47.19B accounted for 40.5% of total assets, and the lengthening collection period is constraining cash conversion. 【Investment Efficiency】Capital expenditures of ¥4.04B were within depreciation and amortization of ¥4.70B, indicating that the investment burden is currently limited. 【Financial Soundness】Against total assets of ¥116.43B, net assets were ¥99.56B and the equity ratio was 85.5%. The D/E ratio was extremely low, while current assets of ¥69.99B substantially exceeded current liabilities of ¥14.74B, indicating no short-term liquidity issues.

Cash Flow Analysis

Operating cash flow increased 4.8% YoY to ¥9.18B, but remained at 0.91x net income attributable to owners of the parent of ¥10.10B. The main factors were cash outflows from a ¥2.46B increase in accounts receivable, a ¥0.34B decrease in trade payables, and ¥5.41B in corporate income tax payments, resulting in cash conversion progressing more slowly than earnings growth. Investing cash flow was positive at ¥0.92B, as the ¥4.04B outflow for capital expenditures was offset by other investment recovery factors. Financing cash flow was an outflow of ¥9.98B, primarily reflecting share repurchases of ¥3.97B and dividend payments of ¥5.99B. Reported free cash flow (operating cash flow + investing cash flow) was ¥10.10B, confirming a certain degree of capacity for shareholder returns. However, operating cash flow after capital expenditures alone (¥5.14B) was below dividend payments of ¥5.99B, making improvements in working capital key to the sustainability of future returns.

Earnings Quality

The earnings growth for the current period was primarily attributable to cost containment at the operating level and originated from the core business, with no temporary factors such as extraordinary gains or losses identified. Non-operating income and expenses resulted in net income of ¥0.11B, including dividend income of ¥0.01B, while non-operating expenses were negligible. Accordingly, the difference between ordinary income and operating income was small, and the earnings structure remained stable. Meanwhile, comprehensive income was ¥10.32B (¥10.09B attributable to owners of the parent), and the difference from net income of ¥10.10B was minor, including an adjustment of -¥0.02B related to retirement benefits. The divergence between comprehensive income and net income was therefore limited. From an accrual perspective—the difference between earnings and operating cash flow—operating cash flow was only 0.91x net income, indicating cash tied up primarily due to the increase in accounts receivable. Although accounting earnings themselves maintained good quality, attention is warranted regarding the speed of cash conversion.

Earnings Forecasts and Guidance

The full-year company forecast is revenue of ¥85.00B, operating income of ¥18.20B (+2.5% YoY), ordinary income of ¥18.25B (+1.8%), and forecast EPS of ¥133.53. The cumulative Q3 achievement rates were 75.7% for revenue, 78.8% for operating income, and 79.2% for ordinary income, exceeding the standard progress rate of 75%. However, the full-year forecast operating income growth rate of 2.5% is lower than the cumulative Q3 earnings growth rate of 4.5%, indicating that the plan incorporates a slowdown in earnings growth toward Q4. The operating margin required in Q4 is approximately 18.7%, below the cumulative Q3 level of 22.3%, suggesting that the Company’s forecast includes a degree of conservatism or an expected increase in costs toward the fiscal year-end.

Shareholder Returns

The Q2 dividend was ¥64.00 per share, and the payout ratio based solely on dividends was approximately 59.7%. In addition, the Company conducted share repurchases of ¥3.97B, bringing combined dividends and share repurchases to ¥9.96B. The total return ratio relative to net income attributable to owners of the parent of ¥10.10B reached approximately 98.6%. Dividend-only sustainability is covered by free cash flow of ¥10.10B. However, given that operating cash flow is currently below net income, the high total return ratio means that the sustainability of shareholder returns will partly depend on future improvements in working capital.

Risk Factors

1. Delay in accounts receivable collection and cash conversion: Accounts receivable of ¥47.19B accounted for 40.5% of total assets, while the conversion rate of operating cash flow relative to EBITDA of ¥19.05B remained approximately 0.48x. A lengthening collection period is a factor suppressing operating cash flow growth.

2. Competitive environment in the domestic telecommunications market: The continuation of price competition and customer acquisition competition represents a structural factor that could affect the maintenance of the high operating margin of 22.3%.

3. High total return ratio and sources of shareholder returns: The total return ratio combining dividends and share repurchases reached approximately 98.6%. If operating cash flow remains below net income, the sustainability of shareholder returns will depend on progress in improving working capital.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

Both the operating margin and net profit margin were substantially above the industry median, placing the Company among the industry’s top performers in terms of profitability.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. The Company maintained high profitability within the industry, with an operating margin of 22.3% and an EBITDA margin of 29.6%. Progress against the full-year forecast was also ahead of the standard pace, at 78.8% for operating income and 80.5% for net income attributable to owners of the parent.

2. The operating cash flow/net income ratio of 0.91x, OCF/EBITDA ratio of approximately 0.48x, and accounts receivable-to-total-assets ratio of 40.5% indicate that the pace of cash generation is relatively slower than earnings growth. Future trends in accounts receivable collection will therefore be a key area of focus.

3. In addition to a payout ratio of 59.7%, the total return ratio including share repurchases reached approximately 98.6%, confirming an aggressive shareholder return policy supported by a strong financial base, including an equity ratio of 85.5%.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,114–¥1,179 at ±1% for the cost of equity, and ¥1,144–¥1,148 at ±0.1 for ω.

Notes:

• Net assets as of the end of the quarter are used (there is a timing difference 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 (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / This is a mechanically calculated value based solely on publicly disclosed data. It 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. The industry benchmark is 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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