AIN HOLDINGS INC. FY2026 FY Earnings Report

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Executive Summary

AIN Holdings posted substantial increases in both revenue and profit, driven by the expansion of its dispensing pharmacy and retail businesses and an increase in consolidated subsidiaries through M&A. Revenue was ¥647.83B (¥456.80B in the previous year, +41.8%), Operating Income was ¥29.83B (¥16.87B, +76.8%), Ordinary Income was ¥28.41B (¥18.08B, +57.2%), and Net Income attributable to owners of the parent was ¥17.26B (¥9.26B, +86.4%). Although the Operating Income margin increased to 4.6% (3.7% in the previous year) due to improved gross margin and a lower SG&A ratio, extraordinary losses (including ¥3.92B in impairment losses) exerted temporary downward pressure on net income.

Factors Affecting Performance

【Revenue】Revenue increased substantially by 41.8% to ¥647.83B. The dispensing pharmacy business led overall performance, with revenue of ¥556.42B (+44.6%, representing 85.9% of total revenue), while the drug and cosmetics store business also achieved double-digit growth of 31.5% to ¥80.25B. The addition of 13 newly consolidated subsidiaries contributed to the increase, indicating expansion driven by both same-store growth and M&A.

【Profit and Loss】Operating Income increased 76.8% to ¥29.83B, while Ordinary Income increased 57.2% to ¥28.41B. The gross margin was 16.8% and the SG&A ratio was 12.2%, with efficiency gains from the larger scale of operations pushing up the Operating Income margin. Meanwhile, amortization of goodwill rose sharply to ¥11.08B (¥5.79B in the previous year), and interest expenses increased to ¥2.09B (¥0.26B), indicating that M&A-related costs restrained the rate of increase in Ordinary Income (+57.2%) relative to the rate of increase in Operating Income (+76.8%). Extraordinary losses of ¥4.73B, including ¥3.92B in impairment losses, were temporary factors. After deducting income taxes and other taxes of ¥6.75B from Profit Before Tax of ¥24.05B, Net Income amounted to ¥17.29B. Revenue and profit both increased.

Segment Analysis

The dispensing pharmacy business generated revenue of ¥556.42B (+44.6%) and segment profit of ¥35.76B (+47.2%, profit margin of 6.4%), with both revenue and profit growth exceeding the company-wide rates and making it the primary driver of earnings growth. The drug and cosmetics store business recorded revenue of ¥80.25B (+31.5%) and segment profit of ¥6.53B (+35.9%, profit margin of 8.1%). Although its profit margin is higher than that of the pharmacy business, its contribution to total revenue is smaller. Segment profit is calculated on an Ordinary Income basis, and its definition therefore differs from consolidated Operating Income. Both businesses achieved increases in revenue and profit, confirming that growth is broadening across the overall business portfolio.

Key Financial Metrics

【Profitability】The Operating Income margin improved to 4.6% (3.7% in the previous year), while the Ordinary Income margin was 4.4% and the Net Income margin increased to 2.7% (2.0% in the previous year). ROE was 10.9%, supported by the substantial increase in net income. 【Cash Flow Quality】Operating Cash Flow (OCF) was ¥30.87B, or 1.79 times Net Income of ¥17.29B, confirming cash generation commensurate with reported earnings. 【Investment Efficiency】Investing Cash Flow was -¥60.60B, of which capital expenditures were limited to ¥9.90B; most of the amount was allocated to the acquisition of shares in subsidiaries in connection with M&A. Free Cash Flow was -¥29.73B, representing net cash outflows, which were covered by ¥53.73B raised through Financing Cash Flow. 【Financial Soundness】The Equity Ratio declined to 31.2% (45.7% in the previous year), while long-term borrowings surged to ¥151.11B (¥26.47B in the previous year). Total assets expanded to ¥509.65B, and goodwill of ¥194.18B accounted for 38.1% of total assets, indicating increasing concentration in intangible assets and greater reliance on debt associated with M&A.

Cash Flow Analysis

OCF was ¥30.87B, up 33.4% year on year, exceeding Net Income of ¥17.29B and demonstrating cash-generating capacity supporting reported earnings. However, in terms of working capital, inventories made a negative contribution of ¥3.51B and trade receivables made a negative contribution of ¥3.93B, partly offset by a positive contribution of ¥4.79B from trade payables. Investing Cash Flow was -¥60.60B. In addition to capital expenditures of ¥9.90B, the acquisition of shares in subsidiaries accounted for the majority of investment outlays, indicating that business expansion was M&A-led. Financing Cash Flow was positive at ¥53.73B, with funding through long-term borrowings covering the excess investment outflows. As a result, Free Cash Flow was -¥29.73B, representing net cash outflows, meaning that business growth during the period was achieved alongside increased reliance on borrowings.

Earnings Quality

The difference between Ordinary Income and Net Income can be explained by Profit Before Tax of ¥24.05B and income taxes and other taxes of ¥6.75B. Extraordinary losses of ¥4.73B, including impairment losses of ¥3.92B and losses on the disposal and sale of fixed assets of ¥0.53B, were temporary downward factors. Extraordinary income was small at ¥0.36B, while the gain on bargain purchase of ¥0.07B related to two newly consolidated subsidiaries and was not included in segment profit. Interest expenses of ¥2.09B accounted for a significant portion of non-operating expenses of ¥4.11B and are expected to continue as a recurring increase in costs associated with higher borrowings. Comprehensive Income of ¥19.03B slightly exceeded Net Income of ¥17.29B, supported by other comprehensive income items such as ¥0.93B in adjustments related to retirement benefits. The difference between net income and comprehensive income is not significant.

Earnings Forecast and Guidance

The full-year forecast calls for Revenue of ¥721.50B (+11.4% year on year), Operating Income of ¥32.50B (+8.9%), and Ordinary Income of ¥30.00B (+5.6%). Compared with the current-period results (Revenue +41.8%, Operating Income +76.8%), the plan anticipates a substantial slowdown in the pace of revenue and profit growth. This can be interpreted as a conservative outlook that incorporates not only the unwinding of temporarily high growth generated by M&A, but also the continuing burden of goodwill amortization and interest expenses. Forecast EPS is ¥426.74, below the current-period result of ¥491.62.

Shareholder Returns

The year-end dividend was ¥100 (no dividend in the previous year), resulting in a Payout Ratio of 20.3%. The Payout Ratio is calculated using Net Income attributable to owners of the parent as the numerator, and total dividends of ¥3.53B are sufficiently covered by OCF of ¥30.87B. However, Free Cash Flow is negative, resulting in a structure in which dividend funding depends on OCF.

Risk Factors

1. Risk of concentration in goodwill and intangible assets: Goodwill of ¥194.18B represents 38.1% of total assets and 122.0% of net assets. If the performance of acquired M&A businesses deteriorates, impairment risk may materialize. The company recorded impairment losses of ¥3.92B during the current period.

2. Risk of increased financial leverage: Long-term borrowings surged to ¥151.11B (¥26.47B in the previous year), while the Equity Ratio declined to 31.2% (45.7% in the previous year). Interest expenses increased to ¥2.09B (¥0.26B in the previous year), raising concerns about higher interest payment burdens in an environment of rising interest rates.

3. Tightening short-term liquidity: Current assets of ¥173.17B were below current liabilities of ¥185.06B, resulting in a current ratio below 100%. The company has a working capital structure highly dependent on accounts payable of ¥113.87B.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The Operating Income margin exceeds the industry median, while the Net Income margin remains approximately at the same level.

Growth and Capital Efficiency

The Revenue growth rate substantially exceeds the industry median, highlighting the company’s expansion pace, including M&A.

※Source: Compiled by the Company

Key Takeaways from the Earnings Release

1. Business expansion was driven by increases in revenue and profit in both the dispensing pharmacy and retail segments, as well as the consolidation of new subsidiaries through M&A. The Operating Income margin improved by +91bp year on year.

2. OCF was 1.79 times Net Income, indicating solid cash generation. However, Free Cash Flow was negative due to M&A investments, and the company’s funding structure relied on Financing Cash Flow to supplement the shortfall.

3. Goodwill accounts for 38.1% of total assets, while long-term borrowings have also increased sharply. In future earnings releases, impairment trends and the repayment and funding status of interest-bearing debt will be key points for assessing the quality of the balance sheet.

Theoretical Share Price (Reference Value)

Sensitivity: ¥5,396–¥5,724 at ±1% for the Cost of Equity, and ¥5,530–¥5,597 at ±0.1 for ω.

Notes:

• Goodwill amortization of ¥315.1 per share has been added back to earnings, as it is a non-cash expense and to improve comparability with IFRS companies.
• Net Income is substantially compressed relative to Operating Income due to the tax burden, acquisition-related expenses, and non-controlling interests (Net Income ÷ Operating Income 46%). This value reflects that compression at face value; if these factors are temporary, underlying earnings power may be higher.
• Goodwill represents a high proportion of net assets, and the assumptions would change significantly if impairment were recognized.

(Calculation model: Residual Income Model (Ohlson-type, five-year explicit 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 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 discretion and responsibility, in consultation with a professional advisor as necessary.

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