HORAI (9679) FY2026 Q1 Earnings Report

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Executive Summary

This was a revenue and profit growth quarter in which profitability clearly improved, with Operating Income increasing significantly in addition to higher Revenue. Revenue was ¥1.62B (¥1.39B in the previous year, +17.3%), Operating Income was ¥0.23B (¥0.11B in the previous year, +121.5%), Ordinary Income was ¥0.28B (¥0.13B in the previous year, +109.0%), and Net Income was ¥0.19B (¥0.06B in the previous year, +194.6%). In addition to the improvement in the gross profit margin accompanying higher Revenue, the reduction in the loss on disposal and sale of fixed assets recorded in the same period of the previous year helped drive the increase in Net Income.

Factors Affecting Earnings

【Revenue】Revenue was ¥1.62B, up +17.3% year on year. By segment, Revenue comprised ¥0.33B from the Real Estate Business, ¥0.31B from the Insurance Business, ¥0.74B from the Senbonmatsu Ranch Business, and ¥0.25B from the Golf Business, with the Ranch Business accounting for the largest share by Revenue scale. The increase in Revenue appears to have been driven by expanding demand across each segment.

【Profit and Loss】Operating Income was ¥0.23B (+121.5%), and the Operating Income margin improved substantially to 14.3% from 7.6% in the previous year. Segment profit margins were high in the Real Estate Business at 60.2% and the Insurance Business at 38.5%, and these businesses led the increase in Operating Income, while the Golf Business remained low-margin at 6.2%. Ordinary Income was ¥0.28B (+109.0%), supported by ¥0.06B in non-operating income, including ¥0.01B in dividend income. Net Income was ¥0.19B (+194.6%), boosted by the decline in the loss on disposal and sale of fixed assets, which had been ¥0.05B in the same period of the previous year. Overall, the Company achieved both revenue and profit growth.

Segment Analysis

The Real Estate Business generated Revenue of ¥0.33B and Operating Income of ¥0.20B, achieving the highest profitability among all segments with a margin of 60.2%. The Insurance Business generated Revenue of ¥0.31B and Operating Income of ¥0.12B, with a high profit margin of 38.5%. The Senbonmatsu Ranch Business was the largest segment by Revenue at ¥0.74B, but its profit margin remained at 12.5%, indicating challenges in balancing scale and profitability. The Golf Business had the lowest profitability, with Revenue of ¥0.25B and a profit margin of 6.2%, and was a factor weighing down the overall profit margin.

Key Financial Indicators

【Profitability】The Operating Income margin of 14.3% improved by 670bp from 7.6% in the same period of the previous year, while the Net Income margin also increased substantially to 11.7% from 4.6% in the previous year.【Cash Flow Quality】The reduction in extraordinary losses from ¥0.05B in the same period of the previous year to ¥0.001B in the current period supported the increase in Net Income. The fact that Net Income growth of +194.6% exceeded Operating Income growth of +121.5% reflects the impact of temporary factors.【Investment Efficiency】Annualized ROE was 7.6%. The asset-intensive structure, with fixed assets accounting for 87.6% of total assets, suppresses asset turnover and constrains ROE despite the high profit margin.【Financial Soundness】The Equity Ratio was 51.2%, improving from 50.1% in the same period of the previous year. The current ratio was approximately 201%, and interest-bearing debt consisted solely of ¥2.85B in long-term borrowings, resulting in a conservative D/E ratio of approximately 0.95x.

Cash Flow Analysis

Although the Statement of Cash Flows has not been disclosed, funding trends can be assessed from changes in the balance sheet. Cash and deposits were ¥1.69B, a decrease of ¥0.25B from ¥1.94B in the same period of the previous year. Long-term borrowings were essentially unchanged at ¥2.85B from ¥2.85B, while property, plant and equipment increased slightly from ¥15.90B to ¥15.99B. Net assets were ¥9.98B, an increase of ¥0.12B year on year, indicating continued accumulation of retained earnings. Cash exceeded current liabilities of ¥1.21B, and there were no issues with short-term liquidity.

Earnings Quality

Ordinary Income exceeded Operating Income by ¥0.05B, supported by ¥0.06B in non-operating income (including ¥0.01B in dividend income). However, this represented 3.7% of Revenue and was not large enough to materially impair earnings quality. The high year-on-year growth rate in Net Income of +194.6% includes the temporary factor of the loss on disposal and sale of fixed assets declining from ¥0.05B in the same period of the previous year to ¥0.001B in the current period. Accordingly, the Operating Income growth rate of +121.5% is the more appropriate indicator of underlying business performance. The effective tax rate was 32.1%, within a normal range, and no special tax-related adjustments were identified.

Earnings Forecast and Guidance

Q1 progress against the Full-Year forecast was 26.2% for Revenue, 36.8% for Operating Income, 38.5% for Ordinary Income, and 38.0% for Net Income, with all figures progressing at a pace above the simple 25% benchmark. On the other hand, the Full-Year forecast itself does not anticipate growth as high as that achieved in Q1, projecting year-on-year changes of +2.1% for Operating Income, △0.7% for Ordinary Income, and +0.4% for Net Income. The key points for monitoring going forward will be whether Q1’s high profit margins, non-operating income, and reduction in extraordinary gains and losses can be sustained throughout the year.

Shareholder Returns

The Full-Year dividend forecast is ¥24.00 per share, while the Full-Year EPS forecast is ¥119.39, resulting in a forecast Payout Ratio based solely on dividends of 20.1%. Based on the average number of shares outstanding during the period of 4,188,075 shares, the estimated annual total dividend is approximately ¥0.10B, representing a modest burden relative to the Full-Year Net Income forecast of ¥0.50B. Retained earnings have accumulated to ¥4.70B, providing a solid foundation supporting dividend sustainability.

Risk Factors

1. Asset-intensive business structure risk: Fixed assets account for 87.6% of total assets, and the Company holds land of ¥9.15B and property, plant and equipment of ¥15.90B. This structure makes profitability susceptible to fluctuations in facility utilization rates and maintenance and renewal costs.

2. Profit margin normalization risk: The Q1 Operating Income margin of 14.3% improved substantially from the previous year, but the year-on-year growth forecast for Full-Year Operating Income is only +2.1%. There is a possibility that Q1’s high profitability will not be maintained throughout the year.

3. Non-operating income volatility risk: Ordinary Income partly depends on ¥0.06B in non-operating income, including ¥0.01B in dividend income. Changes in the dividend policies of investee companies and market conditions could affect Ordinary Income.

Industry Benchmark (For Reference; Compiled by the Company)

Although median industry data is limited, the Company’s Operating Income margin of 14.3% and Net Income margin of 11.7% represent levels that have improved substantially from the previous year.
※Source: Compiled by the Company

Key Points from the Earnings

1. Revenue increased +17.3%, while Operating Income increased +121.5%, resulting in a 670bp improvement in the Operating Income margin. By segment, the high profitability of the Real Estate and Insurance Businesses led this improvement.

2. Net Income growth of +194.6% includes the temporary factor of the reduction in the loss on disposal and sale of fixed assets recorded in the same period of the previous year. Accordingly, monitoring Operating Income trends is important when assessing sustainability for the Full Year.

3. Q1 progress against the Full-Year forecast was above the standard pace, at 36.8% for Operating Income and 38.0% for Net Income. However, the Full-Year forecast itself assumes only modest profit growth, making profit margin trends in subsequent quarters an important basis for assessing whether the plan will be achieved or exceeded.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,987–¥2,102 at Cost of Equity ±1%; ¥2,032–¥2,050 at ω±0.1.

Notes:

• Because Net Income progress against the Full-Year forecast (38%) exceeds the standard pace (25%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies progressing ahead of forecast tend to exceed their forecasts. The adjustment may be excessive for businesses with strong seasonality).
• Because forecast ROE is below the Cost of Equity, the theoretical value is below Book Value per Share.
• Net assets as of the end of the quarter are used (there is a time lag relative to the Full-Year forecast).
• Because net assets include non-controlling interests, the theoretical value may be calculated at a somewhat high level.

(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 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 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 discretion and responsibility, after consulting professionals as necessary.

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