OYO (9755) FY2026 Q1 Earnings Report

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Executive Summary

In FY2026 Q1, Disaster Prevention & Infrastructure posted a substantial increase in profit, while declines in Environmental & Energy and widening losses in International pressured consolidated profitability, resulting in lower revenue and earnings. Revenue was ¥20.19B (down -0.7% year on year), Operating Income was ¥2.69B (down -11.9%), Ordinary Income was ¥2.85B (down -12.5%), and Net Income was ¥1.97B (down -18.9%). Due to the反動 from special gains, including gains on the sale of investment securities recorded in the same period of the previous year, the decline in Net Income exceeded the decline in Operating Income.

Factors Affecting Results

【Revenue】Revenue was ¥20.19B, essentially flat, declining 0.7% year on year. Disaster Prevention & Infrastructure (composition ratio: 49.4%) grew significantly to ¥9.98B (up +17.7%), while Environmental & Energy (composition ratio: 32.5%) declined to ¥6.57B (down -14.6%) and International (composition ratio: 18.8%) declined to ¥3.79B (down -12.3%). Declines in the other businesses offset growth in the core business.

【Profit and Loss】Operating Income was ¥2.69B (down -11.9%). The gross margin declined to 36.6% from 37.2% in the same period of the previous year, while SG&A expenses increased by +4.3%. Segment profit in Disaster Prevention & Infrastructure increased substantially to ¥2.42B (up +61.4%, profit margin: 24.3%), while Environmental & Energy declined sharply to ¥0.67B (down -62.2%), and the loss in International widened to ¥0.43B. Ordinary Income was ¥2.85B (down -12.5%), and Net Income was ¥1.97B (down -18.9%); the absence of gains on the sale of investment securities recorded in the same period of the previous year magnified the decline in Net Income. Overall, the Company posted lower revenue and earnings, with widening differences in profit margins between businesses pressuring consolidated profitability.

Segment Analysis

Disaster Prevention & Infrastructure reported Revenue of ¥9.98B (up +17.7%) and segment profit of ¥2.42B (up +61.4%, profit margin: 24.3%), demonstrating the highest profitability among the three businesses and serving as the central driver of consolidated profit. Environmental & Energy significantly retreated, with Revenue of ¥6.57B (down -14.6%) and segment profit of ¥0.67B (down -62.2%, profit margin: 10.2%). International reported Revenue of ¥3.79B (down -12.3%) and a segment loss of ¥0.43B, widening from a loss of ¥0.23B in the same period of the previous year, as deteriorating profitability on overseas projects weighed on consolidated profit. There were no relevant matters concerning impairment losses on fixed assets or goodwill.

Key Financial Indicators

【Profitability】The Operating Income margin was 13.3%, down 169bp from 15.0% in the same period of the previous year, while the Net Income margin also declined by 226bp, from 11.8% to 9.6%. The gross margin likewise declined to 36.6% from 37.2%, down 58bp, as cost pressures and an increase in SG&A expenses (up +4.3%) progressed simultaneously.【Cash Quality】Special gains contracted substantially to ¥0.05B due to the反動 from gains on the sale of investment securities recorded in the same period of the previous year; consequently, the decline in Net Income (-18.9%) exceeded the decline in Operating Income (-11.9%).【Investment Efficiency】Annualized ROE was 9.9%, indicating a profitability structure led by the Net Income margin under low financial leverage.【Financial Soundness】The Equity Ratio remained high at 72.1%, while Cash and deposits of ¥23.63B exceeded Current liabilities of ¥22.09B.

Cash Flow Analysis

Although detailed disclosure of the cash flow statement is unavailable, changes in the balance sheet indicate that the Company has maintained financial capacity. Cash and deposits increased slightly to ¥23.63B from ¥23.36B in the same period of the previous year, while Short-term borrowings increased substantially to ¥5.68B from ¥2.19B. Cash and deposits exceed Short-term borrowings by more than four times, suggesting that short-term financing is being used to address working capital and project funding needs. Retained earnings increased to ¥50.41B from ¥49.99B in the same period of the previous year, indicating continued accumulation of internal reserves.

Quality of Earnings

Special gains and losses for the current period consisted of Special gains of ¥0.05B and Special losses of ¥0.04B, contributing only a net ¥0.01B. Compared with Special gains of ¥0.32B recorded in the same period of the previous year, including ¥0.32B in gains on the sale of investment securities, this constituted a temporary factor suppressing the growth of Net Income. Non-operating income totaled ¥0.19B, including ¥0.06B in interest income, while Non-operating expenses totaled ¥0.04B, including ¥0.02B in interest expense and ¥0.01B in foreign exchange losses, remaining within the range of recurring income and expenses. Comprehensive income was ¥2.31B, exceeding Net Income of ¥1.97B, primarily due to a foreign currency translation adjustment of +¥0.45B. The divergence between Net Income and Comprehensive income was mainly attributable to foreign exchange factors; therefore, analysis at the Operating Income and Ordinary Income levels is more important when evaluating the profitability of the core business.

Earnings Forecast and Guidance

Progress toward the Full-Year earnings forecast was 26.9% for Revenue against the forecast of ¥75.00B, 64.1% for Operating Income against the forecast of ¥4.20B, and 59.4% for Ordinary Income against the forecast of ¥4.80B. Progress rates for Operating Income and Ordinary Income substantially exceeded the standard quarterly progress rate of 25%, indicating that Q1 profit accounts for a high proportion of the Full-Year plan. As the Company has not revised either its earnings forecast or dividend forecast, it appears to assume that profit levels will decline below those of Q1 from Q2 onward, while presuming improved profitability in Environmental & Energy and International.

Shareholder Returns

The Full-Year dividend forecast is ¥110.0 per share, and the Payout Ratio based on the Full-Year forecast EPS of ¥171.15 is 64.3%. No revision has been made to the dividend forecast. The Q1 Net Income progress rate was 49.5% (based on Net Income attributable to owners of the parent), and current earnings progress is at a level supporting the annual dividend forecast. The Company holds 1.534 million treasury shares (6.3% of the 24.322 million issued shares).

Risk Factors

1. Deterioration in profitability of the International business: Revenue was ¥3.79B (down -12.3% year on year), and the segment loss widened to ¥0.43B from ¥0.23B in the same period of the previous year. Progress on overseas projects and foreign exchange fluctuations could cause downside risk to consolidated profit.

2. Decline in profit in the Environmental & Energy business: Revenue declined significantly to ¥6.57B (down -14.6%), while segment profit fell to ¥0.67B (down -62.2%). The recovery in project volume and profitability will influence future consolidated margins.

3. Concentration of profit dependence on the core business: Segment profit in Disaster Prevention & Infrastructure is the central contributor to consolidated profit, making the timing of public investment execution and progress on large-scale projects factors affecting results. In addition, SG&A expenses increased by +4.3% despite declining revenue, creating a continuing risk of a lower Operating Income margin.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

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

Growth and Capital Efficiency

Revenue growth was substantially below the industry median, placing the Company among the low-growth companies in the industry.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. Disaster Prevention & Infrastructure grew substantially, with Revenue up +17.7% and segment profit up +61.4% (profit margin: 24.3%), serving as the central driver of consolidated profit. However, weakness in Environmental & Energy and International resulted in a -11.9% decline in consolidated Operating Income.

2. The Q1 progress rate against the Full-Year Operating Income forecast was high at 64.1%. Since the Company has maintained its forecast, this may imply an assumption that profit levels will decline toward the second half of the fiscal year.

3. Although the strong financial base, including an Equity Ratio of 72.1% and Cash and deposits of ¥23.63B, has been maintained, Short-term borrowings increased substantially year on year. Changes in the financing structure require continued monitoring.

Theoretical Share Price (Reference Value)

Sensitivity: ¥3,000–¥3,168 at ±1% for the cost of equity, and ¥3,069–¥3,090 at ±0.1 for ω.

Notes:

• As progress of Net Income against the Full-Year forecast (49%) exceeds the standard level (25%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies with leading progress tend to exceed forecasts. For businesses with strong seasonality, the adjustment may be excessive).
• As 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 timing difference relative to the Full-Year forecast).
• As 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 / 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 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, after consulting with a professional as necessary.

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