Maruken Lease (9763) FY2026 Q3 Earnings Report

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Executive Summary

The key feature of the current results was slightly lower profitability in the core business despite higher revenue, with increases in non-operating income and equity-method investment income supporting growth in ordinary income and net income. Revenue was ¥195.7B (+17.1% YoY), Operating Income was ¥12.3B (-0.4%), Ordinary Income was ¥16.7B (+18.9%), and Net Income was ¥11.5B (+16.1%). While the growth rates of cost of sales and SG&A expenses exceeded revenue growth, resulting in contractions in the gross margin and Operating Income margin, the expansion of equity-method investment income (¥3.9B, +¥2.8B YoY) drove growth below the ordinary income level.

Factors Behind Earnings Fluctuations

【Revenue】Revenue increased 17.1% YoY to ¥195.7B. The core Heavy Temporary Structures segment led the increase, generating revenue of ¥145.0B (+17.0% YoY) and accounting for 74.1% of total revenue. Heavy Temporary Structures Construction contributed ¥38.1B (+23.3%), while Civil Engineering, Water and Sewerage Facilities Construction, etc. contributed ¥12.6B (+3.4%), with both contributing to revenue growth.

【Profit and Loss】Operating Income was ¥12.3B, essentially flat at -0.4% YoY. Cost of sales increased by +18.2% and SG&A expenses by +21.0%, both exceeding the revenue growth rate (+17.1%), resulting in the gross margin narrowing to 18.4% (approximately 19.1% in the same period last year) and the Operating Income margin contracting to 6.3%. Meanwhile, the expansion of non-operating income, including the increase in equity-method investment income, resulted in Ordinary Income and Net Income rising significantly by +18.9% and +16.1%, respectively. Overall, the structure was one of higher revenue but lower profit at the operating level, while Ordinary Income and Net Income increased. A key characteristic was that investment and non-operating factors, rather than core business profitability, supported final earnings.

Segment Analysis

Total segment profit was ¥18.2B (+4.6% YoY). Heavy Temporary Structures was the core business, generating ¥15.8B in profit (10.9% margin) and accounting for 87.1% of total segment profit. Heavy Temporary Structures Construction generated profit of ¥1.95B (5.1% margin, +25.8% YoY), while Civil Engineering, Water and Sewerage Facilities Construction, etc. generated profit of ¥0.40B (3.2% margin, +25.0% YoY), with both showing strong profit growth. However, corporate adjustments expanded from -¥5.0B in the same period last year to -¥5.9B, offsetting the increase in segment-level profit and leaving consolidated Operating Income approximately flat year on year.

Key Financial Metrics

【Profitability】The Operating Income margin was 6.3% and the Net Income margin was 5.9%; together with the gross margin of 18.4%, these showed a declining trend compared with the same period last year. Annualized ROE was 8.4%. The increasing reliance on non-operating income and equity-method investment income relative to operating-level profitability is an important consideration when assessing earnings quality.【Cash Quality】Cash and deposits increased by +¥5.3B from the end of the previous fiscal year to ¥25.3B, while accounts receivable and notes receivable were ¥58.1B and inventories were ¥9.5B, both increasing year on year, potentially indicating an increasing tying-up of funds.【Investment Efficiency】Investment securities were ¥51.9B, goodwill was ¥12.9B (+93.1% YoY), and intangible assets were ¥13.7B (+100.6% YoY), all representing significant increases. This is a phase in which the progress of investment recovery should be monitored.【Financial Soundness】The Equity Ratio was 44.3% and long-term borrowings were ¥34.6B. While the overall asset and liability structure was stable, the ratio of short-term liabilities, including short-term borrowings, was relatively high, making monitoring of cash management effective.

Cash Flow Analysis

As cash flow statement data were not presented in these results, cash trends are analyzed based on changes in the balance sheet. Cash and deposits increased by +¥5.3B from ¥20.0B at the end of the previous fiscal year to ¥25.3B. Meanwhile, accounts receivable and notes receivable increased to ¥58.1B (¥54.5B in the same period last year), and inventories increased to ¥9.5B (¥6.95B in the same period last year, +36.3%), suggesting that some funds generated through operating activities may have been absorbed by increases in trade receivables and inventories. Contract liabilities increased to ¥15.8B (¥8.3B in the same period last year, +90.5%), indicating a structure in which customer advances support part of working capital. Long-term borrowings increased to ¥34.6B (+11.6% YoY). As this increase coincided with increases in goodwill and intangible assets (combined increase of approximately +¥13.1B), some investment and acquisition funding may have been raised through borrowings.

Earnings Quality

The increases in Ordinary Income and Net Income depended substantially on the expansion of non-operating income, particularly equity-method investment income, which increased from ¥1.1B in the same period last year to ¥3.9B. Equity-method investment income was equivalent to 31.6% of Operating Income of ¥12.3B, and this non-operating factor was the primary reason Ordinary Income increased by +18.9% despite core Operating Income remaining almost flat. Total non-operating income expanded to ¥5.2B (¥2.1B in the previous year), including dividend income of ¥0.5B. No information on extraordinary gains or losses was provided, and no significant impact from temporary factors was identified. Comprehensive income was ¥13.6B, and the difference from Net Income of ¥11.5B was primarily attributable to an increase in valuation difference on securities (+¥2.8B). In addition to the profitability of the operating business, valuation changes in investment assets increased final comprehensive income. Given the gap between operating-level profitability and growth in Ordinary Income and Net Income, the sustainability of earnings requires further verification.

Earnings Forecast and Guidance

The Q3 cumulative progress rates against the full-year company forecasts were 78.3% for Revenue (forecast: ¥250.0B), 79.1% for Operating Income (forecast: ¥15.5B), 89.3% for Ordinary Income (forecast: ¥18.7B), and 87.1% for Net Income (forecast: ¥13.3B). All exceeded the standard progress rate of 75%, with particularly high progress for Ordinary Income and Net Income. However, the high progress rates for Ordinary Income and Net Income were attributable to reliance on non-operating income, including equity-method investment income, while the progress rate for Operating Income, which reflects the core business, was relatively moderate at 79.1%. The full-year forecast calls for Revenue growth of +11.8%, Operating Income growth of +2.4%, and Ordinary Income growth of +8.6%, conservatively projecting Q4 growth compared with results through Q3 (Revenue +17.1%, Ordinary Income +18.9%).

Shareholder Returns

The Q2 dividend was ¥73.00 per share, and the full-year forecast dividend is ¥157.00. The forecast Payout Ratio against forecast EPS of ¥419.17 is 37.5%, below the 60% level generally regarded as a benchmark for sustainability. Treasury stock of ¥4.39B is recorded, but no data on share repurchases during the current period were provided; accordingly, shareholder returns are evaluated based on the Payout Ratio. Q3 cumulative Net Income of ¥11.59B had reached 87.1% of the full-year forecast of ¥13.30B. Assuming the company achieves its forecast, there is a certain degree of flexibility in the funding available for dividends.

Risk Factors

1. Contraction in core business margins: The gross margin declined year on year, and the Operating Income margin contracted by approximately 110bp to 6.3%. Cost of sales (+18.2%) and SG&A expenses (+21.0%) grew faster than revenue (+17.1%), and if the decline in cost pass-through capability continues, Operating Income may remain unable to grow even amid higher revenue.

2. Profit concentration in the core segment: The Heavy Temporary Structures segment accounts for 87.1% of segment profit, creating a structure in which fluctuations in construction and temporary-structure demand have a significant impact on consolidated earnings. The segment’s revenue increased by +17.0%, while profit increased by only +2.1%, indicating a decline in its internal profit margin as well.

3. Short-term funding structure and lengthening DSO: Against short-term borrowings of ¥38.83B, cash and deposits were ¥25.28B, meaning that cash/short-term liabilities was below 1x. The collection period (DSO) for accounts receivable and electronically recorded monetary claims was above the generally accepted benchmark of 60 days. A lengthening collection period, together with reliance on short-term borrowings, is a key point for monitoring liquidity management.

Industry Benchmark (Reference; Company Analysis)

Industry Benchmark (trading)

Profitability and Returns

Both the Operating Income margin and Net Income margin exceeded the industry median, indicating that profitability was relatively favorable within the industry.

Growth and Capital Efficiency

The Revenue growth rate significantly exceeded the industry median, indicating that top-line expansion was at a high level within the industry.

※Source: Company analysis

Key Points in the Results

1. While Revenue increased by +17.1%, representing high growth within the industry, Operating Income was nearly flat at -0.4%. The conversion of revenue growth into earnings is therefore the central point of observation in these results. The main factor was that the increases in cost of sales and SG&A expenses exceeded revenue growth.

2. Growth in Ordinary Income (+18.9%) and Net Income (+16.1%) depended substantially on the expansion of non-operating income, including equity-method investment income. Equity-method investment income was equivalent to 31.6% of Operating Income, and the fact that factors separate from core business profitability supported the growth in final earnings is noteworthy when assessing earnings quality.

3. Progress rates against the full-year forecast were high at 89.3% for Ordinary Income and 87.1% for Net Income, while the progress rate for Operating Income was somewhat more moderate at 79.1%. Understanding the composition of the high progress rates, including the contribution from non-operating factors, is therefore required.

Theoretical Share Price (Reference Value)

Sensitivity: ¥5,194–¥5,489 at Cost of Equity ±1%; ¥5,324–¥5,348 at ω±0.1.

Notes:

• As the progress of Net Income against the full-year forecast (87%) exceeds the standard level (75%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies ahead of their forecast progress tend to exceed their forecasts. The adjustment may be excessive for businesses with strong seasonality).
• As forecast ROE is below the Cost of Equity, the theoretical value is below Book Value Per Share.
• Net assets as of the quarter-end are used (there is a time lag 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 / 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 forecast 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 responsibility, after consulting professionals as necessary.

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