SENSHU ELECTRIC CO.,LTD. FY2026 Q3 Earnings Report

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Executive Summary

The Company posted higher revenue and earnings, accompanied by improved profit margins, driven by expanded sales in the wire and cable business and a lower SG&A ratio. Revenue was ¥1,215.5B (+19.9% YoY), Operating Income was ¥95.0B (+40.9%), Ordinary Income was ¥98.8B (+40.3%), and Net Income attributable to owners of the parent was ¥70.2B (+40.9%). Operating Income growth exceeded revenue growth, primarily reflecting the emergence of operating leverage through the containment of SG&A expenses.

Factors Affecting Performance

【Revenue】Revenue increased 19.9% YoY to ¥1,215.5B. As the Company operates as a single segment—the wire and cable business—breakdowns by business are not disclosed; however, expanded sales volume is considered the primary driver of the revenue increase. The combined balance of accounts receivable and electronically recorded monetary claims also increased substantially YoY, consistent with the expansion in sales and operating receivables.

【Profit and Loss】Operating Income was ¥95.0B (+40.9% YoY), and the Operating Income margin improved to 7.8% from 6.7% in the same period of the previous year. While the gross margin declined slightly to 15.1%, the SG&A ratio decreased to 7.3% from 8.6% in the previous year. The fact that SG&A expense growth (+1.8%) was substantially below revenue growth (+19.9%) was the central factor behind the margin improvement. Ordinary Income was ¥98.8B, with non-operating income—including dividend income of ¥0.9B and interest income of ¥0.8B—providing an additional contribution. Profit before tax included a gain on the sale of investment securities of ¥5.5B, while an impairment loss of ¥0.9B and a loss on disposal of fixed assets of ¥0.3B were recorded. Consequently, special gains and losses provided a net uplift of ¥4.7B. Overall, the Company achieved higher revenue and earnings, with temporary special gains providing additional support for Net Income alongside the increase in operating earnings.

Segment Analysis

The Company operates as a single segment, the wire and cable business, and does not disclose segment-level revenue or profit and loss information.

Key Financial Indicators

【Profitability】The Operating Income margin was 7.8%, improving from 6.7% in the same period of the previous year, while the Net Income margin was 5.7%, improving from 4.9%. Annualized ROE was 14.8%, indicating a solid level of profitability.【Cash Flow Quality】Profit before tax of ¥103.4B included a ¥5.5B gain on the sale of investment securities, while an impairment loss of ¥0.9B was recorded. Accordingly, the net positive contribution from special gains and losses should be considered when assessing Net Income of ¥70.2B.【Investment Efficiency】Against total assets of ¥1,303.0B, Operating Income was ¥95.0B and the gross margin was 15.1%; asset efficiency is trending upward alongside revenue growth.【Financial Soundness】The Equity Ratio was 48.5%, down from 52.7% in the same period of the previous year. This decline was attributable primarily to an increase in liabilities resulting from higher accounts payable. Cash and deposits of ¥408.5B substantially exceeded short-term borrowings of ¥4.3B, indicating sound short-term payment capacity.

Cash Flow Analysis

As the statement of cash flows is not disclosed, cash trends are analyzed based on changes in the balance sheet. Cash and deposits were ¥408.5B, up from ¥329.7B in the same period of the previous year, indicating that financial capacity has been maintained during the business expansion phase. Meanwhile, inventories increased 45.4% YoY and accounts payable increased 32.2% YoY, indicating an accumulation of working capital accompanying revenue growth. The combined balance of accounts receivable and electronically recorded monetary claims also increased substantially. Although funding requirements associated with operating activities have expanded, cash and deposits substantially exceeded short-term borrowings of ¥4.3B, ensuring sufficient financial flexibility.

Quality of Earnings

Profit through the Ordinary Income level reflects an improvement in recurring earnings capacity supported by Operating Income growth. However, Profit before tax included the non-recurring gain on the sale of investment securities of ¥5.5B, while an impairment loss of ¥0.9B and a loss on disposal of fixed assets of ¥0.3B were recorded as special losses. Special gains and losses amounted to a net positive ¥4.7B, meaning that a meaningful portion of Net Income attributable to owners of the parent of ¥70.2B depended on temporary factors. Non-operating income was small, at approximately 0.4% of revenue, and primarily consisted of recurring income such as dividend income and interest income. Comprehensive income was ¥75.5B, exceeding Net Income attributable to owners of the parent of ¥70.2B. Unrealized valuation gains, including foreign currency translation adjustments and valuation differences on securities, contributed to the excess and should be noted as factors underlying the divergence from Net Income.

Earnings Forecast and Guidance

The full-year earnings forecast comprises revenue of ¥1,600.0B (+18.0% YoY), Operating Income of ¥125.5B (+40.2%), and Ordinary Income of ¥130.0B (+40.2%). Revisions to the earnings forecast and dividend forecast were announced during the current quarter. Cumulative progress rates were 76.0% for revenue, 75.7% for Operating Income, and 76.0% for Ordinary Income, slightly exceeding the 75% benchmark based on simple period allocation. Required revenue for Q4 is approximately ¥384.5B and required Operating Income is approximately ¥30.5B. The required Operating Income margin is approximately 7.9%, nearly equal to the 7.8% recorded for cumulative Q3, suggesting that the revised plan does not assume a substantial improvement over the current level of profitability.

Shareholder Returns

The full-year dividend forecast is ¥170 per share, comprising an interim dividend of ¥80 and a forecast year-end dividend of ¥90. The dividend forecast was revised concurrently with the earnings forecast. Based on forecast full-year Net Income attributable to owners of the parent of ¥91.5B, the forecast Payout Ratio is 31.8%. This remains below 60% as a level of profit distribution, leaving room for retained earnings. Treasury shares increased by ¥7.4B YoY, indicating capital policy activity beyond dividends. Accordingly, the Payout Ratio based solely on dividends should be distinguished from the Total Return Ratio, which includes share repurchases.

Risk Factors

1. Raw Material Market and Price Pass-Through Risk: The gross margin was 15.1%, declining slightly YoY. The Company’s earnings structure is relatively sensitive to fluctuations in the prices of raw materials such as copper and to timing differences in passing those costs through to customers.

2. Inventory and Working Capital Risk: Inventories increased +45.4% YoY, outpacing revenue growth of +19.9%. Depending on demand trends, lower inventory turnover or inventory valuation losses could emerge.

3. Risk from the Single-Business Structure: The Company operates as a single segment focused on the wire and cable business, limiting the diversification benefits from its business portfolio. Accounts payable also increased +32.2% YoY, exceeding sales growth, and changes in purchasing and settlement terms could affect working capital.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (trading)

Profitability and Returns

Both the Operating Income margin and Net Income margin substantially exceeded the industry median, indicating a high level of profitability within the industry.

Growth and Capital Efficiency

The revenue growth rate also substantially exceeded the industry median, placing the Company among the industry’s higher-growth companies.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. Operating Income growth of +40.9% versus revenue growth of +19.9% demonstrates the emergence of operating leverage through the decline in the SG&A ratio from 8.6% to 7.3%, which was the central feature of the current period’s performance.

2. The gross margin of 15.1% declined slightly YoY, indicating that the sustainability of the margin improvement depends on future price pass-through and the maintenance of sales volume.

3. The full-year forecast was revised upward, and the cumulative Q3 progress rate, including 75.7% for Operating Income, slightly exceeded the standard progress rate. However, the ¥5.5B gain on the sale of investment securities included in Profit before tax is a non-recurring factor. Accordingly, it is appropriate to assess sustainable earnings capacity primarily based on Operating Income and Ordinary Income.

Theoretical Share Price (Reference Value)

Sensitivity: ¥4,154–¥4,400 at ±1% for the cost of equity, and ¥4,261–¥4,295 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: 2026-08 / Mechanically calculated solely from 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 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 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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