MATSUYA FOODS HOLDINGS CO.,LTD. FY2027 Q1 Earnings Report

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Executive Summary

The quarter resulted in higher revenue but lower profit, with the key issue being that revenue expansion has not translated into profit growth. Revenue increased substantially to ¥506.6B (+17.4% YoY), while Operating Income declined to ¥7.0B (-28.0%) and Ordinary Income declined to ¥8.5B (-25.7%). Net Income increased to ¥7.0B (+26.8%); however, this was attributable to extraordinary income of ¥2.8B, including a gain on the sale of fixed assets of ¥2.1B, and therefore needs to be evaluated separately from the deterioration in core operating profitability. The primary cause of the decline in Operating Income was the increase in SG&A expenses (+18.5%), which exceeded the increase in revenue.

Factors Affecting Performance

【Revenue】Revenue increased 17.4% YoY to ¥506.6B. As the Company operates a single Food Service Business segment, the expansion of its store network, including existing and new stores, appears to have driven revenue growth. Gross profit increased 17.0% YoY to ¥317.4B, broadly in line with revenue growth, while the gross margin declined slightly to 62.6% from 62.8% in the previous year.

【Profit and Loss】SG&A expenses increased 18.5% YoY to ¥310.4B, outpacing revenue growth (+17.4%). As a result, Operating Income decreased by ¥2.70B to ¥6.95B from ¥9.65B in the previous year, and the Operating Income margin narrowed to 1.4% from 2.2%. Ordinary Income also declined to ¥8.5B (-25.7% YoY), primarily due to factors including an increase in interest expense (¥0.81B→¥1.77B). Net Income increased to ¥7.0B (+26.8% YoY) due to extraordinary income of ¥2.8B, including a gain on the sale of fixed assets of ¥2.1B; however, the increase was primarily driven by temporary factors that offset the deterioration at the operating level. In conclusion, the quarter resulted in higher revenue but lower profit.

Segment Analysis

The Company operates a single Food Service Business segment, and disclosure by segment has been omitted. Consequently, the factors behind the deterioration in margins cannot be broken down by business category, and overall store operating efficiency is the key determinant of performance.

Key Financial Indicators

【Profitability】The Operating Income margin narrowed by approximately 0.8pt to 1.4% from 2.2% in the previous year, primarily because the SG&A ratio of 61.3% remained high relative to the gross margin of 62.6%. 【Cash Flow Quality】Of Net Income of ¥7.0B, extraordinary income of ¥2.8B, including a gain on the sale of fixed assets of ¥2.1B, made a significant contribution, indicating a high degree of reliance on temporary items. 【Investment Efficiency】ROE (annualized) remained at 4.9%, with low profitability constraining capital efficiency. 【Financial Soundness】The Equity Ratio improved to 42.6% from 41.0% in the previous year; however, the Company carries ¥391.0B in long-term borrowings, and interest expense increased from ¥0.81B in the previous year to ¥1.77B.

Cash Flow Analysis

Although a cash flow statement has not been disclosed, the movement of funds can be inferred from changes in the balance sheet. Cash and deposits amounted to ¥225.8B, down ¥81.1B from ¥306.8B in the previous year. During the same period, buildings and structures and construction in progress increased, suggesting that cash expenditures for store-related investments contributed to the decline in cash balances. Meanwhile, long-term borrowings amounted to ¥391.0B, down ¥23.6B from the previous year, and debt repayments also contributed to cash outflows. Accounts payable increased by ¥14.9B YoY to ¥55.2B, indicating that the expansion of procurement volumes or changes in payment terms may have affected working capital.

Earnings Quality

The quality of earnings for the quarter warrants caution due to the high degree of reliance on temporary factors. Extraordinary income of ¥2.8B, including a gain on the sale of fixed assets of ¥2.1B, contributed to Net Income of ¥7.0B, in contrast to the 28.0% YoY decline in Operating Income. Non-operating income increased to ¥3.9B from ¥3.3B in the previous year, but much of this consisted of other non-operating income, limiting its sustainability as a recurring source of earnings. Comprehensive income was ¥7.2B, broadly in line with Net Income of ¥7.0B, and the impact of other comprehensive income, including foreign currency translation adjustments of ¥0.2B, was limited. Overall, it is necessary to consider that the improvement in profit during the period was not attributable to enhanced core earning power but was supported by the non-recurring factor of asset sales.

Earnings Forecast and Guidance

Progress against the full-year forecast was approximately 23.6% for revenue, broadly at a standard level, while progress was substantially lower at 8.5% for Operating Income and 10.2% for Ordinary Income. The progress rate for Net Income was 18.5%; however, this includes the gain on the sale of fixed assets and does not directly offset the lag in Operating Income progress. Achieving the full-year Operating Income forecast of ¥82.0B (+8.0% YoY) will require the absorption of SG&A expenses and improvement in store profitability from Q2 onward. No revisions have been made to the earnings forecast.

Shareholder Returns

The full-year dividend forecast is ¥26 per share (¥12 interim dividend and ¥1 commemorative dividend; ¥12 year-end dividend and ¥1 commemorative dividend), representing an expected increase from the previous year's dividend of ¥12. The Payout Ratio against the full-year forecast EPS of ¥184.51 is approximately 14.1%, indicating a low dividend burden relative to earnings. However, as current-period Net Income includes temporary extraordinary income, it should be noted that dividend sustainability depends on the extent of recovery in core operating profit.

Risk Factors

1. Decline in Operating Income margin: The Operating Income margin narrowed to 1.4% from 2.2% in the previous year. SG&A expenses increased 18.5% against revenue growth of 17.4%, making the ability to absorb store operating costs a key issue.

2. Increase in interest expense and lower coverage: Interest expense increased from ¥0.81B in the previous year to ¥1.77B. Together with the decline in Operating Income, the increased interest burden could affect financial flexibility.

3. Decline in cash and deposits: Cash and deposits amounted to ¥225.8B, down ¥81.1B (-26.4%) YoY. Cash outflows from store-related investments and debt repayments appear to be the underlying factors, and the contraction of the liquidity buffer needs to be monitored.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Profitability was below the industry median, with both the Operating Income margin and Net Income margin positioned in the lower range.

Growth and Capital Efficiency

Revenue growth significantly exceeded the industry median, placing it in the upper range.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. While revenue continued to expand, increasing 17.4%, Operating Income declined 28.0%; the key issue going forward will be whether the Company can convert growth into profit.

2. The increase in Net Income was supported by extraordinary income, including a gain on the sale of fixed assets, and needs to be viewed separately from core earning power.

3. Q1 progress against the full-year Operating Income plan was only 8.5%, and improvement in the SG&A ratio from Q2 onward will be required to achieve the Company’s plan.

Theoretical Share Price (Reference Value)

Sensitivity: ¥2,500–¥2,648 at ±1% for the cost of equity, and ¥2,564–¥2,578 at ±0.1 for ω.

Notes:

• Net Income is substantially compressed relative to Operating Income due to tax burden, acquisition-related expenses, non-controlling interests, and other factors (Net Income ÷ Operating Income 46%). This value reflects that compression at face value; if the factors are temporary, underlying earnings power may be higher.
• 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 gap relative to the full-year forecast).
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Valuation model: Residual Income Model (Ohlson type; explicit 5-year fade) / Interest rate reference month: 2026-07 / This is a mechanical calculation based solely on publicly disclosed data and does not constitute a forecast of the market share price or a recommendation of any specific investment action, nor does it 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 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 responsibility, after consulting with professionals as necessary.

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