BELLUNA (9997) FY2026 Q3 Earnings Report

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Executive Summary

In addition to higher revenue, operating income and net income increased significantly, clearly demonstrating an improvement in profitability. Revenue was ¥1,643.6B (+3.6% YoY), operating income was ¥108.7B (+48.1%), ordinary income was ¥109.7B (+25.9%), and net income was ¥76.8B (up from ¥53.7B in the prior year). The primary drivers of earnings growth were operating leverage resulting from an improved gross margin and a lower SG&A ratio. In addition, temporary factors such as gains on the sale of investment securities and foreign exchange gains also boosted profit before tax.

Factors Affecting Performance

【Revenue】Revenue was ¥1,643.6B, representing a +3.6% YoY increase. The disclosed Property segment generated revenue of ¥370.4B, operating income of ¥64.8B, and a profit margin of 17.5%, making it a highly profitable segment that significantly exceeds the company-wide profit margin of 6.6%. Cost of sales was ¥628.9B, increasing only +0.3% YoY and below the rate of revenue growth, resulting in an improvement in the gross margin to 61.7% from 60.5% in the prior year.

【Profit and Loss】SG&A expenses were ¥906.0B, up +2.2% YoY and below the rate of revenue growth, causing the SG&A ratio to decline to 55.1%. As a result, operating income increased to ¥108.7B (+48.1%), and the operating margin improved to 6.6% from 4.6% in the prior year. Below operating income, the company recorded a foreign exchange gain of ¥11.2B, while interest expense increased to ¥9.8B from ¥5.2B in the prior year, resulting in ordinary income of ¥109.7B (+25.9%). Non-operating items included extraordinary income of ¥11.1B, mainly consisting of a ¥11.0B gain on the sale of investment securities, and extraordinary losses of ¥5.4B, including an impairment loss of ¥3.4B. The resulting net extraordinary gain of ¥5.6B was added to profit before tax. Net income was ¥76.8B against profit before tax of ¥115.3B, representing results characterized by both revenue and profit growth. However, it should be noted that the increase in net income includes contributions from the temporary gain on the sale of investment securities and the foreign exchange gain.

Segment Analysis

The only disclosed segment is Property, which generated revenue of ¥370.4B, operating income of ¥64.8B, and a profit margin of 17.5%, substantially exceeding the company-wide average of 6.6%. This segment accounted for 22.5% of total company revenue of ¥1,643.6B. Although detailed disclosure for other segments is unavailable, the Property Business appears to be the main driver of profitability.

Key Financial Metrics

【Profitability】The operating margin was 6.6%, improving by approximately 2.0pt from 4.6% in the prior year, while the net margin also increased to 4.7% from 3.4%. The improvement in profitability was supported by the gross margin improving to 61.7% from 60.5% and the SG&A ratio declining to 55.1% from 55.9%.【Cash Flow Quality】Accounts receivable were ¥155.8B, increasing +43.3% YoY and substantially outpacing revenue growth of +3.6%. As the increase in accounts receivable of +¥47.1B exceeded the increase in accounts payable of +¥30.0B, working capital may be tying up funds. Inventory was ¥266.0B, requiring continued monitoring of inventory levels.【Investment Efficiency】ROE (annualized) was 7.0%, reflecting the improvement in profitability. Total assets expanded to ¥3,442.7B, up +10.2% YoY, indicating room for improvement in asset efficiency from the perspective of asset turnover.【Financial Soundness】The equity ratio was 42.8%, down from 45.2% in the prior year. Long-term borrowings increased +25.6% YoY to ¥1,292.3B, apparently reflecting financing undertaken in response to the expansion of tangible fixed assets, including buildings of +¥124.8B and land of +¥75.3B. Current assets of ¥1,410.6B substantially exceeded current liabilities of ¥612.4B, indicating that short-term payment capacity is secured.

Cash Flow Analysis

As cash flow statement data is not disclosed, funding trends are assessed based on changes in the balance sheet. Cash and deposits increased to ¥360.5B from ¥335.5B in the prior year, while long-term borrowings increased +¥263.7B YoY to ¥1,292.3B. This appears to reflect financing undertaken in response to the expansion of tangible fixed assets, which increased +¥218.4B YoY. From a working capital perspective, accounts receivable increased +¥47.1B YoY (+43.3%), exceeding the +¥30.0B increase in accounts payable, indicating growing funding requirements associated with operating activities. Inventory remained high at ¥266.0B, suggesting that funds continue to be tied up in inventory. Overall, the company appears to be financing business expansion and capital investment through long-term borrowings, while the increase in working capital remains an area requiring monitoring from a cash management perspective.

Quality of Earnings

The improvement in operating income resulted from core business factors—an increase in the gross margin and a decline in the SG&A ratio—and is therefore considered relatively sustainable. Meanwhile, profit before tax of ¥115.3B includes an ¥11.0B gain on the sale of investment securities and an ¥11.2B foreign exchange gain, both of which are items with low recurrence. Extraordinary income of ¥11.1B less extraordinary losses of ¥5.4B, including an impairment loss of ¥3.4B, resulted in a net extraordinary gain of ¥5.6B, which boosted profit before tax. The net income growth rate of +42.9% YoY is close to the operating income growth rate of +48.1%, although the underlying earnings growth rate excluding temporary factors is expected to be somewhat slower. Comprehensive income was ¥85.9B, exceeding net income of ¥76.8B, primarily due to a +¥11.0B valuation difference on securities. This does not represent a materially large divergence between net income and comprehensive income.

Earnings Forecast and Guidance

Progress against the full-year company forecast was 76.6% for revenue at ¥1,643.6B / ¥2,146.0B, 80.5% for operating income at ¥108.7B / ¥135.0B, and 81.2% for ordinary income at ¥109.7B / ¥135.0B. All exceeded the simple progress benchmark of 75%. Progress in earnings exceeding revenue progress indicates that the improvement in profitability, including in the second half, is incorporated into the plan, while the improvement through the first half is progressing ahead of plan. Against the full-year forecast revenue growth rate of +1.8%, cumulative revenue growth for the current period was higher at +3.6%, indicating that the first-half growth pace is ahead of the full-year plan.

Shareholder Returns

A dividend of ¥15.00 per share was paid in Q2, and the full-year forecast indicates annual dividends of ¥30.00 (representing an increase from the prior-year actual result). Using the full-year net income forecast of ¥95.0B and approximately 96.24 million issued shares after deducting treasury shares, the forecast payout ratio is approximately 30.7%. Retained earnings of ¥1,238.7B and net assets of ¥1,472.6B provide a substantial financial base, and the company has sufficient capacity to pay dividends. However, the possibility that funds tied up in working capital due to the increase in accounts receivable and high inventory levels may affect future cash management should be considered when assessing dividend sustainability.

Risk Factors

1. Inventory and Working Capital Risk: In addition to inventory of ¥266.0B, accounts receivable increased +43.3% YoY, substantially exceeding revenue growth of +3.6%. The increase in accounts receivable of +¥47.1B exceeded the increase in accounts payable of +¥30.0B, intensifying the funds tied up in working capital.

2. Borrowing Growth and Interest Burden Risk: Long-term borrowings increased +25.6% YoY to ¥1,292.3B, while interest expense increased +87.0% from ¥5.2B in the prior year to ¥9.8B. Fixed liabilities of ¥1,357.7B also account for an increasing share of total assets, raising concerns about pressure on earnings if the interest-rate environment changes.

3. Risk of Reliance on Temporary Gains: Profit before tax includes an ¥11.0B gain on the sale of investment securities, while non-operating income includes an ¥11.2B foreign exchange gain. Excluding these items, recurring earnings growth could be slower than the disclosed growth rate of +48.1% for operating income.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (retail)

Profitability and Return

The company's operating margin and net margin both substantially exceed the industry median, placing it in the upper tier in terms of profitability.

Growth and Capital Efficiency

The revenue growth rate is slightly above the industry median, but compared with the IQR upper bound of 10.3%, the growth rate itself remains at a mid-range level.

※Source: Compiled by the Company

Key Earnings Highlights

1. The operating margin improved by approximately 2.0pt YoY to 6.6%, confirming a recovery in core business profitability driven by an improved gross margin and lower SG&A ratio. Progress against the full-year forecast also exceeded the standard 75% benchmark, reaching 80.5% for operating income and 81.2% for ordinary income.

2. The increase in net income includes temporary factors consisting of an ¥11.0B gain on the sale of investment securities and an ¥11.2B foreign exchange gain. These items should be distinguished when assessing the recurring earnings growth rate.

3. Accounts receivable increased at a pace substantially exceeding revenue growth and surpassed the increase in accounts payable. Together with the increase in long-term borrowings (+25.6%) and interest expense (+87.0%), changes in working capital and the funding structure will be important factors to monitor for their impact on future financial metrics.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,358–¥1,437 at cost of equity ±1%, and ¥1,392–¥1,399 at ω±0.1.

Notes:

• As forecast ROE is below the cost of equity, the theoretical value will be below book value per share.
• Net assets as of the quarter-end are used (there is a timing difference from 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 / This is a mechanically calculated value 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 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. 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, with consultation with a professional advisor as necessary.

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