Dear Life Q3 FY2026 Earnings Analysis: Inventory Surges 170% as Company Strengthens Growth Foundation for 'Challenge 2028' Strategy

Dear Life Co., Ltd. (Securities Code: 3245) reported a temporary year-on-year decline in both revenue and profit for the third quarter of the fiscal year ending September 2026 . However, this quarter marked a significant milestone in acquisition activities, signaling robust future growth and earning potential.

This report analyzes the company's current performance, financial strategy, the pace of real estate acquisitions, and progress toward the "Challenge 2028" medium-term management plan, based on 10 key topics derived from the earnings presentation materials.

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1. Overview of Consolidated Financial Results for Q3 FY2026

The consolidated financial results for the first nine months of the fiscal year ending September 2026 are as follows:

• Net Sales : 29,127 million yen ( down 17.8% YoY)
• Operating Profit : 2,771 million yen ( down 4.8% YoY)
• Ordinary Profit : 2,695 million yen ( down 10.4% YoY)
• Profit Attributable to Owners of Parent : 1,844 million yen ( down 9.7% YoY)
• Earnings Per Share (EPS) : 38.01 yen ( down 19.1% YoY)

While performance figures are temporarily trailing the previous year due to the nature of the business—which is dependent on the timing of real estate development and sales—gross profit margins on property sales have improved. A key feature of this quarter was the simultaneous execution of a record-high volume of property acquisitions while maintaining a strategy of selling under favorable conditions.

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2. Strengthening Financial Foundation and Expanding Debt Capacity via Public Offering

The company significantly increased its equity capital through a public offering this fiscal year. Consequently, its debt capacity , including cash on hand and credit lines from financial institutions, has expanded dramatically.

Total assets grew from 47,376 million yen at the end of the previous fiscal year to 70,648 million yen (a 49.1% increase) . Net assets also rose to 34,502 million yen. With an equity ratio of 48.2% (down 11.1 points from the previous fiscal year-end) and a D/E ratio of 0.98x , the company maintains a healthy balance sheet, creating a financial environment conducive to swift and aggressive real estate investment leveraging.

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3. Performance of the Core Real Estate Business and Surge in Pipeline

In the core Real Estate Business , segment sales for the first nine months reached 26,094 million yen (down 19.7% YoY) , with segment profit at 3,563 million yen (down 7.1% YoY) .

Despite the decline in revenue and profit, the accumulation pace of inventory (real estate for sale + real estate for sale in process) , which serves as the source of future earnings, has reached an all-time high for the company.

[Slide 7 Commentary: The Significance of the Inventory Surge]

This slide highlights the most decisive fact for measuring the company's future growth potential. Inventory, which stood at 16.8 billion yen (16,800 million yen) at the end of FY2025, jumped dramatically to 45,338 million yen (a 169.9% increase, or approximately 2.7 times) by the end of Q3 FY2026 .

Breaking this down, real estate for sale accounts for 39,878 million yen , and real estate for sale in process accounts for 5,460 million yen . This indicates that the company is not merely acquiring land, but rapidly accumulating a stock of completed and operational properties ready for sale. This acceleration in acquisition activity serves as a critical leading indicator that will directly translate into a dramatic increase in sales and profits from the next fiscal year onward.

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4. Strategic Investment Locations: Focus on Tokyo's 23 Wards and Proximity to Stations

The company’s real estate acquisitions are strictly focused on urban centers where high demand and asset value retention are expected.

• Area Composition : 95.8% of total investments are within Tokyo's 23 wards (27.4% in the five central wards, 68.4% in other wards).
• Proximity to Stations : 97.8% of properties are within a 10-minute walk of the nearest station (18.1% within 1–3 minutes, 22.3% within 4–5 minutes).

By securing commercial facilities, office buildings, and residences in highly scarce locations such as Chiyoda-ku Jimbocho, Shibuya-ku Harajuku Takeshita-dori, and Shinjuku-ku Ushigome-Kagurazaka, the company has built a portfolio capable of enjoying reliable rental demand and high resale value even in an inflationary environment.

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5. Scaling Up Through the "Dual Engine" of Larger Projects and Increased Volume

The business is scaling up in both the "quality" and "quantity" of its investments.

[Slide 12 (Index 11) Commentary: The Impact of Larger Projects]

This slide illustrates the trend in the number of acquisition projects by scale. Notably, there are 22 large-scale projects exceeding 1 billion yen , including 10 ultra-large projects exceeding 2 billion yen .

While the company previously focused on small-to-medium properties (100 million to under 500 million yen), projects over 1 billion yen are now powerfully driving the scale-up of the entire business. The total project scale acquired in the current fiscal year reached 59 billion yen (59,043 million yen) in the first nine months, proving steady progress toward the annual target of 120 billion yen . The shift toward larger projects has exponentially increased the profit impact per deal.

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6. Progress of Development Projects and Income-Generating Property Pipeline

Specific projects currently underway are progressing smoothly.

• Development Projects (12 ongoing) : Projects include the "Kagurazaka Bentencho Project" (24 units, urban residence), "Higashi-Nihonbashi Project" (11 units, office building), and "Kasai II Project" (27 units, residence), all located within walking distance of major stations.
• Income-Generating Properties (48 ongoing) : Projects include "DEAR LIFE Harajuku Takeshita-dori" (8 retail units), "DEAR LIFE Jimbocho" (7 office/retail units), and "DeLCCS Ushigome-Kagurazaka Ekimae II" (6 retail units, 26 residential units).

By incorporating commercial facilities and office buildings in city centers alongside urban residences, the company is diversifying its asset types and broadening its revenue base.

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7. Strong Expansion of the Sales Promotion Business

The non-real estate Sales Promotion Business continues to function as a stable foundation for revenue and profit growth.

• Segment Sales : 3,032 million yen ( up 3.2% YoY)
• Segment Profit : 49 million yen (compared to 44 million yen in the same period last year)

Growth has been accelerated by an increase in the number of working days for dispatched staff, the development of new clients, and the revision of contract unit prices with corporate clients, particularly in real estate-related staffing. Furthermore, profit margins have improved due to reduced recruitment costs resulting from higher employee retention rates.

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8. Setting Targets for the First Year of the "Challenge 2028" Medium-Term Plan

The company is promoting a growth strategy titled "Challenge 2028" to achieve medium- to long-term growth.

[Slide 18 (Index 17) Commentary: The "Challenge 2028" Roadmap]

This slide shows the numerical targets for the first year (FY2026) of "Challenge 2028." The company has set highly ambitious growth targets for this fiscal year: 10 billion yen in ordinary profit (up 27.7% YoY) and 6.8 billion yen in final profit (profit attributable to owners of parent) .

In terms of capital efficiency, the company aims to maintain an ROE of 20% or higher and an ROIC level of 12% , demonstrating a clear intent to balance aggressive capital deployment with high profitability. The massive inventory (45.3 billion yen) acquired by the third quarter will serve as the "fuel" to achieve this 10 billion yen ordinary profit target.

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9. Shareholder Return Policy Considering DOE and Dividend Targets

The company continues to maintain a shareholder return policy that balances stability and growth.

Since the fiscal year ended September 2024, the company has implemented stable dividends while considering DOE (Dividend on Equity) . Past dividend performance has shown steady growth: 30 yen (FY2021), 44 yen (FY2022), 41 yen (FY2023), 47 yen (FY2024), and 63 yen (FY2025).

For the fiscal year ending September 2026, the company has set an annual dividend target of 64 yen per share . This reflects a clear commitment to shareholders by maintaining and increasing return levels in line with business expansion.

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10. Summary and Key Points to Watch

While Dear Life's Q3 FY2026 earnings show a decline in revenue and profit on the surface of the P&L, an analysis of the balance sheet (BS) and business pipeline reveals strong growth momentum :

1. The company utilized funds raised through a public offering to acquire real estate at a record pace.
2. Inventory surged to 45.3 billion yen (2.7 times the previous year-end) , setting the stage for future sales and monetization.
3. The company has sharpened the quality of its acquisitions by targeting large-scale projects near stations in Tokyo's 23 wards .

Given these factors, the company is steadily completing the "acquisition and preparation" phase to achieve its first-year "Challenge 2028" target of 10 billion yen in ordinary profit . The primary point to watch in the fourth quarter and the coming fiscal year will be the timing and conditions under which these large-scale acquired properties are sold and converted into profit.