Zenhoren (5845) Q1 FY2027 Earnings Deep Dive: A Growth Story Driven by Record Profits and Upward Revisions to Full-Year Guidance and Dividends

Zenhoren Co., Ltd. (TSE Standard: 5845) reported record-highs in both net sales and operating profit for the first quarter of the fiscal year ending March 2027, demonstrating robust progress. Consequently, the company announced an upward revision to its full-year earnings and year-end dividend forecasts on July 29, 2026.

This report synthesizes key takeaways from the earnings materials into 10 core points, providing a detailed analysis of the company's business environment, financial health, growth strategy, and future outlook.

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10 Key Topics

1. Q1 Earnings Highlights (Record-High Profits)
2. Upward Revision to Full-Year Earnings and Dividend Forecasts
3. Synergy Effects with MUFG (Mitsubishi UFJ Financial Group)
4. Solid Financial Foundation and High Capital Efficiency (ROE 38.5%)
5. Reduction in Indemnity Receivables (Potential Bad Debt) and High Safety Standards
6. Industry-Leading Profitability: (Adjusted) EBITDA Margin of 31.4%
7. Rigorous Receivables Management Amid External Headwinds (Rising Bankruptcies)
8. Steady Expansion of Business Foundation (Increase in Partner Bases and Contracts)
9. Productivity Gains and Cost Reductions via DX and Digitization
10. Strengthening the Customer Base and Long-Term Corporate Value Enhancement

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Chapter 1: Q1 Earnings Highlights and Upward Revision to Full-Year Forecasts

In the first quarter of the fiscal year ending March 2027, Zenhoren posted consolidated net sales of 6,690 million yen (+2.8% YoY), operating profit of 1,120 million yen (+19.5% YoY), ordinary profit of 1,116 million yen (+19.6% YoY), and quarterly net profit of 751 million yen (+22.7% YoY). All profit lines reached record highs for a first quarter .

Rationale for Slide Selection and Data Background (Slide 1)

The earnings highlight slide above is a critical document for grasping the company's current performance momentum and its shifting valuation in the stock market at a glance. Regarding the P&L, while cost of sales increased (2,011 million yen) due to factors such as the normalization of credit costs, selling, general and administrative (SG&A) expenses decreased significantly from 3,793 million yen to 3,558 million yen compared to the same period last year, thanks to operational efficiencies and cost-cutting measures. As a result, the operating profit margin expanded from 14.4% to 16.7% . Furthermore, the operating profit progress rate against the full-year forecast reached 28.0% at the end of the first quarter, marking a strong start. The stock price has also performed steadily, with market capitalization reaching a record high of 31.2 billion yen (as of July 31, 2026).

Following these strong Q1 results, the company disclosed an upward revision to its full-year earnings and dividend forecasts on July 29, 2026.

Rationale for Slide Selection and Data Background (Slide 3)

This revision slide is one of the most important data points indicating the company's full-year outlook and shareholder return policy. While the full-year net sales forecast remained unchanged at 27,416 million yen, operating profit was raised from the initial 3,530 million yen to 4,000 million yen (+13.3%) , ordinary profit from 3,532 million yen to 4,000 million yen (+13.2%) , and net profit from 2,524 million yen to 2,800 million yen (+10.9%) . Earnings per share (EPS) will also increase from 96.46 yen to 107.00 yen .

Factors contributing to this upward revision include:

• MUFG Synergy Promotion : Concentration of transactions with high-quality clients and promotion of high-value-added products such as the "Mitsubishi UFJ Card Plan."
• Credit Cost Control : The establishment of a downward trend in indemnity receivables due to sophisticated screening and strengthened collection systems.
• Cost Reduction via Digitization : SG&A expenses were reduced more than anticipated through IT and AI-driven operational efficiency.

In line with the earnings revision, the year-end dividend forecast was increased by 6.00 yen from the initial 48.00 yen to 54.00 yen per share annually (compared to 40.00 yen in the previous fiscal year) . This represents a dividend increase of 12.5% , demonstrating a proactive stance toward shareholder returns.

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Chapter 2: Financial Soundness and Industry-Leading Profitability

In the rent guarantee industry, managing credit risk in response to economic trends and bankruptcy rates is the core of management. Currently, judicial statistics show an upward trend in personal rehabilitation and bankruptcy cases, and data from Tokyo Shoko Research (TSR) indicates an increase in corporate bankruptcies. Amid this environment, Zenhoren boasts a robust risk management system.

Rationale for Slide Selection and Data Background (Slide 4)

This slide, which compares safety and profitability, objectively demonstrates Zenhoren's competitive advantages and financial safety relative to its peers.

Key Indicators:

1. Indemnity Receivables to Net Sales Ratio (24.7%) : Indemnity receivables, which arise from rent advances, are essentially "potential bad debt." While the ratio for other companies (A to D) ranges from 40% to over 90%, Zenhoren has kept this at an extremely low level of 24.7% . This signifies high screening accuracy and a low incidence of unpaid rent.
2. Allowance for Doubtful Accounts to Indemnity Receivables Ratio (58.9%) : This indicator shows how conservatively the company provides for incurred indemnity receivables. Zenhoren maintains a very high level of 58.9% , providing overwhelming coverage compared to peers and ensuring sufficient preparation for future default risks.
3. (Adjusted) EBITDA Margin (31.4%) : The (adjusted) EBITDA margin, which indicates cash-generating ability and actual profitability, reached 31.4% , maintaining a high-profit structure that is among the best in the industry.

As an indicator of management precision regarding default risk, the company's "subrogation payment rate after 30 days, net of early payments" remains at a healthy 0.44% , and the "subrogation recovery rate" improved by 0.56pt year-on-year to 96.99% . Advanced screening and collection processes are the pillars of the company's high soundness.

On the balance sheet, the company holds 9,484 million yen in cash and deposits, maintaining a virtually debt-free management style. The equity ratio is 33.0% , and ROE (Return on Equity) has reached 38.5% on an annualized basis, achieving a balance between capital efficiency and safety.

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Chapter 3: Expansion of Business Foundation and Promotion of DX (Digitization)

Fundamental data driving the company's growth includes the expansion of partner bases and the number of contracts.

• Number of Partner Bases : 59,068 (+4,407 bases from end of June 2025, +8.1% )
• Cumulative Rent Debt Guarantee Contracts : 4.565 million (+255,000, +5.9% )
• Contracts in Force : 1.960 million (+11,000, +0.6% )

The network of real estate partners is expanding steadily, leading to a stable increase in new contracts.

Furthermore, the company is aggressively promoting digital transformation (DX). The number of bases adopting the web guarantee application and contract system " Z-WEB2.0 " reached 21,752 , accounting for 36.8% of total partner bases (an increase of 8,027 bases, or approximately 1.6x from the previous year). Consequently, digitization rates have improved significantly:

• Electronic Application Rate : 47.9% (+9.4pt YoY)
• Electronic Contract Rate : 26.4% (+5.3pt YoY)

With nearly half of all applications now digitized, the company has accelerated screening and reduced administrative burdens, contributing significantly to SG&A cost control and improved customer convenience.

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Chapter 4: Growth Strategy and Long-Term Corporate Value Enhancement

Zenhoren is expanding beyond simple rent guarantees to provide services that support the entire lifestyle of tenants. Through " YUiPASS ," a life support platform with approximately 80,000 members , the company offers diverse services before and after move-in, including credit card payments, moving services, appliance/furniture rentals, and beauty equipment. This creates continuous touchpoints with tenants, maximizing LTV (Life Time Value) and strengthening the customer base.

Key organizational and governance initiatives include:

1. Headquarters Relocation : Scheduled to move to the "Naha Port Building" on December 21, 2026, to improve transportation convenience and create a better working environment, aiming to attract top talent and revitalize internal communication.
2. Strengthening Governance : Transitioned to a company with an Audit and Supervisory Committee in June 2026 to enhance the oversight function of the Board of Directors and accelerate decision-making.
3. Shareholder Returns and IR Activities : The company is committed to enhancing shareholder value through active briefings for individual investors and dividend increases. The long-term plan sets a market capitalization target of 66.9 billion yen in four years .

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Conclusion and Summary

Zenhoren's Q1 FY2027 earnings showed exceptionally strong progress, marked by record-high profits and upward revisions to full-year earnings and dividend forecasts.

• Performance & Efficiency : Operating profit margins have improved through SG&A cost reductions and the deployment of high-value-added products, with ROE reaching an extremely high level of 38.5% .
• Risk Management : With a low indemnity receivables ratio, a high provision rate ( 58.9% ), and a high recovery rate ( 96.99% ), the company maintains rock-solid financial resilience against external environmental changes such as rising bankruptcies.
• DX & Structural Reform : Initiatives to improve productivity, such as the increased electronic application rate ( 47.9% ) driven by the adoption of Z-WEB2.0, are yielding results.

Against the backdrop of deepening cooperation with the MUFG Group, efficiency gains through digitization, and a solid customer base, these earnings confirm that the company's long-term growth story and efforts to enhance corporate value are progressing smoothly.