MUSCAT GROUP Inc. 1Q Earnings Preview

First Earnings Report to Confirm Post-Restructuring Profit Recovery

PublishedAugust 10, 2026 at 15:30 GMT+9

Summary

The 1Q of FY2027/3 marks the first quarter in which the results of the large-scale structural reforms implemented in the prior fiscal year will be reflected. With the exit from unprofitable businesses (RiLi casting, apparel, lifestyle support, etc.) now complete, and resources concentrated on brand production and niche-top strategy under the new operating structure, the key focus is the extent to which three growth pillars—full-year contribution from Kanarabo (Fujiko/b idol), bialne growth at HaD, and MiiS's expansion into oral beauty—will drive revenue and earnings. The company listed on the Growth Market in June 2024 and operates a distinctive model combining inorganic growth through M&A with brand development centered on social media marketing. With goodwill of JPY 2.311B and an equity ratio of just 19.2%, investors need to carefully assess 1Q progress toward the full-year operating income target of JPY 50M (return to profitability).

Key Points for Next Quarter

Key Points & Focus	Implications
Revenue GrowthConsolidated revenue run-rate with Kanarabo's first full-quarter contribution	Whether 1Q revenue exceeds JPY 1.5B (our estimate: ~23% of full-year target) is a prerequisite for breakeven, against the full-year plan of JPY 6.602B
Profitability ImprovementYoY trends in gross profit margin and SG&A ratio	In the prior year, gross profit margin was 53.6% vs. SG&A ratio of 63.3%, resulting in an operating loss. We estimate a 5pt+ reduction in SG&A ratio is needed to reflect the impact of exiting unprofitable businesses
Adjusted EBITDAEarning power before goodwill amortization and acquisition-related costs	1Q progress toward the full-year target of JPY 324M (vs. JPY -118M in prior year). We estimate JPY 80M+ per quarter as the benchmark
Goodwill / Impairment RiskRecoverability of JPY 2.31B goodwill balance	Goodwill accounts for 40.9% of total assets. Need to verify whether business plans remain on track at Kanarabo (JPY 694M), NADESIKO (JPY 609M), Tokakai/MOM (JPY 481M), and others
Financial SoundnessTrends in equity ratio and interest-bearing debt	Equity ratio has declined to 19.2% (from 32.7% in the prior year). Refinancing status of JPY 820M in short-term borrowings + JPY 944M in current portion of long-term debt is critical for liquidity
New BusinessInitial revenue contribution from Oripa business and MiiS LIFT BRUSH	The trading card investment / online gacha business has unclear synergies with existing brand production operations. MiiS's beauty appliance rollout could enhance LTV as a high-ASP product line
Capital EfficiencyRecovery trend in ROE and ROIC	ROE was -32.8% in the prior year. Even with the full-year adjusted net income target of JPY 128M, meaningful ROE improvement is limited; need to assess the specificity of medium-term capital efficiency enhancement measures

Key Issues from Previous Results (FY2026/3 Full-Year Results)

The prior fiscal year delivered M&A-driven revenue growth (+38.3%), but was weighed down by Kanarabo's sales shortfall vs. plan, declining orders in other new business areas, and JPY 304M in goodwill impairment at the RiLi business, resulting in a deterioration to an operating loss of JPY -399M. That said, adjusted net income of JPY 310M (+95.0%) was secured, and the year can be characterized as one in which the company executed structural reforms and completed its pivot to a niche-top strategy. In FY2027/3, the reorganized group structure enters its first full quarter, and the focus shifts from growth in "quantity" to growth in "quality."

1. Full-Year Contribution from Kanarabo (Fujiko/b idol) and Distribution Expansion

Prior Year
: 5-month consolidated contribution period (November 2025–March 2026). Estimated revenue impact assuming start-of-year consolidation was +JPY 1.382B
This Quarter's Focus
: Whether the introduction into approximately 3,000 drugstore locations (announced July 2026) can offset revenue declines in the variety store channel through channel mix diversification
Key Metrics
: Kanarabo standalone quarterly revenue (our estimate: annual revenue of JPY 2.0B+ is implied in the full-year plan), gross margin trends

Kanarabo was consolidated as a subsidiary following a 68.0% stake acquisition in 3Q of the prior year, resulting in only five months of consolidated contribution. While results fell short of plan due to a deteriorating market environment in its variety store-centric distribution channel, the brand's equity in the cosmetics market remains intact, and it is positioned as the core of the niche-top strategy.

2. Restructuring and Earnings Contribution From Other New Business Areas

Prior Year
: Order declines driven by client ad budget reductions and accelerating in-housing. Revenue from the divested business prior to the Rice Curry LS transfer was JPY 448M (operating income JPY 188M)
This Quarter's Focus
: Recovery in RCP's order pipeline following the food & beverage specialization. Revenue erosion from the divestiture and resulting margin profile changes
Key Metrics
: Quarterly revenue in the other new business segment, OPM (compared with prior-year levels for RCP as a whole)

In the other new business segment, the lifestyle support business was divested to LMG (booking JPY 645M in gains on sale of affiliate shares), pivoting to a strategy focused on social media marketing support for the food & beverage category. Revenue in this segment was pressured by clients' advertising spend cuts and in-housing of marketing functions in the prior year.

3. Appropriateness of Goodwill Balance and Impairment Risk Management

Prior Year
: Goodwill balance of JPY 2.31B (40.9% of total assets). JPY 304M goodwill impairment booked at WinC. Goodwill amortization of JPY 161M
This Quarter's Focus
: Business plan progress at Kanarabo (JPY 694M / 10-year straight-line), NADESIKO (JPY 609M / 10 years), and Tokakai/MOM (JPY 481M / 20 years)
Key Metrics
: Quarterly goodwill amortization (our estimate: ~JPY 230M annually), any signs of additional impairment

The consolidation scope changed frequently during the year with 9 new entities added and 4 removed, causing the goodwill balance to surge from JPY 762M to JPY 2.31B. Given the precedent of JPY 304M in impairment at WinC (formerly RiLi), monitoring the degree to which each acquired company achieves its business plan remains a critical issue this fiscal year.

4. Financial Stability and Cash Flow Improvement

Prior Year
: Operating CF JPY -676M, cash balance JPY 689M. Short-term borrowings JPY 820M, current portion of long-term debt JPY 944M
This Quarter's Focus
: Outlook for operating CF turning positive. Normalization of inventory at JPY 954M (up +234% from JPY 285M in the prior year)
Key Metrics
: Quarterly operating CF, cash balance trajectory, debt service coverage ratio (our estimate: annual principal and interest payments exceed JPY 600M)

Operating cash flow has been negative for two consecutive years (JPY -676M in the prior year). M&A funding has been sourced through borrowings and equity issuance, with total interest-bearing debt reaching JPY 3.531B (including JPY 210M in bonds). The equity ratio has declined to 19.2%, raising questions about financial sustainability.

5. Monetization Progress in Oral Beauty and Clinic Business

Prior Year
: Tokakai/MOM consolidated (September 2025). Estimated operating loss of JPY -146M on a start-of-year pro forma basis. Harukikai was treated as acquired at fiscal year-end (balance sheet consolidation only)
This Quarter's Focus
: Revenue contribution from MiiS LIFT BRUSH (JPY 14.5M on Makuake → general release in August), timeline to monthly breakeven for the clinic business
Key Metrics
: Oral beauty-related revenue, quarterly operating income/loss in the clinic business

Starting from the "MiiS" brand, the company consolidated Tokakai, MOM, and Harukikai as subsidiaries, entering the clinic support and operations business. However, Tokakai/MOM showed an estimated operating loss of JPY -146M on a full-year pro forma basis, and the timeline to profitability remains a concern.

Timely Disclosure & Industry Trends

2026/07/22
MiiS LIFT BRUSH General Release — Following JPY 14.5M in crowdfunding on Makuake (4,831% funded), sales commenced on the official website, Amazon, Rakuten, and nationwide LOFT stores. Focus is on 1Q revenue contribution from the expansion of the high-ASP oral beauty product line. MiiS LIFT BRUSH General Release
2026/07/10
Fujiko "Keana Odamari! Cream" Launched in ~3,000 Major Drugstore Locations — Cumulative sales surpassed 110K units within 1.5 months of launch, exceeding 180% of the wholesale division's plan. This represents a critical assumption underpinning the full-year plan as the company diversifies away from variety store dependence. Fujiko Major Drugstore Launch
2026/06/23
Fujiko/b idol Win Multiple 1H 2026 Best Cosme Awards — Best cosme awards from beauty magazines validate brand awareness and equity. Fujiko's new products are tracking at approximately 3x the initial sales plan. Fujiko/b idol Best Cosme Awards
2026/06/17
Entry Into Trading Card Investment and Oripa Business — Announced entry into the online gacha service "Oripa Shop" as a "growth-redistributive treasury strategy." Synergies with existing brand production operations are limited, and monitoring is warranted from the perspective of business focus and selection. Trading Card Investment / Oripa Business Entry

Previous Quarter Results (FY2026/3 Full-Year Results)

MUSCAT GROUP operates as a "brand production company," running proprietary brands (brand production segment) and providing social media marketing support for corporations (other new business segment). Following its listing on the Growth Market in June 2024, the company aggressively pursued M&A under a niche-top strategy, consolidating Kanarabo (Fujiko/b idol), HaD (bialne), Tokakai/MOM (oral beauty clinics), and others. In the prior fiscal year, M&A-driven consolidation scope expansion fueled +38.3% revenue growth, but the company swung to an operating loss due to Kanarabo's sales shortfall, declining orders in the other new business segment, and impairment charges at the RiLi business. The company executed structural reforms, completing its exit from unprofitable businesses and transition to a holding company structure.

Item	Amount	YoY	vs. Guidance	Remarks
Revenue	JPY 4.129B	+38.3%	-	Primarily driven by consolidation scope expansion via M&A
Operating Income	JPY -399M	-	-	Swung to a loss from JPY 88M in the prior year. SG&A ratio rose to 63.3%
Recurring Profit	JPY -451M	-	-	Pressured by interest expense of JPY 56M (vs. JPY 21M in the prior year)
Net Income	JPY -368M	-	-	JPY 304M goodwill impairment, JPY 205M DTA write-down. Partially offset by JPY 710M gain on sale of affiliate shares
EPS	JPY -121.46	-	-	Deteriorated from JPY 38.68 in the prior year

Guidance Achievement Rate vs. Full-Year Plan: Not calculable as the company did not disclose full-year guidance for FY2026/3. Note that FY2027/3 full-year guidance calls for revenue of JPY 6.60B and operating income of JPY 50M.

MUSCAT GROUP Inc.