TRIAL Holdings (141A) Lowering forecasts and price target on operating environment and actual earnings; maintain Overweight 

Research evidence excerpt

TRIAL Holdings (141A) Lowering forecasts and price target on operating environment and actual earnings; maintain Overweight

count the impact of (i) the disposal of old inventories in

4Q, (ii) competition measures and the negotiation of purchasing terms, and (iii) an

increase in earnings-linked bonuses that exceeded our previous assumption.

• Negative surprises in 3Q results: We estimate that the surprises relative to the

previous market consensus were mainly at Trial. Trial’s profit topped initial

guidance by ¥5.3 billion in the nine months through 3Q, but the downward revision

to guidance of around ¥2.7 billion in 4Q was a major factor. Of the ¥2.7 billion

revision for 4Q, the company said that ¥300 million was in expenses (performance-

linked personnel expenses not included in the initial plan) and the remaining ¥2.4

billion was due to a deterioration in gross profit. The breakdown of ¥2.4 billion is as

follows: (i) the ¥500 million cost to dispose of old inventories, (ii) a delay in the

realization of the results of negotiations with suppliers to reduce costs (¥600–800

million); and (iii) the impact of price promotions in late June and early July 2026

(¥1.2 billion). The company said it has taken the necessary action in each area to

achieve the targets in the medium-term plan. In negotiations with suppliers, the

outlook for the medium term is unchanged as this is just due to the gap in the timing

at which the benefits will be realized. For the impact of price promotions (reduction

in selling prices), we think the guidance revision factors in only the one-time decline

in the appraised value of fiscal year-end inventories (and the increase in

procurement COGS) so we expect a positive impact of around the same amount in

FY6/27.