4933.T

Core Business Model & Competitive Advantages

• I-ne operates as a fabless beauty manufacturer, with an in-house R&D center (JBIST) that develops proprietary product formulas, which are then produced in partnership with OEM manufacturers. It distributes products via e-commerce, drugstores, and consumer electronics retailers, following an EC x retail growth model.
• Three core competitive strengths:
  1. IPTOS: Proprietary gated brand management system that splits product development into multiple phases (ideation, planning, testing, test sales, scaling) with strict performance gates, allowing low-risk rapid testing of new products and fast exit for underperforming concepts. Years of accumulated success/failure data continuously improves demand forecasting accuracy, increasing the hit rate of new products.
  2. Brand Creation Capability: Collects over 10,000 new ideas annually, narrows ideas via data-driven "science" filtering, then uses qualitative "art" judgment to select novel, buzz-worthy concepts (avoiding overfamiliar low-differentiation ideas that test well but do not generate viral traction). Employs 87 in-house creators (far more than peer fabless manufacturers) for fast high-quality creative iteration, and maintains a network of over 200 OEM partners for flexible high-quality product development.
  3. OMO (Online Merges with Offline): Integrated online-offline go-to-market, a rare capability in the Japanese beauty industry where online strength is concentrated in startups and offline strength in large incumbents. Benefits from 20 years of offline retailer relationship building, and is recognized as a digitally-capable manufacturer that can offer combined digital promotion and product placement to retailers.

M&A Strategy

• I-ne has experience with both sell-side and buy-side M&A: It sold the CHILL OUT beverage brand to Coca-Cola Japan for 3 billion yen in 2023 to focus on core beauty categories.
• Recent acquisitions include skincare brand TOUT VERT owner Touvere Inc, and Artemis Inc (the trading arm for SALONIA). The Artemis acquisition is expected to eliminate 0.8 billion yen in annual intermediate margin to improve profit margins, while TOUT VERT's strong online capabilities complement I-ne's offline expansion strengths.
• M&A strategy targets promising brands/companies with single-channel (online/offline) gaps, unique positioning, or margin improvement potential, and only pursues deals where internal analysis confirms the brand can be scaled successfully.

Organizational & Portfolio Changes

• A 2-year-old shift to a division-based organizational structure (from functional structure) weakened the IPTOS system, leading to over-reliance on survey results (science) and loss of the critical art/science balance in product development, which caused the recent slowdown in core segments. To address this, I-ne has shifted to a combined functional-divisional organizational structure, re-strengthening the IPTOS decision process. The recently launched YOLU Mellow series, developed under the revised process, is already performing very well, and core segment growth has started to improve from Q2 to Q3 2025.
• I-ne has strategically allocated resources to build skincare and other categories as a new revenue pillar to hit its long-term revenue target, and this segment is already producing multiple hit and pipeline products, with strong growth projected to continue.

Shareholder Returns

• I-ne has expanded shareholder returns to grow individual shareholder ownership and improve stock liquidity: It now offers 10 thousand yen in digital gift vouchers for holders of 100-499 shares, and 20 thousand yen for holders of 500+ shares, and increased year-end dividend from 13.5 yen to 15.0 yen per share.

• The next medium-term management plan will be released in February 2026.
• I-ne maintains its long-term target to reach 100 billion yen in revenue, 14 billion yen in EBITDA, and 11 billion yen in operating profit between 2028 and 2030, with the goal of becoming a leading Japanese beauty megaventure, and targets 200 billion yen to 300 billion yen in revenue in the longer term.
• Full delivery of products from the new organizational structure is expected to start from the second half of the 2026 12-month period, with improved existing products to be sold in the interim.
• I-ne's long-term strategic vision is to expand Japanese-made "J-Beauty" globally, competing with the current dominant K-Beauty trend, and to pave the way for other Japanese venture beauty brands to enter global markets.

For the 2025 12-month period third quarter: 1. Hair care segment: Revenue came in below the prior year same period, after years of being I-ne's core segment holding the No.1 domestic market share in Japan. 2. Beauty appliances segment: Revenue also fell below the prior year same period, with SALONIA brand holding top-tier domestic market share in the hair iron category. 3. Skincare and other categories (including fabric softener ReWEAR, eye drops, health food): This segment significantly outperformed its initial planned growth, driven by focused resource allocation over the past 2-3 years, and is currently experiencing very rapid growth. As of the 2024 full year, total consolidated revenue reached 45 billion yen.

• Quarterly sales volatility is high due to shelf reallocation timing, delivery date shifts, and timing variation of annual collaborative/limited products, which can make sequential and year-over-year comparisons misleading even as full-year growth remains stable.
• Goodwill amortization from recent M&A makes reported operating profit growth appear slower than underlying business performance; underlying growth remains strong on an EBITDA basis.
• The recent underperformance of core hair care and beauty appliance segments is a temporary issue caused by internal organizational misalignment rather than primarily due to intensified industry competition, and corrective organizational changes are already being implemented.
• I-ne currently has very low overseas sales ratio, which is a existing challenge to its goal of global expansion.

Q: Why is I-ne's current share price priced at a discount despite consistent revenue and profit growth? / A: Management identifies three main factors for the discounted share price. First, quarterly volatility from retail delivery and scheduling shifts makes short-term results look weaker than underlying full-year performance. Second, goodwill amortization from M&A depresses reported operating profit even as underlying EBITDA growth remains strong. Third, core segments have seen temporary temporary slowdown recently, which is already being addressed. Management believes the current share price is at a discounted, attractive level.

Q: What caused the recent slowdown in I-ne's core hair care and beauty appliance segments, and how is management addressing this? / A: The slowdown is primarily due to internal organizational issues, not just external competition. A shift to division-based organization weakened the IPTOS system's balanced decision process, leading to over-reliance on survey results that produced low-novelty products. Management has restructured to a combined functional-divisional model to restore IPTOS functionality, and the first new product under the new process is already performing very well. Core segment growth has started improving in recent quarters.

Q: What is I-ne's approach to M&A, and how do you avoid common post-acquisition performance issues? / A: I-ne pursues both buy and sell M&A to sharpen portfolio focus and add complementary capabilities. It targets promising brands that have gaps in online or offline go-to-market that I-ne can fill, or that can deliver margin improvements. Only deals that internal analysis confirms can be scaled successfully are pursued, with a dedicated M&A team doing deep product-level due diligence before approving any transaction.

Q: Why has I-ne expanded shareholder returns recently, and what is the strategic goal? / A: I-ne has increased dividends and significantly expanded shareholder gift vouchers because individual shareholder ownership is currently very low. The goal of expanded returns is to grow the individual shareholder base, improve stock liquidity, and broaden market support for the company.