ORIX expands asset-based lending

ORIX has begun FY 26 with strong momentum, fueled by increased investment gains and broad-based growth across its real estate, financial services and asset management businesses. Strategic expansion through recent acquisitions enhances its capabilities, particularly in asset-based lending and portfolio management. Management maintains an upbeat outlook, supported by operational discipline and a focus on navigating evolving market opportunities.

ORIX Corporation was established in 1964 in Osaka, Japan, as Orient Leasing Company, a pioneering joint venture between Nichimen Corporation and Sanwa Bank, alongside other financial institutions. The company is headquartered in Tokyo, Japan. The company operates in over 30 countries and regions worldwide, with approximately 34,000 employees. The company provides a comprehensive range of services including equipment leasing, corporate lending, real estate financing and development, life insurance, investment banking, venture capital, and securities brokerage. The revenue is reported under three categories: Finance, Operations, and Investments.

The company operates through 10 business segments namely: Real Estate (20.5% of Q1 26 revenue), Insurance (17.4%), Corporate Financial Services and Maintenance Leasing (15.9%), PE Investment and Concession (12.4%), ORIX Europe (8.3%), Asia and Australia (7.4%), Environment and Energy (6.4%), ORIX USA (5.3%), Aircraft and Ships (3.6%) and Banking and Credit (2.8%).

Growth in Q1 26 & upbeat outlook

ORIX released its Q1 26 results on August 7, 2025. The company reported sales of JPY768.6bn, up 8.5%, primarily driven by higher gains from investment securities, increased dividends, and stronger sales from goods, real estate, and service activities, somewhat offset by declines in life insurance premiums and related investment returns. In addition, ORIX experienced 33.8% y/y growth in Real Estate business, 8.4% y/y growth in Corporate Financial Services and Maintenance Leasing, and 0.7% y/y growth in PE Investment and Concession business.

Operating income experienced 50.4% y/y growth, reaching JPY129.8bn, driven by higher gains from ongoing investments as compared to one-time sales. Consequently, margins expanded by 470bp to 16.9%. Net profit rose by 23.7% y/y, to JPY107.3bn, with EPS of JPY94.4, reflecting a 25.5% y/y rise.

Looking forward to FY 26, the company expects net income of JPY380.0bn, with an aim to achieve record-high earnings for the third consecutive year. Management expects profits from the Finance category to grow by 2.0% y/y to JPY180.0bn, bolstered by consistent insurance premium income growth. For the Operations category, it expects 15.0% y/y growth, with profit reaching JPY230.0bn, thanks to steady AUM in ORIX’s European operations and strong results in its aircraft leasing activities. Likewise, for the Investment category, segment profit is expected to grow by 13.0% y/y, reaching JPY190.0bn, driven by robust performance by domestic PE and real estate investment business.

In addition, the company expects new investments and divestments between JPY500.0 bn to JPY700.0bn respectively and capital gains ranging from JPY120.0bn to JPY180.0bn.

ORIX USA acquires Hilco Global

On September 3, 2025, ORIX Corporation announced the completion of acquisition of 71.4% of the issued shares of Hilco Trading, LLC (“Hilco Global”) for $776.0m as declared on July 4, 2025. Hilco Global is a US based global financial services company, which provides services related to asset monetization and asset-based lending. ORIX Corporation USA (OCU) serves as a strategic business hub for ORIX in the US and operates through three business units: private credit, real estate-related finance, and private equity investment.

The acquisition positions OCU to build stronger expertise in asset-based loan origination and supports expansion of its asset management operations. By enhancing these capabilities, OCU is well placed to capitalize on anticipated growth in the asset-based lending market, leveraging third-party assets to broaden its contract base and drive continued advancement of its asset management business.

Sustained growth momentum

ORIX reported a decent top-line performance over FY 22-25, posting a revenue CAGR of 4.7% to reach JPY2.9tn in FY 25, the principal drivers include robust performance across finance, operations, and investment segments and solid gains from private equity exits. EBIT rose at a CAGR of 8.8% to JPY545.0bn, with margins expanding by 197bp to 19.0%. Net income increased at 3.5% CAGR over the same period, reaching JPY352.0bn.

Consistent net income growth led to decent growth in CFO, increasing from JPY1.1tn to JPY1.3tn. In addition, the cash and cash equivalent rose from JPY955.0bn to JPY1.2tn.

In comparison, Sumitomo Mitsui Financial Group, a local peer, reported a revenue CAGR of 5.2% over FY 22-25, reaching JPY3.3tn in FY 25. EBIT surged at a CAGR of 0.1% to JPY516.0bn, however margins contracted by 255bp to 15.8% in FY 25. Net income declined at a CAGR of minus 0.04% to JPY510.0bn.

Optimistic outlook & stronger yields

Over the past 12 months, the company’s stock has delivered decent returns of approximately 18.5%. In comparison, Sumitomo Mitsui Financial’s stock delivered higher returns of 29.4% over the same period. In addition, ORIX declared dividends of JPY120.0 in FY 25, with a rate of return of 3.9%. Analysts expect a dividend yield of 4.1% over the coming years.

ORIX is currently trading at a P/E of 10.3x, based on the FY 26 estimated EPS of JPY371.6, which is slightly higher than its 3-year historical average of 10.2x but lower than Sumitomo Mitsui Financial’s valuation of 11.0x. The company is currently trading at an EV/EBIT multiple of 22.6x, based on FY 26 estimated EBIT of JPY412.1bn, which is lower than its 3-year historical average of 24.0x but higher than Sumitomo Mitsui Financial (8.1x).

ORIX is monitored by eight analysts, five of whom have ‘Buy’ ratings and three have ‘Hold’ ratings for an average target price of JPY4,166.3, implying 8.7% upside potential over its current market price.

The analysts’ views are supported by an estimated revenue CAGR of 5.4%, reaching JPY3.4tn over FY 25-28. EBIT is estimated to rise at a CAGR of 14.8% to JPY502.5bn with margin expansion of 338bp to 14.9% in FY 28. In addition, analysts estimate a net profit CAGR of 10.2% to JPY470.2bn. Likewise, for Sumitomo Mitsui Financial, the analysts estimate an EBIT CAGR of 8.2% and a net profit CAGR of 15.1% over FY 25-28.

Overall, ORIX has demonstrated consistent operational progress, supported by diversified revenue streams across its finance, operations, and investment categories. The company's strategic expansion, with selective acquisitions, has strengthened its competitive positioning and enhanced long-term value creation potential. Looking ahead, ORIX remains well positioned for sustained growth, underpinned by management's confidence in achieving record earnings and expanding profitability across key business segments.

However, the company is exposed to macroeconomic volatility and interest rate fluctuations, which could pressure lending margins, investment valuations, and insurance underwriting performance across its diversified portfolio. In addition, navigating regulatory complexities across multiple international markets could impact profitability and revenue growth momentum.