HOB Co.,Ltd. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥315M
• Operating Income: ¥-55M
• Net Income: ¥-33M
• EPS: ¥-70.75

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Verdict: Weak Q1 with continued operating losses despite a solid liquidity position. Revenue was 3.15 (−3.3% YoY), with gross profit of 0.93 and gross margin at 29.7%, indicating pressure on topline and limited pricing power. SG&A of 1.26 (40.0% of sales) exceeded gross profit, producing operating income of −0.55 (−8.6% YoY) and an operating margin of −17.5%. Ordinary income was −0.54 (−11.3% YoY), and net income was −0.53, which improved by 14.2% YoY but remains a loss (EPS −70.75 yen). Asset turnover was a low 0.299, and with financial leverage of 1.59x, ROE printed at −8.0% driven by a −16.8% net margin. The company’s margin comparison in basis points versus last year is not calculable due to missing prior-period margin data; directionally, operating profitability deteriorated modestly given operating loss down 8.6% versus revenue down 3.3%. Earnings quality cannot be verified as operating cash flow is unreported; OCF/NI and FCF are not calculable. Liquidity is strong with a current ratio of 392% and cash of 6.37 covering current liabilities of 2.33 nearly 2.7x, mitigating near-term solvency concerns. Leverage appears moderate with D/E at 0.59x and minimal interest expense, though reported interest coverage is mechanically negative due to negative EBIT. Working capital is ample (6.81), and payables (1.65) are substantially covered by cash and receivables (6.37 + 2.28). ROIC is reported at −202.2%, reflecting negative operating profitability against a small invested capital base; improvement requires either revenue scale-up or SG&A reduction. With DPS unreported and a net loss, dividend visibility is low; cash reserves could support a small payout if policy dictates, but sustainability depends on turning OCF positive. Forward-looking, the priority is restoring operating breakeven by lifting gross profit (pricing/mix) and compressing SG&A; absent that, continued losses will erode retained earnings despite today’s strong liquidity.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = (−16.8%) × 0.299 × 1.59 ≈ −8.0%. The dominant drag is the net margin, as asset turnover is low but stable-looking, and financial leverage is moderate at 1.59x. Business driver: SG&A of 1.26 (40.0% of sales) exceeded gross profit of 0.93, yielding operating margin −17.5%; cost structure appears too heavy for current scale. Non-operating line was near-neutral (income 0.01, expenses 0.00), so core operations drove the loss. Sustainability: Without cost actions or revenue recovery, the negative margin is structural rather than one-off; no one-time gains/losses are disclosed. Concerning trend flags: SG&A intensity (40.0% of sales) exceeds gross margin (29.7%), indicating negative operating leverage; revenue decline (−3.3%) alongside larger operating loss (−8.6% YoY) suggests deterioration in efficiency.

Growth Assessment

Revenue declined 3.3% YoY to 3.15, indicating demand softness or pricing pressure. Operating income deterioration (−8.6% YoY) outpaced the topline decline, implying unfavorable operating leverage. Gross margin stands at 29.7%; no YoY margin detail is available to quantify bps change, but the current level is insufficient to cover a 40.0% SG&A ratio. Ordinary income (−0.54) worsened 11.3% YoY, while net income loss narrowed 14.2% YoY, likely due to a lighter tax/extraordinary impact (tax expense was a small +0.01). Outlook hinges on scaling revenue and/or reducing fixed costs to reach breakeven; absent mix/pricing improvements, growth alone must exceed SG&A growth to restore profitability. With asset turnover at 0.299, improving utilization of assets (inventory turns, receivables collection, capacity utilization) could support growth quality.

Financial Health

Liquidity is strong: current ratio 392.3% and quick ratio 374.6%, with cash and deposits of 6.37 versus current liabilities of 2.33. No warning on current ratio (<1.0) or leverage; D/E is 0.59x (below 2.0 threshold). Maturity mismatch risk is low: current assets 9.14 comfortably exceed current liabilities 2.33; accounts receivable 2.28 plus cash 6.37 cover accounts payable 1.65 multiple times. Noncurrent liabilities total 1.56 against equity of 6.64, indicating moderate solvency risk. Interest-bearing debt is unreported, but interest expense is ~0.00, suggesting minimal debt service burden. Off-balance sheet obligations are not disclosed.

Cash Flow Quality

OCF is unreported, so OCF/Net Income and FCF cannot be assessed; earnings quality is therefore indeterminate. Given negative operating income and declining revenue, underlying cash generation risk is elevated until proven otherwise. Working capital: receivables (2.28) and inventories (0.41) look moderate relative to sales, but without cash flow data we cannot confirm collection speed or inventory build/releases. No signs of working capital manipulation can be assessed due to missing CF detail.

Dividend Sustainability

DPS and total dividends are unreported; the calculated payout ratio of −71.9% is not economically meaningful with a net loss and missing DPS data. With net income negative and OCF unreported, dividend capacity relies on existing cash (6.37) and any untapped debt capacity. Near-term, liquidity appears sufficient to support a small payout if policy requires, but sustainability depends on restoring positive OCF and operating profit. No buybacks or capex data were provided to assess competing cash uses.

Risk Assessment

Business Risks:

• Demand softness and/or pricing pressure evidenced by −3.3% YoY revenue decline
• Cost structure misalignment: SG&A at 40.0% of sales versus 29.7% gross margin
• Small scale leading to negative operating leverage and earnings volatility
• Potential seasonality and product mix risk impacting gross margin

Financial Risks:

• Sustained operating losses (operating margin −17.5%) could erode retained earnings
• Cash flow uncertainty due to unreported OCF and FCF
• ROIC reported at −202.2%, indicating value destruction until profitability recovers
• Mechanical interest coverage warning due to negative EBIT, though cash mitigates near-term service risk

Key Concerns:

• Path to breakeven unclear without either revenue scale-up or SG&A reduction
• Limited visibility on capex and investment needs due to missing CF/PP&E data
• Dependence on working capital discipline; receivables collection timing not disclosed
• Data gaps (OCF, depreciation, segment detail) impede full risk assessment

Investment Implications

Key Takeaways:

• Q1 delivered a net loss of −0.53 with operating margin −17.5% on revenue decline of −3.3%.
• Cost structure is too heavy: SG&A (1.26) exceeds gross profit (0.93).
• Liquidity is a positive: cash 6.37 and current ratio 392% provide runway.
• Leverage moderate at 0.59x; debt service burden appears minimal.
• ROE −8.0% driven by a −16.8% net margin and low asset turnover (0.299).
• Cash flow visibility is low; inability to assess OCF/FCF is a key constraint.
• Turning operating profit positive will require margin uplift and/or SG&A compression.

Metrics to Watch:

• Revenue growth and ASP/mix to lift gross margin above 40% SG&A intensity
• SG&A trend and cost actions to reduce fixed-cost burden
• Operating cash flow and working capital (DSO, inventory turns) once disclosed
• Gross margin trajectory and input cost dynamics
• Retention of cash balance vs. any new borrowing or capex commitments

Relative Positioning: Compared to small-cap peers, the company’s liquidity is strong and leverage conservative, but profitability lags with negative operating margins and ROE; recovery hinges on cost discipline and topline stabilization.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis