Hokuryo Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥11.54B
• Operating Income: ¥2.52B
• Net Income: ¥1.79B
• EPS: ¥211.57

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

Hokuriyo Co., Ltd. (13840) reported a strong FY2026 Q2 standalone performance under JGAAP, characterized by substantial top-line growth and exceptionally strong operating leverage. Revenue rose 29.7% YoY to ¥11.542bn, while operating income surged 615% YoY to ¥2.519bn, lifting operating margin to roughly 21.8%. Ordinary income was ¥2.562bn and net income ¥1.789bn (+76.3% YoY), implying a net margin of 15.5%. DuPont decomposition indicates ROE of 11.62%, driven primarily by improved profitability (net margin 15.5%) and moderate asset turnover (0.556) with conservative leverage (financial leverage 1.35x). EBITDA reached ¥3.041bn (26.3% margin), with D&A of ¥522m, highlighting a sizable but manageable non-cash component. Cash generation kept pace with earnings quality: operating cash flow was ¥1.681bn, about 94% of net income, a solid conversion for a first-half period and consistent with robust earnings quality. Liquidity is strong with a current ratio of 191% and a quick ratio of 188%, supported by low inventories (¥116m) relative to current assets. The balance sheet is conservative: liabilities total ¥5.062bn against equity of ¥15.398bn, for a D/E of 0.33x and financial leverage of 1.35x, providing ample solvency headroom. Interest expense is negligible (¥1m) and interest coverage is effectively unconstrained (over 2,500x on an operating-income basis). Free cash flow could not be assessed due to undisclosed investing cash flows; therefore reported FCF of zero reflects missing data, not actual zero. Similarly, cash and equivalents and the equity ratio were not disclosed, limiting certain ratio diagnostics. The disclosed “gross profit” of ¥1.133bn appears inconsistent with the operating profit level, suggesting a possible labeling or classification difference; analysis here relies on operating and ordinary income as the more reliable profitability anchors. Tax expense of ¥470m implies an effective tax rate in the high teens, despite a calculated metric showing 0.0%, which appears to be a placeholder. Dividend information (DPS and payout ratio) appears undisclosed in substance, constraining dividend sustainability analysis. Overall, the company exhibits strong profitability, high cash conversion, and low leverage, but sustainability hinges on maintaining favorable pricing and cost conditions in its core operations. Outlook-wise, the large swing in operating income versus revenue growth implies high operating leverage, which can work both ways if market conditions normalize.

Profitability Analysis

ROE of 11.62% is explained by net margin of 15.50%, asset turnover of 0.556, and financial leverage of 1.35x. Operating margin is approximately 21.8% (¥2.519bn / ¥11.542bn), underscoring significant operating leverage as operating income grew far faster than revenue (+615% vs. +29.7% YoY). EBITDA margin is strong at 26.3%, with D&A of ¥522m implying a healthy EBIT level consistent with operating income. Interest burden is negligible (interest expense ¥1m), so the spread between operating and ordinary income is marginal, indicating minimal financial drag. The reported gross profit line (¥1.133bn, 9.8% margin) is inconsistent with the higher operating income, suggesting data labeling/mapping differences; hence margin quality is best assessed at EBITDA/operating levels, which appear robust. The net margin of 15.5% reflects strong operating performance and a moderate tax rate. Overall profitability quality appears high, but the step-up versus revenue indicates sensitivity to volume/price and cost inputs—i.e., elevated operating leverage.

Growth Assessment

Revenue grew 29.7% YoY to ¥11.542bn, a strong top-line performance for a first-half period. Profit growth far outpaced sales, with operating income up 615% YoY, implying a mix of favorable pricing, cost normalization, or efficiency gains. The expansion in EBITDA margin to 26.3% and operating margin to roughly 21.8% suggests cyclical or transitory tailwinds, possibly from product pricing and input cost relief. Net income increased 76.3% YoY to ¥1.789bn, with ordinary income at ¥2.562bn, indicating that non-operating items were not the primary driver of growth. Sustainability will depend on maintaining current pricing power and stable feed/energy costs; given the magnitude of operating leverage, a partial normalization could compress margins materially even if revenue holds. Asset turnover at 0.556 indicates reasonable asset utilization for a production-oriented business, but not aggressive growth through asset sweating. Outlook: if market conditions remain favorable, current profitability can be sustained near the mid-teens net margin; however, any adverse commodity or price shifts could reduce margins and ROE back toward historical norms.

Financial Health

Liquidity is solid: current assets of ¥6.795bn versus current liabilities of ¥3.555bn yield a current ratio of 191% and a quick ratio of 188%, with inventories modest at ¥116m. Working capital stands at ¥3.24bn, providing operational flexibility. Solvency is conservative: total liabilities of ¥5.062bn against equity of ¥15.398bn drive a debt-to-equity ratio of 0.33x, consistent with low financial risk. Financial leverage of 1.35x (assets/equity) is modest, leaving capacity if needed. Interest expense is de minimis at ¥1m, with extremely high interest coverage, minimizing refinancing risk. Total assets are ¥20.768bn and equity ¥15.398bn; the reported equity ratio line is undisclosed (0.0% placeholder), but the balance sheet composition implies an equity ratio around 74% (equity/assets) in substance. Overall, liquidity and solvency positions are strong.

Cash Flow Quality

Operating cash flow of ¥1.681bn equates to 94% of net income (¥1.789bn), indicating solid earnings-to-cash conversion. OCF/EBITDA is approximately 55%, suggesting some working capital build or timing effects typical of a growth phase or first-half seasonality. D&A of ¥522m indicates a meaningful non-cash component, but EBITDA comfortably covers it. Investing cash flow is undisclosed (shown as zero), so free cash flow cannot be reliably computed; the reported FCF of zero reflects missing investing data rather than an actual zero. Financing cash flow was an outflow of ¥504m, indicating either debt reduction or shareholder returns; details are not disclosed. Cash and equivalents are undisclosed, so period-end liquidity buffers cannot be directly assessed from cash data. Overall, cash flow quality appears sound given OCF alignment with earnings, but full FCF assessment is constrained by missing investing details.

Dividend Sustainability

Dividend data appear undisclosed in substance (DPS reported as 0.00 and payout 0.0% are placeholders rather than confirmed figures). With EPS of ¥211.57 for the period and strong operating cash flow, capacity for dividends exists in principle, but without confirmed DPS or policy guidance, payout sustainability cannot be concluded. FCF coverage cannot be assessed due to undisclosed investing cash flows (reported FCF zero is a data gap). Balance sheet strength (D/E 0.33x) supports potential distributions, but policy constraints, capex needs, and cyclicality in earnings should be considered. Until DPS and capex/FC plan are disclosed, treat dividend outlook as undetermined.

Risk Assessment

Business Risks:

• Margin normalization risk if product pricing weakens or input costs (e.g., feed, energy) rise
• High operating leverage evidenced by outsized profit swing versus sales growth
• Supply chain and biosecurity risks inherent to livestock/egg production operations
• Regulatory and food safety compliance requirements
• Geographic concentration and demand volatility in domestic market

Financial Risks:

• Working capital sensitivity given OCF/EBITDA at ~55% this period
• Limited visibility on cash and equivalents and investing cash flows (undisclosed), constraining FCF analysis
• Potential capex needs to maintain production quality and capacity
• Tax rate variability; recalculated effective tax rate in high teens vs. placeholder metric

Key Concerns:

• Sustainability of current high margins given cyclical drivers
• Data inconsistencies in gross profit and undisclosed equity ratio/cash/FCF limiting precision
• Dividend policy undisclosed; payout visibility low

Investment Implications

Key Takeaways:

• Strong top-line growth (+29.7% YoY) with exceptional operating leverage (+615% YoY operating income)
• High profitability: EBITDA margin 26.3%, operating margin ~21.8%, net margin 15.5%
• Conservative balance sheet: D/E 0.33x, financial leverage 1.35x
• Solid earnings quality: OCF/NI ~0.94, though OCF/EBITDA ~0.55 suggests WC/timing effects
• Limited disclosure on investing cash flows and dividends constrains FCF and payout analysis

Metrics to Watch:

• Egg/product pricing and feed/energy cost indices (margin drivers)
• Operating margin and EBITDA margin trend normalization
• OCF/EBITDA and working capital days (AR/AP/inventory dynamics)
• Capex and investing cash flows to reconstitute FCF profile
• Tax rate normalization versus implied mid-to-high teens effective tax
• Equity ratio/cash balances once disclosed

Relative Positioning: Versus typical domestic protein/egg producers, Hokuriyo currently exhibits superior margins and very low financial leverage, implying higher near-term returns and lower solvency risk, but with above-average operating leverage to market conditions that could compress margins from elevated levels.

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