SHO-BOND Holdings Co.,Ltd. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥20.56B
• Operating Income: ¥4.87B
• Net Income: ¥3.39B
• EPS: ¥66.26

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: Solid profitability resilience despite top-line decline; margins expanded and net profit grew modestly, supported by disciplined cost control and minimal reliance on non-operating items. Revenue declined 4.7% YoY to 205.56, but operating income edged up 0.5% YoY to 48.74, implying healthy operating leverage in a softer demand quarter. Gross profit was 61.00 with a gross margin of 29.7%, and SG&A was contained at 12.50, keeping the SG&A ratio low at about 6.1% of sales. Operating margin improved to roughly 23.7% (48.74/205.56), versus an implied ~22.5% in the prior year period, a c.+120 bps expansion. Net income rose 0.5% YoY to 33.83, lifting the net margin to 16.5% from an implied ~15.6% YoY, a c.+90 bps expansion. Non-operating impact was small (income 0.90, expenses 0.11), indicating earnings are primarily operating-driven. The effective tax rate was 31.2%, consistent with a stable domestic tax environment. Balance sheet strength remains exceptional: current ratio of 601% and working capital of 773.73 reflect abundant liquidity, anchored by cash and deposits of 317.24. Leverage is structurally low with total liabilities of 178.00 versus equity of 1,045.47, translating into a D/E of about 0.17x under a broad definition. ROE is modest at 3.2% due to low asset turnover (0.168) and conservative leverage (1.17x), despite strong margins. ROIC of 4.6% is below the 5% warning threshold, highlighting a capital efficiency headwind likely tied to substantial cash balances and asset-light operations. Earnings quality cannot be fully assessed this quarter as operating cash flow was unreported; this is a key data gap. Dividend details were not disclosed, and the mechanical payout ratio of 284% likely mixes annual dividends with quarterly earnings and is not a reliable indicator of ongoing payout sustainability for this quarter. Forward-looking, the combination of margin discipline and a fortress balance sheet positions the company well to navigate order timing volatility typical in infrastructure maintenance. However, improving ROIC/ROE will likely require either higher asset turnover (order growth) or more assertive capital allocation. Watch for order backlog trends, project mix, and working capital developments once cash flow data is available.

Profitability Analysis

ROE decomposition (DuPont): ROE 3.2% = Net Profit Margin 16.5% × Asset Turnover 0.168 × Financial Leverage 1.17x. The component exerting the largest drag is asset turnover (0.168), reflecting a large asset base (notably cash and investment securities) relative to quarterly revenue, and conservative leverage. Net margin strengthened YoY as operating income rose slightly despite lower sales, aided by effective SG&A containment and limited non-operating noise. Financial leverage remains intentionally low (1.17x), consistent with the cash-rich balance sheet and minimal debt. Business driver: the slight revenue contraction (−4.7% YoY) was offset by improved cost mix and execution, expanding operating margin by c.+120 bps; non-operating items were small and tax rate stable, supporting net margin. Sustainability: margin gains look reasonably sustainable near term if project mix and execution quality hold, but seasonality/order timing could introduce volatility in subsequent quarters; asset turnover is likely to remain structurally low absent faster revenue growth or balance-sheet optimization. Watch for any SG&A growth outpacing revenue in future periods; in this quarter SG&A grew slower than revenue (revenue declined, OI rose), indicating positive operating leverage.

Growth Assessment

Top line contracted 4.7% YoY to 205.56 amid likely order timing and project phasing typical for maintenance-oriented construction. Operating income grew 0.5% YoY to 48.74 and net income similarly rose 0.5% to 33.83, demonstrating margin resilience. Operating margin expanded to ~23.7% and net margin to 16.5%, with negligible contribution from non-operating income (0.90). Growth quality appears operating-driven rather than one-off gains. Outlook hinges on order intake/backlog and project mix (public infrastructure maintenance), which were not disclosed; absent this, sustaining growth will depend on steady public works demand and controlled input costs. Currency and commodity impacts are limited versus resource-heavy peers, but material and labor cost inflation remain risks. Near-term growth trajectory appears stable to modest, with upside if backlog accelerates or mix remains favorable.

Financial Health

Liquidity is exceptionally strong: current assets 928.03 vs current liabilities 154.30 yield a current ratio of 601% and working capital of 773.73. Quick ratio is reported equal to current ratio due to unreported inventories; even assuming some inventories, liquidity remains ample. Solvency is conservative: total liabilities 178.00 vs equity 1,045.47 implies low leverage (approx. D/E 0.17x). No interest-bearing debt details were disclosed; however, large cash (317.24) and modest liabilities suggest negligible refinancing risk. No immediate maturity mismatch concerns given cash and current assets far exceed current liabilities. No off-balance sheet obligations were reported in the data provided.

Cash Flow Quality

Operating cash flow was unreported, preventing OCF/Net Income assessment and free cash flow analysis. As such, we cannot determine whether earnings were cash-backed this quarter (benchmark OCF/NI > 1.0). Working capital components (AR, AP, inventories) were unreported, limiting our ability to diagnose potential quarter-end working capital management. Capex and financing cash flows (dividends, buybacks) were also unreported, so FCF coverage of distributions cannot be assessed. Given the company’s historically cash-rich posture, liquidity risk is low, but we need OCF data in subsequent filings to validate earnings quality.

Dividend Sustainability

Dividend data (DPS, total dividends, buybacks) were unreported for the quarter. The calculated payout ratio of 284% likely compares an annual dividend to a single quarter’s earnings and is not meaningful for sustainability analysis. Without OCF and capex data, FCF coverage cannot be evaluated. Given the large cash balance and low leverage, the balance sheet can support dividends in the short term, but sustainable payout assessment requires full-year earnings and FCF. Monitor management’s stated dividend policy and any guidance in the next disclosure.

Risk Assessment

Business Risks:

• Order timing and seasonality in infrastructure maintenance could drive revenue volatility QoQ.
• Project mix changes can impact margins despite steady demand.
• Material and labor cost inflation may compress gross margins if not offset by pricing.
• Execution risk on large or technically complex repair projects.
• Dependence on public infrastructure budgets and tender outcomes.

Financial Risks:

• Low asset turnover and sub-5% ROIC indicate capital efficiency risk.
• Potential mark-to-market volatility on investment securities (110.01) affecting comprehensive income.
• Limited visibility on cash flow due to unreported OCF and working capital details.
• Tax rate variability around the 31.2% effective rate could affect net margins.

Key Concerns:

• OCF/NI cannot be assessed this quarter; earnings quality unverified.
• ROE at 3.2% and ROIC at 4.6% point to constrained capital efficiency despite strong margins.
• Revenue declined 4.7% YoY; need confirmation this is timing-related via backlog/order data.
• Dividend sustainability cannot be evaluated without DPS and FCF disclosures.

Investment Implications

Key Takeaways:

• Margins expanded notably despite a mid-single-digit revenue decline, highlighting strong execution.
• Earnings are primarily operating-driven with minimal non-operating contribution.
• Balance sheet strength is exceptional with ample cash and very low leverage.
• Capital efficiency remains the main structural constraint (ROIC 4.6%, ROE 3.2%).
• Data gaps (OCF, DPS, working capital) limit near-term conclusions on earnings quality and payout sustainability.

Metrics to Watch:

• Order intake and backlog to gauge revenue visibility and asset turnover trajectory.
• OCF/Net Income and FCF once disclosed to validate earnings quality.
• Gross margin and SG&A ratio trends for sustained operating leverage.
• Project mix and pricing versus input cost inflation.
• ROIC progression and capital allocation (dividends/buybacks) decisions.
• Effective tax rate stability.
• Comprehensive income sensitivity to investment securities.

Relative Positioning: Versus domestic construction/maintenance peers, Sho-Bond exhibits superior operating margins and a fortress balance sheet, but lags on capital efficiency (low ROE/ROIC) due to conservative leverage and large cash holdings; growth visibility will hinge on backlog momentum and disciplined project selection.

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