Sanyo Homes Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥19.08B
• Operating Income: ¥-52M
• Net Income: ¥-542M
• EPS: ¥-12.69

Income Statement

Balance Sheet

Cash Flow Statement

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

Sanyo Homes (1420) reported FY2026 Q2 consolidated results under JGAAP showing continued loss-making operations but with material year-on-year improvement at the operating and net levels. Revenue grew 20.6% YoY to ¥19.08bn, indicating healthy top-line momentum despite a soft housing market backdrop. Gross profit is reported at ¥3.215bn, implying a gross margin of 16.8%, while operating income was a slight loss of ¥52m (a 109.2% YoY improvement), suggesting operating leverage is beginning to work but has not yet fully offset fixed costs. Ordinary income and net income remained negative at ¥150m and ¥142m, respectively, with EPS of -¥12.69, but losses narrowed sharply YoY (net income +78.3% YoY). The DuPont bridge indicates a modestly negative net margin (-0.74%), low asset turnover (0.373x), and high financial leverage (3.42x), yielding a calculated ROE of -0.95%. The EBITDA margin was a very thin 0.1% (EBITDA ¥20.7m), highlighting tight margins and limited cushion against interest expense (¥76.3m). The balance sheet shows total assets of ¥51.164bn, liabilities of ¥35.232bn, and equity of ¥14.941bn, indicating an implied equity ratio of roughly 29% (the disclosed 0.0% is an unreported placeholder). Liquidity appears sound with a current ratio of 194% and working capital of ¥21.98bn, although this reflects a business model with substantial current assets typical of housing and real estate projects. Operating cash flow was deeply negative at -¥13.265bn, likely driven by working capital build (project execution, land/work-in-process, and receivables typical for the sector), and was funded by financing cash inflows of ¥10.215bn. Dividends were not paid (DPS ¥0), which appears consistent with the near-term priority to stabilize earnings and cash flows. Interest coverage is weak at -0.7x on the reported metric, underscoring the need to lift operating income to comfortably service debt costs. The reported income tax was a negative ¥206m, consistent with tax benefits amid losses. Several line items (e.g., inventories, cash, investing cash flow, share data, equity ratio) are shown as zero due to non-disclosure or different tagging and should not be interpreted as actual zero balances. Overall, the quarter reflects a company in transition: revenue growth and narrowed losses point to improving operations, but cash flow remains strained by heavy working capital needs and thin margins, and leverage heightens sensitivity to execution.

Profitability Analysis

• ROE decomposition (DuPont): Net profit margin -0.74%, asset turnover 0.373x, financial leverage 3.42x, yielding ROE of -0.95%. The negative margin is the dominant drag on ROE; turnover is modest for a developer/home builder, and leverage amplifies the small loss.
• Margin quality: Gross margin is 16.8% (gross profit ¥3.215bn on revenue ¥19.08bn). With operating income at -¥52m, implied SG&A plus other operating items are roughly ¥3.27bn, placing the operating margin just below breakeven. This indicates price/cost pressure and/or elevated fixed costs. Interest expense of ¥76.3m remains meaningful relative to EBITDA (¥20.7m), leaving little buffer.
• Operating leverage: Revenue grew 20.6% YoY while the operating loss narrowed to near zero, evidencing positive operating leverage. To reach sustainable profitability, incremental gross profit must exceed fixed cost growth; the small negative operating margin suggests the breakeven threshold is close but not yet achieved.
• Ordinary vs operating: Ordinary loss (-¥150m) was wider than operating loss due to net non-operating expenses (including interest). This gap will persist unless EBITDA meaningfully increases.
• Tax: A tax benefit of ¥206m supports bottom line but is non-core and not a driver of sustainable profitability.

Growth Assessment

• Revenue sustainability: +20.6% YoY to ¥19.08bn signals solid order conversion and/or project deliveries. However, sustainability depends on order intake, backlog execution, cancellation trends, and pricing amid construction cost and mortgage-rate dynamics.
• Profit quality: Despite top-line growth, EBITDA margin of 0.1% and operating loss indicate weak profit conversion. Gross margin at 16.8% must either expand or SG&A efficiency must improve to ensure durable profits.
• Mix and pricing: The housing/real estate portfolio typically faces margin variability based on product mix (for-sale housing vs contracted builds, renovation, and asset-utilization). Without segment disclosure here, the observed gross margin suggests competitive pricing and/or cost inflation still weighing on spreads.
• Outlook drivers: Key to H2 will be backlog burn, cost pass-through effectiveness, site pipeline/land bank turnover, and on-time delivery. If revenue growth persists and fixed costs remain contained, operating profit breakeven or better appears achievable; however, interest burden and cash flow needs temper near-term earnings visibility.
• External backdrop: Domestic housing demand, construction input costs, and mortgage environment will influence both volume and margin realization.

Financial Health

• Liquidity: Current assets ¥45.29bn vs current liabilities ¥23.32bn yield a current ratio of 194% and working capital of ¥21.98bn. Quick ratio is reported equal to current ratio due to unreported inventories; in practice, liquidity is likely lower once inventories/real estate for sale are considered.
• Solvency/capital structure: Total liabilities ¥35.23bn vs equity ¥14.94bn imply a liabilities-to-equity ratio of 2.36x. The reported equity ratio is shown as 0.0% due to disclosure limitations; the implied equity ratio is approximately 29% (¥14.94bn/¥51.16bn).
• Interest coverage: Weak at -0.7x on the provided metric, underscoring sensitivity to interest rates and the necessity for higher operating earnings.
• Debt reliance: Financing cash inflow of ¥10.22bn funded a material portion of working capital absorption. Refinancing and covenant headroom (not disclosed) are important considerations given negative OCF.

Cash Flow Quality

• Earnings vs cash flow: OCF of -¥13.27bn versus net loss of -¥142m indicates large working capital outflows dominate cash dynamics. The reported OCF/Net Income ratio of 93.42 is not economically meaningful with both figures negative; the takeaway is heavy cash usage despite improving P&L.
• Free cash flow: Investing CF is unreported (shown as 0), so FCF cannot be reliably computed. Directionally, with large negative OCF, FCF is likely negative absent asset sales.
• Working capital: The business model inherently carries significant WIP/land and receivables swings. The period likely saw inventory/land and/or receivable build consistent with revenue growth and project starts. Monitoring turnover (orders-to-completions, days in WIP/land, receivable days) is critical.
• Cash buffer: Cash and equivalents are unreported (shown as 0), so on-balance cash liquidity cannot be assessed from the provided data; reliance on financing inflows suggests internal cash generation was insufficient in the half.

Dividend Sustainability

• Current policy/outturn: DPS is ¥0 with a payout ratio of 0.0%. This aligns with the current loss position and substantial cash requirements.
• Coverage: With OCF deeply negative and investing CF undisclosed, FCF coverage for dividends cannot be assessed, but is likely weak at present. Prioritizing balance sheet and working capital funding appears prudent.
• Outlook: Resumption of dividends would require sustained operating profitability (positive operating margin), improved interest coverage, and normalization of working capital to restore positive OCF/FCF.

Risk Assessment

Business Risks:

• Housing demand cyclicality and sensitivity to mortgage rates and consumer confidence
• Construction cost inflation and subcontractor availability impacting gross margins
• Project execution risk (delivery timing, permitting, cancellations) affecting revenue recognition
• Pricing pressure in competitive markets limiting margin recovery
• Land acquisition and inventory turnover risk typical of housing/real estate development
• Supply chain and labor shortages causing delays and cost overruns

Financial Risks:

• Weak interest coverage (-0.7x) and sensitivity to rate increases
• Large negative operating cash flow (-¥13.27bn) requiring external financing (+¥10.22bn inflow)
• Leverage profile (liabilities/equity 2.36x) heightens downside in a downturn
• Refinancing and covenant risk if profitability recovery lags
• Working capital concentration in current assets; potential liquidity strain if sales slow

Key Concerns:

• Thin EBITDA margin (0.1%) provides minimal buffer against cost shocks
• Near-breakeven operating income still negative amid rising interest burden
• Visibility limited by unreported inventories, cash, and investing cash flows
• Sustainability of 20.6% revenue growth needed to achieve durable profitability

Investment Implications

Key Takeaways:

• Top-line growth (+20.6% YoY) but profitability remains just below breakeven (operating loss ¥52m)
• Gross margin at 16.8% requires improvement and/or SG&A efficiency to achieve steady operating profit
• Cash generation is the primary pressure point with OCF -¥13.27bn funded by financing inflows
• Balance sheet shows moderate equity (implied ~29% equity ratio) but reliance on debt is notable (2.36x liabilities/equity)
• Interest burden (¥76m) outweighs slim EBITDA, constraining ordinary profit

Metrics to Watch:

• Order intake and backlog conversion (volume and pricing)
• Gross margin and SG&A ratio trajectory
• Operating cash flow and working capital turnover (land/WIP and receivables days)
• Interest-bearing debt levels and interest coverage
• Cancellation rates and delivery timing
• Housing starts and mortgage rate trends in core regions

Relative Positioning: Within Japan’s mid-sized housing/development cohort, Sanyo Homes exhibits improving revenue momentum but thinner margins and weaker cash conversion versus peers with stronger cost pass-through and lower working capital intensity; leverage is manageable but leaves limited room for prolonged cash burn.

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