SAAF Holdings Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥14.68B
• Operating Income: ¥280M
• Net Income: ¥-301M
• EPS: ¥2.85

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

SAAF Holdings (14470) reported FY2026 Q2 consolidated results under JGAAP showing solid top-line growth and sharp operating profit improvement, but only modest bottom-line gains. Revenue rose 7.0% year over year to ¥14.68 billion, while operating income increased 73.7% to ¥280 million, lifting the operating margin to roughly 1.9%. Gross profit was ¥3.318 billion, implying a gross margin of 22.6%, suggesting some improvement in pricing or mix and/or better cost control versus the prior year. Ordinary income of ¥267 million was slightly below operating income, reflecting interest expense of ¥55 million and ordinary-level non-operating items. Net income was ¥69 million, essentially flat YoY (+0.0%), indicating that below-the-line pressures (notably taxes and interest) absorbed most of the operating uplift. The net margin remains thin at 0.47%, pointing to limited pricing power and/or elevated fixed cost burden despite the operating recovery. DuPont analysis yields a calculated ROE of 2.43%, driven by very low net margin (0.47%), reasonable asset turnover (0.86x), and high financial leverage (6.01x). Liquidity appears adequate with a current ratio of 1.14x and a quick ratio of 1.12x, supported by relatively low inventories (¥160 million). The balance sheet is leveraged, with total liabilities of ¥14.15 billion against total equity of ¥2.84 billion (debt-to-equity 4.98x). The disclosed equity ratio is shown as 0.0%, which we treat as undisclosed; by inference, equity-to-assets is about 16.6%, underscoring a geared capital structure. Operating cash flow was ¥233.9 million, outpacing net income (OCF/NI 3.39x), which supports earnings quality; however, investing cash flow and cash balances are shown as zero (undisclosed), limiting free cash flow assessment. Interest coverage based on EBIT is approximately 5.1x, indicating manageable near-term debt service, though sensitivity to profit volatility remains. The effective tax rate, inferred from reported tax expense, appears elevated (~62%), which likely constrained net income growth despite strong operating gains. With annual DPS shown as zero (undisclosed) and payout ratio listed as 0.0% (not reliable due to data gaps), dividend policy visibility is low. Overall, the quarter demonstrates operating momentum and improving cash conversion, but sustained improvement in net profitability will require continued margin gains, control of financing costs, and normalization of the tax rate. We note significant data limitations where zeros indicate non-disclosure rather than actual zero values.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin 0.47% × Asset turnover 0.86 × Financial leverage 6.01 ≈ ROE 2.43%. The ROE is constrained primarily by the thin net margin, while leverage amplifies return on equity. Operating margin improved to ~1.9% (¥280 million EBIT on ¥14.68 billion sales), reflecting operating leverage as revenue grew 7.0% YoY and operating income rose 73.7% YoY. Gross margin of 22.6% (¥3.318 billion gross profit) indicates decent value capture relative to cost of sales, though SG&A and other operating costs still absorb a large portion of gross profit. EBITDA was ¥529 million, implying an EBITDA margin of ~3.6%, which provides a moderate buffer for interest and taxes but remains thin for a leveraged balance sheet. Interest expense of ¥55 million yields EBIT interest coverage of ~5.1x, acceptable but exposed if profitability softens. Margin quality: positive OCF/NI (3.39x) supports accrual quality, but we lack detail on one-offs and non-cash items beyond D&A (¥249 million). Below-the-line drag is evident: ordinary margin (~1.8%) is close to operating margin, while the inferred effective tax rate appears high (~62%), compressing net margin. Operating leverage is visible in the YoY delta in operating income versus sales, suggesting fixed cost absorption improved; sustaining this will depend on revenue mix, pricing discipline, and SG&A control.

Growth Assessment

Revenue grew 7.0% YoY to ¥14.68 billion, suggesting steady demand. Operating income surged 73.7% YoY to ¥280 million, indicating strong operating leverage and improved cost execution. Ordinary income (¥267 million) and net income (¥69 million) lag the operating improvement due to financing costs and a high inferred tax burden, limiting bottom-line growth (net income +0.0% YoY). Profit quality is supported by OCF exceeding net income (3.39x), implying healthy cash conversion from earnings. Sustainability will hinge on maintaining gross margin at ~22–23%, controlling SG&A, and managing financing costs. With inventories modest (¥160 million), revenue growth appears less inventory-driven and potentially service/contract mix-oriented; however, lack of order backlog or segment data limits visibility. Outlook hinges on continued revenue expansion and stabilization of below-the-line items; if the elevated tax rate normalizes and interest costs are contained, net margin can converge upward toward operating levels. Key uncertainties include input cost inflation, pricing power, and macro demand. Absent investing cash flow disclosure, we cannot assess growth capex or capacity investments, which clouds medium-term growth durability.

Financial Health

Liquidity: Current ratio 1.14x and quick ratio 1.12x indicate adequate short-term coverage; working capital stands at ~¥1.29 billion. Inventories are low at ¥160 million, limiting obsolescence risk and supporting quick liquidity. Solvency: Total liabilities ¥14.15 billion vs. total equity ¥2.84 billion implies a high debt-to-equity ratio of 4.98x. The disclosed equity ratio is 0.0% (undisclosed); by inference, equity-to-asset ratio is roughly 16.6% (¥2.84b/¥17.07b), signaling leverage. Interest coverage (EBIT/interest) of ~5.1x suggests presently manageable debt service capacity. Capital structure is geared, and results are sensitive to profit volatility; strengthening equity (retained earnings) would improve resilience. We lack detail on debt maturity profile, covenants, and cash on hand (cash is shown as zero, which we treat as undisclosed), limiting a fuller solvency assessment.

Cash Flow Quality

Earnings quality appears reasonable with operating cash flow (¥233.9 million) exceeding net income (¥69.0 million), OCF/NI = 3.39x. This suggests positive working-capital dynamics and/or non-cash charges (D&A ¥249.4 million) supporting cash generation. Free cash flow cannot be reliably calculated because investing cash flow is shown as zero (undisclosed) and capex is not provided. Interest is covered by operating earnings (EBIT coverage ~5.1x) and also by OCF (OCF/interest ≈ 4.3x), indicating acceptable near-term cash coverage for financing costs. Working capital: current assets of ¥10.80 billion vs. current liabilities of ¥9.51 billion yield ~¥1.29 billion surplus; inventories are small, pointing to limited cash tied in stock. Without cash balance disclosure, we cannot comment on liquidity buffers or net debt accurately. Overall, cash conversion this period supports the income statement, but lack of investment cash flow detail constrains assessment of structural FCF.

Dividend Sustainability

Dividend data (annual DPS 0.00, payout ratio 0.0%, FCF coverage 0.00x) appear to reflect non-disclosure rather than actual zeros; therefore, dividend policy cannot be concluded from the provided figures. With EPS of ¥2.85 and net income of ¥69 million, any payout would need to be balanced against the company’s leveraged capital structure (D/E ~4.98x) and the priority of strengthening equity. OCF is positive and exceeds net income, but without investing cash flow and capex disclosure we cannot assess true FCF coverage of dividends. Given the thin net margin (0.47%) and high inferred tax burden this period, maintaining or increasing cash dividends would depend on sustained operating improvements and clearer visibility on capex needs and debt service. Policy outlook is therefore uncertain based on available data.

Risk Assessment

Business Risks:

• Thin operating and net margins leave limited cushion against input cost inflation or pricing pressure.
• Revenue visibility uncertain due to lack of order backlog/segment disclosure.
• Potential tax volatility; inferred effective tax rate appears elevated (~62%).
• Competitive dynamics may constrain pricing power and gross margin sustainability.
• Operational leverage can work in reverse if volumes soften.

Financial Risks:

• High leverage (debt-to-equity ~4.98x; inferred equity ratio ~16.6%) increases sensitivity to earnings volatility.
• Exposure to interest rates; although coverage is ~5.1x, rising rates or lower EBIT could pressure coverage.
• Limited disclosure on cash balance and debt maturities constrains liquidity assessment.
• Free cash flow uncertainty due to undisclosed investing cash flows and capex.

Key Concerns:

• Net income stagnation despite strong operating improvement, driven by high taxes and financing costs.
• Reliance on leverage to support ROE; fundamental return generation at the margin level remains weak.
• Data gaps (cash, investing CF, equity ratio, dividend details) reduce transparency and hinder risk evaluation.

Investment Implications

Key Takeaways:

• Top-line grew 7.0% YoY with strong operating leverage (+73.7% YoY operating income), but net profit was flat.
• Margins remain thin: operating ~1.9%, net 0.47%; improving but still a constraint on value creation.
• Cash conversion is supportive (OCF/NI 3.39x), indicating decent earnings quality this period.
• Balance sheet is leveraged (D/E ~4.98x; inferred equity ratio ~16.6%), necessitating continued profit and cash discipline.
• Interest coverage (~5.1x EBIT) is acceptable but dependent on sustaining operating gains.
• High inferred tax rate (~62%) materially compresses net income; normalization would be a key earnings lever.

Metrics to Watch:

• Gross margin and SG&A ratio trajectory to validate sustained operating leverage.
• Operating margin and ordinary margin progression vs. interest expense.
• Effective tax rate normalization and drivers of tax expense.
• OCF/NI ratio, working capital turns, and cash conversion cycle.
• Investing cash flow and capex to assess true free cash flow and growth reinvestment.
• Leverage metrics (D/E, net debt/EBITDA when cash and debt details are available) and interest coverage.
• Liquidity buffer (cash and committed lines) once disclosed.

Relative Positioning: Based on the available figures, the company exhibits mid-single-digit revenue growth with improving operating leverage but remains margin-thin and comparatively leveraged, placing it in a more financially geared position than peers with stronger equity cushions; full peer comparison is constrained by sector and disclosure gaps.

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