As Partners CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥13.61B
• Operating Income: ¥1.53B
• Net Income: ¥1.09B
• EPS: ¥305.26

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

Verdict: Solid top-line growth with resilient profitability and strong operating cash generation, but leverage remains elevated and free cash flow turned slightly negative due to heavy capex. Revenue rose 28.5% YoY to 136.1, demonstrating robust demand or capacity additions. Operating income increased 17.3% YoY to 15.28, while net income grew 20.8% YoY to 10.92. Operating margin is 11.2% this quarter, and net margin is 8.0%. Using the disclosed growth rates, operating margin likely compressed by about 109 bps YoY (from ~12.3% to ~11.2%). Net margin likely compressed by about 52 bps YoY (from ~8.5% to ~8.0%). Gross profit margin stands at 18.9%, supporting a healthy spread over costs, though we lack YoY gross margin data. Earnings quality is high: OCF of 22.02 is 2.02x net income, indicating strong cash conversion. Free cash flow is approximately -1.44 after capex of 23.46, implying growth investments outpaced operating cash generation in the period. Balance sheet liquidity is sound with a current ratio of 183% and cash of 68.56 against short-term loans of 11.30. However, solvency risk is non-trivial: D/E is 3.40x, and total interest-bearing loans (short + long) of 83.93 imply reliance on debt funding despite excellent interest coverage (38.6x). ROE is a strong 21.5%, driven by healthy margin, modest asset turnover (0.643x), and high financial leverage (4.17x). With an 18% payout ratio, dividends look conservative and likely covered by internal cash generation over the cycle. Forward-looking, growth investments should support revenue, but sustaining margins amid cost pressures and managing leverage will be key. Absent segment disclosure and non-consolidated reporting limit visibility into drivers and sustainability.

Profitability Analysis

DuPont decomposition (current): ROE 21.5% = Net Profit Margin (8.0%) × Asset Turnover (0.643x) × Financial Leverage (4.17x). The leverage component is the largest mechanical amplifier of ROE, with asset turnover moderate and margin mid-single digit to high-single digit. Directionally, operating margin likely compressed YoY because operating income (+17.3%) grew slower than revenue (+28.5%), implying ~109 bps operating margin compression (est. prior ~12.3% vs current 11.2%). Net margin also likely compressed by ~52 bps (est. prior ~8.5% vs current 8.0%) given NI (+20.8%) lagged sales growth. Business drivers: faster top-line growth may have required higher cost of services, start-up/scale costs from new sites, or wage inflation, while SG&A increased to 12.71 supporting growth. Sustainability: margin pressure could normalize as new investments mature; however, wage/cost inflation and competitive pricing could cap near-term expansion. Operating leverage: revenue expansion outpaced operating profit, indicating negative operating leverage this period; watch SG&A efficiency. Flags: Without full SG&A breakdown, we cannot verify whether SG&A grew faster than revenue, but the observed margin compression suggests cost growth outpaced gross profit scalability.

Growth Assessment

Revenue growth of +28.5% YoY to 136.1 indicates strong demand or footprint expansion. Operating income growth of +17.3% and NI +20.8% show scale benefits but also cost pressure. Non-operating items are small (net +0.26) and not a major driver of earnings quality. ROIC of 15.7% (provided) is well above 8% benchmark, implying value-accretive investments. However, capex of 23.46 exceeded OCF, indicating growth is being funded partly with debt (Financing CF +13.04). Outlook: if newly invested assets mature, operating margin could stabilize or recover; otherwise, continued ramp costs may keep margins under slight pressure. With strong OCF and high ROE, near-term growth prospects appear intact, contingent on cost control and funding discipline.

Financial Health

Liquidity is solid: current ratio 183% and quick ratio 183%, with cash 68.56 comfortably above short-term loans 11.30 and accounts payable 4.07. Working capital stands at 74.18, providing cushion. Solvency: D/E is 3.40x (warning; >2.0), and total loans are 83.93 against equity of 50.71, indicating elevated leverage. Interest coverage is very strong at 38.59x, mitigating immediate servicing risk. Maturity profile: short-term debt (11.30) is well covered by cash and current assets, suggesting low near-term refinancing pressure; noncurrent debt is sizable (72.63), implying long-dated obligations that require sustained cash flow. Off-balance sheet items: none disclosed; visibility limited due to non-consolidated basis.

Cash Flow Quality

OCF/NI is 2.02x (>1.0), indicating high-quality earnings with strong cash conversion. Free cash flow approximated at -1.44 (OCF 22.02 minus capex 23.46), turning slightly negative due to elevated investment; this appears deliberate for growth rather than cash earnings weakness. Financing CF +13.04 implies net borrowing or equity-related inflows to fund capex and/or liquidity buffer. No clear signs of working capital manipulation are visible from point data; however, lack of inventory and payables detail constrains analysis. Sustainability: if capex normalizes post-expansion, FCF should revert positive given strong OCF.

Dividend Sustainability

Payout ratio is a conservative 18.0%, well below the <60% benchmark. DPS and total dividend paid are unreported, limiting precision. With OCF at 22.02 and only modest dividends implied by the payout ratio, coverage appears comfortable even with temporarily negative FCF driven by capex. Medium-term sustainability depends on maintaining current OCF levels and moderating capex intensity; leverage should be monitored to avoid crowding out shareholder returns. Policy outlook: given growth investments and high leverage, management may prioritize deleveraging or reinvestment over rapid dividend increases.

Risk Assessment

Business Risks:

• Margin compression risk as revenue growth outpaces operating profit (+28.5% vs +17.3%).
• Execution risk on recent capex (23.46) to achieve targeted returns and utilization.
• Potential wage and cost inflation impacting gross and operating margins.
• Customer/contract concentration risk cannot be assessed due to limited disclosure.

Financial Risks:

• High leverage (D/E 3.40x) increases refinancing and covenant headroom risk.
• Negative FCF this period (approx. -1.44) implies reliance on external funding for growth.
• Interest rate risk on 83.93 of loans; though coverage is currently strong (38.6x).
• Maturity mismatch appears low near term, but long-term debt service depends on sustained OCF.

Key Concerns:

• Sustaining ROE 21.5% given reliance on high leverage (4.17x financial leverage in DuPont).
• Visibility constraints from non-consolidated reporting and many unreported line items.
• Potential for further margin pressure if cost controls lag growth.

Investment Implications

Key Takeaways:

• Strong top-line momentum (+28.5% YoY) with solid profitability (operating margin ~11.2%).
• High-quality earnings: OCF/NI at 2.02x despite modest margin compression.
• ROE robust at 21.5%, supported by leverage and reasonable asset turnover.
• Leverage elevated (D/E 3.40x); balance-sheet risk is the key overhang.
• Capex-driven negative FCF suggests a growth phase funded partly by debt.

Metrics to Watch:

• Operating and net margin trends (target stabilization or expansion after ramp).
• Net debt to EBITDA and D/E trajectory as capex completes.
• OCF sustainability and FCF reversion as investment cycle progresses.
• Interest coverage sensitivity to potential rate increases.
• Working capital efficiency (DSO and payables) once disclosed.

Relative Positioning: Within small-to-mid cap single-entity filers, the company exhibits above-average growth, strong cash conversion, and strong ROE, offset by higher-than-peer leverage; risk-reward skews to execution on growth investments and disciplined deleveraging.

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