Rezil Inc. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥16.06B
• Operating Income: ¥1.54B
• Net Income: ¥1.04B
• EPS: ¥29.96

Income Statement

Balance Sheet

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: A mixed Q1 with strong topline growth but margin compression and a sharp drop in bottom-line due largely to below-the-line items and minority interest drag. Revenue rose 27.6% YoY to 160.59, while operating income increased 6.2% YoY to 15.41, indicating positive demand momentum. Gross profit was 26.60, implying a gross margin of 16.6%, and SG&A was held at 12.08, or 7.5% of sales, supporting operating profitability. Operating margin stands at 9.6% (15.41/160.59), down versus last year by an estimated ~194 bps based on the growth delta between revenue and operating income. Ordinary income was 15.11 (+4.5% YoY), but profit before tax fell to 14.47, reflecting net extraordinary losses of about 0.64 between ordinary and pre-tax. Net income dropped 45.0% YoY to 5.74, with an implied minority interest drag of roughly 4.71 after tax (PBT 14.47 minus tax 4.02 minus NI 5.74), a key driver of the bottom-line contraction. The effective tax rate is 27.8%, broadly normal, so the main pressure is not tax but items below operating income and higher non-controlling interests. ROE is 5.5% (DuPont: 3.6% margin × 0.574 asset turnover × 2.71x leverage), indicating modest capital efficiency. Leverage is elevated with D/E at 1.71x, though interest coverage is strong at 190x, reflecting low interest burden relative to operating earnings. Liquidity is sound with a current ratio of 154.8% and quick ratio of 154.1%, and cash of 29.95 exceeds short-term loans of 10.00, limiting near-term refinancing risk. Equity remains solid at 103.45 against total assets of 279.97, but sizable goodwill (20.52) and intangibles (22.65) highlight potential impairment sensitivity if performance softens. Cash flow data were not disclosed, preventing an assessment of earnings quality via OCF/NI; this is a notable limitation for judging sustainability. The calculated payout ratio of 121.4% suggests potential strain if based on current earnings run-rate, though dividend details were not disclosed and seasonality may distort Q1. Forward-looking, management appears to be pursuing growth with increased scale, but achieving margin discipline and controlling minority interest leakage are pivotal to converting sales growth into shareholder returns. Monitoring extraordinary items, affiliate profit allocations, and cash generation will be crucial to validate the recovery of net margins in coming quarters.

Profitability Analysis

Decomposition: ROE 5.5% = Net Profit Margin 3.6% × Asset Turnover 0.574 × Financial Leverage 2.71x. The most material change vs last year appears to be the net profit margin, inferred from +27.6% revenue but only +6.2% operating income and a 45.0% drop in net income. Business drivers: margin pressure stems from a combination of (i) lower operating margin (estimated ~194 bps YoY compression to 9.6%), (ii) net extraordinary losses between ordinary and pre-tax (~0.64), and (iii) a larger share to non-controlling interests (~4.71 after tax), which diluted profit attributable to owners. Asset turnover at 0.574 is reasonable but not a standout; the big headwind to ROE is the compressed net margin rather than turnover. Financial leverage at 2.71x is providing ROE support but raises sensitivity to earnings volatility. Sustainability: operating margin could recover with mix/pricing and cost control, but the minority interest burden might persist if growth is concentrated in less-than-wholly-owned subsidiaries; extraordinary items are inherently non-recurring but can be frequent depending on M&A/asset revaluations. Watch points: SG&A grew more slowly than revenue this quarter (SG&A ratio 7.5% suggests decent cost control), but the large delta between revenue and net income indicates adverse below-the-line effects overshadowing operating leverage.

Growth Assessment

Topline growth is robust (+27.6% YoY to 160.59), implying strong demand or consolidation effects. Operating income growth (+6.2%) lagged sales, signaling negative operating leverage from mix, pricing, or cost inflation. Ordinary income growth (+4.5%) further trailed, and net income contracted 45.0%, highlighting deterioration below operating line (extraordinary losses and higher minority interest attribution). Gross margin is 16.6%, which, together with an operating margin of 9.6%, points to limited gross profitability headroom unless pricing or mix improves. Non-operating contributions are minimal (non-operating income ratio 2.0%), so earnings are primarily driven by core operations and extraordinary items. ROIC at 6.7% is slightly below a typical 7–8% target range, suggesting value creation is marginal after cost of capital. Sustainability hinges on margin repair and better alignment of subsidiary ownership economics; absent that, revenue growth may not translate into EPS growth. Near-term outlook: focus on improving operating margin through mix and cost actions, reducing extraordinary loss frequency, and managing the NCI share of profit. A normalized net margin closer to the operating run-rate would materially lift ROE from the current 5.5%.

Financial Health

Liquidity is solid: current ratio 154.8% and quick ratio 154.1% exceed healthy thresholds. No warning on current ratio (<1.0) or D/E >2.0; however, D/E is 1.71x, above a conservative 1.5x benchmark, warranting attention though not distressing. Cash and deposits (29.95) exceed short-term loans (10.00), and working capital is positive at 50.84, suggesting manageable short-term obligations. Maturity profile: long-term loans of 82.75 vs noncurrent liabilities 83.77 indicate a leveraged, longer-dated structure; refinancing risk is moderate but cushioned by strong interest coverage (190x). Balance sheet composition includes goodwill 20.52 and intangible assets 22.65; combined 43.17 equals ~41.7% of equity, introducing impairment risk if cash-generating units underperform. Off-balance sheet obligations were not reported; no explicit disclosure of guarantees or leases beyond what’s captured in liabilities. Overall solvency is adequate, but leverage and intangibles elevate sensitivity to earnings shocks.

Cash Flow Quality

Operating, investing, and financing cash flows were not disclosed, so OCF/Net Income and FCF coverage cannot be assessed this quarter. Without OCF, we cannot validate accrual quality, working capital consumption, or the cash conversion of earnings. Given the divergence between operating-level profitability and net income (due to extraordinary items and NCI), cash flow scrutiny is important in subsequent quarters. Signs of working capital manipulation cannot be assessed in the absence of OCF and detailed AR/AP/inventory movements; accounts receivable were not disclosed and inventories are small at 0.69. Dividend and capex cash commitments were not disclosed, preventing FCF sustainability analysis.

Dividend Sustainability

Dividend details are unreported; however, the calculated payout ratio of 121.4% suggests potential stress if it reflects declared dividends against current-period earnings. With OCF and FCF unreported, we cannot confirm cash coverage of dividends. Given leverage at 1.71x D/E and ROE of 5.5%, sustaining a payout above earnings would likely depend on either stronger earnings in subsequent quarters or balance sheet capacity. Policy outlook is unclear; if the company aims to maintain dividends through volatility, it will need improved net margins and reduced NCI drag to keep payout ratios within a sustainable <60% threshold over the fiscal year.

Risk Assessment

Business Risks:

• Margin compression risk from pricing/mix and input cost inflation (operating margin down an estimated ~194 bps YoY).
• Execution risk in integrating businesses with substantial goodwill and intangible assets (potential impairment).
• Minority interest leakage reducing profit attributable to owners despite revenue growth.
• Volatility from extraordinary items affecting PBT and net income visibility.

Financial Risks:

• Leverage risk with D/E at 1.71x, increasing sensitivity to earnings downturns.
• Refinancing risk on 82.75 in long-term loans over time despite strong current interest coverage.
• Dividend sustainability risk given calculated payout ratio >100% and missing cash flow visibility.
• Potential impairment risk given intangibles and goodwill totaling ~41.7% of equity.

Key Concerns:

• Sharp 45.0% YoY decline in net income driven by below-the-line items and NCI.
• Lack of cash flow disclosure, limiting assessment of earnings quality and dividend coverage.
• Estimated operating margin compression despite strong revenue growth.
• Dependence on maintaining cost discipline (SG&A at 7.5% of sales) amid scaling operations.

Investment Implications

Key Takeaways:

• Strong topline momentum (+27.6% YoY) but weak net income conversion (NPM 3.6%).
• Operating margin at 9.6% likely compressed ~194 bps YoY; further pressure would cap ROE.
• ROE at 5.5% is modest; leverage (2.71x) is doing much of the work, not margins or turnover.
• Minority interest impact (~4.7) is a major drag on shareholders’ earnings.
• Solid liquidity (CR 1.55x) and very high interest coverage (190x) mitigate near-term financial stress.
• ROIC at 6.7% sits just below common targets, indicating marginal value creation.
• Dividend sustainability is questionable with a 121.4% payout ratio absent stronger earnings or OCF support.

Metrics to Watch:

• Operating margin trajectory and SG&A ratio vs revenue growth.
• Extraordinary gains/losses and their recurrence.
• Non-controlling interest share of profit and ownership mix of growth drivers.
• OCF/Net Income once disclosed (target >1.0) and FCF after capex.
• Leverage trend (D/E toward <1.5x) and net debt to EBITDA once EBITDA disclosed.
• Impairment indicators related to goodwill/intangibles and ROIC vs WACC.

Relative Positioning: Relative to peers, the company shows superior revenue growth but weaker earnings translation, modest ROE supported by leverage rather than operational efficiency, and adequate liquidity. Improving margin discipline and reducing minority leakage are prerequisites to close the gap in profitability metrics.

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