Kohjin Bio Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.50B
• Operating Income: ¥257M
• Net Income: ¥202M
• EPS: ¥39.53

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

FY2026 Q2 was a mixed quarter with resilient top line but notable margin compression, resulting in a sharp year-on-year decline in earnings. Revenue was essentially flat at 25.04 (−0.1% YoY), but operating income fell to 2.57 (−32.2% YoY) and ordinary income to 2.72 (−34.7% YoY), with net income declining to 2.02 (−27.1% YoY). Gross profit came in at 10.13, implying a healthy gross margin of 40.4%, yet operating margin contracted to 10.3%. Based on last year’s implied figures, operating margin compressed by roughly 480 bps (from ~15.1% to 10.3%). Net margin compressed by roughly 300 bps (from ~11.1% to 8.1%). The operating income decline outpaced the small revenue dip, indicating adverse operating leverage and/or higher cost intensity. Non-operating income of 0.55 partially offset non-operating expenses of 0.41, helping ordinary income, but not enough to prevent a significant YoY decline. Earnings quality was acceptable this quarter: operating cash flow of 2.02 matched net income (OCF/NI ≈ 1.00x), reducing concerns about accrual-driven profit. Liquidity remains strong with a current ratio of 198.6% and quick ratio of 186.3%, and solvency is conservative with D/E at 0.52x and interest coverage at 13.4x. However, capital efficiency is a concern: ROE is 3.5% and ROIC is 3.8%, both below typical cost of capital benchmarks, signaling value creation challenges. Cash investment outflows appear sizable relative to cash generation, as capex (−5.09) exceeded OCF (2.02), implying negative pre-financing free cash flow in the period. With payout ratio calculated at 60.7%, distributions are edging toward the upper limit of sustainability, especially against negative implied FCF this half. The balance sheet shows 15.0 of short-term loans, but cash and deposits of 25.88 plus strong working capital provide a comfortable liquidity buffer. Forward-looking, restoring operating margin will be key—cost control and pricing discipline will need to improve to defend profitability on flat revenue. Monitoring the mix of non-operating gains and the trajectory of SG&A versus sales is important, as higher non-operating reliance (non-operating income ratio 27.3%) adds volatility. Near-term priorities should include protecting gross margin, tightening SG&A, and calibrating capex to internally generated cash.

Profitability Analysis

ROE decomposes to 8.1% net profit margin × 0.283 asset turnover × 1.52x financial leverage = 3.5% ROE. The largest driver of deterioration vs last year is the net profit margin: net margin compressed by roughly 300 bps as operating income declined 32% on flat revenue, while financial leverage (0.52x D/E; 1.52x equity multiplier) and asset turnover (0.283) appear relatively stable. The business driver likely includes adverse operating leverage and cost pressure: SG&A at 7.55 equates to ~30.1% of sales, and operating margin fell to ~10.3% from an implied ~15.1% last year. Non-operating items provided only a small cushion (0.55 income vs 0.41 expense) and did not alter the core margin trend. This change looks cyclical/operational rather than one-time—unless specific temporary costs are disclosed, the compression reflects weaker cost absorption or pricing/mix. Without YoY component detail, we cannot confirm SG&A growth exceeding revenue, but the scale of operating income decline on flat sales indicates operating cost intensity increased. Sustainability: asset turnover may improve only with stronger sales or asset base optimization; margin recovery depends on cost controls and pricing. Financial leverage remains conservative and is not a key ROE lever currently.

Growth Assessment

Top-line growth was flat (−0.1% YoY), suggesting stable demand but limited momentum. Profit growth deteriorated sharply: operating income −32.2% YoY, ordinary income −34.7% YoY, and net income −27.1% YoY, indicating negative operating leverage. The 40.4% gross margin remains respectable, but the drop in operating margin to 10.3% underscores pressure from operating costs and/or lower pricing power/mix. EBITDA of 4.51 (18.0% margin) provides some cushion, but not enough to offset the OI drop. Non-operating contributions (0.55) are meaningful relative to operating income, implying some reliance on non-core drivers. Outlook hinges on margin repair rather than volume growth; with a stable revenue base, tightening SG&A and safeguarding gross margin will be critical for 2H. Absent evidence of one-offs, we assume cost pressure persists near term; therefore, FY margin guidance (if any) should be monitored for revisions. ROIC at 3.8% is below a typical 5% warning threshold, highlighting a need to improve returns on deployed capital to sustain growth.

Financial Health

Liquidity is strong: current ratio 198.6% and quick ratio 186.3% comfortably exceed benchmarks. No warning on current ratio (<1.0) or D/E (>2.0); D/E is 0.52x, conservative. Interest coverage is robust at 13.37x, indicating low short-term refinancing stress. Maturity profile shows 15.0 of short-term loans versus 25.88 cash and deposits, 7.89 receivables, and 2.87 inventories—implying low maturity mismatch risk. Long-term loans are modest at 3.00, and total liabilities 30.30 are well covered by assets (88.43). Working capital stands at 23.03, providing a buffer against shocks. Equity is 58.13; book value per share calculated at 1,137 JPY. No off-balance sheet obligations are disclosed in the provided data; absence of disclosure limits our visibility into guarantees/leases. Overall solvency and liquidity profiles are healthy, giving management flexibility to navigate margin pressures.

Cash Flow Quality

OCF of 2.02 equals net income of 2.02, yielding OCF/NI of 1.00x—neutral to good earnings quality with no apparent accrual red flags. Investing CF is unreported, but disclosed capex of −5.09 indicates investment outflows exceeded OCF, implying negative pre-financing FCF of approximately −3.07 for the period. Financing CF was −2.20, suggesting net repayment or dividends, further reducing cash. Working capital signals are limited without period-over-period changes; however, the balance sheet structure (AR 7.89 vs AP 1.39) indicates limited supplier financing reliance, which can constrain cash conversion if collections slow. No clear signs of working capital manipulation are detectable from the static snapshot provided. Sustainability: if capex run-rate persists above OCF, internal funding of investments and dividends could strain cash unless margins recover or capex is moderated.

Dividend Sustainability

Annual DPS is unreported, but the calculated payout ratio is 60.7%, slightly above the <60% comfort threshold. With implied negative pre-financing FCF this half (capex > OCF), dividend coverage from internal cash generation appears tight in the near term. Liquidity is ample (cash 25.88), which can support payouts temporarily, but sustained payouts at current earnings levels would benefit from margin recovery or capex normalization. Balance sheet capacity exists given low leverage, yet using debt to fund dividends would erode financial flexibility. Policy outlook: expect a cautious stance—maintaining dividends may be prioritized, but upside is contingent on operating margin improvement and positive FCF trajectory in 2H.

Risk Assessment

Business Risks:

• Margin pressure from cost inflation or unfavorable sales mix, evidenced by ~480 bps operating margin compression YoY.
• Negative operating leverage on flat revenue, increasing earnings volatility.
• Execution risk in cost control and pricing needed to restore profitability.
• Potential reliance on non-operating income (non-operating income ratio 27.3%) which can be volatile.

Financial Risks:

• Capex outflows exceeding OCF in the period, leading to negative implied pre-financing FCF.
• Short-term debt of 15.0 requires ongoing liquidity discipline, albeit mitigated by strong cash holdings.
• Low ROIC (3.8%) and ROE (3.5%) imply weak capital efficiency relative to potential cost of capital.

Key Concerns:

• Sustained margin compression could keep ROIC below the 5% warning threshold.
• Dividend sustainability is borderline with a 60.7% payout ratio against negative implied FCF.
• Limited disclosure on investing CF and segment details obscures drivers of profitability and cash use.

Investment Implications

Key Takeaways:

• Top line stable (−0.1% YoY) but significant operating margin compression to 10.3%.
• Net margin down ~300 bps to 8.1%, driving ROE down to 3.5%.
• Earnings quality neutral: OCF/NI ~1.00x, but capex > OCF implies negative implied FCF.
• Balance sheet strength (current ratio 199%, D/E 0.52x, interest coverage 13.4x) provides cushion.
• ROIC at 3.8% underscores need for margin recovery and/or asset efficiency improvements.

Metrics to Watch:

• Operating margin trajectory and SG&A as % of sales in 2H.
• Gross margin resilience amid cost environment.
• OCF vs capex run-rate to confirm FCF inflection.
• Short-term debt refinancing and cash balance trends.
• Any shift in non-operating income/expenses impact on ordinary income.

Relative Positioning: Financially conservative with strong liquidity and low leverage, but currently underperforming on capital efficiency and profitability metrics versus typical market benchmarks; recovery depends on restoring operating margins on a stable revenue base.

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