Saita Holdings Co., Ltd. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥1.55B
• Operating Income: ¥65M
• Net Income: ¥7M
• EPS: ¥90.88

Income Statement

Balance Sheet

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

Verdict: A mixed FY2026 Q1 with solid top-line growth but margin compression at the operating and net levels and heavy reliance on below-the-line items to support profit. Revenue grew 7.5% YoY to 15.51 (100M JPY), while operating income fell 11.6% YoY to 0.65, indicating weaker operating leverage. Gross profit was 4.12 with a gross margin of 26.6%, but selling pressure (SG&A 3.38) limited operating margin to 4.2%. Ordinary income surged 89.8% YoY to 0.85, implying sizable positive non-operating or classification effects at the ordinary level relative to last year. Profit before tax was 0.45 and income tax expense was 0.38, implying a high effective tax rate of roughly 83.4%. Despite the high tax burden at the PBT level, reported net income was 0.57 (-32.4% YoY), suggesting material below-the-line effects or differences in classification that lifted bottom-line results versus PBT. Operating margin compressed by an estimated ~90 bps YoY (from ~5.1% to 4.2%), highlighting cost pressure and/or mix shifts. Net margin compressed by an estimated ~217 bps YoY (from ~5.8% to ~3.7%), underscoring weaker earnings conversion of sales. Conversely, ordinary income margin expanded by an estimated ~238 bps YoY (to ~5.5%), indicating improved non-operating performance versus the prior year. Liquidity remains a key strength: cash and deposits of 47.53 and a current ratio of 321% provide ample buffer against 9.84 in short-term loans. Leverage is conservative with D/E at 0.37x and interest coverage at 26.7x. Capital efficiency is weak: ROIC is flagged at 1.1% and DuPont-derived ROE is only 0.9%, driven by low asset turnover (0.174) and modest net margin (3.7%). Earnings quality cannot be fully assessed because operating cash flow was not disclosed; thus, OCF to net income and FCF coverage are not calculable. The payout ratio is indicated at 81.2%, which is elevated versus typical sustainability thresholds and could pressure future flexibility if cash flow does not improve. Forward-looking, the company needs to restore operating margin, improve asset turnover, and align tax/extraordinary impacts to stabilize bottom-line predictability. Overall, balance sheet strength buys time, but improving core profitability and capital efficiency is the strategic priority.

Profitability Analysis

DuPont decomposition (Q1 annualized effects not applied; point-in-time view): ROE ≈ Net Profit Margin × Asset Turnover × Financial Leverage = 3.7% × 0.174 × 1.37 ≈ 0.9%. The largest drag is asset turnover (0.174), followed by a modest net margin of 3.7%, while leverage at 1.37x is conservative and not a driver. The YoY pattern shows revenue +7.5% but operating income -11.6%, indicating negative operating leverage and cost absorption issues, which compressed the operating margin by ~90 bps (from ~5.1% to ~4.2%). Ordinary income rose sharply (+89.8%), implying improved non-operating contributions or reclassification benefits at the ordinary level; however, this did not translate to net income growth due to high tax and/or extraordinary items between ordinary income and PBT. Business reasons likely include higher SG&A intensity (3.38) relative to gross profit growth and possible increases in non-operating expenses (0.50) offset by other ordinary gains. Sustainability: reliance on non-operating items to lift ordinary income is less dependable than recurring operating profit; without SG&A discipline or mix improvement, operating margin recovery may be limited near term. Concerning trends include operating income declining despite revenue growth and an elevated non-operating income ratio (37.9%), suggesting a greater share of profits coming from outside core operations.

Growth Assessment

Top-line growth was healthy at +7.5% YoY, reaching 15.51. Operating profit declined 11.6% YoY to 0.65, indicating that cost inflation or unfavorable mix outpaced pricing/productivity. Ordinary income strength (+89.8% to 0.85) implies one-off or cyclical non-operating tailwinds; however, PBT of 0.45 and net income down 32.4% to 0.57 point to volatility below the operating line. Estimated operating margin fell ~90 bps YoY, while net margin compressed ~217 bps, reducing earnings quality of growth. Absent disclosure of segment drivers, sustainability of revenue growth is uncertain; if growth is driven by lower-margin categories, margin headwinds may persist. Near-term outlook hinges on SG&A control and conversion of gross profit to operating profit; restoring operating margin toward prior levels (~5%+) would materially support ROE. With ROIC at 1.1%, incremental growth should be evaluated for return thresholds; projects must exceed cost of capital to improve capital efficiency.

Financial Health

Liquidity is strong: current ratio 320.8% and quick ratio 310.0%, far above benchmarks; no warning on current ratio (>>1.0). Cash and deposits of 47.53 more than cover short-term loans of 9.84, minimizing maturity mismatch risk; working capital is 43.65. Solvency is conservative: D/E at 0.37x is well below 1.5x benchmark; noncurrent liabilities are modest at 4.47. Interest coverage is robust at 26.66x, indicating comfortable debt service capacity. No explicit off-balance sheet obligations were disclosed. Equity base is solid at 64.74 (owners' equity 58.18), supporting resilience. Overall, balance sheet strength is a clear positive.

Cash Flow Quality

Operating cash flow, investing cash flow, and free cash flow were not disclosed, so OCF/Net Income and FCF coverage cannot be assessed. Consequently, we cannot validate accrual quality, working capital intensity, or cash conversion timing this quarter. With a payout ratio shown at 81.2%, confirmation of OCF sufficiency would be important; absent OCF disclosure, dividend coverage by cash remains unclear. Working capital levels appear ample (current assets 63.41 vs current liabilities 19.77), reducing short-term liquidity stress, but without the cash flow statement we cannot rule out timing-driven improvements or reversals in receivables/payables.

Dividend Sustainability

Reported payout ratio is 81.2%, which is above the typical <60% sustainability benchmark and suggests limited buffer if earnings or cash flow weaken. FCF coverage is not calculable due to missing OCF and capex data, so cash-based sustainability cannot be confirmed. Balance sheet liquidity is strong, which could temporarily support distributions, but with ROIC at 1.1% and operating margin under pressure, sustaining a high payout could constrain reinvestment capacity. Policy outlook should prioritize improving cash earnings and capital efficiency; if profitability normalizes, payout flexibility may increase. Until OCF disclosure is available, dividend safety assessment remains data-limited.

Risk Assessment

Business Risks:

• Operating margin compression (~90 bps YoY) amid revenue growth indicates cost inflation or adverse mix.
• High reliance on non-operating items (non-operating income ratio 37.9%) to support ordinary income.
• Net margin compression (~217 bps YoY) and elevated effective tax rate (~83.4%) reducing earnings conversion.
• Low capital efficiency (ROIC 1.1%) risks value dilution if growth investments do not clear cost of capital.

Financial Risks:

• Potential dividend strain with payout ratio at 81.2% absent confirmed OCF/FCF coverage.
• Earnings volatility between ordinary income, PBT, and net income suggesting exposure to extraordinary or tax items.
• Refinancing or interest rate risk is limited currently, but short-term loans (9.84) create rollover needs (mitigated by high cash).

Key Concerns:

• Data gaps in cash flow statement prevent validation of earnings quality and dividend coverage.
• Sustained low asset turnover (0.174) depresses ROE (0.9%), requiring either margin expansion or asset base optimization.
• Classification differences between ordinary income (0.85) and PBT (0.45) indicate below-the-line volatility.

Investment Implications

Key Takeaways:

• Top-line growth (+7.5% YoY) did not translate to operating profit growth; operating margin contracted to ~4.2%.
• Ordinary income surged (+89.8%), but PBT and net were weak, revealing below-the-line volatility and high taxes.
• Balance sheet is very strong (current ratio 321%, D/E 0.37x, cash 47.53), reducing near-term financial stress.
• Capital efficiency is the main weakness: ROIC 1.1% and ROE 0.9% driven by low asset turnover and compressed margins.
• Payout ratio at 81.2% appears elevated relative to underlying profitability and unknown FCF.

Metrics to Watch:

• Operating margin trajectory and SG&A-to-sales ratio
• OCF and FCF once disclosed; OCF/Net Income target >1.0
• Asset turnover improvements (inventory and receivables efficiency when disclosed)
• Effective tax rate normalization and reconciliation between ordinary income, PBT, and net income
• ROIC trend versus 7–8% target threshold

Relative Positioning: Within small-cap Japanese peers, the company stands out for balance sheet liquidity and low leverage but lags on operating margin resilience, capital efficiency (ROIC/ROE), and earnings quality transparency due to missing cash flow data.

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