CHUCO CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥5.70B
• Operating Income: ¥25M
• Net Income: ¥55M
• EPS: ¥0.76

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

For FY2026 Q2, 株式会社中広 delivered revenue of ¥5,699m, up 4.0% YoY, but profitability deteriorated sharply with operating income at ¥25m (-73.5% YoY) and net income at ¥5m (-88.7% YoY). Gross profit of ¥2,414.9m implies a solid gross margin of 42.4%, yet SG&A intensity remained very high, compressing operating margin to 0.4%. Ordinary income at ¥32m indicates modest non-operating tailwinds relative to operating income, despite ¥3.2m in interest expense. Net margin fell to 0.09%, reflecting both weakened operating leverage and an atypical tax burden versus earnings. The DuPont profile shows ROE at 0.24% driven by very thin net margin (0.09%), moderate asset turnover (1.078x), and financial leverage of 2.54x. Liquidity appears comfortable with a current ratio of 153.7% and quick ratio of 152.5%, supported by low inventories (¥26.7m) and sizeable working capital (¥1,262.2m). Balance sheet leverage is moderate, with total liabilities of ¥2,955.1m vs. equity of ¥2,085.0m (implying an equity ratio around 39.5% derived from provided totals), and a debt-to-equity ratio of 1.42x. Operating cash flow was negative at -¥141.4m, indicating weaker cash conversion in the period, likely from working capital consumption. Financing cash outflows of -¥101.2m suggest debt repayment or other financing uses, while investing cash flows were unreported. Earnings quality indicators are weak this quarter as OCF/Net Income is -28.27x, inconsistent with reported earnings momentum. Interest coverage of 7.8x (operating income basis) remains adequate despite low EBIT, given low interest burden. The discrepancy between income tax expense (¥46.6m) and very low pre-tax income points to unusual items or timing differences; the “effective tax rate: 0.0%” metric provided is not reliable for interpretation in this context. Given the nature of the business and typical seasonality in advertising-related revenue, second-half performance could differ, but current data signal pressure on operating efficiency. Several fields (equity ratio, cash, investing CF, per-share data, DPS) are unreported in the XBRL, limiting full assessment of per-share metrics and capital allocation. Overall, the company shows stable top-line but significant margin compression, negative OCF, and low ROE in the period, warranting close monitoring of cost controls, working capital, and the tax line.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin 0.09% x Asset turnover 1.078x x Financial leverage 2.54x = ROE 0.24%. Net margin is the primary drag; asset turnover is reasonable for an asset-light media/advertising model, and leverage provides only limited lift. Gross margin of 42.4% is healthy, but SG&A intensity is high: implied SG&A ≈ ¥2,389.9m (gross profit ¥2,414.9m minus operating income ¥25m), equating to ~42.0% of revenue, leaving an operating margin of ~0.4%. Operating income fell 73.5% YoY on modest +4.0% revenue growth, evidencing unfavorable operating leverage—incremental costs outpaced incremental gross profit. EBITDA of ¥58.2m implies a very thin EBITDA margin of ~1.0%, indicating limited buffer for non-cash and financing costs. Interest expense of ¥3.2m is small; interest coverage at ~7.8x (EBIT/interest) remains adequate despite minimal EBIT. Ordinary income (¥32m) above operating income suggests some non-operating gains/interest income, but not enough to offset operating weakness. Overall margin quality is weak this quarter due to SG&A escalation and possibly pricing/mix or project-level cost pressures.

Growth Assessment

Revenue grew 4.0% YoY to ¥5,699m, indicating modest top-line momentum. The sustainability of revenue growth is uncertain given that margin degradation suggests either lower pricing power, unfavorable mix, or elevated delivery costs. Gross margin at 42.4% remains solid, but the conversion to operating profit deteriorated, with operating income dropping 73.5% YoY, highlighting quality-of-growth concerns. Ordinary income at ¥32m and net income at ¥5m show that below-the-line items and taxes further diluted growth translation into earnings. Negative operating cash flow (-¥141.4m) against positive earnings indicates that growth required working capital investment or faced slower collections, which may not be sustainable if it persists. Outlook hinges on management’s ability to rein in SG&A, improve utilization and pricing, and normalize working capital. Seasonality could support second-half recovery typical in advertising-related businesses, but current data point to execution and cost control as key swing factors.

Financial Health

Liquidity is solid: current ratio 153.7% and quick ratio 152.5%, with low inventories (¥26.7m) supporting liquid working capital of ¥1,262.2m. Cash and equivalents were unreported, limiting precision on immediate liquidity buffers. Solvency appears reasonable with total liabilities of ¥2,955.1m vs. equity of ¥2,085.0m; implied equity ratio is ~39.5% (despite the reported 0.0% placeholder), and debt-to-equity is 1.42x. Financial leverage of 2.54x (assets/equity) is moderate for the sector. Interest burden is light (¥3.2m), and interest coverage at 7.8x is adequate even with depressed EBIT. No large capex outflows were reported (investing CF unreported), suggesting a relatively asset-light profile. Overall, the balance sheet can absorb near-term volatility, but prolonged negative OCF would tighten flexibility.

Cash Flow Quality

OCF was -¥141.4m versus net income of ¥5m, yielding an OCF/NI ratio of -28.27x, signaling poor earnings-to-cash conversion this period. The shortfall is likely driven by working capital consumption (e.g., higher receivables or timing of payables) rather than non-cash charges, as D&A was modest at ¥33.2m. Free cash flow cannot be reliably assessed because investing CF was unreported in the XBRL; the provided FCF value of 0 should be treated as unavailable rather than zero. Financing cash outflow of -¥101.2m suggests debt repayment or other financing uses; with dividends unreported, we cannot ascribe the outflow to shareholder returns. Sustained negative operating cash flow would be a key red flag; normalization of collections and tighter expense control are needed for improved cash generation.

Dividend Sustainability

Dividend data (annual DPS and payout ratio) are unreported in this dataset, so we cannot infer current dividend policy or payments. With net income of ¥5m in the period and negative operating cash flow of -¥141.4m, coverage would be weak if dividends were paid; however, the absence of disclosed DPS precludes a definitive assessment. Free cash flow is not computable due to missing investing CF. Policy outlook therefore remains unclear in the quarter; any sustainable dividend would require stabilization of operating margins and recovery of cash conversion.

Risk Assessment

Business Risks:

• Margin pressure from elevated SG&A, reducing operating leverage despite revenue growth
• Potential pricing or mix headwinds in advertising/media services
• Seasonality risk leading to earnings concentration in H2
• Client concentration or regional economic sensitivity (typical for regional advertising businesses)
• Execution risk in cost control and working capital management

Financial Risks:

• Negative operating cash flow (-¥141.4m) indicating weak cash conversion
• Moderate leverage (D/E 1.42x; financial leverage 2.54x) that could magnify earnings volatility
• Tax line volatility: income tax expense (¥46.6m) vs. low pre-tax income, implying potential unusual items or timing differences
• Limited visibility on cash balance and investing cash flows due to unreported items
• Dependence on continued access to working capital financing if OCF remains negative

Key Concerns:

• Sharp YoY decline in operating profit (-73.5%) on only +4.0% revenue growth
• OCF/Net Income at -28.27x, indicating poor earnings quality in the period
• Net margin compressed to 0.09% and ROE at 0.24%
• High SG&A intensity (~42% of revenue) leaving minimal operating margin buffer
• Unusual tax expense relative to earnings, obscuring underlying profitability

Investment Implications

Key Takeaways:

• Top-line growth of 4.0% YoY did not translate into profits; operating margin ~0.4%
• ROE of 0.24% driven by thin margins; asset turnover and leverage provide limited uplift
• Liquidity metrics are comfortable (current ratio 154%, quick 153%), but cash generation is weak
• Operating cash flow -¥141.4m signals working capital strain and weak earnings quality
• Moderate leverage (D/E 1.42x) with adequate interest coverage (7.8x)
• Visibility on dividends, cash balance, and capex is limited due to unreported items
• Tax line volatility materially affected bottom line

Metrics to Watch:

• SG&A ratio and operating margin trajectory
• Receivables days and working capital turns to gauge cash conversion
• Order intake/backlog and pricing in core advertising services
• Ordinary income vs. operating income gap (non-operating items)
• Tax expense normalization and any one-offs
• Debt levels and financing cash flows

Relative Positioning: Relative to domestic advertising/media peers, the company exhibits weaker near-term profitability (sub-1% operating and EBITDA margins) and low ROE, albeit with acceptable balance sheet solvency and liquidity; improvement hinges on SG&A discipline and working capital normalization.

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