SEIGAKUSHA CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥7.07B
• Operating Income: ¥167M
• Net Income: ¥74M
• EPS: ¥13.09

Income Statement

Balance Sheet

Cash Flow Statement

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

Seigakusha (TSE:2179) reported FY2026 Q2 (cumulative six months) consolidated results under JGAAP showing solid top-line growth with meaningful operating leverage but modest net profit due to non-operating items and taxes. Revenue rose to ¥7,066m (+8.1% YoY), while operating income increased to ¥167m (+41.8% YoY), evidencing good cost discipline and scale benefits. Gross profit was ¥1,219.9m, implying a gross margin of 17.3%, and operating margin expanded to 2.4%. Ordinary income (¥159m) trailed operating income due to net non-operating expenses (notably interest expense of ¥12.6m), and net income came in at ¥72m (-2.3% YoY), indicating drag below the operating line and a tax charge. DuPont metrics point to a low but positive ROE of 1.86%, driven by slim net margins (1.02%), moderate asset turnover (0.754x), and leverage (assets/equity) of 2.42x. Cash flow from operations was ¥105m, exceeding net income (OCF/NI = 1.46x), which supports earnings quality. Liquidity is adequate with a current ratio of 1.11x and quick ratio of 1.11x (inventories not disclosed), and interest coverage is healthy at 13.2x. The balance sheet shows total assets of ¥9,367m and equity of ¥3,877m (D/E 1.45x), indicating moderate leverage consistent with the ordinary income profile. Several disclosures, including cash and equivalents, investing cash flows, equity ratio, and share-related details, are not reported in the feed (zeros denote undisclosed, not actual zero), limiting the precision of some analyses (e.g., FCF, dividend coverage, per-share metrics). Despite these constraints, the operating improvement and OCF support a cautiously positive view on earnings quality in the period. Net profit softness versus operating profit growth suggests taxes and non-operating items as key swing factors into 2H. Given typical seasonality in the education services industry, 2H enrollment and utilization will be important to confirm sustainability of margin gains. The financing cash inflow (¥328m) points to incremental borrowing or similar activities, which should be monitored against future interest cost trends. Overall, Seigakusha is demonstrating operating leverage with moderate financial leverage, but sustaining margin expansion and converting earnings to cash through 2H will be critical to improving ROE.

Profitability Analysis

ROE decomposition (DuPont) shows: Net profit margin 1.02%, asset turnover 0.754x, and financial leverage 2.42x, yielding ROE of 1.86%. Operating margin improved to 2.36% (¥167m/¥7,066m) while gross margin printed at 17.3%. SG&A is inferred at ~¥1,053m for the half (gross profit ¥1,219.9m minus operating income ¥167m), equating to ~14.9% of sales; the YoY growth of operating income (+41.8%) outpacing revenue (+8.1%) indicates operating leverage through better SG&A efficiency or utilization. EBITDA was ¥344.8m (EBITDA margin 4.9%), implying D&A of ¥177.8m, which is significant relative to EBIT and suggests a capital-intensive footprint (classroom build-outs and equipment), with scope to improve EBITDA-to-EBIT spread as utilization rises. Ordinary income (¥159m) versus operating income (¥167m) shows a minor non-operating drag (¥8m), primarily interest expense (¥12.6m). Net income dipped YoY (-2.3%), despite stronger EBIT, suggesting higher tax burden or non-operating/extraordinary impacts in the period. Overall margin quality is improving at the operating level but remains thin at the bottom line, constraining ROE.

Growth Assessment

Revenue growth of +8.1% YoY to ¥7,066m reflects healthy demand and/or classroom expansion; sustainability will hinge on enrollment trends, retention, pricing, and capacity utilization into 2H. Operating income growth of +41.8% underscores positive operating leverage, likely from fixed-cost absorption; the key is whether this persists with seasonality. Ordinary income growth lagged operating income due to interest and other non-operating factors; net income declined (-2.3%), indicating that below-the-line items and taxes offset operating gains. Given the education sector’s typical 2H skew, a stronger back half could reinforce the trajectory, but visibility is limited by undisclosed items (investing CF, cash, detailed non-operating breakdowns). Absent guidance in the dataset, a prudent outlook is for modest continued revenue growth with margin expansion conditional on maintaining utilization and SG&A discipline. Watch for wage inflation and classroom occupancy, which can compress margins if growth moderates.

Financial Health

Liquidity: Current assets ¥3,848m versus current liabilities ¥3,479m yields a current ratio of 1.11x and quick ratio of 1.11x (inventories not disclosed), indicating adequate near-term coverage but limited buffer if working capital intensifies seasonally. Working capital stands at ¥370m. Solvency: Total assets ¥9,367m and equity ¥3,877m imply leverage of 2.42x (assets/equity) and a debt-to-equity ratio of 1.45x (provided), reflecting moderate leverage for the business model. Interest coverage is strong at ~13.2x (operating income/interest expense), suggesting manageable debt service at current earnings. Equity ratio appears as 0.0% in the feed but should be considered undisclosed; based on reported assets and equity, the implied equity ratio approximates 41% (3,877/9,367), though this is not an official disclosure. Financing cash inflow of ¥328m implies incremental debt or similar financing, which should be balanced against future cash generation to avoid leverage creep.

Cash Flow Quality

OCF of ¥105m exceeds net income of ¥72m (OCF/NI 1.46x), indicating decent earnings quality in 1H, likely aided by non-cash charges (D&A ¥178m). Investing cash flow is not disclosed (0 in feed), preventing a reliable free cash flow calculation; the reported FCF of 0 should be treated as indeterminable rather than zero. Without cash and equivalents disclosure, we cannot evaluate the cash buffer or net debt precisely. Working capital dynamics are not detailed, but the positive OCF despite profit softness suggests either stable receivables/advance tuition dynamics or beneficial payables timing; 2H working capital seasonality should be monitored. Overall, cash conversion looks acceptable for the half, but confirmation requires full cash flow details and year-to-date capex.

Dividend Sustainability

Dividend data (DPS 0.00, payout ratio 0.0%, FCF coverage 0.00x) are not disclosed in the feed and should not be interpreted as actual zeros. With EPS at ¥13.09 for 1H and positive OCF, the capacity to pay/dividend policy cannot be assessed without: (1) full-year profit outlook, (2) actual DPS/payout guidance, and (3) visibility on capex and net debt. Absent these, payout sustainability analysis is inconclusive. Historically, sustainability would hinge on stable enrollment-driven cash flows, modest capex, and maintaining interest coverage; current interest coverage (13.2x) and OCF/NI (1.46x) are supportive, but financing inflows this half suggest capital needs that could constrain distributions if persistent.

Risk Assessment

Business Risks:

• Enrollment and retention volatility affecting utilization and margins
• Price sensitivity amid competitive cram school market and demographic headwinds (fewer students)
• Teacher hiring, training, and wage inflation impacting SG&A
• Seasonality leading to 2H concentration and forecasting uncertainty
• Potential regulatory or curriculum changes affecting demand patterns
• Geographic concentration risks if heavily exposed to specific regions

Financial Risks:

• Moderate leverage (D/E 1.45x; assets/equity 2.42x) and exposure to rising interest rates
• Thin net margin (1.02%) leaves limited cushion for shocks
• Undisclosed cash and capex obscure true FCF and liquidity buffers
• Reliance on financing inflows this half (¥328m) if OCF underperforms
• Tax and non-operating items driving divergence between EBIT growth and NI

Key Concerns:

• Sustainability of operating leverage as growth normalizes
• Visibility on capex and free cash flow due to undisclosed investing cash flows
• Net income declining YoY despite stronger operating income
• Potential interest cost creep if financing continues
• Data gaps (cash balance, equity ratio, dividends, shares) limiting precision of capital allocation analysis

Investment Implications

Key Takeaways:

• Top-line growth (+8.1% YoY) combined with +41.8% YoY operating income evidences improving operating leverage
• Net margin remains very thin (1.02%), resulting in low ROE (1.86%) despite moderate leverage
• OCF exceeds net income (1.46x), supporting earnings quality in 1H
• Liquidity adequate (current ratio 1.11x), interest coverage robust (13.2x), but leverage moderate (D/E 1.45x)
• Financing inflow (¥328m) and undisclosed investing CF complicate FCF assessment

Metrics to Watch:

• 2H enrollment, same-center revenue, and utilization rates
• SG&A ratio and staff cost trends vs revenue growth
• EBIT margin progression and bridge from EBIT to NI (non-operating items, taxes)
• Capex and investing cash flows to triangulate true FCF
• Cash and equivalents; net debt and interest expense trajectory
• Working capital movements (receivables and deferred revenue/advances)
• ROE trajectory via margin expansion vs leverage changes

Relative Positioning: Within Japan’s education services/cram school peer set, Seigakusha exhibits below-peer operating and net margins but demonstrates improving operating leverage. Leverage is moderate and coverage healthy, placing it in a middle-of-the-pack financial risk profile; sustained margin gains and clearer FCF would be needed to close the profitability gap with higher-margin peers.

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