SUNNY SIDE UP GROUP Inc. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥5.43B
• Operating Income: ¥616M
• Net Income: ¥129M
• EPS: ¥32.30

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 strong FY2026 Q1 with sharp profit inflection and margin expansion, supported by disciplined costs and modest non-operating items. Revenue rose 47.6% YoY to 54.33, and operating income surged 241.7% YoY to 6.16, indicating powerful operating leverage. Ordinary income climbed 221.2% YoY to 6.21, while net income jumped 273.6% YoY to 4.79, pushing EPS to 32.30 yen. Operating margin improved to 11.3%, ordinary margin to 11.4%, and net margin to 8.8%. Based on growth rates, we estimate operating margin expanded by about 644 bps YoY (from ~4.9% to ~11.3%). Ordinary margin likely expanded by ~619 bps and net margin by ~533 bps. ROE calculated via DuPont is 10.1%, underpinned by asset turnover of 0.634 and moderate leverage of 1.81x. Liquidity is robust with a current ratio of 223% and quick ratio of 222%, and the balance sheet sits in net cash (cash 23.19 versus total loans 4.96), supporting financial flexibility. Interest coverage is extremely strong at 367.5x, and the equity ratio is approximately 55% (equity 47.30 / assets 85.75). Non-operating income (0.22) and expenses (0.09) are small, indicating earnings are predominantly operational in nature. A data inconsistency exists between reported gross profit (8.44) and the implied figure from revenue minus cost of sales (25.97), so margin analysis leans on reported gross profit margin (15.5%) while noting the discrepancy. Cash flow statements were not disclosed, preventing assessment of OCF conversion and FCF coverage. The reported payout ratio (calculated) of 69.8% is above our 60% benchmark, implying higher reliance on steady cash generation to sustain dividends. ROIC is reported at a healthy 14.0%, comfortably above the 8% excellence threshold. Forward-looking, strong operating leverage and net cash position are positives, but sustainability hinges on revenue momentum and cash conversion given the elevated payout ratio and absent CF data.

Profitability Analysis

ROE decomposition (DuPont): ROE 10.1% = Net Profit Margin 8.8% × Asset Turnover 0.634 × Financial Leverage 1.81x. The largest YoY improvement appears in the margin component: operating income +241.7% vs revenue +47.6% implies substantial operating margin expansion (estimated +644 bps YoY). Asset turnover (0.634) reflects higher throughput on a relatively stable asset base, but the primary driver of ROE uplift is margin expansion rather than leverage or turnover. Business reason: scale benefits and operating leverage with SG&A at 6.64 (approximately 12.2% of revenue) suggest fixed-cost dilution as revenue accelerated; non-operating items were modest, so gains are mainly operational. Sustainability: partially sustainable if demand momentum continues and fixed costs remain controlled; however, unusually high growth rates may normalize, tempering incremental margin gains. Watchpoints: SG&A detail is undisclosed; if SG&A growth accelerates faster than revenue in subsequent quarters, operating leverage could reverse. Also, the discrepancy between reported gross profit and revenue minus cost of sales introduces uncertainty around margin structure.

Growth Assessment

Revenue growth of 47.6% YoY to 54.33 demonstrates strong topline momentum. Operating income growth of 241.7% indicates significant operating leverage, likely from fixed-cost dilution and mix. Ordinary income rose 221.2% with minimal reliance on non-operating income (non-operating income ratio ~4.5%), supporting quality of earnings from core operations. Net income growth of 273.6% to 4.79 further underscores margin-led expansion. Sustainability: absent segment disclosure and cash flow data, durability of this growth is uncertain; results could moderate if demand normalizes. Near-term outlook benefits from net cash, strong liquidity, and elevated ROIC (14.0%), which supports reinvestment capacity. Key sensitivities: revenue trajectory in subsequent quarters, mix effects within services, and potential cost inflation in labor/outsourcing. Given the payout ratio is high, maintaining growth and cash conversion will be important to support capital returns.

Financial Health

Liquidity is strong: current ratio 222.8% and quick ratio 221.7% (both well above benchmarks). No warnings for current ratio < 1.0 or D/E > 2.0; D/E at 0.81x is moderate and conservative. Balance sheet shows net cash of approximately 18.23 (cash 23.19 minus total loans 4.96), providing flexibility. Equity ratio is roughly 55.1% (47.30 / 85.75), indicating a solid capital base. Maturity mismatch risk appears low: current assets 67.64 comfortably exceed current liabilities 30.37; accounts receivable 29.09 versus accounts payable 14.24 suggests working capital is manageable, though collection efficiency should be monitored. Off-balance sheet obligations are not disclosed in the provided data.

Cash Flow Quality

Operating cash flow, investing cash flow, and free cash flow are undisclosed, so OCF/Net Income and FCF coverage cannot be assessed. This prevents validation of earnings quality via cash conversion; as such, OCF/NI could not be benchmarked against the 0.8 threshold. With a calculated payout ratio of 69.8%, FCF sufficiency is an important unknown—absent cash flow disclosure, dividend coverage cannot be verified. Working capital: AR (29.09) is sizable relative to revenue for the quarter, implying cash conversion will hinge on timely collections; no evidence of WC manipulation is apparent from the limited data.

Dividend Sustainability

The calculated payout ratio is 69.8%, modestly above our 60% comfort threshold, implying moderate strain unless cash generation is strong. FCF coverage is not calculable due to missing OCF and capex, introducing uncertainty. Balance sheet strength (net cash) provides a buffer in the near term, but medium-term sustainability will depend on maintaining operating momentum and cash conversion. Policy outlook cannot be inferred without historical DPS or stated policies; monitor guidance, interim dividends, and any stated payout/DOE targets.

Risk Assessment

Business Risks:

• Revenue normalization risk after a high-growth quarter, potentially reducing operating leverage benefits
• Execution risk in scaling operations while maintaining SG&A discipline given limited cost breakdown disclosure
• Client concentration or project-timing risk typical for marketing/PR/event-driven businesses (not disclosed but industry-relevant)

Financial Risks:

• Dividend sustainability risk with a 69.8% payout ratio absent verified FCF coverage
• Receivables collection risk given AR size relative to quarterly revenue
• Data inconsistency between reported gross profit and revenue minus cost of sales, which clouds precise margin assessment

Key Concerns:

• Lack of cash flow disclosure prevents assessment of earnings quality and dividend coverage
• Margin structure uncertainty due to gross profit discrepancy
• Potential volatility in demand for promotional/events-related services in a cyclical macro environment

Investment Implications

Key Takeaways:

• Strong operational turnaround with operating margin rising to ~11.3% and ROE at 10.1%
• Robust balance sheet with net cash (~18.2) and strong liquidity (current ratio ~223%)
• Earnings quality appears operationally driven, with minimal non-operating contributions
• Dividend payout ratio above benchmark heightens dependence on consistent cash generation
• Data gaps (cash flows, SG&A breakdown) and a gross profit inconsistency limit precision of margin analysis

Metrics to Watch:

• Operating cash flow and FCF to validate earnings conversion and dividend coverage
• AR days and collection trends to monitor working capital
• Operating margin trajectory and SG&A ratio to revenue
• ROIC sustainability relative to the 8% benchmark
• Any clarification on cost of sales/gross profit definitions to reconcile margin metrics

Relative Positioning: Within Japan-listed marketing/PR/event-related peers, the company exhibits above-average growth, solid ROE, and a strong balance sheet (net cash), but carries higher-than-preferred payout ratio and limited disclosure on cash flows and cost structure, warranting cautious interpretation of margin sustainability.

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