GOKURAKUYU HOLDINGS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥7.95B
• Operating Income: ¥711M
• Net Income: ¥626M
• EPS: ¥18.93

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

Gokurakuyu Holdings (23400) delivered solid top-line expansion in FY2026 Q2 with revenue of ¥7,948m, up 13.8% YoY, indicating healthy customer traffic and/or pricing gains in its spa/bathhouse operations. Operating income grew modestly by 2.5% YoY to ¥711m, implying operating leverage was limited and that cost inflation (notably utilities and labor in this industry) likely absorbed much of the incremental sales. Net income declined 4.9% YoY to ¥595m, reflecting a narrower flow-through to the bottom line despite higher sales. Profitability remains adequate: operating margin is approximately 9.0% and net margin 7.49%, with EBITDA of ¥1,005m and an EBITDA margin of 12.6%. DuPont analysis shows ROE at 13.32%, driven by a 7.49% net margin, 0.645x asset turnover, and 2.76x financial leverage, suggesting balanced contributions from profitability and moderate leverage. Cash generation was strong relative to earnings, with operating cash flow (OCF) of ¥904m exceeding net income by 1.52x, which supports the quality of earnings. Liquidity is acceptable, with a current ratio of 108.8% and quick ratio of 104.4%, indicating sufficient near-term coverage of obligations. The balance sheet shows total assets of ¥12,329m and equity of ¥4,468m; this implies an equity ratio around the mid-30% range despite a reported 0.0% figure (likely an undisclosed metric in the source). Total liabilities of ¥9,204m result in a debt-to-equity of 2.06x, which is material but manageable given 16.8x interest coverage. Financing cash outflows of ¥739m suggest ongoing deleveraging or lease/debt service; no cash dividends were paid (DPS ¥0), consistent with balance sheet reinforcement. The reported effective tax rate metric is 0.0%, but the disclosed income tax expense of ¥146m implies a roughly high-teens rate relative to pre-tax earnings; we treat 0.0% as an undisclosed calculated field. Free cash flow cannot be precisely assessed because investing cash flow and capex are not disclosed; the reported FCF of 0 should be interpreted as unreported rather than zero. Overall, the company is growing, but margin expansion is not yet evident, likely due to cost pressures. Strong OCF relative to earnings is a positive signal for cash conversion and debt service. The absence of dividends appears prudent given leverage and reinvestment needs, though it reduces near-term shareholder yield. Data gaps (cash balance, investing cash flows, share count) limit precision in certain ratios and per-share metrics; however, the available data supports a view of stable profitability, adequate liquidity, and improving balance sheet resilience. Key watchpoints include cost control (utilities and labor), pricing power, and capex intensity for store maintenance and growth.

Profitability Analysis

ROE of 13.32% decomposes into a 7.49% net profit margin, 0.645x asset turnover, and 2.76x financial leverage. Operating margin is approximately 8.95% (¥711m/¥7,948m), while EBITDA margin is 12.6%, indicating a reasonable operating cushion for a service-heavy model. The YoY spread between revenue growth (+13.8%) and operating income growth (+2.5%) signals subdued operating leverage this period, suggesting cost inflation (especially utilities and labor) and possibly promotional or mix effects offset top-line gains. Net margin at 7.49% remains healthy, aided by favorable non-operating items (ordinary income ¥771m exceeds operating income), and manageable interest burden (interest expense ¥42m, 16.8x coverage). Depreciation of ¥294m implies moderate capital intensity relative to sales (~3.7% of revenue), consistent with facility-heavy operations. Margin quality appears mixed: EBITDA/Operating income gap (¥1,005m vs ¥711m) provides buffer, but YoY margin compression indicates near-term cost pressure. The implied effective tax rate (based on disclosed tax expense) appears around the high teens, consistent with normalized profitability after non-operating items. Overall, profitability is solid but near-term operating leverage is limited; sustaining mid-teens ROE likely requires either margin recovery (cost containment, pricing) or further asset turnover improvements.

Growth Assessment

Top-line growth of 13.8% YoY to ¥7,948m suggests recovering demand and/or successful pricing initiatives across the store base. However, operating income growth of 2.5% YoY and a 4.9% YoY decline in net income indicate growth quality is constrained by cost inflation and/or mix. The delta between ordinary income (¥771m) and operating income (¥711m) implies supportive non-operating factors which may not be structural. Revenue sustainability appears reasonable given the defensive, repeat-visit nature of bath/spa services, but energy and wage dynamics will be key to throughput of sales into profit. EBITDA growth (implied by higher revenue and stable D&A) supports medium-term reinvestment capacity. With OCF of ¥904m exceeding net income, cash conversion is supportive of growth funding, although capex requirements are unknown due to undisclosed investing CF. Outlook hinges on ability to pass through costs (ticket price, ancillary sales), manage utilities, and optimize staffing while maintaining customer traffic. Store pipeline, refurbishment cadence, and membership/loyalty trends will drive medium-term growth durability. Non-operating contributions to ordinary income should be monitored for sustainability. Given industry seasonality, H2 trajectory and winter utility costs may influence margin contour. Without disclosed investing activity, near-term net store growth and capex-led expansion are uncertain.

Financial Health

Liquidity is adequate: current assets of ¥4,134m vs current liabilities of ¥3,800m yield a current ratio of 108.8% and a quick ratio of 104.4%, offering modest headroom. Working capital is positive at ¥334m, which, combined with strong OCF, supports near-term obligations. Total liabilities of ¥9,204m vs equity of ¥4,468m result in a debt-to-equity ratio of 2.06x; leverage is meaningful but appears serviceable given 16.8x interest coverage. Total assets are ¥12,329m; this implies an equity ratio around 36% (equity/assets), despite a reported 0.0% figure that likely reflects an undisclosed calculated item. Financing cash outflow of ¥739m suggests debt/lease repayments or other financing uses, consistent with a cautious stance on leverage. Absence of a disclosed cash balance limits assessment of liquidity buffers; however, positive OCF mitigates this. No covenant data are provided; based on current ratios and interest coverage, near-term solvency appears sound. Asset turnover at 0.645x is in line with facility-based service models; further improvement would bolster returns without increasing leverage.

Cash Flow Quality

OCF of ¥903.5m is 1.52x net income (¥595m), indicating strong cash conversion and limited accrual risk in the period. The EBITDA-to-OCF bridge appears healthy for a services operator, suggesting disciplined working capital. Working capital is positive, and the quick ratio above 1.0 indicates limited reliance on inventory monetization (inventories ¥167m are small relative to current assets). Free cash flow cannot be determined due to undisclosed investing cash flows/capex; the reported FCF of 0 should be treated as unreported rather than zero. Financing CF of -¥739m likely reflects scheduled repayments (and no dividends), which are well-covered by OCF in this period. D&A of ¥294m implies ongoing maintenance capex needs; without capex disclosure, we assume at least maintenance-level reinvestment is required to sustain store quality. Overall, earnings quality is supported by OCF exceeding NI and by high interest coverage; the main limitation is capex visibility, which constrains true FCF assessment.

Dividend Sustainability

The company paid no dividend (DPS ¥0; payout ratio 0%), consistent with a focus on reinvestment and/or deleveraging. Given OCF of ¥904m and meaningful financing outflows, internal cash generation appears directed toward balance sheet management and capex rather than shareholder distributions. Without capex disclosure, FCF coverage of dividends cannot be evaluated; the reported FCF coverage of 0.00x reflects non-disclosure, not an actual constraint. With ROE at 13.3% and leverage at 2.06x debt-to-equity, retaining earnings to fortify the balance sheet is sensible. Future dividend capacity will depend on stabilizing operating margins, visibility on capex, and reduction in financing needs. A potential dividend initiation or resumption would require sustained positive FCF after maintenance capex and comfortable liquidity buffers. Policy-wise, management appears to prioritize financial flexibility over cash returns in the current phase.

Risk Assessment

Business Risks:

• Utilities cost volatility (energy, gas, electricity) directly impacts bathhouse margins
• Labor cost inflation and staffing constraints in services
• Demand sensitivity to weather/seasonality and macro discretionary spending
• Competition from other leisure and wellness offerings, including pricing pressure
• Operational disruptions (maintenance, refurbishments) affecting store availability
• Health/sanitation incidents potentially impacting brand and traffic

Financial Risks:

• Moderate-to-high leverage (debt-to-equity 2.06x) despite strong interest coverage
• Limited disclosure on cash balances and investing CF reduces visibility on liquidity runway and capex
• Exposure to interest rate changes on floating-rate debt or lease liabilities
• Refinancing risk if credit conditions tighten
• Potential working capital swings in a seasonal business affecting OCF

Key Concerns:

• Operating leverage not materializing despite double-digit revenue growth
• Unknown capex profile; true free cash flow cannot be assessed
• Reported calculated metrics (equity ratio, effective tax rate, cash) show as zero/unreported, constraining ratio analysis precision

Investment Implications

Key Takeaways:

• Robust top-line growth (+13.8% YoY) but limited operating income growth (+2.5% YoY) indicates cost pressures
• ROE at 13.32% supported by solid margins, reasonable asset turnover, and moderate leverage
• Strong cash conversion (OCF/NI 1.52x) underpins debt service and reinvestment
• Liquidity is adequate (current ratio 1.09x; quick 1.04x) with positive working capital
• Leverage meaningful (D/E 2.06x) but manageable given 16.8x interest coverage
• Dividend suspended (DPS ¥0); cash likely prioritized for deleveraging and capex

Metrics to Watch:

• Same-store sales growth and average ticket per customer
• Utilities expense ratio to sales and energy price trends
• Labor cost ratio and staffing efficiency
• Capex (maintenance vs growth) and investing cash flows
• Net openings/closures and refurbishment schedule
• Ordinary income components (sustainability of non-operating gains)
• Equity ratio (inferred ~36%) and net debt/EBITDA once cash and debt details are disclosed

Relative Positioning: Within Japan’s leisure/service operators, the company exhibits above-average cash conversion and acceptable liquidity, with ROE in the low-to-mid teens and leverage moderately higher than asset-light peers; near-term margins appear more sensitive to utilities and labor than some diversified leisure names, making cost pass-through effectiveness a key differentiator.

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