Care Service Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.61B
• Operating Income: ¥27M
• Net Income: ¥49M
• EPS: ¥13.04

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

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

Care Service Co., Ltd. (2425) reported FY2026 Q2 (non‑consolidated, JGAAP) revenue of ¥4,606 million, effectively flat YoY, indicating stable topline amid a challenging operating environment. Gross profit was ¥421 million, implying a thin gross margin of 9.1%, consistent with the labor‑intensive nature of care service operations and limited pricing power. Operating income was ¥27 million, for an operating margin of 0.6%, underscoring tight cost control requirements and modest operating leverage at current scale. Ordinary income of ¥69 million exceeded operating income by ¥42 million, suggesting material non‑operating contributions that helped lift earnings. Net income reached ¥49 million, a net margin of 1.06%, and calculated ROE stood at 1.70% based on provided DuPont inputs. The DuPont breakdown indicates modest profitability driven by low margin (1.06%), reasonable asset turnover (1.168x), and conservative leverage (financial leverage 1.36x). EBITDA was ¥102 million and the EBITDA margin 2.2%, reflecting limited buffer to absorb wage inflation or reimbursement pressure. Liquidity appears strong with current assets of ¥3,347 million versus current liabilities of ¥907 million, yielding a current ratio of 3.69x and working capital of ¥2,440 million. Leverage looks conservative: total liabilities of ¥1,196 million against equity of ¥2,888 million implies a debt‑to‑equity ratio of 0.41x and interest expense of only ¥0.325 million, with interest coverage a high 83.1x. Operating cash flow of ¥76.963 million exceeded net income (OCF/NI = 1.57x), signaling adequate cash conversion in the period. Financing cash outflow of ¥91.322 million points to repayments or other financing uses; no dividend was paid (DPS ¥0, payout 0%). Several items are unreported in XBRL (e.g., cash and equivalents, equity ratio, investing cash flows, inventories, share counts), which limits precision in certain ratios and per‑share analyses; per instruction, reported zeros here reflect non‑disclosure rather than actual zero balances. The balance sheet totals show a small reconciliation gap (assets ¥3,942 million vs liabilities plus equity ¥4,084 million), which may stem from rounding or classification timing in the provided snapshot. Effective tax expense of ¥29.495 million implies a tax rate in the high‑30% range on pre‑tax income by our calculation, even though a 0.0% effective tax rate was listed in the summary metrics. Overall, the company’s financial profile is characterized by steady revenue, very slim operating margins, strong liquidity, low financial risk, and acceptable cash conversion. Profitability remains the key area to monitor, particularly the reliance on non‑operating income to bridge from operating to ordinary earnings. With no dividend currently, internal cash appears to be prioritized for stability and potential reinvestment. Data limitations around capex and cash balances constrain free cash flow assessment, but current leverage and interest burden are comfortably low.

Profitability Analysis

ROE_decomposition: Calculated ROE 1.70% = Net profit margin 1.06% × Asset turnover 1.168 × Financial leverage 1.36. The primary drag is the very low net margin, while turnover is adequate for a service operator and leverage is modest. margin_quality: Gross margin 9.1% (¥421m/¥4,606m) is thin and consistent with a labor‑heavy model. Operating margin 0.6% (¥27m/¥4,606m) indicates minimal operating buffer; EBITDA margin 2.2% (¥102m/¥4,606m) shows limited room to absorb wage inflation or reimbursement cuts. Ordinary income margin 1.5% benefits from non‑operating items (~¥42m net), lifting the bottom line to a 1.06% net margin. operating_leverage: Incremental operating leverage appears muted at current scale—flat revenue with only ¥27m operating profit suggests fixed costs are already well covered but leave little incremental profit. Depreciation of ¥75m (~1.6% of sales) is moderate; labor and service delivery costs likely dominate cost of sales. Sustained margin improvement will require mix/pricing gains or structural cost efficiencies rather than volume alone.

Growth Assessment

revenue_sustainability: Revenue was ¥4,606m (+0.0% YoY as indicated), implying stable demand but limited expansion. For a care services provider, this typically reflects steady utilization with constrained pricing power due to public reimbursement frameworks. profit_quality: Ordinary income (¥69m) materially exceeds operating income (¥27m), implying reliance on non‑operating drivers to support earnings; core profitability is thin. Calculated effective tax burden (~38% on our calculation) suggests normalized tax outflows, corroborating earnings quality at the bottom line, while OCF/NI of 1.57x is supportive. outlook: Short‑term growth likely hinges on utilization, capacity additions, and service mix optimization rather than price. Wage inflation and staffing tightness remain headwinds to margin expansion. If non‑operating gains normalize, sustaining net margins above 1% will require operating improvements.

Financial Health

liquidity: Current assets ¥3,346.9m vs current liabilities ¥907.4m yield a current ratio of 3.69x and quick ratio 3.69x (inventories unreported). Working capital stands at ¥2,439.6m, indicating ample near‑term coverage. solvency: Total liabilities ¥1,195.9m vs equity ¥2,888.0m imply a debt‑to‑equity ratio of 0.41x and financial leverage of 1.36x. Interest expense is minimal at ¥0.325m with 83.1x coverage, reflecting very low debt burden. capital_structure: Balance sheet is equity‑heavy with modest leverage. The provided equity ratio metric is unreported (0.0%), but the implied equity ratio using totals would be high given liabilities are ~30% of assets, subject to the noted balance reconciliation gap.

Cash Flow Quality

earnings_quality: OCF of ¥76.963m exceeds net income of ¥49m (OCF/NI 1.57x), indicating acceptable cash conversion. The gap between operating and ordinary income implies some non‑cash or non‑operating contributions, but cash earnings appear supportive in the period. FCF_analysis: Investing cash flow is unreported (listed as ¥0). Free cash flow cannot be precisely calculated without capex/maintenance data; the provided FCF value of 0 likely reflects non‑disclosure rather than actual zero. Given positive OCF and low interest burden, underlying FCF is likely positive absent outsized capex. working_capital: Details by component are not disclosed, but strong current ratios indicate working capital is ample. The OCF/NI ratio suggests that working capital movements did not materially drain cash in the period.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0.00 and payout ratio 0.0%, consistent with retaining earnings given slim profitability (net margin 1.06%) and the need to reinforce operating resilience. FCF_coverage: FCF coverage is shown as 0.00x due to non‑disclosure of investing flows; thus, dividend coverage cannot be meaningfully assessed from FCF this period. policy_outlook: With thin operating margins and reliance on non‑operating income, a conservative dividend stance appears prudent near term. Any initiation or increase would likely depend on sustained operating margin improvement and clearer capex visibility.

Risk Assessment

Business Risks:

• Reimbursement and policy changes affecting care service pricing and profitability
• Labor cost inflation and staffing shortages impacting service margins and capacity
• Utilization variability across facilities and service lines
• Competitive pressure from regional operators and large chains
• Compliance and quality control risks in regulated care services
• Potential disruption from infectious disease waves affecting operations and costs

Financial Risks:

• Thin operating margin (0.6%) leaves little buffer against cost shocks
• Earnings reliance on non‑operating income to bridge from operating to ordinary profit
• Limited disclosed visibility on capex and cash balances (investing CF and cash unreported)
• Balance sheet reconciliation gap between assets and liabilities plus equity (possible reporting/rounding)

Key Concerns:

• Sustainability of core operating profitability at sub‑1% net margins
• Execution on cost control and staffing to prevent margin compression
• Sensitivity to reimbursement/tariff changes in the care sector

Investment Implications

Key Takeaways:

• Stable revenue at ¥4,606m but minimal growth
• Operating margin remains very thin at 0.6%; EBITDA margin 2.2%
• Ordinary income exceeds operating income by ¥42m, highlighting non‑operating support
• Strong liquidity (current ratio 3.69x) and low interest burden (83x coverage)
• OCF exceeds net income (1.57x), indicating acceptable cash conversion
• No dividend currently; capital being conserved amid thin margins

Metrics to Watch:

• Operating margin and gross margin trajectory
• Staff cost ratio and utilization rates (if disclosed)
• Non‑operating income components vs. recurring operating profit
• OCF/NI and working capital movements
• Capex and investing cash flows to assess sustainable FCF
• Leverage and interest expense trends amid financing cash outflows

Relative Positioning: Within domestic care service operators, profitability is below typical peer medians (industry operating margins often in the low‑single digits), but the balance sheet is comparatively conservative with ample liquidity and low financing risk.

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