Hibino Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥31.32B
• Operating Income: ¥2.38B
• Net Income: ¥1.40B
• EPS: ¥133.54

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: Strong Q2 FY2026 performance with clear operating leverage; profitability and ordinary income grew well ahead of revenue, though leverage remains elevated and cash flow data is unavailable. Revenue rose 16.4% YoY to 313.16, driven by robust demand in core segments (implied by higher operating income growth versus sales). Operating income surged 62.6% YoY to 23.81, lifting operating margin to 7.6%. Ordinary income increased 76.1% YoY to 23.96, indicating improved non-operating balance despite modest interest costs. Net income climbed 69.8% YoY to 13.25, pushing net margin to 4.2%. Gross margin stands at 36.9%, and the SG&A ratio is 29.3%, signaling better cost absorption. Operating margin expanded by about 215 bps YoY (from ~5.5% to 7.6%), and net margin expanded by about 133 bps (from ~2.9% to 4.2%). Ordinary margin expanded by roughly 260 bps (from ~5.0% to 7.7%), underpinned by operating improvement and contained non-operating expenses. Interest coverage is strong at 16.77x (23.81 operating income vs 1.42 interest expense), reducing immediate refinancing risk. However, the effective tax rate is elevated at 41.0%, which caps net profitability. Balance sheet shows total assets of 450.72 and equity of 132.89, implying leverage of 3.39x assets-to-equity and a D/E (total liabilities/equity) of 2.39x—high versus standard benchmarks. Liquidity is adequate but not abundant with a current ratio of 138.2% and quick ratio of 103.2%. Cash and deposits (38.17) are roughly in line with short-term loans (40.06), so near-term cash management discipline remains important. ROE is 10.0% via NPM 4.2% × asset turnover 0.695 × leverage 3.39x; ROIC at 6.2% trails typical 7–8% targets, suggesting value creation depends partly on leverage. Earnings quality cannot be fully assessed due to unreported cash flows; OCF/NI and FCF coverage of dividends are not calculable. Forward-looking, sustained project activity and utilization should support margins, but high leverage and a high tax rate temper upside and raise sensitivity to demand fluctuations or execution slippage.

Profitability Analysis

ROE (10.0%) decomposes into Net Profit Margin (4.2%) × Asset Turnover (0.695) × Financial Leverage (3.39x). The most material YoY change is in Net Profit Margin, evidenced by operating income growth (+62.6% YoY) far outpacing revenue growth (+16.4% YoY), driving operating margin expansion from 5.5% to 7.6% (+215 bps). Asset turnover at 0.695 is stable for a services/equipment-mix business and likely changed modestly. Financial leverage at 3.39x remains high but appears stable; leverage did not drive the quarter’s delta in ROE. Business rationale: better project mix, improved utilization, and cost discipline reduced SG&A intensity (29.3% of sales) and enhanced operating leverage. Non-operating balance was broadly neutral (1.74 income vs 1.59 expense), so core operating improvement is the main driver. Sustainability: margin gains tied to scale and mix can persist if demand remains healthy; however, event/project timing and utilization can be volatile, so some margin normalization risk exists. Watch for SG&A growth vs revenue; in this quarter, operating leverage is positive (OI +62.6% vs revenue +16.4%), an encouraging sign. Effective tax rate of 41.0% is a drag on net margin sustainability unless structural tax items normalize.

Growth Assessment

Top-line growth of 16.4% YoY to 313.16 is robust and broad-based in implication given operating income outperformance. Profit growth quality is good at the operating level: operating income +62.6% and ordinary income +76.1% show scaling benefits and potentially favorable mix. Net income +69.8% indicates improved profitability despite a high tax rate. Operating margin expansion (~+215 bps YoY) suggests stronger pricing/mix or utilization; SG&A ratio at 29.3% supports operating leverage. Non-operating results were a small net positive (1.74 income vs 1.59 expense), implying earnings are primarily operational. With ROE at 10.0% and ROIC at 6.2%, incremental growth is value-accretive but partly leverage-assisted; focus on raising ROIC above 7–8% target range. Outlook depends on sustained event demand, equipment installation backlog, and execution on large projects; any slowdown could compress margins given fixed cost base. Absence of R&D/capex disclosures limits visibility into pipeline and future capacity. Effective tax rate normalization could add upside to net profit growth. Overall, growth appears sustainable near term if demand holds, but sensitivity to project timing and utilization remains.

Financial Health

Liquidity: Current ratio 138.2% (above 1.0 but below 1.5 benchmark) and quick ratio 103.2% indicate adequate near-term liquidity. Cash and deposits (38.17) are roughly equal to short-term loans (40.06), so day-to-day liquidity relies on receivable collections (135.26). Solvency: D/E is 2.39x (warning: >2.0); assets-to-equity 3.39x; estimated equity ratio ≈ 29.5% (132.89/450.72). Interest coverage at 16.77x is strong, mitigating near-term solvency concerns. Maturity profile: short-term loans (40.06) and accounts payable (43.16) are covered by current assets (269.80), and working capital is positive at 74.57. No off-balance sheet obligations were reported in the provided data. Explicit warning: High leverage (D/E > 2.0) increases sensitivity to earnings volatility and refinancing conditions, though current liquidity is adequate.

Cash Flow Quality

Operating cash flow is unreported; OCF/Net Income cannot be assessed, which limits earnings quality evaluation. Free cash flow is unreported; therefore, dividend and capex coverage cannot be evaluated. Working capital: receivables (135.26) are sizable relative to half-year revenue (313.16), implying longer collection cycles typical for project/event businesses; no clear signs of manipulation, but cash conversion is a key watch-point. Inventory (68.23) is moderate for the scale and mix of equipment-related operations. Interest expense (1.42) is well-covered by operating income, supporting cash interest capacity. In absence of cash flow statements, we cannot confirm whether NI translated into cash; this is a key limitation.

Dividend Sustainability

Calculated payout ratio is 54.2%, within the <60% benchmark for sustainability. However, DPS, total dividends, OCF, and FCF are unreported, so cash coverage of dividends cannot be assessed. Given leverage (D/E 2.39x) and cash roughly equal to short-term borrowings, prudent payout maintenance likely depends on stable OCF and disciplined capex. Policy outlook cannot be inferred from the data provided; confirm management guidance and historical payout consistency when available.

Risk Assessment

Business Risks:

• Demand volatility in live events, exhibitions, and installation projects affecting utilization and margins
• Project timing risk causing revenue and cash flow lumpiness
• Pricing/mix risk if competition intensifies or large projects are delayed
• Execution risk on complex installations impacting costs and delivery schedules

Financial Risks:

• High leverage (D/E 2.39x) increases sensitivity to earnings shocks and refinancing conditions
• Liquidity reliance on receivable collections given cash ≈ short-term loans
• High effective tax rate (41.0%) reduces net profitability and cash generation
• Interest rate risk on floating-rate debt, if applicable (not disclosed)

Key Concerns:

• OCF and FCF unreported—cannot verify cash conversion of earnings
• ROIC at 6.2% below typical 7–8% target, indicating reliance on leverage to deliver ROE
• Potential working capital build around project cycles could pressure cash if demand softens
• Limited disclosure on segment mix and capex constrains forward visibility

Investment Implications

Key Takeaways:

• Clear operating leverage: operating income +62.6% vs revenue +16.4%, operating margin up ~215 bps YoY to 7.6%
• Net margin improved ~133 bps YoY to 4.2% despite a 41% tax rate
• Interest coverage strong at 16.8x; funding risk manageable near term
• Leverage elevated (D/E 2.39x); equity ratio ~29.5%
• ROE 10.0% supported by improved margin but ROIC 6.2% suggests room to enhance capital efficiency
• Liquidity adequate but not ample: current ratio 1.38x, quick ratio 1.03x, cash ≈ short-term loans
• Cash flow disclosure absent—key constraint on assessing earnings quality and dividend coverage

Metrics to Watch:

• Operating cash flow and FCF conversion vs net income
• SG&A ratio and operating margin trajectory
• Receivables days and cash conversion cycle
• Capex intensity and ROIC improvement
• Debt mix, interest rate exposure, and refinancing schedule
• Effective tax rate normalization

Relative Positioning: Within Japanese AV/event services peers, the company shows stronger-than-average margin expansion this quarter and solid interest coverage, but it operates with higher leverage and ROIC below peer targets, making sustained utilization and disciplined capital allocation critical to maintain ROE without increasing balance-sheet 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