Premium Water Holdings,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥40.35B
• Operating Income: ¥6.74B
• Net Income: ¥3.94B
• EPS: ¥132.52

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

Premium Water Holdings delivered steady top-line growth and strong operating leverage in FY2026 Q2 (IFRS, consolidated). Revenue rose 3.7% YoY to 403.47, while operating income increased 12.3% to 67.37, indicating cost discipline and scale benefits. Net income advanced 25.8% to 39.36, aided by operating strength and despite non-operating headwinds. Gross profit of 330.42 implies an 81.9% gross margin, reflecting the high-margin subscription/water delivery model and favorable mix. SG&A of 270.72 grew slower than gross profit, compressing the SG&A ratio and lifting operating margin to approximately 16.7% (67.37/403.47). EBITDA of 126.96 (31.5% margin) provides a solid cash earnings cushion for reinvestment and debt service. Profit before tax was 60.59, below operating income, signaling net non-operating costs; equity-method losses of -5.60 were a notable drag. The effective tax rate was 31.5%, broadly in line with a normalized range. DuPont decomposition shows a calculated ROE of 14.1% (net margin 9.8%, asset turnover 0.329x, financial leverage 4.40x), with leverage the key amplifier of equity returns. The equity ratio stands at 22.7% and the reported debt-to-equity ratio at 3.12x, highlighting a balance sheet reliant on liabilities to fund growth. Operating cash flow was robust at 102.65, equal to 2.61x net income, underscoring solid earnings quality and working capital discipline. Free cash flow was positive at 38.08 after -64.57 investing outflows, suggesting ongoing growth capex or strategic investments. Financing cash flow was -66.71, including dividends of -13.41 and share repurchases of -3.35, alongside likely debt repayments. Cash and equivalents were 319.00, providing liquidity despite the lack of disclosure on current liabilities and interest-bearing debt by tenor. Dividend affordability appears adequate with a 76.1% payout ratio and 1.27x FCF coverage, though headroom is not excessive under a leveraged capital structure. Data limitations exist for several line items (e.g., current liabilities, interest expense, capex detail, DPS), but the available metrics support a view of improving profitability and resilient cash conversion.

Profitability Analysis

ROE_decomposition: ROE 14.1% = Net margin 9.8% × Asset turnover 0.329 × Financial leverage 4.40x. Returns are primarily leverage-driven, with moderate asset efficiency and solid margins. margin_quality: Gross margin 81.9% reflects premium unit economics in water delivery; operating margin ~16.7% (67.37/403.47) improved YoY as SG&A grew below gross profit. EBITDA margin 31.5% indicates healthy cash earnings capacity. Net margin at 9.8% is dampened by non-operating losses, notably equity-method -5.60. operating_leverage: Revenue +3.7% vs operating income +12.3% demonstrates positive operating leverage from cost control and scale effects. SG&A ratio declined as a share of revenue, supporting margin expansion.

Growth Assessment

revenue_sustainability: Top-line growth of 3.7% suggests stable subscriber base expansion and ARPU resilience, albeit at a moderated pace. High gross margins imply pricing power and sticky recurring revenue. profit_quality: Operating profit grew faster than revenue; EBITDA of 126.96 supports recurring earnings quality. Non-operating drag (equity-method loss) partially offsets operating gains but does not impair the core trajectory. outlook: Assuming continued subscriber growth, disciplined customer acquisition costs, and stable logistics/energy inputs, mid-single-digit revenue growth with incremental margin gains is plausible. Watch for normalization of non-operating items to translate operating strength into bottom-line growth.

Financial Health

liquidity: Cash and equivalents of 319.00 provide a liquidity buffer. Current assets total 473.24, but current liabilities are unreported, so current and quick ratios cannot be assessed. Working capital disclosure is limited; reliance on receivables (122.71) is moderate; inventories are lean at 9.17. solvency: Equity ratio 22.7% and debt-to-equity 3.12x indicate high leverage. Financial leverage of 4.40x in DuPont confirms liabilities are a significant part of the funding mix. Interest coverage cannot be calculated due to missing interest expense, but EBITDA provides a cushion. capital_structure: Total assets 1,228.05 vs total liabilities 870.03 and total equity 278.95. Lack of breakdown between short- and long-term debt limits refinancing risk assessment; financing cash outflows suggest some deleveraging alongside shareholder returns.

Cash Flow Quality

earnings_quality: OCF/Net income of 2.61x indicates strong cash realization of earnings, supported by solid EBITDA and likely favorable working capital movements. FCF_analysis: Free cash flow of 38.08 after -64.57 investing CF indicates capacity to fund dividends and selective buybacks while investing for growth. Capex specifics are unreported, so maintenance vs growth split is unknown. working_capital: Accounts receivable of 122.71 and low inventories (9.17) suggest an asset-light operating model. Without current liabilities detail, cash conversion cycle analysis is constrained.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 76.1%, elevated but manageable given current earnings and OCF strength. EPS (basic) is 132.52 JPY; DPS is unreported, limiting precision. FCF_coverage: FCF coverage of dividends is 1.27x, implying current dividends are covered by internally generated cash after investments, albeit with limited buffer under stress. policy_outlook: With leverage elevated and growth investments ongoing, management may prioritize balance sheet resilience over aggressive dividend hikes. Stable to modestly progressive dividends appear consistent with current cash generation, subject to investment needs and financing conditions.

Risk Assessment

Business Risks:

• Customer acquisition cost inflation and churn in subscription water delivery
• Logistics and energy cost volatility affecting delivery margins
• Sourcing and quality risks for water and consumables
• Competitive pricing pressure from other home/office delivery and retail water options
• Regulatory and environmental constraints on water source development
• FX exposure for imported equipment and materials
• Natural disasters and supply chain disruptions impacting distribution

Financial Risks:

• High leverage (equity ratio 22.7%, D/E 3.12x) increases sensitivity to cash flow volatility
• Refinancing and interest rate risk; interest coverage not observable due to data gaps
• Non-operating losses (equity-method -5.60) could persist or widen
• Limited disclosure on debt tenor and covenants hinders assessment of near-term obligations
• Potential working capital swings given receivables-heavy model

Key Concerns:

• Sustaining margin gains while maintaining subscriber growth
• Visibility on debt structure and interest burden
• Persistence of non-operating losses narrowing the OI-to-NI conversion

Investment Implications

Key Takeaways:

• Solid operating performance with positive operating leverage: revenue +3.7%, OI +12.3%, NI +25.8%
• High-margin model (GM 81.9%, EBITDA margin 31.5%) supports cash generation
• Leverage-driven ROE of 14.1% with an equity ratio of 22.7% implies higher financial risk
• Strong cash conversion (OCF/NI 2.61x) and positive FCF (38.08) fund dividends and selective buybacks
• Non-operating headwinds (equity-method -5.60) depressed PBT vs OI; monitoring needed

Metrics to Watch:

• Operating margin trajectory and SG&A as a percentage of revenue
• OCF/NI conversion and FCF after growth investments
• Debt metrics: interest expense, interest coverage, maturity profile, and net debt
• Equity-method results and other non-operating items affecting PBT
• Subscriber growth, churn, ARPU, and customer acquisition cost
• Receivables days and cash conversion cycle

Relative Positioning: Within domestic beverage/water delivery peers, the company exhibits superior gross margins and solid EBITDA margins consistent with a subscription-heavy model, offset by higher financial leverage and moderate top-line growth.

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