EDION Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥385.67B
• Operating Income: ¥13.79B
• Net Income: ¥9.39B
• EPS: ¥88.54

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

Verdict: A mixed FY2026 Q2—topline grew modestly but operating profitability compressed, with strong cash generation cushioning weaker margins. Revenue rose 1.4% YoY to 3,856.68, while operating income fell 4.9% YoY to 137.87, indicating negative operating leverage. Gross profit reached 1,152.87, implying a gross margin of 29.9%, which is stable for a consumer electronics retailer. The operating margin declined to 3.58% from roughly 3.81% a year ago, a compression of about 23 basis points. Ordinary income was 143.53 (-4.5% YoY) as modest net non-operating income (5.66) provided only slight support. Net income decreased 6.9% YoY to 93.36, equating to a net margin of 2.42%. SG&A was 1,015.00, representing 26.33% of sales, suggesting fixed-cost pressure given slower revenue growth. Cash generation was a bright spot: operating cash flow of 204.38 exceeded net income by 2.19x, signaling high earnings quality for the quarter. EBITDA was 193.73 (5.0% margin), with interest coverage of 45.8x indicating ample buffer against interest costs (3.01). Balance sheet liquidity is adequate but inventory-heavy: current ratio 134.9% and quick ratio 44.4%, pointing to reliance on inventory conversion. Leverage is moderate with D/E at 0.84x; estimated net debt is around 490 (short- and long-term loans totaling ~580 vs cash 90.6). ROE was 4.1% by DuPont (NPM 2.4% × AT 0.913 × Leverage 1.84x), below an assumed cost of equity, while ROIC was 3.3%, triggering a capital efficiency caution. Capex was restrained at 45.75, allowing likely positive free cash flow after investments. Shareholder returns continued through buybacks of 28.57, and the calculated payout ratio stood at 56.4%, within a broadly sustainable range given OCF. Looking ahead, margin recovery hinges on SG&A discipline and inventory management through the seasonal peak, with pricing environment and product mix (white goods vs AV/IT) as key drivers. Overall, despite modest revenue growth and strong cash flow, profitability softness and low ROIC temper the quarter's quality, making execution on cost and working capital crucial for 2H.

Profitability Analysis

ROE decomposition: 4.1% = 2.4% Net Profit Margin × 0.913 Asset Turnover × 1.84x Financial Leverage. The most impactful drag this quarter was Net Profit Margin, as operating margin compressed from ~3.81% to 3.58% (~23 bps), and net margin settled at 2.42%. Business drivers likely include cost inflation (logistics/energy/labor) and a less favorable sales mix versus fixed SG&A, given revenue only grew 1.4%. Asset turnover at 0.913 is reasonable for the format but not improving, implying limited topline acceleration or asset base efficiency gains this quarter. Leverage (1.84x) provided modest support but is not the primary ROE driver. Sustainability: margin pressure may persist near term unless mix improves (services/installation/extended warranties) and SG&A is contained; leverage effects are stable, while asset turnover could lift seasonally in 2H if inventory converts well. Watch for concerning trends: SG&A ratio at 26.3% with revenue growth at 1.4% suggests fixed-cost absorption challenges; if SG&A growth continues to outpace sales, operating deleverage risk remains.

Growth Assessment

Revenue grew 1.4% YoY to 3,856.68, a subdued pace versus typical seasonal demand, suggesting muted category growth or competitive pricing pressure. Operating income declined 4.9% YoY, indicating revenue growth did not offset cost pressures. Ordinary income (-4.5% YoY) and net income (-6.9% YoY) trailed, reflecting some non-operating headwinds and higher tax burden (effective tax rate 33.2%). Gross margin at 29.9% is consistent with a stable mix but not expanding enough to overcome SG&A density. EBITDA margin at 5.0% is thin, typical for the sector, leaving limited room for shocks. Outlook: near-term growth will depend on seasonal categories (heating, year-end promotions), services attachment, and home-related demand; any normalization in logistics/energy costs could aid margins. We see restrained capex (45.75) supporting cash while the company prioritizes efficiency; however, ROIC at 3.3% indicates that growth investments must be tightly screened. The non-operating result was modestly positive (net 5.66), with limited support from financial items; absent large one-offs, earnings will track operating trends. Risks to growth include price deflation in CE, competitive intensity from e-commerce, and weather variability affecting white goods. With OCF strong, the company has flexibility to fund tactical promotion without balance sheet strain, but profit growth requires better SG&A leverage.

Financial Health

Liquidity: Current ratio 134.9% (adequate but below the 1.5x comfort benchmark); Quick ratio 44.4% signals dependence on inventory conversion for liquidity. Solvency: Debt-to-equity 0.84x (moderate), interest coverage 45.8x (strong). Maturity profile and mismatch: Short-term loans 252.54 vs current assets 1,784.97; with cash 90.60 and receivables 341.49, the company relies on inventory (1,197.95) and payables (393.28) to manage the cycle—mismatch risk is manageable if inventory turns remain healthy. Net debt (approx.) ~490 (loans 580.71 less cash 90.60), implying comfortable but not negligible leverage for a retailer. No explicit off-balance sheet obligations were reported in the data provided. Warning thresholds: Current ratio is above 1.0 (no immediate red flag), D/E below 2.0 (no leverage warning). Overall, balance sheet is serviceable but working-capital-intensive.

Cash Flow Quality

OCF/Net Income at 2.19x indicates strong earnings quality, likely supported by favorable working capital movements and non-cash depreciation (55.86). Estimated FCF (OCF minus capex) is about 158.63, adequate to fund buybacks (28.57) and likely dividends, leaving a buffer. With interest expense at 3.01 and high coverage, cash interest is not a strain. Sustainability: If current OCF benefits from seasonal payables or inventory reductions, some mean reversion may occur in 2H; monitor inventory and payables turns. No apparent signs of aggressive working capital manipulation are evident from available snapshots, but low quick ratio underscores execution risk if sales slow. Financing cash outflow of -128.60 suggests active shareholder returns and/or debt service, consistent with disciplined capital allocation.

Dividend Sustainability

The calculated payout ratio is 56.4%, within the generally sustainable range (<60%). While total dividends paid are unreported, estimated FCF of ~158.63 comfortably covers typical dividends and the reported share repurchases (28.57). Balance sheet leverage is moderate (D/E 0.84x), supporting ongoing distributions absent a sharp earnings decline. Policy outlook: With ROIC at 3.3% and ROE at 4.1%, management may prioritize stable dividends over aggressive buyback expansion unless profitability improves. Key sensitivities are margin recovery in 2H and inventory discipline; either would support maintaining or modestly growing DPS, but data gaps (unreported DPS/total dividends) limit precision.

Risk Assessment

Business Risks:

• Thin operating margin (3.58%) vulnerable to cost inflation and promotional intensity
• Inventory obsolescence/markdown risk given high inventory (1,197.95) and low quick ratio
• Demand cyclicality and seasonality in consumer electronics; weather-sensitive white goods
• Price deflation and competitive pressure from e-commerce and mass retailers
• Supplier terms and rebate variability affecting gross margin

Financial Risks:

• Working capital dependence; liquidity reliant on inventory conversion and payables
• Moderate net debt (~490) introduces interest rate and refinancing risk
• ROIC at 3.3% below the 5% warning threshold, indicating capital efficiency risk
• Potential cash flow normalization if current OCF benefits from timing (payables/inventory)

Key Concerns:

• Operating margin compression (~23 bps YoY) amid slow revenue growth
• Low asset efficiency relative to capital base (AT 0.913) and subdued ROE (4.1%)
• Limited non-operating income support; earnings largely exposed to core operations
• Low quick ratio (0.44) increases short-term liquidity sensitivity if sales weaken

Investment Implications

Key Takeaways:

• Revenue growth modest at 1.4% with negative operating leverage; profit softness persists
• Cash generation strong (OCF/NI 2.19x), enabling shareholder returns and capex coverage
• ROIC (3.3%) and ROE (4.1%) below cost of capital point to efficiency improvement needs
• Liquidity adequate but inventory-heavy; working capital execution is critical into 2H
• Capital allocation remains balanced (capex restrained; buybacks ongoing), but upside hinges on margin recovery

Metrics to Watch:

• Operating margin trajectory and SG&A ratio in 2H
• Inventory levels and turnover vs payables (cash conversion cycle)
• Category mix (white goods/services) and attachment rates (installation, warranties)
• OCF sustainability vs seasonal reversals
• ROIC progress and store productivity/space optimization

Relative Positioning: Within Japan’s consumer electronics retail peer set, the company shows solid cash generation and conservative leverage, but trails on capital efficiency (ROIC 3.3%) and faces typical margin pressures; near-term performance depends on execution in cost control and inventory, rather than outsized 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