JP-HOLDINGS,INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥20.76B
• Operating Income: ¥2.71B
• Net Income: ¥1.94B
• EPS: ¥20.73

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

JP Holdings reported FY2026 Q2 consolidated results under JGAAP with steady top-line growth but softer bottom-line momentum. Revenue rose 7.9% year over year to ¥20.763bn, reflecting resilient demand and/or capacity additions in the childcare services portfolio. Gross profit reached ¥4.015bn, translating to a gross margin of 19.3%, broadly stable for a labor-intensive, subsidy-influenced model. Operating income was ¥2.715bn, down 0.2% YoY, implying modest margin compression as operating margin settled at 13.1%. Ordinary income of ¥2.755bn exceeded operating income, indicating positive net non-operating items despite low financial income/expense overall. Net income declined 8.6% to ¥1.773bn, pulling net margin to 8.54%, as tax expense and minor non-operating variance offset revenue gains. DuPont analysis shows ROE at 8.72%, driven by an 8.54% net margin, 0.58x asset turnover, and 1.76x financial leverage, indicative of balanced returns with moderate leverage. EBITDA was ¥3.055bn (14.7% margin), with D&A comprising roughly 12.6% of revenue and 16–17% of operating income, suggesting modest capital intensity. Cash conversion was mixed: operating cash flow was ¥1.303bn, approximately 73% of net income, pointing to working capital absorption or timing effects in the half. Liquidity appears strong with a current ratio of 240% and working capital of ¥15.687bn, supporting operational flexibility and seasonality. Solvency metrics are comfortable: interest coverage stands at 97x, and debt-to-equity at 0.89x, consistent with manageable financial risk. Certain disclosures are not available or show as zero (e.g., equity ratio, cash and equivalents, investing cash flow, DPS), which under the stated convention indicates non-disclosure rather than actual zero. Balance sheet subtotals have some internal inconsistencies (sum of liabilities and equity versus total assets), so we prioritize the internally consistent ratios provided (e.g., current ratio, D/E, DuPont inputs) for assessment. The effective tax rate shown as 0.0% is clearly non-representative; based on income tax expense of ¥0.992bn and ordinary income of ¥2.755bn, an indicative tax rate is in the mid-30% range. Overall, JP Holdings demonstrates stable operations with slight negative operating leverage in the period, solid liquidity, and ample interest coverage, though cash conversion and cost pressures warrant monitoring. Near-term outlook hinges on personnel cost control, occupancy/enrollment trends, and policy-driven subsidy dynamics typical of the childcare sector.

Profitability Analysis

ROE of 8.72% decomposes into a net margin of 8.54%, asset turnover of 0.58x, and financial leverage of 1.76x. Operating margin is 13.1% (¥2.715bn OI on ¥20.763bn revenue), slightly lower YoY given operating income fell 0.2% against a 7.9% revenue increase, implying negative operating leverage in the half. Gross margin is 19.3%, consistent with a labor- and rent-heavy cost structure; the delta between gross and operating margins suggests good SG&A discipline but likely pressure from personnel costs and utility/rent inflation. EBITDA margin of 14.7% indicates healthy underlying operating cash earnings for the sector. Interest coverage is very strong at 97.4x, confirming operating earnings are not burdened by financing costs. Ordinary income exceeded operating income by ¥40m, suggesting benign non-operating items. The YoY decline in net income (−8.6%) versus flat operating income points to tax and/or non-operating effects rather than core margin deterioration alone. Overall profitability remains sound but shows signs of cost headwinds, with modest pressure on operating leverage despite revenue growth.

Growth Assessment

Revenue grew 7.9% YoY to ¥20.763bn, implying sustained demand and/or capacity expansion in childcare operations. However, operating income dipped 0.2% YoY, indicating that incremental revenue was offset by higher operating costs (likely personnel and facility-related), delivering negative operating leverage in this period. Net income fell 8.6%, amplifying the drop seen at the operating line due to taxes and minor non-operating movements. EBITDA growth appears subdued given margin at 14.7%, suggesting limited incremental efficiency gains. The sustainability of top-line growth will depend on enrollment/occupancy, new center openings or acquisitions, and continued public funding frameworks. Profit quality remains acceptable, with high interest coverage and solid margins, but cash conversion (OCF/NI at 0.73x) was weaker, warranting attention to working capital and subsidy receivables timing. Near-term outlook is cautiously stable: if cost normalization and staffing efficiency improve, operating leverage could recover; conversely, persistent wage inflation could cap margin expansion despite growth.

Financial Health

Liquidity is robust: current assets of ¥26.862bn versus current liabilities of ¥11.176bn yield a current ratio of 240% and working capital of ¥15.687bn. The quick ratio of 240% reflects minimal inventory reliance (inventories ¥45.6m). Solvency is comfortable with debt-to-equity of 0.89x and interest coverage near 97x, indicating ample buffer to service obligations. While the disclosed equity ratio is shown as 0.0% (non-disclosed), using totals implies a healthy equity cushion; however, reported totals for liabilities and equity do not reconcile perfectly with total assets, so headline balance sheet ratios should be interpreted with caution. Capital structure appears conservative-to-moderate for a services business, and low interest burden limits financial risk. Financing cash flow was an outflow of ¥2.543bn, likely reflecting debt repayment and/or shareholder returns, though detail is not disclosed here. Overall, balance sheet strength supports ongoing operations and selective growth.

Cash Flow Quality

Operating cash flow was ¥1.303bn, equating to 0.73x of net income, which is weaker than ideal for a services business and suggests working capital absorption or timing of subsidy/fee collections. EBITDA of ¥3.055bn provides a useful cushion, but conversion to OCF lagged, potentially due to receivables growth or payables normalization. Investing cash flow is shown as zero (non-disclosed), preventing calculation of true free cash flow; the FCF figure shown as zero should be treated as not available. Absent investing detail, an OCF-only lens implies the business generated positive cash from operations but may have simultaneously repaid financing (FCF likely positive before financing, but unquantified). Working capital dynamics deserve monitoring given the scale of current assets relative to current liabilities and the sector’s reliance on public/private receivables. Earnings quality is generally acceptable given the alignment between EBITDA and operating income and limited non-operating influence, but cash conversion should improve to bolster confidence.

Dividend Sustainability

Annual DPS is shown as ¥0.00 and payout ratio as 0.0%, which per the data convention indicates non-disclosure rather than a true zero. Without confirmed dividends and with investing cash flows not disclosed, we cannot compute reliable FCF coverage of dividends. From an earnings capacity perspective, net income of ¥1.773bn and strong liquidity suggest potential room for distributions if policy allows, but sustainability would depend on capex needs for new facilities, regulatory capital requirements, and maintaining sufficient cash buffers. Financing cash outflow of ¥2.543bn may include shareholder returns or debt service; absent detail, we cannot attribute it to dividends. Policy outlook is therefore unclear from the provided data; we assume a conservative stance until explicit dividend guidance or historical payout data is available.

Risk Assessment

Business Risks:

• Personnel cost inflation and staffing shortages for certified childcare workers
• Regulatory and subsidy framework changes at national or municipal levels
• Enrollment/occupancy volatility due to demographics and local competition
• Compliance and safety standards risk inherent to childcare operations
• Expansion execution risk for new center openings or M&A
• Reputation risk from operational incidents affecting brand trust

Financial Risks:

• Weaker cash conversion (OCF/NI at 0.73x) indicating working capital pressure
• Potential capex and lease commitments for facility expansion not disclosed here
• Exposure to interest rate changes on variable-rate debt, albeit mitigated by high coverage
• Data inconsistencies in balance sheet aggregates complicate precise leverage assessment

Key Concerns:

• Negative operating leverage despite 7.9% revenue growth
• Cash flow visibility limited by non-disclosure of investing cash flows
• Dependence on public funding/subsidies that can change with policy

Investment Implications

Key Takeaways:

• Solid top-line growth (+7.9% YoY) but slight margin compression at the operating and net levels
• ROE of 8.72% supported by healthy net margin and moderate leverage
• Exceptional interest coverage (97x) and strong liquidity (current ratio 240%) reduce financial risk
• Cash conversion softer (OCF/NI 0.73x), indicating working capital/timing headwinds
• Disclosure gaps (investing CF, equity ratio, share data, DPS) limit full valuation and payout assessment

Metrics to Watch:

• Personnel cost ratio and staff retention/turnover
• Enrollment/occupancy and center count development
• OCF/Net income and working capital movements (receivables days)
• Capex and new center pipeline (once investing CF is disclosed)
• Policy changes affecting childcare subsidies and fee structures
• Operating margin trajectory as cost environment evolves

Relative Positioning: Within Japan’s childcare services space, JP Holdings demonstrates scale benefits and above-average operating margins for a labor-intensive model, coupled with strong liquidity and low financing burden; however, its near-term operating leverage is negative and cash conversion weaker than ideal, leaving it mid-pack on earnings momentum but solid on balance sheet strength.

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