AMIYAKI TEI CO.,LTD. FY2026 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥27.61B
• Operating Income: ¥1.41B
• Net Income: ¥827M
• EPS: ¥40.30

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

AI Financial Analysis

Executive Summary

Verdict: FY2026 Q3 was a mixed quarter—top-line grew 5.6% YoY, but profits compressed materially with operating income down 26.4% and net income down 30.4%. Revenue reached 276.1, while operating income fell to 14.1, pulling operating margin down to 5.1%. Net income declined to 8.27, resulting in a net margin of 3.0%. The margin compression is significant: operating margin contracted by about 222 bps versus the prior period’s ~7.3%. Gross margin remains high at 59.7%, suggesting merchandise cost control is intact; however, SG&A intensity (150.8) absorbed most of the gross profit. Non-operating items were modestly positive (net +0.98), with low interest expense (0.04) underscoring a conservative balance sheet. DuPont analysis points to margin as the primary drag on ROE (3.8%), with asset turnover at 0.96 and low leverage (1.31x) cushioning downside risk. The effective tax rate was elevated at 42.4%, depressing net income; tax burden ratio is 0.575, below the 0.70 benchmark. Liquidity and solvency are strong: current ratio 217%, quick ratio 214%, net cash substantially exceeds short-term debt (cash/STD ~25x). Balance sheet shows increased goodwill and intangibles (+~37% YoY each), likely from M&A or franchise/intellectual property investments, introducing future impairment risk if earnings don’t recover. Interest coverage is extremely robust at ~352x, reflecting minimal financial risk despite lower earnings. Dividend policy appears aggressive relative to earnings—estimated payout ratio ~169%—and is not sustainable absent earnings and cash flow recovery. Cash flow statements were unreported, limiting assessment of earnings quality and FCF coverage; inventory rose 43% YoY against 5.6% sales growth, a data point to monitor for working capital efficiency. Forward-looking, margin recovery hinges on SG&A discipline, cost normalization (labor, utilities, food inputs), and potential easing of the tax rate toward statutory norms. In sum, resilient sales and a fortress-like balance sheet contrast with pressured profitability and an elevated tax burden, making near-term earnings improvement the key swing factor.

Profitability Analysis

ROE decomposition: ROE (3.8%) = Net Profit Margin (3.0%) × Asset Turnover (0.955×) × Financial Leverage (1.31×). The largest change vs prior year is the net profit margin, given operating income fell 26.4% on a 5.6% revenue increase and the operating margin compressed by ~222 bps (from ~7.3% to 5.1%). Business drivers likely include higher SG&A intensity (labor inflation, utilities, promotions, and store operating costs) outweighing stable gross margin, while an elevated tax rate further reduced net margin. Interest burden is minimal (EBT/EBIT ~1.02), confirming financing costs are not the issue. Sustainability: SG&A pressures could moderate with cost actions and price/mix, but tax burden normalization is uncertain; near-term, profitability remains vulnerable if same-store sales growth or pricing does not offset fixed cost inflation. Concerning trends: profit growth is negative despite revenue growth (negative operating leverage), and inventory growth (+43% YoY) outpaced sales, which could pressure future margins if not matched by demand.

Growth Assessment

Revenue grew 5.6% YoY to 276.1, indicating steady demand, but we lack same-store sales and traffic/ticket data to judge underlying momentum. Gross margin at 59.7% suggests product cost control remains solid; however, operating income declined 26.4% as SG&A absorbed gains, implying higher operating costs per sales yen. Without segment or store metrics, it’s unclear whether growth came from price, volume, or network changes. The near-term outlook depends on cost normalization and potential price/mix improvement; if the effective tax rate reverts closer to statutory (~30–31% national + local), EPS could see a mechanical uplift. Risks to growth include consumer spending softness, competition in casual dining, and input cost volatility (meat prices, utilities). Absent KPIs, we assume mid-single-digit sales growth is sustainable but margin recovery is the key determinant of profit growth.

Financial Health

Liquidity is strong: current ratio 217.3% and quick ratio 214.3%, with working capital of 58.1. There is no warning on current ratio (<1.0) or D/E (>2.0); D/E stands at a conservative 0.31x and Debt/Capital at 3.9%. Maturity profile is comfortable: short-term loans are 3.0 versus cash of 74.95 (cash/STD ~25x), and current assets of 107.6 comfortably exceed current liabilities of 49.5—low maturity mismatch risk. Interest-bearing debt totals 9.04 (short-term 3.0; long-term 6.04); interest coverage is extremely strong at ~352x. Noncurrent assets are 62.8% of assets, with goodwill (10.0%) and intangibles (10.1%) elevated; this increases medium-term impairment risk if cash-generating units underperform. No off-balance sheet obligations are disclosed; however, as a restaurant operator, lease exposures likely exist but are unreported here (JGAAP may not capitalize operating leases), representing a potential hidden fixed-cost burden.

Notable B/S Changes

Long-term Loans: +3.33 (+122.9%) – Increased term borrowing; still low leverage but monitor purpose and covenants. Accounts Receivable: +0.10 (+76.9%) – Small absolute amount; limited impact given cash-heavy model. Inventories: +0.46 (+43.4%) – Working capital buildup ahead of sales; potential OCF drag if not turned. Intangible Assets: +7.97 (+37.4%) – Likely system/software or franchise rights; raises amortization and impairment monitoring needs. Goodwill: +7.80 (+37.0%) – Suggests M&A; increases impairment risk if acquired units underperform.

Cash Flow Quality

OCF, investing CF, and FCF are unreported; thus, OCF/Net Income and FCF coverage cannot be assessed. We cannot flag OCF/NI <0.8 given the data gap. Inventory rose 43.4% YoY, materially above sales growth (+5.6%), which could indicate working capital buildup or timing effects; if persistent, it may weigh on future OCF. Receivables are immaterial in this model (0.23) given cash-sales nature of restaurants; payables at 15.16 provide some supplier financing. Without depreciation and CapEx, we cannot evaluate maintenance vs growth investment or CapEx sufficiency. Overall, earnings quality is indeterminable; monitoring cash conversion once OCF is disclosed is essential.

Dividend Sustainability

Declared DPS totals approximately ¥68 (¥51 interim + ¥17 year-end), implying total dividends of ~14.0 on 20.55m shares, versus net income of 8.27—payout ratio ~169%. This exceeds the <60% sustainable benchmark and appears unsupported by current earnings power. While the company has ample cash (74.95) and low debt, funding dividends from the balance sheet is not a durable policy if profits remain weak. FCF coverage is unknown due to missing cash flow data; if CapEx needs are modest, near-term coverage may be manageable, but sustained overdistribution risks future cuts. Unless profitability and OCF recover, we view the current payout as stretched.

Risk Assessment

Business risks include Margin pressure from rising labor and utility costs compressing operating margin to 5.1%, Input cost volatility (meat/raw materials) that can erode gross-to-operating margin conversion, Demand sensitivity to consumer discretionary spending in casual dining, Execution risk on cost control and pricing amid competitive dynamics.

Financial risks include High effective tax rate (42.4%) depressing net margin and ROE, Elevated goodwill/intangibles (~20% of assets combined) increasing impairment risk if performance weakens, Dividend payout (~169%) exceeding earnings, potentially stressing cash if continued.

Key concerns include Negative operating leverage: operating income -26% on +6% sales, Inventory growth (+43% YoY) outpacing sales (+6%), risking future OCF drag, Lack of disclosed OCF/CapEx obscures earnings quality and FCF sustainability.

Investment Implications

Key takeaways include Sales growth remains positive (+5.6% YoY) but profitability deteriorated materially, Operating margin compressed ~222 bps to 5.1%, driving ROE down to a low 3.8%, Balance sheet is very conservative: net cash position and strong liquidity, High effective tax rate is a significant EPS headwind; normalization would lift net margin, Dividend payout (~169%) is not supported by earnings and may be unsustainable without recovery.

Metrics to watch include Same-store sales growth and traffic vs ticket trends, SG&A ratio trajectory and labor/utility cost inflation, Effective tax rate and any one-off tax items, OCF/Net income once disclosed; inventory turns and working capital, CapEx vs depreciation to gauge reinvestment and store network strategy, Impairment indicators for goodwill/intangibles.

Regarding relative positioning, Financially conservative versus domestic casual dining peers thanks to high liquidity, very low leverage, and robust interest coverage; however, profitability and ROE are at the low end, and the current dividend policy appears aggressive relative to earnings.