DAISHO CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥12.40B
• Operating Income: ¥232M
• Net Income: ¥136M
• EPS: ¥14.10

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

Daisho Co., Ltd. (28160) reported modest top-line growth in FY2026 Q2, with revenue up 2.1% YoY to ¥12.405bn, but profitability compressed sharply as operating income fell 41.7% YoY to ¥232mn and net income declined 53.8% YoY to ¥136mn. The gross margin remains healthy at 37.6%, yet the operating margin contracted to 1.9%, indicating SG&A cost pressure and/or limited pricing power. SG&A expenses are inferred at ¥4.434bn, representing a high 35.7% of sales, which materially limited operating leverage despite revenue growth. Ordinary income of ¥225mn and net margin of 1.10% reflect further pressure below the operating line. DuPont analysis shows ROE of 1.38%, driven by low net margin (1.10%), moderate asset turnover (0.562x), and leverage of 2.24x; profitability is the clear bottleneck. Liquidity is sound with a current ratio of 156.7% and quick ratio of 129.9%, and implied equity ratio is a solid 44.7% (equity/total assets), even though the disclosed equity ratio field is unreported. Interest coverage is robust at 21.1x (operating income basis), suggesting manageable financing costs. Operating cash flow was negative at -¥373mn despite positive net income, implying a working capital build (e.g., inventories or receivables), typical for seasonal patterns but worth monitoring. Financing cash inflow of ¥1.792bn likely funded operations and/or working capital, increasing financial reliance on external sources this half. Inventory stands at ¥1.331bn, implying ~32–33 days on hand based on period COGS, which appears reasonable for the category. With dividends and share data unreported this period, dividend capacity and per-share metrics cannot be assessed from this dataset. Overall, fundamentals show resilient sales but significant margin compression and weak cash conversion in the half, balanced by an adequate balance sheet and strong liquidity. Key focuses ahead are pricing/mix initiatives to restore margin, SG&A control, and normalization of working capital to improve OCF. Data limitations exist in certain disclosures (e.g., cash balance, investing CF, DPS), so conclusions emphasize the available non-zero items.

Profitability Analysis

ROE of 1.38% decomposes into net profit margin 1.10% × asset turnover 0.562 × financial leverage 2.24. The gross margin is 37.6% (gross profit ¥4.666bn on revenue ¥12.405bn), but operating margin fell to 1.87% as SG&A intensity rose to 35.7% of sales (¥4.434bn), eroding operating leverage despite +2.1% revenue growth. Ordinary margin was 1.81% and net margin 1.10%, indicating additional pressure from non-operating and tax items. EBITDA was ¥565mn, an EBITDA margin of 4.6%, highlighting limited buffer after SG&A and D&A (D&A ¥333mn; 2.7% of sales). Interest expense is low at ¥11mn; interest coverage at 21.1x (operating income/interest) shows financing costs are not a driver of margin compression. The core issue is cost structure: either elevated input costs (COGS at 60.3% of sales) or higher selling/distribution/admin costs compressed margins. Restoring pricing power and SG&A discipline are key to improving ROE.

Growth Assessment

Revenue grew 2.1% YoY to ¥12.405bn, indicating steady demand but not sufficient to offset cost inflation or SG&A growth. Profit growth lagged materially, with operating income -41.7% YoY and net income -53.8% YoY, underscoring weak operating leverage in the current cost environment. Gross margin (37.6%) remains respectable for a packaged foods/seasoning profile, suggesting product mix is not structurally impaired, but incremental costs and commercial spending weighed on operating profit. With EBITDA margin at 4.6%, earnings quality is sensitive to further input cost swings and promotional intensity. Outlook hinges on the company’s ability to execute price increases, optimize channel mix, and contain SG&A to re-expand operating margin toward historical levels. Near-term growth in profits will likely depend more on margin repair than on volume growth, given modest topline momentum.

Financial Health

Total assets are ¥22.065bn; total equity ¥9.861bn; total liabilities ¥8.905bn. Implied equity ratio is approximately 44.7% (equity/total assets), despite the equity ratio field being unreported. Debt-to-equity is 0.90x, indicating moderate leverage for a food manufacturer. Liquidity is solid: current ratio 156.7% and quick ratio 129.9%, with working capital of ¥2.819bn, suggesting headroom to manage intra-year cash swings. Interest expense is minimal at ¥11mn with strong coverage (21.1x EBIT/interest), limiting interest rate sensitivity near term. Financing cash inflow of ¥1.792bn indicates increased reliance on external funding this period, likely to bridge negative OCF and working capital needs. Overall solvency appears sound, with a conservative capital structure for the sector.

Cash Flow Quality

Operating cash flow was -¥373mn versus net income of ¥136mn, yielding an OCF/NI ratio of -2.74, pointing to weak cash conversion due to working capital build (specific components not disclosed). Free cash flow cannot be determined because investing cash flow is unreported; the presented FCF value of zero should be treated as unavailable, not zero. Inventory stood at ¥1.331bn; using period COGS of ¥7.487bn (H1), inventory days are roughly 32–33, which is reasonable but any increase versus prior periods (not provided) would help explain OCF weakness. D&A of ¥333mn (2.7% of sales) supports EBITDA but does not offset the cash impact of working capital this half. Sustainability of cash generation hinges on normalizing receivables/payables cycles and calibrating production to demand to avoid inventory builds.

Dividend Sustainability

Dividend per share and payout ratio are unreported in this dataset, so dividend capacity cannot be quantified this period. With OCF negative and FCF unobservable (investing CF unreported), near-term coverage from internal cash generation appears weak for this half alone. However, liquidity ratios are strong and leverage moderate, which may provide balance sheet flexibility to sustain a dividend if one exists. Absent disclosed policy and DPS, we cannot assess adherence to a payout policy or its stability. Key determinants will be a recovery in operating margin and normalization of working capital to restore positive OCF.

Risk Assessment

Business Risks:

• Raw material and packaging cost inflation pressuring gross margins
• Limited pricing power and promotional intensity compressing operating margins
• Channel mix shifts (e.g., retail vs. foodservice) affecting volumes and margins
• Competition from private labels and domestic peers in seasonings/sauces
• Demand seasonality and potential weather-related consumption swings
• FX volatility for imported ingredients impacting input costs under JGAAP reporting

Financial Risks:

• Negative OCF in the half requiring ¥1.792bn financing inflow
• Working capital volatility (receivables/inventories) weakening cash conversion
• Potential increase in leverage if external funding persists
• Interest rate risk on variable-rate borrowings (interest currently low)
• Data gaps (cash balance, investing CF) limit visibility on liquidity runway

Key Concerns:

• Sharp YoY decline in operating and net income despite revenue growth
• High SG&A ratio (35.7% of sales) eroding operating leverage
• OCF/Net Income at -2.74 indicates poor cash conversion in the period
• Reliance on financing cash inflows to fund operations and working capital

Investment Implications

Key Takeaways:

• Top-line growth of 2.1% YoY accompanied by significant margin compression
• Operating margin at 1.9% and ROE at 1.38% highlight profitability headwinds
• Liquidity is strong and solvency comfortable, mitigating near-term stress
• Negative OCF and increased financing inflow point to working capital strain
• Restoring pricing power and SG&A discipline is critical for earnings recovery

Metrics to Watch:

• Gross margin trajectory and input cost pass-through
• SG&A-to-sales ratio and operating margin recovery
• Operating cash flow and OCF/Net Income conversion
• Inventory days and receivables/payables cycles
• Leverage (debt-to-equity) and interest coverage
• Ordinary income margin as a proxy for recurring profitability

Relative Positioning: Versus domestic packaged food peers, Daisho shows comparable gross margins but thinner operating margins this half and weaker cash conversion, while maintaining stronger-than-average liquidity and moderate leverage; near-term improvement depends on margin repair and working capital normalization.

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