Polaris Holdings Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥22.99B
• Operating Income: ¥1.94B
• Net Income: ¥890M
• EPS: ¥4.69

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

Polaris Holdings (30100) reported strong topline momentum in FY2026 Q2, with revenue of ¥22,988 million, up 122.7% YoY, indicating a robust recovery/expansion in operations. Gross profit reached ¥9,907 million, implying a gross margin of 43.1%, which is healthy for an asset-heavy services model. Operating income was ¥1,940 million (+55.8% YoY), translating to an operating margin of 8.4%, suggesting meaningful cost absorption but also indicating that operating leverage did not fully match the pace of revenue growth. Ordinary income came in at ¥1,353 million, notably below operating income, reflecting net non-operating costs of roughly ¥587 million, including interest expense of ¥297 million and potentially other non-operating items. Net income was ¥1,096 million (+23.2% YoY), with EPS reported at 4.69; however, share count data are unreported, limiting per-share diagnostics. The DuPont breakdown shows a net margin of 4.77%, asset turnover of 0.346x, and financial leverage of 2.33x, yielding a calculated ROE of 3.83%, which aligns with the reported ROE. Liquidity appears comfortable with a current ratio of 159.2% and positive working capital of approximately ¥4,873 million, though cash and equivalents were unreported. The debt-to-equity ratio is 1.36x (based on total liabilities/equity), indicating a moderate leverage posture, and interest coverage of 6.5x points to manageable interest burden at current earnings levels. Operating cash flow was strong at ¥2,294 million, equating to 2.09x net income, indicating good earnings-to-cash conversion supported by non-cash charges and/or working capital inflows. Investing cash flow and cash balances were unreported (shown as zero), so capital intensity and free cash flow cannot be reliably assessed from the disclosed data. The reported cost of sales (¥413 million) does not reconcile with revenue and gross profit; the implied cost of goods/services sold is approximately ¥13,081 million (revenue minus gross profit), suggesting classification differences or partial disclosure for cost lines. The equity ratio was reported as 0.0% but is clearly unreported; based on assets of ¥66,524 million and equity of ¥28,597 million, the calculated equity ratio is around 43.0%. No dividend was declared (DPS ¥0), consistent with a potential focus on reinvestment or balance sheet strengthening. Overall, fundamentals show strong demand recovery and solid cash conversion, but margin scalability, non-operating cost drag, and data gaps on capex and liquidity composition are key monitoring points. Given missing disclosures (e.g., cash, investing CF, shares), conclusions are constrained to available non-zero datapoints. The outlook hinges on sustaining revenue growth while improving cost discipline and managing financing costs.

Profitability Analysis

ROE decomposition (DuPont): net profit margin 4.77% (¥1,096m/¥22,988m), asset turnover 0.346x (¥22,988m/¥66,524m), and financial leverage 2.33x (assets/equity), producing a calculated ROE of 3.83%. This indicates modest profitability primarily driven by leverage and turnover, with the net margin still relatively thin. Gross margin of 43.1% (¥9,907m/¥22,988m) is favorable, but substantial SG&A and other operating costs compress the operating margin to 8.4% (¥1,940m/¥22,988m). EBITDA was ¥2,398 million (EBITDA margin 10.4%), indicating limited but positive operating cash earnings after accounting for D&A of ¥458 million. The gap between operating income (¥1,940m) and ordinary income (¥1,353m) highlights non-operating drag of ¥587m, including interest expense of ¥297m and other non-operating items. Interest coverage at 6.5x (operating income/interest expense) is adequate, suggesting earnings can absorb financing costs under current conditions. The effective tax rate appears low at roughly 6% (¥72.7m tax / estimated pre-tax income near ¥1,169m), likely reflecting loss carryforwards or tax incentives; the reported 0.0% in metrics appears to be a placeholder rather than an economic rate. Operating leverage appears mixed: revenue grew 122.7% YoY while operating income grew 55.8%, indicating incremental margins below historical levels and suggesting fixed costs and/or reactivation costs tempered profit scalability. Margin quality is affected by classification nuances: the reported cost of sales (¥413m) does not reconcile with the implied COGS (¥13,081m), indicating that some cost elements are captured outside the reported line item.

Growth Assessment

Revenue growth of +122.7% YoY to ¥22,988m indicates strong demand recovery and/or network expansion. However, operating income growth (+55.8% YoY) lagged revenue growth, suggesting that the step-up in volume came with higher incremental costs (labor, utilities, re-opening costs, or sales/marketing), limiting operating leverage in the period. Net income growth of +23.2% YoY further lagged due to non-operating expenses (notably interest) and possible extraordinary items. The sustainability of revenue growth will depend on maintaining occupancy/utilization and pricing; near-term growth could moderate as base effects fade. Profit quality is supported by OCF exceeding net income (OCF/NI = 2.09x), implying that earnings are backed by cash conversion in this period. Outlook hinges on continued normalization of demand while the company executes on cost control to lift EBITDA and operating margins. Non-operating drag (interest and other items) and potential capex needs could temper earnings growth if financing costs rise. Without investing cash flow disclosure, it is unclear whether growth is organic or capex-driven; future margin trajectory will depend on the mix of owned vs. leased/managed assets and associated cost structures.

Financial Health

Total assets were ¥66,524m and equity ¥28,597m, implying a calculated equity ratio around 43.0% (the reported 0.0% equity ratio is unreported). Total liabilities were ¥38,845m, yielding a debt-to-equity ratio of 1.36x (note: this appears based on total liabilities/equity, not strictly interest-bearing debt). Liquidity is comfortable with current assets of ¥13,102m and current liabilities of ¥8,229m, resulting in a current ratio of 159.2% and positive working capital of approximately ¥4,873m. The quick ratio equals the current ratio due to inventories being unreported; actual liquidity composition is unclear because cash and equivalents are unreported. Interest coverage at 6.5x suggests manageable servicing of interest obligations from operating profit. Financial leverage (assets/equity) at 2.33x supports ROE but also elevates sensitivity to earnings volatility and interest rate changes. Overall solvency appears solid on a book basis, but clarity on the mix and maturity of interest-bearing debt and the cash buffer is limited by disclosure gaps.

Cash Flow Quality

Operating cash flow of ¥2,293.6m versus net income of ¥1,096.0m (OCF/NI = 2.09x) indicates strong cash realization of earnings, supported by non-cash charges (D&A of ¥457.6m) and likely working capital inflows. EBITDA of ¥2,397.6m is broadly consistent with OCF, reinforcing that operating cash generation aligns with core profitability in this period. Investing cash flow was reported as zero (unreported), so capital expenditures cannot be assessed; therefore, free cash flow cannot be reliably calculated despite an indicated FCF of 0 in the summary metrics. Financing cash flow was negative ¥920.6m, implying net debt repayment, interest payments, or other financing outflows. Working capital dynamics appear favorable given the positive OCF; however, with cash balances unreported and no breakdown of receivables/payables, the durability of these inflows is uncertain. Overall, earnings quality looks good in this snapshot, but the absence of capex data is a major limitation to evaluating true free cash flow and reinvestment needs.

Dividend Sustainability

No dividend was declared (DPS ¥0), and the payout ratio is 0.0%. Given positive OCF and ongoing growth/recovery dynamics, the retained earnings approach appears consistent with reinvestment or balance sheet priorities. However, free cash flow coverage cannot be assessed because investing cash flows (and thus capex) are unreported; the reported FCF coverage of 0.00x should be treated as a placeholder, not an economic measure. Sustainability of future dividends (if initiated) would depend on recurring OCF after maintenance capex and the trajectory of financing costs. Current leverage and the need to support growth may keep distributions conservative in the near term.

Risk Assessment

Business Risks:

• Revenue normalization risk following a sharp YoY rebound; potential moderation as base effects fade
• Cost inflation (labor, energy, supplies) pressuring operating margins
• Operational leverage risk if occupancy/utilization softens
• Execution risk in scaling operations and optimizing cost structure
• Potential reliance on non-operating items that reduce ordinary income relative to operating income

Financial Risks:

• Interest rate and refinancing risk given leverage (D/E 1.36x) and interest expense of ¥297m
• Cash balance and liquidity transparency risk due to unreported cash and equivalents
• Capex intensity and FCF uncertainty with investing cash flows unreported
• Potential volatility in effective tax rate due to loss carryforwards/extraordinary items
• Sensitivity of ROE (3.83%) to margin changes given modest net margin (4.77%)

Key Concerns:

• Non-operating drag of ~¥587m reducing ordinary income versus operating income
• Limited visibility on capex and free cash flow due to missing investing CF data
• Discrepancy between reported cost of sales and implied COGS, complicating margin diagnostics
• Unreported equity ratio and cash balances, constraining solvency and liquidity analysis granularity

Investment Implications

Key Takeaways:

• Strong revenue rebound (+122.7% YoY) with solid gross margin (43.1%), but operating leverage was partial (operating margin 8.4%)
• ROE of 3.83% reflects modest net margins offset by reasonable asset turnover and leverage
• Non-operating expenses (including ¥297m interest) materially reduce ordinary income
• Cash generation is solid (OCF/NI 2.09x), but FCF can’t be assessed without capex data
• Balance sheet appears sound on a book basis (calculated equity ratio ~43%, current ratio 159%), though liquidity composition is unclear

Metrics to Watch:

• Operating margin and EBITDA margin progression as revenue growth normalizes
• Ordinary income vs. operating income gap (non-operating gains/losses, interest costs)
• Interest coverage and effective interest rate amid rate environment changes
• Capex and investing cash flows to gauge maintenance vs. growth investment and FCF
• Working capital movements and OCF sustainability
• Calculated equity ratio and net debt once cash and interest-bearing debt disclosures are available

Relative Positioning: Within a recovering services/asset-heavy peer set, the company shows above-average revenue rebound and adequate liquidity, with mid-pack profitability (ROE 3.8%) constrained by thin net margins and non-operating costs; better disclosure on capex and liquidity would clarify its standing.

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