Qol Holdings Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥142.23B
• Operating Income: ¥7.18B
• Net Income: ¥2.33B
• EPS: ¥94.51

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

Quol Holdings (30340) delivered solid top-line and operating performance in FY2026 Q2 (cumulative), with revenue up 14.0% year over year to ¥142.23bn and operating income up 17.8% to ¥7.18bn, indicating positive operating leverage. Gross profit was ¥19.05bn, implying a gross margin of 13.4%, and operating margin improved to roughly 5.0%. Ordinary income reached ¥7.26bn, and net income surged 192.7% to ¥3.55bn, lifting the net margin to 2.49%, partly aided by lower non-operating drag and possibly fewer one-offs versus the prior period. DuPont analysis shows ROE of 6.30%, driven by a modest net margin (2.49%), decent asset turnover (0.933x), and relatively high financial leverage (2.71x). Interest expense remained low at ¥97m, giving a very strong interest coverage of about 74x on EBITDA, underscoring manageable financing costs despite leverage. Liquidity is tight with a current ratio of 81.3% and quick ratio of 75.3%, and working capital stands at negative ¥13.85bn, which warrants monitoring. Operating cash flow was weak at ¥0.48bn relative to net income (OCF/NI ratio of 0.13), flagging earnings-to-cash conversion risk in the period. Investing cash flow and cash/equivalents are unreported (shown as zero), limiting full free cash flow assessment; therefore, the provided “FCF: 0” is not interpretable as actual zero. The calculated effective tax rate is shown as 0.0% in the provided metrics, but reported income tax of ¥2.67bn versus net income implies a substantial tax burden; hence, the 0.0% should be treated as an unreported or placeholder value. Balance sheet leverage appears meaningful with a debt-to-equity ratio of 1.73x; however, the reported equity ratio of 0.0% is an unreported field rather than an actual figure. Inventory of ¥4.51bn versus cost of sales suggests relatively fast inventory turns for a dispensing business, consistent with the model, though we lack full working capital detail. EBITDA of ¥8.83bn (6.2% margin) provides a decent buffer for interest and lease-type commitments, but cash generation needs to catch up to earnings to strengthen resilience. Financing cash flow was an outflow of ¥6.20bn, possibly reflecting debt repayment, dividends, or share buybacks; with DPS and share data unreported, we cannot attribute precisely. Overall, fundamentals show improving profitability and operating leverage, counterbalanced by tight liquidity and weak cash conversion in the half. Given the data gaps (notably cash, investing flows, equity ratio details, and dividends), conclusions on solvency and dividend capacity remain provisional. The near-term outlook hinges on sustaining revenue growth while converting higher earnings into operating cash flow and stabilizing working capital.

Profitability Analysis

ROE of 6.30% decomposes into net profit margin of 2.49%, asset turnover of 0.933x, and financial leverage of 2.71x. The improvement in operating income (+17.8% YoY) outpaced revenue growth (+14.0% YoY), indicating positive operating leverage and some fixed-cost absorption. Gross margin printed at 13.4%, while operating margin was approximately 5.05% (¥7.182bn/¥142.23bn), suggesting disciplined SG&A alongside scale benefits. EBITDA of ¥8.831bn implies an EBITDA margin of 6.2%, supporting strong interest coverage (~74x) and highlighting low financing drag. The net margin of 2.49% reflects non-operating items and taxes; despite the provided “effective tax rate 0.0%” metric, actual tax expense of ¥2.667bn versus net income indicates a meaningful tax burden. Ordinary income (¥7.257bn) is close to operating income, implying minimal non-operating headwinds. Given the leverage factor (2.71x), incremental improvements in margin or asset efficiency can translate into notable changes in ROE. Overall profitability quality is improving, but sustainability depends on maintaining revenue momentum and controlling labor and store-level costs.

Growth Assessment

Revenue growth of 14.0% YoY suggests robust demand and/or network expansion in the dispensing business. Operating income growth of 17.8% implies efficiency gains and operating leverage, likely from scale and cost control. Net income surged 192.7% YoY, likely aided by a normalized non-operating/tax burden relative to a weak prior-year base; sustainability of this jump is less certain than the operating trend. Gross profit and EBITDA expansion point to healthy core operations, although gross margin remains relatively thin for the sector and could be sensitive to reimbursement revisions. Asset turnover of 0.933x indicates effective use of the asset base in the period; maintaining or improving this will support ROE. The trajectory suggests continued top-line growth potential, but regulatory pricing (dispensing fees, NHI drug price revisions) could temper revenue per prescription. Labor availability and wage inflation for pharmacists remain structural factors that could constrain growth and margin. With OCF lagging earnings, growth funded by internal cash is less certain until working capital normalizes. Outlook: cautious optimism on operating growth, with a need to convert earnings to cash and maintain cost discipline to sustain profit quality.

Financial Health

Liquidity is tight: current ratio at 81.3% and quick ratio at 75.3% indicate current liabilities exceed liquid current assets. Working capital is negative at ¥13.854bn, which can be manageable in businesses with favorable payables cycles but does elevate short-term refinancing and covenant risk if cash generation is weak. Solvency shows moderate-to-high leverage with debt-to-equity of 1.73x; however, interest coverage is strong at ~74x, suggesting low immediate interest burden. Total assets are ¥152.37bn against equity of ¥56.30bn; the reported equity ratio of 0.0% is unreported and should not be interpreted literally. Ordinary vs operating income proximity implies limited reliance on financial income. Financing CF was a sizable outflow (¥6.196bn), possibly debt repayment or distributions; in the absence of cash and investing disclosures, we cannot fully assess net debt or liquidity buffers. Overall, the capital structure is workable given earnings power, but liquidity headroom appears thin and warrants attention.

Cash Flow Quality

Operating cash flow was ¥0.477bn versus net income of ¥3.547bn (OCF/NI 0.13), signaling weak earnings-to-cash conversion in the half. This gap likely reflects working capital outflows (receivables/payables timing and inventory), common in growth phases or due to payment cycles in dispensing. Free cash flow cannot be reliably calculated because investing cash flow is unreported (shown as zero), and cash balance is also unreported. EBITDA of ¥8.831bn supports potential for cash generation, but conversion is the key issue near term. Inventory stands at ¥4.505bn against cost of sales of ¥105.722bn, indicative of rapid inventory turns consistent with the business model; the primary working capital swing likely resides in receivables/payables. With financing CF at -¥6.196bn, internal cash generation appears insufficient to cover outflows this period, increasing reliance on existing liquidity or credit lines. Going forward, watch OCF normalization as a litmus test of earnings quality.

Dividend Sustainability

Dividend data are unreported in this period (DPS shown as 0.00 and payout ratio 0.0% are placeholders), preventing a direct payout analysis. With net income of ¥3.547bn but OCF of only ¥0.477bn, near-term cash coverage of any dividend would be thin unless working capital reverses. Free cash flow cannot be assessed due to missing investing cash flows; therefore, FCF coverage and sustainability cannot be conclusively determined. Capital allocation signals are mixed with financing CF outflows of ¥6.196bn; without details (debt repayment vs distributions), dividend policy direction remains unclear. Policy outlook is therefore indeterminate based solely on this dataset; sustainability would hinge on improved cash conversion and visibility on capex needs.

Risk Assessment

Business Risks:

• Regulatory and reimbursement risk from NHI drug price and dispensing fee revisions
• Labor cost inflation and pharmacist shortages impacting staffing and store productivity
• Generic drug supply disruptions and procurement volatility affecting margins
• Store network execution risk (new openings, relocations, M&A integration)
• Competitive pressure in dispensing and adjacent pharmacy services
• Technology and workflow changes (e-prescriptions, online-to-offline) requiring investment

Financial Risks:

• Tight liquidity (current ratio 81.3%, quick ratio 75.3%) and negative working capital
• Weak cash conversion in the period (OCF/NI 0.13) elevating funding needs
• Moderate-to-high leverage (D/E 1.73x) amplifying earnings volatility to equity
• Refinancing and covenant risk if OCF remains subdued
• Potential impairment risk on acquired intangibles/goodwill typical in M&A-driven models (not disclosed here)

Key Concerns:

• Sustainability of positive operating leverage amid reimbursement headwinds
• Normalization of operating cash flow and working capital
• Visibility on investing needs and free cash flow given unreported investing cash flows
• Liquidity headroom in the face of sizeable financing outflows
• Data gaps (cash, investing CF, equity ratio, dividend details) limiting full assessment

Investment Implications

Key Takeaways:

• Revenue up 14.0% YoY with operating income up 17.8% indicates healthy operating momentum
• ROE at 6.30% reflects modest margin, decent asset turnover, and elevated leverage
• Interest coverage is very strong (~74x), but liquidity is tight and working capital negative
• OCF materially lags net income (0.13x), pressuring cash-based returns in the near term
• Data gaps around cash, investing flows, and dividends constrain full valuation of financial flexibility

Metrics to Watch:

• OCF/Net income ratio and working capital movements (receivables/payables timing)
• Operating margin and SG&A ratio to assess sustained operating leverage
• Same-store prescription volumes and reimbursement rate changes
• Debt-to-equity and interest coverage under changing rate environments
• Capex and M&A cash needs once investing cash flows are disclosed

Relative Positioning: Within Japan’s dispensing pharmacy space, Quol shows solid revenue and operating growth with mid–single-digit operating margins and strong interest coverage, but appears more liquidity-constrained and more leveraged than conservative peers; sustained cash conversion will be key to closing the gap.

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