Ai Holdings Corporation FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥20.27B
• Operating Income: ¥2.04B
• Net Income: ¥9.80B
• EPS: ¥77.13

Income Statement

Balance Sheet

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

Ai Holdings (TSE:3076) reported a sharp top-line acceleration in FY2026 Q1 with revenue of ¥20.27bn, up 80.6% YoY, but operating profit growth of 14.7% to ¥2.04bn indicates significant margin normalization and/or higher operating expenses. Gross profit of ¥5.71bn implies a gross margin of 28.2%, consistent with the provided calculated metric, though it is not arithmetically consistent with the reported cost of sales figure; we therefore anchor on the disclosed gross profit and margin for analysis. Operating margin stood at roughly 10.1%, suggesting SG&A of about ¥3.67bn (≈18.1% of sales) in the quarter. Ordinary income was ¥2.28bn (≈11.2% margin), indicating solid non-operating results. Net income surged to ¥4.11bn (net margin ≈20.3%), implying approximately ¥2.36bn of pre-tax extraordinary gains in the quarter (pre-tax estimated at ¥4.63bn, given reported income tax of ¥0.53bn). The DuPont decomposition shows a net margin of 20.27%, asset turnover of 0.146x, and financial leverage of 1.25x, yielding a calculated quarterly ROE of 3.69% (not annualized and boosted by one-offs). Liquidity is very strong with a current ratio of 5.0x, quick ratio of 4.4x, and working capital of ¥66.7bn. The balance sheet is conservative: total liabilities of ¥28.84bn against equity of ¥111.39bn imply low leverage (D/E ≈0.26x) and an equity ratio of roughly 80% based on the reported balances (the 0.0% equity ratio shown is clearly a placeholder). Interest burden is negligible (interest expense ¥3m; coverage ~680x). Cash flow data are not disclosed for the quarter, limiting assessment of earnings-to-cash conversion and free cash flow. Dividend information for the quarter is not available (DPS reported as 0 likely indicates non-disclosure at Q1), so payout sustainability cannot be evaluated from cash flow. EPS was ¥77.13; using this and net income implies average shares outstanding of roughly 53.3 million, but official share data were not provided. Overall, the quarter combines exceptional sales growth and strong ordinary earnings with a sizable extraordinary gain, inflating bottom-line profitability metrics; underlying operating momentum appears positive but not proportional to the top-line surge. Given notable data gaps (cash flows, share counts, depreciation) and an internal inconsistency between cost of sales and gross profit, conclusions rely on the non-zero figures and calculated metrics provided.

Profitability Analysis

ROE decomposition (DuPont): Net margin 20.27% × Asset turnover 0.146 × Financial leverage 1.25 ≈ 3.69% quarterly ROE (not annualized). The net margin is elevated due to an estimated ~¥2.36bn pre-tax extraordinary gain; underlying operating margin is ~10.1%. Gross margin is 28.2% per the provided metric; given revenue growth of 80.6% and operating income growth of 14.7%, operating leverage was negative in the quarter, implying either lower gross margin mix and/or higher SG&A intensity (SG&A ≈18.1% of sales). Ordinary income margin of 11.2% suggests favorable non-operating items offsetting some operating margin pressure. Interest burden is de minimis (¥3m), so financing costs are not a profitability headwind. The effective tax rate, inferred from taxes/pre-tax (¥0.525bn/¥4.634bn), is approximately 11–12%, but headline ratios are distorted by one-offs. Overall, core profitability is solid but masked by extraordinary items; monitoring normalized net margin (excluding special gains) and SG&A efficiency is key.

Growth Assessment

Revenue growth was +80.6% YoY to ¥20.27bn, indicating strong demand and/or consolidation effects; sustainability is uncertain without backlog or segment detail. Operating income rose +14.7% YoY to ¥2.04bn, far below revenue growth, pointing to margin headwinds from mix or cost inflation and increased operating investments. Ordinary income of ¥2.28bn benefited from non-operating items, while net income of ¥4.11bn was boosted by approximately ¥2.36bn in extraordinary gains. Profit quality is therefore skewed by one-offs; underlying growth should be assessed on operating and ordinary income trends rather than bottom-line growth alone. The large step-up in sales with limited operating profit flow-through suggests near-term normalization risk if revenue moderates. Absent cash flow data, we cannot corroborate growth with operating cash conversion. Near-term outlook hinges on gross margin resilience, SG&A control, and the durability of demand that drove the top-line surge; continued dependence on extraordinary gains would make YoY comparisons volatile.

Financial Health

Liquidity is very strong: current assets ¥83.27bn vs. current liabilities ¥16.57bn yields a current ratio of ~5.0x and a quick ratio of ~4.4x; inventories are ¥9.73bn. Working capital is ample at ~¥66.7bn, supporting operational flexibility. Solvency is robust with total liabilities of ¥28.84bn and equity of ¥111.39bn (D/E ≈0.26x). Based on reported balances, the equity ratio is approximately 80% (the 0.0% shown is a non-disclosure placeholder), indicating a highly equity-financed structure. Interest coverage is ~680x, reflecting minimal financial risk from debt service. No cash and cash equivalents figure was disclosed for the quarter; however, the large current asset base indicates substantial liquidity even without the specific cash line. Overall, the balance sheet is conservative and resilient.

Cash Flow Quality

Operating cash flow, investing cash flow, and financing cash flow were not disclosed for the quarter (zeros indicate non-reporting). As a result, OCF/Net income and free cash flow metrics cannot be assessed and the reported 0.00 ratios should not be interpreted as actual values. Earnings quality cannot be validated through cash conversion this quarter. Working capital appears strong (high current assets, low current liabilities), but without period-to-period movement data we cannot determine whether the revenue surge required significant cash tied up in receivables or inventory. Depreciation and amortization were not disclosed, preventing EBITDA estimation. A future update with cash flow statements and working capital detail (AR, AP, inventory turns) is necessary to evaluate cash flow quality and free cash flow generation.

Dividend Sustainability

Dividend per share was not disclosed for the quarter (DPS shown as 0 reflects non-reporting). The payout ratio and FCF coverage are therefore not meaningful for this period. Based on the balance sheet strength (low leverage, high liquidity), capacity to sustain ordinary dividends appears structurally sound, but without OCF/FCF data we cannot assess coverage. Extraordinary gains inflated net income this quarter, so any payout assessment should normalize earnings. Policy outlook cannot be inferred from the provided data; management guidance and historical dividend policy would be needed for a firmer view.

Risk Assessment

Business Risks:

• Revenue sustainability risk following an 80.6% YoY surge; potential normalization or reversal if demand was pull-forward or project-based.
• Margin pressure from product mix, input costs, and elevated SG&A required to support growth.
• High earnings volatility due to reliance on extraordinary gains in the quarter.
• Potential seasonality affecting asset turnover and quarterly profitability.
• Supply chain and component availability risks that could impact gross margins and delivery timelines.

Financial Risks:

• Cash flow visibility risk due to non-disclosure of OCF/FCF for the quarter.
• Working capital absorption risk if receivables and inventories grew rapidly with sales.
• Accounting presentation inconsistencies (e.g., cost of sales vs. gross profit) complicating margin analysis.
• Tax rate volatility stemming from non-recurring items.

Key Concerns:

• Disproportionate operating profit growth relative to revenue growth implies weaker operating leverage.
• Net income boosted by ~¥2.36bn of extraordinary gains; underlying earnings lower than headline.
• Lack of cash flow disclosure prevents assessment of earnings-to-cash conversion and dividend coverage.

Investment Implications

Key Takeaways:

• Top-line growth was exceptional (+80.6% YoY) but did not translate proportionally to operating income (+14.7% YoY).
• Gross margin printed at 28.2%, but the reported cost of sales figure appears inconsistent; rely on the disclosed gross profit/margin.
• Net income strength reflects sizable extraordinary gains (~¥2.36bn pre-tax), inflating ROE and net margin.
• Balance sheet quality is high with an estimated ~80% equity ratio, low D/E (~0.26x), and strong liquidity.
• Interest burden is negligible (coverage ~680x), limiting financial risk.
• Cash flow data are absent; FCF generation and cash conversion remain unverified.

Metrics to Watch:

• Gross margin and cost of sales reconciliation in subsequent disclosures.
• SG&A ratio and operating margin trajectory as revenue normalizes.
• Order backlog/book-to-bill (if disclosed) to gauge revenue sustainability.
• Operating cash flow, free cash flow, and working capital turns (AR, inventory, AP).
• Non-operating and extraordinary items, and the normalized effective tax rate.
• Asset turnover trends as seasonality effects abate.

Relative Positioning: Relative to TSE peers, Ai Holdings appears conservatively financed with abundant liquidity and minimal interest burden, which supports resilience; however, near-term profitability optics are flattered by extraordinary gains and data gaps limit comparability on cash generation.

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