KICHIRI HOLDINGS & Co.,Ltd. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥4.16B
• Operating Income: ¥264M
• Net Income: ¥67M
• EPS: ¥13.11

Income Statement

Balance Sheet

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

Verdict: A solid FY2026 Q1 beat on profitability with clear operating leverage, albeit with high balance sheet leverage and limited cash flow visibility. Revenue grew 14.3% YoY to 41.58, with operating income up 124.5% YoY to 2.64, driving a sharp improvement in operating margin to roughly 6.4%. Gross profit was 25.82, implying a robust gross margin of 62.1%, while SG&A of 24.64 held at 59.3% of sales, allowing margin expansion. Ordinary income rose 123.0% YoY to 2.49, and net income rose 118.4% YoY to 1.48, lifting the net margin to 3.6%. Operating margin expanded by about 311 bps YoY (from ~3.2% to ~6.4%), and net margin expanded by roughly 170 bps (from ~1.9% to ~3.6%). The effective tax rate appears elevated at ~41%, which partially tempers bottom-line conversion. There is a notable disconnect between ordinary income (2.49) and profit before tax (1.13), suggesting the presence of material extraordinary items or classification effects under JGAAP; treat PBT-based comparisons cautiously. Interest coverage is strong at 41.6x, indicating near-term debt service capacity despite a high D/E of 2.40x. Liquidity is adequate with a current ratio of 126%, supported by cash and deposits of 18.23. ROE, calculated via DuPont, stands at 6.8%, supported primarily by improved margins and elevated financial leverage (3.40x). ROIC at 5.8% trails the 7–8% target range, pointing to room for capital efficiency improvement. Cash flow data (OCF/FCF) are unreported, limiting earnings quality assessment and dividend coverage analysis. The calculated payout ratio is 57.4%, within a broadly sustainable band but sensitive to cash generation given leverage. Forward-looking, sustaining the higher operating margin will hinge on continued sales growth, disciplined SG&A, and managing cost inflation; leverage reduction would improve resilience.

Profitability Analysis

ROE decomposition (DuPont): ROE 6.8% = Net Profit Margin (3.6%) × Asset Turnover (0.558) × Financial Leverage (3.40x). The largest driver of YoY improvement appears to be net margin expansion: operating income grew 124.5% versus revenue +14.3%, lifting operating margin by ~311 bps to ~6.4%, and net margin by ~170 bps to ~3.6%. Business driver: improved operating leverage as fixed costs (notably SG&A) grew slower than revenue, alongside a strong gross margin of 62.1%. Sustainability: Partially sustainable if topline momentum persists and cost discipline holds; risks include food/wage inflation and promotional intensity that could pressure gross margin or SG&A ratio. Asset turnover at 0.558 is modest and likely constrained by the capital base; further gains may require better store productivity and mix. Financial leverage at 3.40x amplifies ROE but heightens risk; ROE improvement relying on leverage is less durable than margin/turnover gains. Watchpoints: SG&A at 59.3% of sales is high; any SG&A growth outpacing revenue would quickly erode margins. The gap between ordinary income (2.49) and PBT (1.13) indicates one-off items affecting below-the-line profitability; recurring operating profitability is better reflected at the operating/ordinary income level.

Growth Assessment

Revenue grew 14.3% YoY to 41.58, indicating healthy demand and/or store network contribution. Operating income rose 124.5% YoY to 2.64, evidencing significant operating leverage from the prior low base. Net income increased 118.4% YoY to 1.48, with net margin at 3.6% versus an implied ~1.9% a year ago. The gross margin of 62.1% supports the view that mix/pricing and procurement are favorable, but such levels must be defended against input inflation. Ordinary income strength relative to last year is encouraging, but the step-down to reported PBT suggests extraordinary items; core earnings quality is best gauged at operating/ordinary income. Outlook drivers: sustained SSS growth, mix improvements (higher-margin concepts/menu), and SG&A discipline could keep margins elevated. Headwinds include food cost inflation, wage hikes, and utility costs. With ROIC at 5.8%, incremental growth should target higher-return projects or margin accretive initiatives to close the gap to a 7–8% benchmark.

Financial Health

Liquidity: Current ratio 126.1% (above 1.0 but below the 1.5 comfort benchmark). Quick ratio equals current ratio due to unreported inventories; treat the true quick ratio as potentially lower. Working capital is 7.31 (731 million yen), supported by cash and deposits of 18.23. Solvency: Debt-to-equity is elevated at 2.40x (warning >2.0), and financial leverage is 3.40x (assets/equity). Long-term loans total 23.04; short-term loans are unreported, so near-term refinancing needs may be understated. Interest coverage is strong at 41.6x, suggesting manageable interest burden. Equity ratio (calculated) is roughly 29.4% (21.90/74.46), indicating a leveraged but not distressed balance sheet. Maturity mismatch: Current assets (35.28) exceed current liabilities (27.97), mitigating short-term liquidity risk; however, the absence of disclosed short-term borrowings/inventories limits precision. Off-balance sheet: Under JGAAP, operating lease commitments may not be fully capitalized; undisclosed lease obligations could increase effective leverage.

Cash Flow Quality

OCF, FCF, and working capital details are unreported, so OCF/Net Income and FCF coverage cannot be assessed. Earnings quality flags: the gap between ordinary income (2.49) and profit before tax (1.13) implies material extraordinary items affecting below-the-line results; recurring profitability is better reflected at operating/ordinary levels. Without OCF, we cannot verify accruals, working capital swings, or cash conversion. With capex unreported, sustainability of growth and maintenance investment coverage is unclear. No signs of working capital manipulation can be concluded or refuted due to data gaps.

Dividend Sustainability

The calculated payout ratio is 57.4%, near the upper bound of a broadly sustainable range (<60%). However, OCF and FCF are unreported, preventing direct coverage analysis. High leverage (D/E 2.40x) raises the bar for cash preservation, especially if capex or debt amortization requirements increase. Interest burden is currently light (coverage ~41.6x), but higher rates or increased borrowing could pressure coverage. Absent cash flow disclosure, dividend sustainability hinges on maintaining the improved operating margin and generating sufficient cash from operations.

Risk Assessment

Business Risks:

• Input cost inflation (food, beverages, utilities) pressuring the 62.1% gross margin
• Labor cost inflation tightening the SG&A ratio (currently 59.3% of sales)
• Demand volatility and seasonality in the restaurant sector affecting traffic and mix
• Execution risk on store openings/closures and concept positioning

Financial Risks:

• High leverage (D/E 2.40x) and moderate equity ratio (~29%) heighten downside sensitivity
• Cash flow visibility is limited (OCF/FCF unreported), constraining dividend and capex assessment
• Potential undisclosed lease commitments under JGAAP effectively increase leverage
• Refinancing/maturity risk unclear due to unreported short-term loans and debt schedule

Key Concerns:

• Discrepancy between ordinary income (2.49) and profit before tax (1.13) indicates material extraordinary items impacting below-the-line earnings
• Elevated effective tax rate (~41%) dampens net profit conversion
• ROIC at 5.8% below a 7–8% benchmark, implying need for better capital efficiency
• Margin gains could reverse if SG&A growth outpaces revenue or if cost inflation accelerates

Investment Implications

Key Takeaways:

• Strong operating leverage: operating margin expanded ~311 bps YoY to ~6.4%
• Net margin improved to 3.6%, lifting ROE to 6.8% despite high leverage
• Interest coverage is robust (~41.6x), supporting near-term debt service capacity
• Balance sheet leverage is high (D/E 2.40x); de-leveraging would improve resilience
• Cash flow disclosure is insufficient to validate earnings quality and dividend coverage

Metrics to Watch:

• Same-store sales growth and average check to sustain revenue momentum
• SG&A ratio trajectory versus revenue growth
• Gross margin resilience against food and labor cost inflation
• OCF/Net Income and FCF once disclosed; capex needs and lease commitments
• Net debt/EBITDA and ROIC progression toward >7–8%

Relative Positioning: Within the casual dining/restaurant peer set, the company shows improving operating efficiency and strong interest coverage but operates with higher-than-average financial leverage and limited cash flow transparency; sustaining recent margin gains and improving ROIC will be key to closing the gap with best-in-class operators.

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