The Monogatari Corporation FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥35.60B
• Operating Income: ¥2.73B
• Net Income: ¥1.31B
• EPS: ¥49.80

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: Solid top-line growth with mixed margin dynamics and a notable jump in bottom-line, but capital efficiency remains subpar and cash-flow visibility is limited. Revenue grew 19.6% YoY to 355.99, while operating income rose 15.6% to 27.33 and net income surged 45.8% to 19.18. Operating margin is 7.68% this quarter (27.33/355.99). Using the reported YoY growth to infer prior-period metrics, we estimate prior Q1 revenue at ~297.66 and operating income at ~23.64, implying an operating margin of ~7.94%, i.e., an estimated operating margin compression of ~26 bps YoY. Net margin improved to 5.39% (from an estimated ~4.42% previously), implying a ~97 bps expansion YoY. Ordinary income margin improved slightly to 7.69% (from an estimated ~7.51%), a ~18 bps expansion, suggesting a smaller non-operating drag and/or improved financial income/costs versus last year. Gross margin is reported at 55.5%, while SG&A ratio stands around 48.8%, leaving a mid–single digit operating spread; the small operating margin compression indicates some cost pressure as scaling progressed. The effective tax rate is elevated at 38.3%, which partially offsets operating gains, but bottom line still outgrew sales due to improved non-operating and below-the-line factors. ROE is modest at 4.6% (NPM 5.4% × AT 0.456 × leverage 1.89x), and reported ROIC of 4.5% triggers a capital efficiency caution (<5%). Liquidity is adequate but not slack (current ratio 123%, quick ratio 119%), and leverage remains manageable (D/E 0.89x; interest coverage 273x). Earnings quality assessment is constrained as cash flow data are unreported this quarter; OCF/NI and FCF coverage cannot be evaluated. Dividend payout appears high at a calculated 73.6%, which may limit flexibility if cash conversion softens. Forward-looking, sustaining double-digit revenue growth with stable or expanding margins will be key to lift ROE/ROIC toward more attractive levels. Monitoring labor and food cost trends will be crucial to prevent further operating margin erosion. The balance sheet can support ongoing investment, but stronger OCF generation is needed to underpin both capex and a high payout. Overall, momentum is positive at the top-line and in net profit, yet capital efficiency and cash-flow opacity temper the strength of the print.

Profitability Analysis

ROE decomposition (DuPont): ROE 4.6% = Net Profit Margin (5.4%) × Asset Turnover (0.456) × Financial Leverage (1.89x). The component showing the most visible YoY change is Net Profit Margin, which improved by an estimated ~97 bps (to 5.39%) even as operating margin compressed ~26 bps (to 7.68%), implying better below-the-line outcomes (smaller non-operating drag and/or improved other items) and scale benefits. Business drivers: rapid revenue growth (+19.6%) outpaced operating profit growth (+15.6%), indicating cost pressures within SG&A (48.8% of sales) and/or gross cost headwinds; however, ordinary and net income grew faster than operating income, suggesting improvements in non-operating items and possibly a more favorable mix of one-off or financial items versus last year. Sustainability: the slight operating margin compression looks tied to growth and cost inflation dynamics and could normalize with pricing, mix, or process improvements; net margin gains driven by non-operating factors are less robust if they include one-time items. Asset turnover at 0.456 is modest for food service given a relatively asset-heavy base (noncurrent assets 539.10), implying room for productivity gains via higher SSS, utilization, or tighter working capital. Leverage at 1.89x contributes to ROE but remains moderate; debt service capacity is strong (interest coverage 273x). Concerning trends: operating expense intensity appears sticky (SG&A growth likely ≥ revenue growth, inferred from margin compression), and the elevated effective tax rate (38.3%) dampens net profitability.

Growth Assessment

Revenue growth of +19.6% indicates robust demand and/or footprint expansion. Operating income grew +15.6%, lagging sales, which points to cost pressure or ramp-up inefficiencies as the network scales. Ordinary income growth (+22.4%) and net income growth (+45.8%) outpaced operating income, implying better non-operating results and/or below-the-line benefits versus the prior year. Operating margin compressed by an estimated ~26 bps YoY to 7.68%, while net margin expanded ~97 bps to 5.39%, a mixed but ultimately favorable net effect for shareholders. Gross margin is 55.5%, providing room to absorb inflation, but the SG&A ratio of ~48.8% leaves a thin operating spread that is sensitive to labor and energy costs. With ROIC at 4.5%, incremental growth needs to be disciplined to avoid diluting capital efficiency; improving unit economics (SSS, labor scheduling, procurement) will be critical. Outlook: maintaining double-digit sales growth while stabilizing operating margin should lift ROE/ROIC; any improvement in the effective tax rate would further support net margin. Near-term growth quality cannot be fully validated without cash flow data; OCF conversion and capex cadence remain key unknowns.

Financial Health

Liquidity is adequate: current ratio 123% and quick ratio 119% exceed 1.0 (no warning), though below the 1.5x comfort benchmark. Working capital is positive at 45.21. Cash and deposits of 157.38 cover 80% of current liabilities (196.22), and together with receivables/inventories (61.06) comfortably cover short-term obligations. Leverage is manageable: D/E 0.89x, with long-term loans at 105.60 and short-term loans at 10.00; no explicit interest-bearing debt total was disclosed, but interest burden is minimal (interest expense 0.10). Interest coverage is very strong at 273.3x. Maturity profile: current liabilities are sizable versus cash, but liquidity appears sufficient; no immediate maturity mismatch risk given cash + near-cash exceed short-term debt and payables. Off-balance sheet obligations were not reported; none can be assessed from the provided data.

Cash Flow Quality

Operating, investing, and financing cash flows are unreported for the quarter, so OCF/Net Income and FCF cannot be calculated. As such, earnings quality cannot be validated via cash conversion metrics; OCF/NI may be a risk flag if it were to fall below 0.8, but we have no data this period. Dividend and capex coverage from FCF cannot be assessed. Working capital metrics (AR 53.22, inventories 7.84) look modest relative to sales, but without period-to-period deltas, potential working capital release/absorption cannot be evaluated. No signs of manipulation can be inferred from the available snapshot alone.

Dividend Sustainability

The calculated payout ratio is 73.6%, above the 60% benchmark for comfort, implying a tighter margin of safety absent strong cash conversion. FCF coverage is not calculable due to unreported cash flows, so sustainability cannot be confirmed. Balance sheet strength (retained earnings 316.48 and solid interest coverage) provides some buffer, but with ROIC at 4.5%, elevated payouts may constrain reinvestment capacity if growth capex needs stay high. Policy outlook is unclear given missing DPS details; if management targets a stable or progressive dividend, maintaining payout at this level will require stronger OCF and stable margins.

Risk Assessment

Business Risks:

• Cost inflation in food ingredients and utilities pressuring gross margin
• Labor cost inflation and staffing constraints lifting SG&A ratio
• Execution risk from rapid expansion given revenue growth outpacing operating profit growth
• Competitive intensity in domestic dining formats impacting traffic and pricing power
• Potential tax rate volatility with an already elevated effective tax rate (38.3%)

Financial Risks:

• Liquidity not excessive (current ratio 1.23x); reliance on steady cash generation
• Moderate leverage (D/E 0.89x) with long-term debt 105.60; refinancing cost risk if rates rise
• High dividend payout (73.6%) reducing financial flexibility if cash conversion weakens
• ROIC at 4.5% (<5%) signaling capital efficiency risk and potential value dilution if growth investments under-earn

Key Concerns:

• Operating margin compressed ~26 bps YoY despite strong sales growth
• Earnings quality cannot be assessed due to missing OCF/FCF data
• Capital efficiency below benchmark (ROIC 4.5%, ROE 4.6%)
• Elevated tax burden limiting net margin upside

Investment Implications

Key Takeaways:

• Strong topline momentum (+19.6% YoY) with net margin expansion
• Operating margin slightly compressed, indicating cost headwinds amid growth
• Bottom-line growth (+45.8% YoY) benefited from improved non-operating/below-the-line items
• Liquidity adequate and leverage manageable; interest burden very low
• Capital efficiency below threshold (ROIC 4.5%), constraining valuation re-rating potential unless improved
• Dividend payout appears high (73.6%), requiring robust cash generation

Metrics to Watch:

• Same-store sales and ticket/traffic mix to sustain revenue momentum
• Food cost ratio and labor ratio within SG&A to stabilize operating margin
• Operating cash flow and FCF to validate earnings quality and dividend coverage
• Capex and new store ramp productivity to lift ROIC
• Effective tax rate trajectory
• Net non-operating income/expense to assess sustainability of net margin gains

Relative Positioning: Within Japanese casual dining peers, the company demonstrates stronger-than-average revenue growth but exhibits only mid–single digit operating margins and sub-target ROIC, suggesting execution quality on growth is good while efficiency and cash conversion require improvement to close 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