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

Monogatari Corporation reported strong top-line momentum in FY2026 Q1, with revenue of ¥35.6bn, up 19.6% YoY, indicative of robust demand and/or continued store expansion. Gross profit of ¥19.7bn implies a gross margin of roughly 55.4–55.5%, supporting the view that product mix and pricing have remained favorable despite food inflation pressures. Operating income rose 15.6% YoY to ¥2.73bn, translating into an operating margin of 7.7%, a solid level for Japan casual dining but showing slightly less operating leverage than revenue growth. Ordinary income at ¥2.74bn is nearly identical to operating income, suggesting limited non-operating gains/losses and minimal interest burden. Net income climbed 45.8% YoY to ¥1.92bn, driving a net margin of 5.39% and reflecting strong profitability at the bottom line this quarter. The DuPont breakdown shows ROE of 4.64% based on a net margin of 5.39%, asset turnover of 0.456x, and financial leverage of 1.89x, indicating return generation is more volume- and margin-driven than leverage-driven. Balance sheet strength is notable, with total assets of ¥78.1bn and equity of ¥41.4bn, implying an equity ratio of about 53% (the provided 0.0% equity ratio appears undisclosed rather than truly zero). Liquidity is adequate: current ratio 112% and quick ratio 108% reflect moderate headroom over short-term obligations. Leverage is conservative at 0.81x liabilities-to-equity, and interest coverage is very high at 273x, underscoring low financial risk. Inventory of ¥753m is small relative to sales, consistent with a restaurant model with rapid inventory turns and limited holding risk. While profitability signals are strong, key cash flow items (OCF, capex, FCF) were not disclosed in this dataset, limiting assessment of earnings-to-cash conversion and reinvestment needs. Depreciation was also not disclosed, so EBITDA-based metrics are not meaningful here despite appearing as zero in the provided metrics. The effective tax rate is better approximated at about 29.6% (¥811m tax on ~¥2.74bn ordinary income), whereas the provided 0.0% is a placeholder from missing tags. Dividend details were not disclosed; payout and FCF coverage metrics shown as zero should not be interpreted as actual zeros. Overall, fundamentals point to healthy growth and resilient margins with prudent leverage, but the absence of cash flow disclosure is a material limitation for evaluating free cash flow, capex intensity, and dividend capacity.

Profitability Analysis

ROE decomposes to 4.64% = 5.39% net margin × 0.456x asset turnover × 1.89x financial leverage, indicating returns are primarily driven by solid margins and steady asset productivity rather than balance sheet leverage. Operating margin is 7.7% (¥2.73bn/¥35.60bn), which is healthy for casual dining and consistent with pricing power and cost control, albeit growing slower than revenue (+15.6% OI vs +19.6% sales) suggesting modest negative operating leverage this quarter. Gross margin is approximately 55.4–55.5%, implying stable food cost management and/or favorable mix (e.g., yakiniku) offsetting inflation. Ordinary income is nearly equal to operating income, and interest expense is only ¥10m, so non-operating items are not a driver of results. Net margin at 5.39% benefits from scale and limited financing costs; the tax expense of ¥811m implies an effective tax rate around 29.6%, in line with statutory norms. The slight deceleration in operating profit growth vs sales hints at incremental pressure from labor, utilities, or opening costs for new stores. With depreciation undisclosed, EBITDA analysis is not available; nonetheless, the high interest coverage indicates earnings quality at the operating level is robust. Overall profitability quality appears sound with manageable cost headwinds and limited reliance on financial leverage.

Growth Assessment

Revenue growth of 19.6% YoY to ¥35.6bn indicates strong demand and likely continued store openings or renovated units lifting sales. Operating income growth of 15.6% YoY lags sales, pointing to modest cost pressures or pre-opening expenses that tempered operating leverage. Net income surged 45.8% YoY, suggesting favorable below-OP dynamics versus the prior year (e.g., tax normalization, lower non-operating drag), though we lack prior-year detail to isolate drivers. The narrow gap between operating and ordinary income this quarter underscores that core operations are the main growth engine. Sustainability hinges on same-store sales momentum, store pipeline execution, labor availability, and procurement costs (not disclosed but inferred as manageable given gross margin). Given inventories are small, the company’s growth remains service-capacity driven (labor and seating) rather than working-capital heavy. Outlook-wise, if current demand trends persist and cost inflation stabilizes, operating leverage could improve; however, continued expansion may temporarily compress margins through start-up costs. Absence of cash flow disclosures limits our view on reinvestment capacity to sustain growth over coming quarters.

Financial Health

Total assets £78.054bn and equity ¥41.365bn imply an equity ratio near 53% (calculated), reflecting a strong capital base; the provided 0.0% equity ratio is undisclosed rather than actual. Total liabilities of ¥33.662bn yield a liabilities-to-equity ratio of 0.81x, indicating conservative leverage. Liquidity is adequate with current assets of ¥21.139bn vs current liabilities of ¥18.811bn (current ratio 112%) and a quick ratio of 108%, providing moderate short-term cushion. Working capital stands at ¥2.33bn, consistent with the above ratios. Interest expense is minimal at ¥10m and interest coverage is 273x, signaling very low financing risk. Asset turnover at 0.456x is reasonable for a restaurant operator with significant fixed assets; without depreciation data, we cannot benchmark fixed asset intensity precisely. Overall solvency and liquidity appear comfortable, with ample capacity to support ongoing operations and measured growth.

Cash Flow Quality

Operating, investing, and financing cash flows are not disclosed in this dataset (recorded as zeros), so we cannot assess cash conversion, capex, or free cash flow. As a proxy, earnings quality at the operating level appears solid given high interest coverage and limited non-operating noise. However, without OCF and capex, we cannot verify whether working capital movements or capex needs (e.g., new store openings) are absorbing most of the earnings. Depreciation is also undisclosed, preventing EBITDA and maintenance capex comparisons. Inventory levels are low relative to sales, suggesting limited cash tied up in stock, but wage and payables timing can still influence OCF in this model. We therefore classify cash flow visibility as limited this quarter and recommend monitoring OCF/NI and FCF once disclosed.

Dividend Sustainability

Dividend-related figures (annual DPS, payout) are shown as zero due to non-disclosure, not because dividends are necessarily absent. Without OCF and capex data, free cash flow coverage of dividends cannot be evaluated. Balance sheet strength (equity ratio ~53%, low interest burden) suggests capacity for distributions under a stable earnings and cash generation scenario, but policy and actual cash generation remain key unknowns. We therefore cannot assess payout sustainability for FY2026 Q1 from the provided data and will revisit once cash flow and dividend disclosures are available.

Risk Assessment

Business Risks:

• Food cost inflation and procurement volatility (notably imported beef for yakiniku formats)
• Labor cost inflation and staffing shortages impacting service capacity and margins
• Same-store sales volatility due to consumer sentiment and competitive promotions
• Execution risk in new store openings and potential start-up cost drag on margins
• Food safety and brand reputation risks inherent to restaurant operations
• Utility cost fluctuations affecting store-level profitability
• Supply chain disruptions (import logistics, domestic distribution)
• Regulatory and health-related restrictions impacting dine-in traffic

Financial Risks:

• Limited disclosure of cash flows impedes assessment of cash conversion and capex funding
• Potential lease and fixed-asset intensity raising break-even thresholds during downturns
• Interest rate changes could modestly raise financing costs, albeit current expense is low
• Tax rate variability vs assumptions (effective rate estimated ~29.6%)

Key Concerns:

• Operating leverage softened vs sales growth, suggesting rising operating costs
• Absence of OCF and capex data prevents confirmation of free cash flow generation
• Depreciation not disclosed, hindering visibility into asset intensity and maintenance needs

Investment Implications

Key Takeaways:

• Strong revenue growth (+19.6% YoY) with solid operating margin (~7.7%)
• Net income growth (+45.8% YoY) outpaced operating profit, aided by limited non-operating drag
• ROE of 4.64% driven by healthy margins and steady asset turnover rather than leverage
• Balance sheet is robust with an estimated equity ratio around 53% and interest coverage of 273x
• Modest negative operating leverage indicates some cost pressure amid expansion
• Cash flow and dividend data are not disclosed; FCF and payout capacity remain unverified

Metrics to Watch:

• Same-store sales growth and traffic vs ticket trends
• Store openings/closures and pre-opening cost impact on margins
• Gross margin drivers (meat procurement costs, pricing actions, menu mix)
• Labor cost ratio and productivity metrics
• Operating margin trajectory and SG&A efficiency
• OCF/Net income and free cash flow once disclosed
• Capex and new store payback periods
• Effective tax rate vs ~30% assumption
• Asset turnover and ROIC versus WACC

Relative Positioning: Versus domestic casual dining peers, Monogatari shows above-average gross profitability (~55% gross margin) and solid operating margin (~7.7%) with conservative leverage (liabilities/equity ~0.81x) and very high interest coverage. Asset turnover is in a typical range for multi-format operators. Overall, profitability and balance sheet strength appear competitive, though near-term operating leverage is modest and disclosure gaps on cash flows limit visibility compared with best-in-class reporters.

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