Daiwabo Holdings Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥656.83B
• Operating Income: ¥22.43B
• Net Income: ¥15.74B
• EPS: ¥176.04

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

Verdict: A strong Q2 with broad-based top-line growth and pronounced operating leverage, delivering robust profit expansion and double-digit ROIC. Revenue rose 27.0% YoY to 6,568.3, with operating income up 65.9% YoY to 224.35 and net income up 66.1% YoY to 157.36. Gross profit reached 475.79, implying a gross margin of 7.2% in a thin-margin distribution model. Operating margin expanded to roughly 3.41%, with estimated expansion of about 80 bps YoY (from ~2.61%), driven by scale benefits and tight SG&A control. Net margin improved to ~2.40%, an estimated ~57 bps increase YoY (from ~1.83%), aided by operating leverage and modest non-operating income. SG&A ratio was 3.83% of sales, suggesting good cost discipline relative to rapid revenue growth. Non-operating items were small (income 4.48, expenses 2.75), with dividend income of 2.01 and interest income of 0.28; core profitability dominated results. The effective tax rate was 31.2%, broadly in line with Japan norms, implying limited tax-driven distortions. Balance sheet liquidity is sound (current ratio 150.6%, quick ratio 125.0%), supported by large receivables (2,437.66) and cash (500.08); payables (2,365.15) are high but typical for a distribution-heavy model. Leverage measured as total liabilities to equity is 1.82x, but interest-bearing debt appears modest (~204.36 in loans), reflected in a very strong interest coverage of ~200x. ROE calculated at 9.8% and ROIC at 11.7% indicate healthy capital efficiency for this business mix. Cash flow from operations is unreported this quarter, so earnings quality via OCF/NI cannot be validated. Payout ratio is calculated at 55.1%, falling within a generally sustainable range, though FCF coverage is unknown due to unreported cash flows. Forward-looking, the combination of scale-driven efficiencies, controlled SG&A, and strong ROIC suggests continued earnings resilience, but the model remains sensitive to demand cycles, supplier rebates, and inventory/receivables management. Absent OCF disclosure, monitoring working capital trends and conversion to cash will be critical to sustain dividends and growth investments.

Profitability Analysis

ROE decomposition (DuPont): ROE 9.8% = Net Profit Margin (2.4%) × Asset Turnover (1.445x) × Financial Leverage (2.82x). The largest YoY driver appears to be Net Profit Margin expansion, inferred from revenue +27.0% versus operating income +65.9% and net income +66.1%, indicating substantial operating leverage. Business reason: scale effects in the IT distribution model (higher volumes diluting fixed SG&A), potentially improved product mix/rebates, and disciplined expense control (SG&A ratio at 3.83%). Sustainability: some leverage is sustainable if volume remains elevated and pricing/mix hold, but part may be cyclical and sensitive to demand normalization and vendor rebate timing; margins remain thin structurally. Asset turnover remains high at 1.445x, typical for distributors, and likely stable barring inventory or receivable build-ups. Financial leverage (2.82x in DuPont, using accounting leverage) is largely driven by trade payables and operating liabilities rather than heavy interest-bearing debt, which mitigates financial risk. Watchpoints: if SG&A growth starts exceeding revenue growth in subsequent quarters, operating leverage will reverse; given the thin gross margin (7.2%), even small gross margin compression can quickly erode operating margin.

Growth Assessment

Revenue growth of 27.0% YoY indicates strong demand and/or market share gains, consistent with robust IT hardware/software distribution cycles. Operating income growth of 65.9% outpaced sales, evidencing strong operating leverage. Estimated operating margin expansion of ~80 bps YoY and net margin expansion of ~57 bps support improved efficiency, likely from scale and rebate capture. Growth quality is primarily operating-driven; non-operating income contributed only 4.48, a small fraction of ordinary income. With OCF unreported, sustainability hinges on maintaining efficient working capital turnover (AR 2,437.66; inventories 713.51) and avoiding inventory obsolescence or receivable risk. Outlook: If current demand persists and SG&A remains contained, double-digit profit growth could continue; however, normalization in PC/IT demand, changes in vendor rebate structures, and FX-induced pricing dynamics could temper growth.

Financial Health

Liquidity: Current ratio 150.6% and quick ratio 125.0% indicate comfortable short-term liquidity; no warning (both > benchmarks). Solvency: Reported D/E (liabilities to equity) at 1.82x is moderate and below the 2.0x caution threshold; interest coverage is extremely strong at ~200x (224.35 / 1.12). Interest-bearing debt appears modest at ~204.36 (short-term 129.04 + long-term 75.32), implying low cash interest burden relative to earnings and cash (500.08). Maturity mismatch: Current liabilities (2,786.68) are well covered by current assets (4,197.63), with significant trade receivables and cash; reliance on trade payables (2,365.15) is typical for distribution models. Off-balance sheet: No disclosures provided in the data; cannot assess guarantees or operating lease commitments from this dataset.

Cash Flow Quality

OCF/Net Income is not calculable due to unreported OCF; thus, we cannot validate earnings-to-cash conversion this quarter. Free cash flow and capex are unreported, limiting assessment of sustainability for dividends and growth investments. Working capital signals: Large AR and inventory balances are inherent to the model; with rapid revenue growth, some AR expansion is expected. Watch for any sequential rise in days sales outstanding (DSO) or inventory days that could indicate aggressive revenue recognition or demand softening. No direct signs of working capital manipulation are visible from reported figures alone; however, absence of cash flow disclosure is a key limitation.

Dividend Sustainability

The calculated payout ratio is 55.1%, within the <60% benchmark for sustainability, assuming normalized earnings. FCF coverage is unknown due to unreported cash flows; therefore, definitive coverage assessment is not possible. Balance-sheet stance (retained earnings 1,445.81; cash 500.08; modest loans 204.36; very high interest coverage) provides some buffer to sustain dividends near current levels, provided working capital remains well-managed. Policy outlook: If ROE near ~10% and ROIC at 11.7% are maintained, the company has room to maintain or modestly raise dividends; however, without OCF data, a conservative stance on payout growth is prudent.

Risk Assessment

Business Risks:

• Thin gross margins (7.2%) amplify sensitivity to pricing pressure, rebates, and mix changes.
• Demand cyclicality in IT distribution (PC/server/peripherals/software) can quickly alter volumes and margins.
• Inventory obsolescence risk in fast-moving IT categories if demand cools.
• High customer concentration or credit risk embedded in large accounts receivable (2,437.66).
• Supplier dependency and rebate variability impacting gross margin.
• FX volatility affecting import costs and pricing competitiveness.

Financial Risks:

• Leverage measured by liabilities/equity at 1.82x, with reliance on trade payables for funding.
• Working capital swings could pressure OCF during growth surges or downturns.
• Cash flow opacity this quarter (OCF/FCF unreported) increases uncertainty on earnings quality.
• Potential maturity mismatch if receivables collection slows while payables remain high.

Key Concerns:

• Earnings quality cannot be corroborated without OCF; conversion risk remains.
• Sustainability of margin expansion given structurally thin distribution margins.
• Exposure to industry cycles and vendor policy changes (rebates/terms) that can compress gross margin.

Investment Implications

Key Takeaways:

• Strong operating leverage drove OP +65.9% on +27.0% sales, lifting margins.
• ROE 9.8% and ROIC 11.7% demonstrate solid capital efficiency for the business model.
• Balance sheet liquidity is healthy; interest burden is minimal with ~200x coverage.
• Non-operating items are small; earnings are predominantly operating-driven.
• Cash flow disclosure is missing; monitor OCF to validate earnings quality and dividend coverage.

Metrics to Watch:

• Operating cash flow and OCF/NI ratio (target >1.0).
• SG&A ratio and its trajectory versus revenue growth.
• Gross margin and vendor rebate trends.
• Receivables and inventory days (DSO/DIO) for working capital discipline.
• ROIC sustainability relative to the 8% benchmark.
• Payout ratio versus FCF once disclosed.
• Leverage mix (interest-bearing debt versus trade liabilities).

Relative Positioning: Within Japanese IT distribution peers, the company exhibits above-benchmark ROIC (11.7%) and robust operating leverage, with moderate balance sheet risk largely tied to trade liabilities rather than financial debt; continued performance will hinge on maintaining working capital efficiency and defending thin margins.

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