Daiwabo Holdings Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥656.83B
• Operating Income: ¥22.43B
• Net Income: ¥9.47B
• 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

Daiwabo Holdings (31070) delivered a strong FY2026 Q2 performance under JGAAP on a consolidated basis, with clear evidence of operating leverage and margin expansion. Revenue rose 27.0% year on year to ¥656.8bn, while operating income surged 65.9% to ¥22.4bn, outpacing top-line growth. Gross profit reached ¥34.6bn, implying a gross margin of about 5.3%, and operating margin improved to roughly 3.4%, reflecting tighter SG&A control. Ordinary income was ¥22.6bn, and net income was ¥15.7bn, up 66.1% YoY, leading to a net margin of 2.40%. DuPont decomposition indicates ROE of 9.76%, driven by a modest net margin, solid asset turnover of 1.445x, and financial leverage of 2.82x. The balance sheet appears sound: total assets are ¥454.7bn, equity ¥161.2bn, implying an equity ratio around 35.5% (even though the reported equity ratio metric shows 0.0% due to non-disclosure format). Liquidity is adequate with a current ratio of 152% and a quick ratio of 135%, supported by working capital of ~¥140.0bn. Interest-bearing burden appears low, with interest expense of only ¥55m and interest coverage over 400x, underscoring strong debt service capacity. While cash flow statements are not disclosed in this dataset (OCF/FCF reported as zero placeholders), the large working capital base and inventory of ¥45.5bn suggest cash conversion will be a key swing factor. The effective tax rate is not explicitly reported; using available non-zero items (tax expense of ¥4.36bn and profit before tax implied from net income), we estimate an effective tax rate around the low-20% range. EBITDA is shown as zero because depreciation/amortization is undisclosed; operating income therefore serves as the best profitability proxy. Dividend data are not provided in this extract (DPS and payout shown as zero placeholders), so distribution policy cannot be assessed from this dataset alone. Overall, the company demonstrates healthy profitability improvement and disciplined cost control on top of strong revenue growth. The capital structure looks balanced with moderate leverage, though the business model’s thin gross margins imply ongoing sensitivity to inventory turns and supplier incentive dynamics. Key data gaps include operating cash flow, capex, depreciation, and dividend details, which are necessary to fully judge earnings quality and capital return capacity. Despite these limitations, the available non-zero data support a view of improving returns and resilient financial footing in the period.

Profitability Analysis

ROE is 9.76%, decomposed as Net margin 2.40% × Asset turnover 1.445 × Financial leverage 2.82. Operating margin is approximately 3.41% (¥22.435bn / ¥656.830bn) versus gross margin of ~5.26% (¥34.560bn / ¥656.830bn), indicating an SG&A-to-sales ratio near 1.85%. The YoY delta—revenue +27.0% vs operating income +65.9%—signals meaningful operating leverage and effective cost discipline. Ordinary income (¥22.608bn) closely tracks operating income, implying limited non-operating drag; interest expense is minimal at ¥55m. Net margin at 2.40% shows expansion versus the prior year (implied by faster net income growth than sales). With depreciation not disclosed, EBITDA cannot be assessed; however, operating income provides a conservative proxy for operating profitability. Mix likely remains skewed to low-margin distribution businesses, so sustaining gross margin gains will hinge on vendor terms, product mix, and services contribution. Asset turnover at 1.445x is a key ROE driver and consistent with a high-volume, low-margin model. The inferred effective tax rate, using non-zero items (tax ¥4.364bn and net profit ¥15.736bn), is approximately 21–22%, which is reasonable and supportive to net margin.

Growth Assessment

Top-line growth of 27.0% YoY to ¥656.8bn is robust, suggesting strong end-market demand and/or share gains. Profit growth outpaced sales, with operating income +65.9% and net income +66.1% YoY, reflecting operating leverage and improved expense control. Gross profit of ¥34.56bn on higher sales indicates stable-to-improving gross margin dynamics, although still in the mid-single-digit range typical for distribution-heavy models. The relationship between ordinary income and operating income suggests limited non-operating headwinds this period. Revenue sustainability will depend on demand in key segments and the durability of vendor programs; thin margins imply sensitivity to volume normalization. Profit quality cannot be fully verified without cash flow data; however, the low interest burden and manageable tax rate support earnings durability. The outlook is cautiously favorable given better margins and leverage, but normalization risk exists if sales growth moderates. Inventory at ¥45.5bn must be turned efficiently to support continued growth without cash strain. Structural improvements in SG&A efficiency appear to be contributing to margin gains; monitoring whether this is one-off or structural is critical. Exogenous factors such as IT hardware cycle and corporate capex appetite could influence near-term revenue trajectory.

Financial Health

Liquidity is solid: current ratio 152.3% and quick ratio 135.3% indicate adequate coverage of short-term obligations. Working capital stands at approximately ¥140.0bn, providing a buffer for operational needs. Total liabilities are ¥287.8bn versus equity of ¥161.2bn, implying a debt-to-equity of ~1.78x (broad leverage, not necessarily interest-bearing debt). The implied equity ratio is ~35.5% (¥161.224bn / ¥454.664bn), indicating a balanced capital structure despite the reported equity ratio placeholder of 0.0%. Interest expense is only ¥55m, and interest coverage is ~408x (operating income/interest), underscoring low financial risk from borrowing costs. The asset base of ¥454.7bn supports high turnover; however, a significant portion likely sits in working capital, which can increase sensitivity to cycle turns. Short-term liabilities of ¥267.8bn are substantial but are matched by large current assets of ¥407.8bn. Absence of detailed breakdown of interest-bearing debt and cash balance (cash shown as zero placeholder) limits a precise solvency assessment. Overall financial resilience appears good, with ample liquidity and moderate leverage relative to equity. Continued discipline in working capital and vendor terms will be important to maintain this position.

Cash Flow Quality

Operating cash flow, investing cash flow, and financing cash flow are not disclosed in this dataset (zeros are placeholders), preventing direct assessment of earnings-to-cash conversion. The OCF/Net Income ratio and FCF are thus not evaluable here. Working capital appears large (≈¥140.0bn) with inventories at ¥45.5bn; cash conversion will depend on receivables and payables turnover, which are not provided. Earnings quality looks sound from an accrual standpoint given limited non-operating costs and a reasonable inferred tax rate, but cash corroboration is missing. Depreciation and amortization are undisclosed, limiting assessment of non-cash components in operating profit. Capex is unknown, so sustainability of FCF cannot be judged from available data. Given the distribution-heavy model implied by margins, cash flow can be volatile around quarter-ends due to inventory builds and vendor rebates; monitoring OCF against NI will be important when data are available. In the interim, focus on inventory turnover and days working capital as proxies for cash discipline.

Dividend Sustainability

Dividend per share and payout ratio are not disclosed in this dataset (zeros are placeholders), so we cannot assess current distributions. Without OCF and capex, FCF coverage of dividends cannot be evaluated. Balance sheet strength (implied equity ratio ~35.5%) and low interest burden would generally support capacity for shareholder returns, but policy and track record are not available here. If the company targets a stable payout policy, the improved earnings could support higher distributions; however, this is speculative without disclosed policy. Key variables for sustainability include net income durability, OCF consistency, capex needs, and working capital investment intensity. We will reassess when dividend guidance and cash flow data are provided.

Risk Assessment

Business Risks:

• Thin gross margins (~5.3%) make earnings sensitive to pricing, vendor incentives, and mix shifts.
• Inventory management risk (inventories ¥45.5bn) and potential for obsolescence or discounting in downcycles.
• Demand cyclicality in core end-markets; revenue normalization after a strong growth period could compress margins.
• Execution risk in maintaining SG&A efficiency that underpinned recent operating leverage.
• Supply chain and logistics disruptions that could affect availability and costs.
• FX and import cost variability if exposures are material.

Financial Risks:

• High working capital intensity can pressure operating cash flow in periods of rapid growth or inventory build.
• Concentration of current liabilities (¥267.8bn) necessitates sustained liquidity discipline.
• Limited visibility on cash, capex, and interest-bearing debt structure due to undisclosed cash flow and debt details.
• Potential increases in interest rates from low levels could modestly raise finance costs, albeit from a small base.

Key Concerns:

• Absence of operating and free cash flow data limits validation of earnings quality.
• Sustainability of margin gains in a low-margin business model.
• Working capital management and inventory turnover amid growth.

Investment Implications

Key Takeaways:

• Strong topline growth (+27% YoY) with outsized operating income growth (+66% YoY) indicates operating leverage.
• ROE at 9.76% is supported by solid asset turnover (1.445x) and moderate leverage (2.82x).
• Liquidity is healthy (current ratio 152%, quick ratio 135%) with sizeable working capital (~¥140bn).
• Interest burden is minimal (coverage ~408x), reducing financial risk.
• Cash flow data are unavailable; earnings-to-cash conversion remains the biggest unknown.
• Gross margin remains thin (~5.3%), making execution in mix and SG&A discipline critical.

Metrics to Watch:

• Operating cash flow and OCF/Net Income ratio when disclosed
• Inventory turnover and days working capital
• Gross and operating margin trends (and SG&A-to-sales ratio)
• Asset turnover and ROE sustainability
• Ordinary income vs operating income (non-operating items)
• Effective tax rate normalization and its impact on net margin

Relative Positioning: Based on available financials, the company exhibits above-trend revenue growth and notable operating leverage relative to typical low-margin distributors, with moderate balance sheet leverage and strong interest coverage; however, lack of cash flow disclosure tempers confidence in relative cash generation versus peers.

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