kaihan co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.61B
• Operating Income: ¥-570M
• Net Income: ¥-247M
• EPS: ¥-72.28

Income Statement

Balance Sheet

Cash Flow Statement

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

Kaifu Co., Ltd. (3133) reported FY2026 Q2 consolidated results under JGAAP showing a marked divergence between topline recovery and bottom-line pressure. Revenue rose 22.0% year on year to JPY 1,615 million, indicating demand recovery and/or footprint expansion. Despite this growth, profitability remained deeply negative, with operating income of JPY -570 million and ordinary income of JPY -626 million. Net income was JPY -4,014 million, pointing to significant below-operating-line losses, likely from extraordinary items such as impairments, store-related charges, or one-off costs (not itemized here). Gross profit was reported at JPY 917.9 million, yielding a gross margin of 56.8%, which suggests improved pricing or mix versus cost of sales but does not overcome elevated operating costs. EBITDA stood at JPY -533.1 million, implying limited near-term earnings support even before depreciation and amortization (JPY 36.9 million). DuPont metrics highlight extreme pressure on equity returns: net profit margin of -248.54%, asset turnover of 0.334x, and financial leverage of 4.98x combined to a calculated ROE of -413.81%. Liquidity is tight: current assets of JPY 770.8 million versus current liabilities of JPY 1,935.5 million translate into a current ratio of 39.8% and negative working capital of JPY -1,164.6 million. Operating cash flow was negative at JPY -279.4 million, while financing cash inflow of JPY 182.0 million partially bridged the shortfall; investing cash flows were not disclosed in the dataset. Interest expense totaled JPY 23.6 million, and the interest coverage ratio was -24.1x, underscoring dependence on external funding amid losses. The OCF-to-net income ratio of 0.07 indicates weak cash conversion relative to the magnitude of reported losses, although the unusually large net loss likely includes non-cash charges. Equity of JPY 970 million against total assets of JPY 4,835 million implies high leverage alongside the reported debt-to-equity ratio of 3.19x, though the reported equity ratio is not disclosed. No dividend was reported for the period in the dataset; given losses and negative OCF, cash distributions appear unlikely near term. Several line items (e.g., cash and equivalents, investing cash flow, equity ratio, shares outstanding) are not disclosed here, constraining precision in some analyses. Overall, the company shows sales momentum but remains in a restructuring or recovery phase characterized by heavy losses, tight liquidity, and reliance on financing.

Profitability Analysis

ROE decomposition indicates severe equity erosion driven by margin, not efficiency: net margin -248.54% x asset turnover 0.334x x leverage 4.98x yields a calculated ROE of -413.81%. The gross margin of 56.8% suggests that cost of sales is not the core issue; rather, fixed costs and selling, general and administrative expenses are likely absorbing gross profit, evidenced by operating income of JPY -570 million and EBITDA of JPY -533.1 million. Operating leverage appears unfavorable at current scale—revenue growth of +22.0% YoY did not translate into operating breakeven, implying that either the cost base has increased (labor, utilities, rent) or that store productivity remains below pre-pandemic norms. Ordinary income of JPY -626 million versus operating income of JPY -570 million indicates incremental non-operating burdens (interest and other non-operating items). The step-down to net loss of JPY -4,014 million suggests large extraordinary losses or valuation adjustments that are not detailed in the data provided. Interest coverage of -24.1x highlights the absence of earnings buffer for debt service. Effective tax rate analysis is not meaningful given losses; cash tax paid of JPY 49.1 million despite losses may reflect non-deductible items or prior-period settlements under JGAAP. Overall margin quality is weak at the operating and EBITDA levels, with limited evidence of cost flexibility to absorb shocks or to leverage revenue growth in the near term.

Growth Assessment

Topline growth of +22.0% YoY to JPY 1,615 million signals demand recovery and/or potential network changes. Sustainability depends on maintaining traffic, pricing, and store-level productivity amid inflationary inputs; the current negative operating profile indicates that growth alone has not reached scale efficiency. Profit quality remains challenged: EBITDA is negative (JPY -533.1 million), and ordinary loss (JPY -626 million) persists despite higher revenue. The significant gap between ordinary loss and net loss (around JPY -3.4 billion) implies non-recurring items likely dominating reported earnings in this half, which clouds the trajectory for normalized profit. Asset turnover at 0.334x suggests underutilized assets or a footprint that is large relative to current revenue; efficiency improvements could support future profit if utilization improves. Near-term outlook hinges on cost rationalization (rent renegotiations, staff optimization), potential portfolio pruning of underperforming stores, and stabilization of non-operating/extraordinary items. Given negative OCF (JPY -279.4 million) in the period, growth investments appear constrained and likely contingent on external financing or asset-light strategies. Without evidence of structural cost reduction or a clear improvement in store-level EBITDA, near-term profitability inflection remains uncertain.

Financial Health

Liquidity is tight: current assets of JPY 770.8 million versus current liabilities of JPY 1,935.5 million yield a current ratio of 39.8% and quick ratio of 37.1%. Working capital is negative at JPY -1,164.6 million, indicating reliance on payables and short-term liabilities to fund operations. Total liabilities are JPY 3,093.9 million against total assets of JPY 4,835.0 million; reported total equity is JPY 970.0 million, with a high debt-to-equity ratio of 3.19x and financial leverage of 4.98x from DuPont, implying a thin equity buffer. Interest expense of JPY 23.6 million combined with negative EBIT results in an interest coverage ratio of -24.1x, highlighting solvency pressure if losses persist. Cash and equivalents are not disclosed in the dataset, limiting assessment of immediate liquidity headroom; however, financing inflows of JPY 182.0 million suggest active external funding. The undisclosed equity ratio precludes direct confirmation of balance sheet solidity, but available leverage metrics indicate constrained financial flexibility. Overall, the company’s capital structure is stretched and sensitive to continued losses and working capital swings.

Cash Flow Quality

Operating cash flow was JPY -279.4 million, substantially better than net income of JPY -4,014.0 million, yielding an OCF/Net Income ratio of 0.07. This low ratio reflects that the magnitude of net loss far exceeds cash outflow, implying significant non-cash charges (e.g., impairments) within net income. EBITDA of JPY -533.1 million aligns with negative OCF, suggesting core operations consumed cash before financing. Investing cash flow is not disclosed; thus, Free Cash Flow cannot be robustly derived from this dataset (the reported FCF metric of 0 should be treated as undisclosed). Working capital pressure is evident from the low current ratio and negative working capital; detailed components beyond inventories (JPY 52.3 million) are not provided, limiting analysis of receivables and payables behavior. Depreciation and amortization (JPY 36.9 million) is relatively small versus the operating loss, indicating that cash burn is driven more by operating shortfalls than by depreciation-heavy assets. Overall earnings quality is weak, dominated by non-recurring items at the net level and negative cash earnings at the operating level.

Dividend Sustainability

No dividend per share is reported in the dataset for the period, and payout metrics show 0.0%, which should be treated as undisclosed for this analysis. Given the reported net loss (JPY -4,014.0 million) and negative operating cash flow (JPY -279.4 million), internal coverage for dividends is effectively absent. Financing inflows (JPY 182.0 million) appear directed to liquidity support rather than shareholder returns. Without positive free cash flow (not disclosed) and with leverage elevated (debt-to-equity 3.19x), capacity for distributions is constrained. Company policy is not detailed here; however, near-term focus is likely on stabilization and balance sheet preservation rather than cash returns.

Risk Assessment

Business Risks:

• Operating leverage risk: fixed cost base remains high relative to current revenue, keeping EBITDA and operating income negative.
• Demand volatility risk: recovery sustainability in customer traffic and spend is uncertain amid macro and competitive pressures.
• Cost inflation risk: labor, utilities, and raw materials may pressure margins if pricing power is limited.
• Execution risk in restructuring: potential store closures or portfolio optimization may incur further one-off charges.
• Brand and format risk: concept relevance and unit economics need reinforcement to drive repeat traffic and margins.

Financial Risks:

• Liquidity risk: current ratio 39.8% and negative working capital of JPY -1,164.6 million indicate tight near-term funding.
• Solvency risk: interest coverage -24.1x and debt-to-equity 3.19x signal elevated leverage against negative earnings.
• Refinancing risk: reliance on JPY 182.0 million financing inflow suggests dependence on lenders/investors for continuity.
• Covenant risk: potential breaches if losses persist (specific covenants not disclosed).
• Cash flow volatility risk: negative OCF (JPY -279.4 million) with limited visibility on investing cash flows.

Key Concerns:

• Large gap between ordinary loss (JPY -626 million) and net loss (JPY -4,014 million) implies sizable extraordinary charges with limited disclosure.
• Sustained negative EBITDA (JPY -533.1 million) despite +22.0% revenue growth.
• Tight liquidity and negative working capital requiring continued external funding.
• High leverage and thin equity buffer amid ongoing losses.
• Limited disclosure for key items (cash balance, investing cash flows, equity ratio, share count) constrains precise assessment.

Investment Implications

Key Takeaways:

• Topline momentum (+22.0% YoY) contrasts with persistent operating and EBITDA losses.
• Net loss of JPY -4.0 billion likely driven by non-recurring items, overshadowing operating trend analysis.
• Liquidity is constrained (current ratio 39.8%, negative working capital of JPY -1.16 billion).
• Leverage is elevated (debt-to-equity 3.19x; financial leverage 4.98x) with negative interest coverage (-24.1x).
• Negative OCF (JPY -279.4 million) and reliance on financing inflows (JPY 182.0 million) heighten funding risk.

Metrics to Watch:

• Quarterly EBITDA trajectory and operating margin progression.
• Store-level sales productivity and same-store sales (not disclosed here).
• Extraordinary items and impairment charges impacting net income.
• Operating cash flow trend and working capital movements (payables, receivables, inventories).
• Leverage and liquidity headroom (debt levels, interest expense, available credit).
• Any capital actions: equity issuances, asset sales, or debt refinancing terms.

Relative Positioning: Within Japan’s food service and izakaya operators, the company shows stronger revenue recovery but materially weaker profitability and liquidity than would be needed for a stable footing; near-term positioning is that of a turnaround/restructuring profile with high financial leverage and sensitivity to execution on cost control and footprint optimization.

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