MEDIUS HOLDINGS Co.,Ltd. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥72.17B
• Operating Income: ¥158M
• Net Income: ¥74M
• EPS: ¥4.88

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: FY2026 Q1 was a modest top-line beat with flat-to-marginally better bottom-line ratios aided by non-operating items, but profitability remains razor-thin and leverage high. Revenue rose 4.4% YoY to 721.68, while operating income increased 3.2% YoY to 1.58 and ordinary income grew 11.1% YoY to 2.69. Net income advanced 47.1% YoY to 1.08, translating to a net margin of 0.15% (from roughly 0.11% a year ago). Gross profit was 81.81 (gross margin 11.3%), and SG&A was 80.27, leaving only 1.58 of operating income, underscoring the extremely thin operating spread. Operating margin was approximately 0.22% and ordinary margin 0.37%, with the gap largely supported by non-operating income (1.32) exceeding non-operating expenses (0.43). Margin trajectory: operating margin was essentially flat YoY (about -0.3 bps), ordinary margin expanded by ~2 bps, and net margin expanded by ~4 bps. Interest coverage is 4.42x (OI 1.58 / interest expense 0.36), below the 5x comfort threshold, making earnings sensitive to rate or spread increases. The effective tax rate printed a high 69.4% (tax 1.68 vs PBT 2.42), which capped net profit despite positive ordinary income growth. Balance sheet shows a current ratio of 108% and quick ratio of 91%, indicating tight liquidity; debt-to-equity is elevated at 4.85x, highlighting financial risk. Working capital intensity is high (AR 603.82; inventory 146.41; AP 606.55), consistent with the medical distribution model and a key driver of cash conversion. ROE is low at 0.5% despite very high financial leverage (5.85x), as profitability is constrained by sub-1% margins and modest asset turnover (0.614x). ROIC is reported at 0.3%, well below the 5% warning line; capital efficiency remains a key structural challenge. Earnings quality cannot be fully assessed due to unreported cash flows; OCF/NI and FCF coverage are unavailable. Dividend signals are unclear; the calculated payout ratio of 411.8% likely reflects timing/estimation and should be treated with caution in the absence of cash flow data. Forward-looking, incremental gains in ordinary income are possible if non-operating support holds and the tax rate normalizes, but sustaining EPS growth will require SG&A discipline and better gross margin management amid a leveraged balance sheet. Overall, the quarter was stable but leaves little buffer for shocks given thin operating profitability and tight liquidity.

Profitability Analysis

DuPont decomposition (Q1 annualized snapshot): ROE ≈ Net Profit Margin (0.15%) × Asset Turnover (0.614x) × Financial Leverage (5.85x) ≈ 0.5%. The most material driver in the quarter is financial leverage (5.85x), which props up ROE despite very low net margins. Net margin improved slightly YoY (from ~0.11% to 0.15%), supported by a wider non-operating contribution (net non-operating +0.89) and despite a very high effective tax rate of 69.4%. Asset turnover at 0.614x is modest for a distributor and reflects the heavy working capital base; absent stronger turnover, leverage is doing most of the work for ROE. Operating margin was flat to marginally down (-0.3 bps YoY), indicating limited operating leverage because SG&A (80.27) nearly equals gross profit (81.81). Business drivers: gross margin at 11.3% leaves minimal room to absorb wage, logistics, and rent (6.00) inflation; any mix or vendor rebate softness quickly transmits to EBIT. Sustainability: the slight net margin uplift looks fragile, depending on non-operating income and potential normalization of the tax rate; sustainable improvement requires SG&A discipline and incremental gross-margin enhancement. Concerning trends: (1) SG&A burden is structurally high relative to gross profit, (2) interest coverage at 4.42x is below the comfort threshold, and (3) ROIC at 0.3% indicates value dilution risk if capital intensity persists without margin improvement.

Growth Assessment

Revenue growth of 4.4% YoY to 721.68 aligns with steady demand in medical distribution; however, mix and pricing appear insufficient to meaningfully lift gross margin above 11.3%. Operating income rose 3.2% YoY to 1.58, lagging sales growth, implying limited operating leverage. Ordinary income growth (+11.1% YoY) outpaced operating income due to higher non-operating gains (non-operating income 1.32 vs expenses 0.43). Net income surged 47.1% YoY to 1.08, helped by non-operating items and slight margin improvements, but capped by a high tax rate. The sustainability of profit growth relies on stabilizing the tax rate and maintaining non-operating support; core operations remain constrained by the SG&A/gross profit balance. With interest rates and logistics costs still a headwind, management will need procurement optimization, SKU/mix upgrades, and tighter expense control to sustain profit growth. Outlook near term: low-single-digit sales growth with flat operating margin is a reasonable base case; upside requires better rebate capture and SG&A productivity gains.

Financial Health

Liquidity is tight: current ratio 108.2% (>1.0 but below the 1.5x comfort), quick ratio 91.3% (<1.0). Explicit warning: leverage is high with D/E at 4.85x (>2.0 threshold). Interest-bearing debt detail is partially unreported, but disclosed short-term loans (216.82) and long-term loans (42.56) indicate reliance on debt funding. Maturity mismatch risk exists: short-term loans (216.82) and large payables (606.55) are sizable versus cash (149.23), though current assets (936.06) exceed current liabilities (865.17). The working capital model (AR 603.82; inventory 146.41; AP 606.55) implies sensitivity to collection cycles; any stretch in receivables could pressure liquidity. No off-balance sheet commitments were disclosed in the data provided.

Cash Flow Quality

Operating cash flow is unreported, so OCF/Net Income cannot be assessed; we cannot confirm earnings quality. Free cash flow and capex are also unreported, limiting visibility on cash coverage of dividends and debt service. Working capital composition (high AR and inventory) suggests cash conversion could be volatile intra-year; increases in AR or inventory would likely depress OCF relative to NI in growth periods. No clear signs of working capital manipulation can be inferred from the limited snapshot, but the tight quick ratio indicates limited cushion against temporary cash drawdowns. Until OCF data is available, we treat cash flow quality as uncertain.

Dividend Sustainability

Dividend details are unreported; the calculated payout ratio of 411.8% should be treated cautiously given missing OCF and FCF data and possible timing differences. Without OCF/FCF, we cannot confirm coverage of dividends from internal cash generation. Given leverage (D/E 4.85x) and sub-5x interest coverage, maintaining high cash distributions could constrain balance sheet flexibility unless earnings and cash conversion improve. Policy outlook is uncertain in the absence of disclosed DPS; prudent stance would hinge on stabilizing tax rate, improving operating margin, and preserving liquidity.

Risk Assessment

Business Risks:

• Ultra-thin operating margin (~0.22%) leaves little buffer for cost inflation or pricing pressure.
• High working capital intensity (AR 603.82; inventory 146.41) exposes cash conversion to customer collection cycles.
• Potential gross margin pressure from product mix, vendor rebate variability, and logistics costs.
• Dependence on non-operating income to bridge from operating to ordinary profit.

Financial Risks:

• High leverage: D/E 4.85x; financial leverage 5.85x.
• Sub-5x interest coverage (4.42x) creates sensitivity to rate increases and earnings dips.
• Tight liquidity: quick ratio 0.91x; current ratio 1.08x.
• Elevated effective tax rate (69.4%) reduces net profitability and cash available for deleveraging.

Key Concerns:

• ROIC at 0.3% signals capital inefficiency and potential value dilution if sustained.
• Tax rate volatility may cause net income volatility despite stable operations.
• Limited disclosure on cash flows and dividends adds uncertainty to sustainability assessments.
• Any deterioration in receivables quality could rapidly pressure liquidity given short-term loans of 216.82.

Investment Implications

Key Takeaways:

• Sales growth (+4.4% YoY) continues, but operating leverage remains minimal.
• Ordinary profit benefited from non-operating items; core margin improvement is limited.
• Leverage is high and liquidity tight, increasing sensitivity to shocks.
• Effective tax rate normalization is a potential lever for EPS improvement.
• ROIC and ROE remain low despite leverage, highlighting need for margin and turnover gains.

Metrics to Watch:

• Operating cash flow and OCF/NI when disclosed.
• Gross margin trend and vendor rebate contribution.
• SG&A efficiency vs revenue growth (SG&A as % of sales).
• Interest coverage and debt mix (short vs long term).
• Effective tax rate trajectory and drivers.
• Receivables days and inventory days (cash conversion cycle).

Relative Positioning: Within medical distributors, the company exhibits typical working-capital intensity but stands out for elevated leverage, tight liquidity, and exceptionally thin operating margins; absent improvements in gross margin capture and SG&A productivity, returns will lag peers with stronger cash conversion and lower leverage.

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