Restar Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥278.09B
• Operating Income: ¥4.91B
• Net Income: ¥4.86B
• EPS: ¥59.63

Income Statement

Balance Sheet

Cash Flow Statement

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

For FY2026 Q2, 株式会社レスター reported modest topline growth but a sharp contraction in profitability, underscoring margin pressure and higher financial costs. Revenue rose 1.8% YoY to ¥278.1bn, while operating income fell 28.1% YoY to ¥4.9bn, compressing the operating margin to 1.8%. Gross profit was ¥22.4bn, implying a gross margin of 8.1%, but higher SG&A (≈¥17.5bn) eroded operating leverage despite the revenue increase. Ordinary income of ¥3.1bn highlights additional non-operating pressure, notably interest expense of ¥1.61bn, which reduced earnings power below the operating line. Net income decreased 61.8% YoY to ¥1.68bn, driving a thin net margin of 0.60%, despite a reported negative tax expense (tax benefit) of ¥4.37bn that appears to have partially cushioned bottom-line outcomes; this suggests the presence of material below-ordinary items or non-controlling interests not visible in the provided summary. ROE calculated via DuPont is 1.65%, reflecting weak net margin (0.60%), reasonable asset turnover (0.883x), and meaningful financial leverage (3.11x). Liquidity remains sound with a current ratio of 165.7% and quick ratio of 128.8%, supported by ample working capital of ¥95.4bn. Balance sheet solvency looks acceptable: while the disclosed equity ratio shows as 0.0% (unreported), a look-through calculation from available figures indicates equity of ¥101.3bn against total assets of ¥314.9bn, implying an equity ratio of roughly 32.2%. Cash generation was strong at the operating level with OCF of ¥20.35bn, yielding an OCF/Net income ratio of 12.1x, likely driven by working capital release (e.g., inventories/receivables), though detailed drivers are not disclosed. Financing cash outflow of ¥14.28bn indicates deleveraging or shareholder returns, but dividends are not disclosed and DPS shows as zero (treated as unreported). Interest coverage of ~3.0x (EBIT/interest) is adequate but leaves limited cushion if operating conditions deteriorate or interest costs rise. EBITDA was ¥6.45bn (2.3% margin), pointing to narrow underlying profitability for a trading-heavy model. Inventories stood at ¥53.65bn, and inventory discipline will be critical to sustaining cash conversion amid a low-margin environment. The profit drop alongside higher interest burden raises the importance of cost control and mix improvements to restore operating leverage in 2H. Given several unreported fields (investing CF, cash balance, share data, DPS), conclusions rely on partial disclosures, and below-ordinary items remain a key uncertainty behind the net income profile.

Profitability Analysis

DuPont ROE of 1.65% = Net margin (0.60%) × Asset turnover (0.883x) × Financial leverage (3.11x). The principal drag is the compressed net margin, as revenue growth did not translate to profit growth due to SG&A pressure and higher non-operating costs. Gross margin of 8.1% is typical for an electronics trading/solutions business, but the operating margin of 1.8% signals limited pricing power and elevated fixed/semifixed costs. Operating leverage turned negative this half: SG&A (~¥17.5bn) consumed 78% of gross profit, up from implied levels last year (not disclosed), driving a 28.1% YoY operating income decline despite 1.8% revenue growth. Ordinary margin is 1.12% (ordinary income ¥3.11bn / revenue), reflecting non-operating headwinds, primarily interest expense of ¥1.61bn. EBITDA margin is 2.3%, with D&A of ¥1.54bn modest relative to sales, indicating limited depreciation drag but also constrained asset-intensive returns. Interest coverage is ~3.0x on EBIT, adequate but tightening; any further margin compression would quickly pressure coverage. The negative reported tax expense (tax benefit) is atypical relative to ordinary income and implies material below-ordinary adjustments or deferred tax effects; excluding this tailwind would make the net margin even thinner.

Growth Assessment

Revenue grew 1.8% YoY to ¥278.1bn, indicating stable demand but no clear acceleration. Profit growth is weak: operating income fell 28.1% YoY, revealing margin compression and likely unfavorable product/customer mix, higher logistics, or SG&A normalization after prior tight cost control. Ordinary income at ¥3.11bn and elevated interest expense point to balance sheet costs partially offsetting operating efforts. Net income declined 61.8% YoY despite a tax benefit, suggesting sizable below-ordinary or minority items and underscoring low profit quality in this period. Sustainability hinges on inventory discipline and improving gross margin mix in 2H to regain operating leverage. Given the trading-heavy model, top-line growth without mix enhancement may not translate to earnings if SG&A and financing costs remain elevated. With OCF strong this half, there appears to be scope to support working capital for growth, but this is contingent on maintaining inventory turns and credit risk management. Outlook near term: cautious on margin recovery until evidence of improved pricing/mix and cost containment; monitor whether interest expense trends stabilize or decline if financing outflows reflect debt repayment. Longer-term drivers (not disclosed here) likely include solutions value-add and design-in wins that can lift gross margins from the 8% range.

Financial Health

Total assets are ¥314.9bn, liabilities ¥210.0bn, and equity ¥101.3bn. Although the disclosed equity ratio shows as 0.0% (unreported), a computed equity ratio is approximately 32.2% (equity/assets), indicating a moderately levered but not overextended balance sheet for a trading business. Current ratio is 165.7% and quick ratio 128.8%, both solid and supported by ¥95.4bn of working capital. Debt-to-equity is shown as 2.07x based on total liabilities/equity, implying meaningful leverage; interest-bearing debt specifics are not disclosed. Interest coverage of ~3.0x highlights sensitivity to earnings volatility and interest rate levels. Inventories of ¥53.65bn appear sizable versus scale, emphasizing the need for tight inventory management to mitigate obsolescence and margin risk. Financing cash outflow of ¥14.28bn suggests deleveraging or other financing uses, which, if debt repayment, would be supportive for solvency metrics in subsequent periods. Overall, liquidity is comfortable, solvency acceptable, but leverage and interest costs warrant monitoring.

Cash Flow Quality

Operating cash flow of ¥20.35bn versus net income of ¥1.68bn yields an OCF/NI of 12.1x, indicating strong cash conversion this half, likely driven by working capital release (e.g., reductions in inventories/receivables or extended payables). EBITDA of ¥6.45bn provides an additional lens on cash generation capacity, suggesting OCF benefitted meaningfully from non-earnings items and WC movements. Investing cash flow is shown as 0 (treated as unreported), so free cash flow cannot be reliably calculated; the stated FCF of 0 should be viewed as not determinable from the provided data. Without capex/M&A detail, the durability of cash generation cannot be fully assessed. The large financing outflow (−¥14.28bn) indicates uses of cash potentially for debt repayment; absent cash balance data (unreported), we cannot reconcile net cash movement. Working capital management appears to have been a positive driver this period, but sustainability into 2H depends on inventory turns and credit collections remaining favorable.

Dividend Sustainability

Dividend data are not disclosed (DPS shows as 0.00 and payout ratio 0.0%, both treated as unreported). Consequently, we cannot assess payout ratios, historical policy adherence, or FCF coverage. With OCF strong and leverage meaningful, a prudent policy would typically balance deleveraging with returns, but actual policy guidance is not provided here. The lack of investing CF disclosure prevents a reliable FCF-based coverage check. Monitor management commentary for dividend policy updates, target payout, and any linkage to consolidated earnings or free cash flow.

Risk Assessment

Business Risks:

• Low-margin trading model with limited pricing power; margin sensitive to mix and vendor rebates
• Semiconductor and electronics demand cyclicality impacting volumes and inventories
• Inventory obsolescence risk given ¥53.65bn inventories and rapid product cycles
• Customer credit risk in a high working-capital model (receivables not disclosed here)
• Supplier concentration and allocation risk in tight component markets
• FX volatility (USD/JPY and others) affecting gross margins and non-operating items
• Execution risk in transitioning toward higher value-add/solutions to lift margins

Financial Risks:

• Leverage implied by liabilities/equity of ~2.07x; sensitivity to funding conditions
• Interest coverage ~3.0x; earnings downturn or rate hikes could pressure coverage
• Earnings quality volatility with material below-ordinary items and tax benefits
• Cash flow dependence on working capital swings; potential reversal in 2H
• Limited visibility on cash balances and debt maturity profile (undisclosed)

Key Concerns:

• Operating income down 28.1% YoY despite revenue growth, signaling margin compression
• Net income down 61.8% YoY with unusual tax benefit, implying non-recurring impacts
• High interest expense (¥1.61bn) weighing on ordinary income amid narrow EBITDA margin (2.3%)

Investment Implications

Key Takeaways:

• Topline grew 1.8% YoY, but profit contraction highlights weak operating leverage
• ROE of 1.65% constrained by thin net margin and leverage dependence
• Liquidity is strong (current ratio 165.7%), solvency acceptable (~32% equity ratio computed)
• OCF robust at ¥20.35bn, but sustainability unclear without investing CF detail
• Interest coverage ~3x is adequate yet vulnerable to further margin pressure

Metrics to Watch:

• Gross margin and SG&A as % of gross profit to gauge operating leverage recovery
• Ordinary income vs. interest expense trend to assess core earnings momentum
• Inventory levels and implied turns; OCF/NI ratio sustainability
• Equity ratio (computed) and any changes in financing cash flows (debt repayment/refinancing)
• Nature of below-ordinary items and tax effects driving the net income variance

Relative Positioning: Within Japan’s electronics trading/solutions peers, Lester shows stable revenue but weaker margin traction this half, with leverage and interest costs more burdensome than best-in-class peers; liquidity compares favorably, while earnings quality appears more volatile due to below-ordinary items and tax effects.

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