GEOLIVE Group Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥90.10B
• Operating Income: ¥907M
• Net Income: ¥257M
• EPS: ¥81.91

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

Geo-Leaf Group Co., Ltd. (31570) delivered solid topline expansion in FY2026 Q2 with revenue of ¥90.1bn, up 11.6% YoY, indicating healthy demand and/or store network productivity improvements. Cost control and operating leverage drove a sharp profit rebound: operating income reached ¥0.91bn (+151.0% YoY), and net income rose to ¥1.09bn (+322.2% YoY), reflecting both margin recovery and improved non-operating balance. Gross profit was ¥10.34bn, implying an 11.5% gross margin, while operating margin improved to roughly 1.0%, signaling disciplined SG&A but still a thin margin structure typical of value retail formats. Ordinary income of ¥1.35bn exceeded operating income, suggesting net non-operating gains (e.g., subsidies, equity-method income, or financial income) partially offsetting interest expense of ¥22m. The DuPont framework shows net profit margin at 1.21%, asset turnover at 1.051x, and financial leverage at 3.55x, resulting in a calculated ROE of 4.5%, aligned with the reported ROE of 4.5%. This indicates that modest profitability combined with reasonably efficient asset use and elevated leverage generated mid-single digit returns on equity. Liquidity remains adequate with a current ratio of 120.5% and a quick ratio of 107.1%, supported by current assets of ¥64.58bn versus current liabilities of ¥53.59bn. Working capital is positive at ¥10.99bn, providing operational flexibility through the trading cycle. Cash generation quality looks reasonable: operating cash flow of ¥1.75bn exceeds net income (OCF/NI = 1.61x), suggesting earnings are backed by cash conversion, likely aided by working capital management. Interest coverage is a comfortable 41.2x (operating income/interest expense), indicating low near-term refinancing pressure despite a debt-to-equity ratio of 2.74x. Total assets stand at ¥85.69bn and total equity at ¥24.17bn; leverage is meaningful, and the capital structure is skewed toward liabilities. Inventory of ¥7.18bn appears manageable relative to revenue scale, implying moderate inventory intensity within the model. Reported effective tax rate is shown as 0.0% in the metrics table; however, the company disclosed income tax expense of ¥0.51bn, so we treat the 0% as an unreported metric rather than an actual value. Several items are shown as zero (e.g., equity ratio, investing cash flows, cash & equivalents, dividends, shares outstanding), which indicates non-disclosure/mapping differences rather than true zero; therefore, conclusions rely on the disclosed, non-zero data points. Free cash flow is shown as 0, but capex and investing cash flows are not disclosed, limiting our ability to assess FCF durability. Overall, earnings momentum and cash conversion improved meaningfully, but profitability remains thin and leverage elevated; sustaining margin improvement while managing working capital will be key to maintaining ROE and financial resilience.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin 1.21% × asset turnover 1.051× × financial leverage 3.55× = ROE 4.50%. The step-up in operating income (+151% YoY) on +11.6% revenue suggests positive operating leverage, with fixed cost dilution contributing to margin gains. Gross margin stands at 11.5% (¥10.34bn/¥90.10bn), implying controlled procurement and pricing discipline, albeit within a low-margin retail context. Operating margin is approximately 1.0% (¥0.91bn/¥90.10bn), highlighting that SG&A still absorbs most of gross profit; further productivity improvements in store ops, logistics, and labor could lift EBIT margin. EBITDA of ¥1.12bn implies an EBITDA margin of 1.2%, only modestly above operating margin given relatively light depreciation and amortization of ¥0.21bn; the narrow EBITDA-EBIT gap suggests a relatively asset-light model. Ordinary income of ¥1.35bn exceeding operating income indicates supportive non-operating items; sustainability of such items should be monitored as they can influence net margins. Interest expense is low at ¥22m, and interest coverage is strong at 41.2x, so financing costs are not the primary drag on profitability. Net margin at 1.21% is modest; continued revenue growth without commensurate SG&A intensity should help expand margins. Overall, ROE of 4.5% is driven more by leverage and asset turnover than by high margins, underscoring the importance of disciplined capital and working capital management.

Growth Assessment

Revenue increased 11.6% YoY to ¥90.10bn, indicating healthy underlying demand and possibly store network growth or improved same-store sales. Operating income growth (+151% YoY) far outpaced sales, pointing to margin recovery and operating efficiency gains. Net income increased 322.2% YoY to ¥1.09bn, aided by stronger operations and favorable non-operating items. The sustainability of growth will hinge on maintaining traffic and basket metrics while controlling shrinkage, logistics costs, and labor intensity. With EBITDA margin at 1.2% and operating margin ~1.0%, incremental growth should continue to benefit from fixed cost dilution, but the thin base leaves limited buffer against cost inflation. Asset turnover at 1.051x is reasonable for the footprint, and further optimization of inventory and payables could support growth without heavy capital needs. Lack of disclosed investing cash flows and capex data constrains visibility into store expansion pace and long-term growth investments. Outlook hinges on preserving gross margin amid input cost volatility and FX-sensitive procurement (if applicable), while sustaining SG&A productivity to defend EBIT margin expansion.

Financial Health

Liquidity: Current assets ¥64.58bn vs. current liabilities ¥53.59bn yield a current ratio of 120.5% and quick ratio of 107.1%, indicating adequate short-term coverage. Working capital is positive at ¥10.99bn, supporting operational flexibility. Solvency: Total liabilities ¥66.17bn against equity ¥24.17bn imply a debt-to-equity ratio of 2.74x and financial leverage of 3.55x, reflecting a liability-heavy balance sheet. Interest coverage is strong at 41.2x, suggesting manageable interest burden despite leverage. The reported equity ratio of 0.0% is an unreported metric; based on disclosed totals, equity/asset ratio approximates 28.2% (¥24.17bn/¥85.69bn), though we note this is our calculation rather than a company-reported figure. Cash and equivalents are shown as 0 (unreported), limiting assessment of immediate liquidity buffers. Overall, short-term liquidity looks sufficient, but medium-term solvency depends on maintaining cash generation and disciplined liability management.

Cash Flow Quality

OCF was ¥1.75bn versus net income of ¥1.09bn, yielding an OCF/NI ratio of 1.61x, which supports the quality of earnings and indicates positive working capital dynamics and/or non-cash add-backs (depreciation ¥0.21bn). Free cash flow is shown as 0 due to lack of disclosed investing cash flows/capex; this should be treated as undisclosed rather than truly zero. The EBITDA-to-OCF relationship appears healthy, hinting that earnings convert to cash despite thin margins. Without investing CF detail, we cannot assess maintenance vs. growth capex or longer-term FCF sustainability. Positive financing CF of ¥2.34bn suggests reliance on external funding (debt or other), which may relate to growth investments or refinancing; transparency on capex and lease-related cash flows would improve visibility. Working capital appears supportive, given positive OCF; inventory of ¥7.18bn seems proportionate to scale, though sustained turnover will be essential to preserve cash conversion.

Dividend Sustainability

Annual DPS is shown as 0.00 and payout ratio as 0.0%, which we treat as undisclosed rather than actual zeros. With net income of ¥1.09bn and OCF of ¥1.75bn, internal capacity to fund distributions exists, but the absence of investing CF data and elevated leverage (D/E 2.74x) argue for prudent capital allocation until margin and FCF visibility strengthen. FCF coverage is shown as 0.00x due to undisclosed investing cash flows, so we cannot determine sustainable payout capacity. Policy-wise, thin operating margins and ongoing growth needs typically bias toward retention of earnings to strengthen the balance sheet. Any dividend policy update would likely depend on clearer FCF after capex and lease obligations.

Risk Assessment

Business Risks:

• Thin operating margin (~1.0%) leaves limited buffer against cost inflation (labor, logistics, utilities).
• Gross margin sensitivity to procurement costs and potential FX impacts on merchandise.
• Execution risk in store operations and inventory management affecting shrink and markdowns.
• Dependence on non-operating income to support bottom line in some periods.
• Competitive pricing pressure in value retail formats.

Financial Risks:

• Elevated leverage (debt-to-equity 2.74x; leverage 3.55x) increases vulnerability to earnings shocks.
• Limited disclosed cash and capex data hinder assessment of liquidity runway and FCF.
• Potential refinancing risk if credit conditions tighten, despite strong interest coverage currently.
• Working capital swings could impact OCF given inventory intensity.

Key Concerns:

• Sustainability of margin expansion from a low base.
• Lack of transparency on investing cash flows and capex priorities.
• Reliance on external financing (¥2.34bn financing CF) amid already high leverage.

Investment Implications

Key Takeaways:

• Revenue up 11.6% YoY to ¥90.10bn with strong operating leverage (+151% YoY operating income).
• ROE at 4.5% driven by asset turnover and leverage more than high margins.
• OCF/NI at 1.61x indicates solid earnings cash conversion.
• Liquidity adequate (current ratio 120.5%, quick ratio 107.1%) but leverage elevated (D/E 2.74x).
• Non-operating gains helped ordinary income exceed operating income; sustainability to monitor.
• Data gaps on investing CF and cash balances limit FCF assessment and dividend visibility.

Metrics to Watch:

• Like-for-like sales and gross margin progression to confirm demand and pricing power.
• SG&A-to-sales ratio and operating margin trajectory for sustained operating leverage.
• Working capital turns (inventory days, payables days) and OCF/NI ratio stability.
• Capex and store openings/closures to gauge growth reinvestment and FCF.
• Net debt and interest coverage amid financing cash inflows.
• Any changes in dividend policy or shareholder return framework.

Relative Positioning: Within Japan’s value-oriented retail cohort, the company exhibits competitive sales growth and improving operating leverage but maintains thinner margins and higher balance-sheet leverage than conservative peers; cash conversion is supportive, yet limited disclosure on capex and liquidity tempers visibility versus best-in-class operators.

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