AP HOLDINGS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥10.67B
• Operating Income: ¥287M
• Net Income: ¥12M
• EPS: ¥44.93

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share 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

AP Holdings (3175) reported FY2026 Q2 consolidated results under JGAAP with steady topline growth but mixed quality of earnings and stressed liquidity. Revenue rose 5.2% year over year to ¥10,667 million, while operating income expanded 82.4% to ¥287 million, indicating improved cost control or operating leverage at the store and procurement levels. Gross profit reached ¥6,469.8 million, implying a high gross margin of 60.7%, but the EBITDA margin was just 4.7%, suggesting heavy SG&A intensity typical of restaurant and food service models. Ordinary income was ¥222 million, below operating income due to non-operating costs (including ¥40.3 million in interest), pointing to a still-meaningful financial burden. Net income was ¥630 million, far above ordinary income, implying material extraordinary or tax-related effects; the effective tax rate appears at 0.0%, likely reflecting loss carryforwards or one-off tax items. The computed net margin was 5.91%, but the underlying ordinary margin appears closer to ~2.1%, signaling mixed earnings quality. DuPont decomposition shows a calculated ROE of 104.3%, driven primarily by very high financial leverage (11.87x) with an asset turnover of 1.488x and net margin of 5.91%; this level of ROE is unlikely to be sustainable if extraordinary factors normalize. Liquidity is tight: the current ratio is 47.7% and the quick ratio 39.3%, with negative working capital of approximately ¥3,152.7 million, which elevates short-term refinancing and supplier payment risk. Operating cash flow was negative at ¥-318.4 million versus positive net income of ¥630 million, yielding an OCF/NI ratio of -0.51, a red flag for earnings-to-cash conversion in the period. Financing cash flow was an outflow of ¥-656.9 million, suggesting debt repayment and/or lease/interest outlays exceeded new funding, amplifying liquidity pressure. Total assets were ¥7,167 million and total liabilities ¥7,739.4 million, while total equity was reported at ¥604 million; the provided leverage-based metrics (debt-to-equity 12.81x) and DuPont leverage corroborate a highly levered balance sheet. Interest coverage of 7.1x on EBIT appears adequate near term, but the gap between ordinary and net income underlines sensitivity to non-recurring gains and tax effects. Dividend remains suspended (DPS ¥0, payout 0%), consistent with balance sheet repair and cash conservation priorities. With revenues growing and operating income improving, the operational trend is directionally positive, yet the cash flow profile and liquidity headroom require close monitoring. Key uncertainties include the sustainability of SG&A efficiencies, the normalization of extraordinary items, and the pace of working capital stabilization. Data limitations exist (several zero values reflect undisclosed items, not actual zeros), so conclusions rely on available non-zero disclosures and calculated metrics.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin 5.91% x Asset Turnover 1.488x x Financial Leverage 11.87x = ROE 104.3%. The elevated ROE is primarily leverage-driven, with margin support from one-off factors (net income ¥630m vs ordinary income ¥222m). Core operating profitability improved: operating income rose 82.4% to ¥287m on 5.2% revenue growth, indicating positive operating leverage. Gross margin is high at 60.7% (gross profit ¥6,469.8m), but the EBITDA margin is low at 4.7% (EBITDA ¥497.5m), implying heavy SG&A and other operating costs absorbing most of the gross profit. EBIT/interest coverage is 7.1x (EBIT ¥287m vs interest ¥40.3m), providing some cushion, though leverage remains pronounced. Margin quality is mixed: ordinary margin (~2.1%) reflects underlying profitability, while the net margin (5.9%) appears inflated by extraordinary or tax benefits. Operating leverage appears to be improving given the disproportionate increase in operating income relative to revenue; monitoring SG&A/revenue and labor/energy costs will be key to confirming sustainability.

Growth Assessment

Revenue grew 5.2% YoY to ¥10,667m, consistent with modest same-store recovery and/or store mix benefits typical for the sector. Operating income growth of 82.4% indicates efficiency gains and better cost throughput; however, ordinary income at ¥222m suggests non-operating drag persists (financing costs and other items). Net income of ¥630m is likely boosted by extraordinary or tax factors (effective tax rate 0.0%), so headline profit growth quality is lower than operating growth quality. Sustainability of revenue growth hinges on guest traffic, ticket size, store rollout/closures, and supply chain initiatives; no segment disclosure was provided. Near-term outlook depends on cost normalization (food input volatility, labor, utilities) and the ability to retain gross margin while lowering SG&A intensity. Given negative OCF in the period, growth may be constrained by working capital needs unless internally generated cash flow improves or external funding is available. With limited disclosure on store counts and segment trends, we assume low-to-mid single-digit growth is plausible if macro and consumer demand remain stable, but profit growth will depend on maintaining operating leverage without sacrificing service levels.

Financial Health

Liquidity is tight: current assets ¥2,872.6m vs current liabilities ¥6,025.2m; current ratio 47.7% and quick ratio 39.3%, with working capital of approximately ¥-3,152.7m indicating high reliance on supplier credit and short-term financing. Solvency: total liabilities ¥7,739.4m against reported total equity ¥604.0m yields a debt-to-equity ratio of 12.81x, consistent with the DuPont financial leverage of 11.87x; this reflects a thin capital base. Interest coverage at 7.1x on EBIT provides some buffer, but sustained negative OCF would weaken coverage. The equity ratio was shown as 0.0% (undisclosed); based on provided totals, the implied equity proportion appears very low, indicating limited shock absorption capacity. Financing cash outflow of ¥-656.9m in the period suggests repayments exceeded new borrowings, which, combined with negative OCF, tightens liquidity. Overall, the capital structure is highly levered with limited flexibility, requiring careful cash management.

Cash Flow Quality

OCF was ¥-318.4m versus net income of ¥630.0m, yielding an OCF/NI ratio of -0.51, which indicates weak earnings-to-cash conversion in the period. The gap likely reflects working capital outflows (e.g., inventory build or payables reduction) and possibly timing effects; detailed components were not disclosed. EBITDA was ¥497.5m versus D&A of ¥210.5m, suggesting positive cash earnings before working capital, but actual cash generation turned negative after working capital movements and interest/other items. Investing cash flow was undisclosed (shown as 0), so Free Cash Flow cannot be precisely determined; on a simplified basis using OCF as a proxy, FCF appears negative in the period. Financing cash flow was an outflow of ¥-656.9m, compounding cash pressures. Given these factors, current-period cash flow quality is weak and dependent on reversing working capital outflows and sustaining operating improvements.

Dividend Sustainability

Dividend per share was ¥0.00 with a payout ratio of 0.0%, indicating suspension/absence of distributions. With negative operating cash flow and high leverage (debt-to-equity 12.81x), internal coverage for dividends is inadequate at present. FCF coverage is shown as 0.00x (investing CF undisclosed), but directionally the period’s cash generation would not support payouts. The company appears focused on balance sheet stabilization and liquidity preservation. Future resumption would require consistent positive OCF, normalized working capital, and reduced leverage; current data suggest caution on near-term reinstatement.

Risk Assessment

Business Risks:

• Margin volatility from food input cost inflation and procurement risks
• Labor cost pressure and staffing constraints affecting service levels
• Sensitivity of traffic and ticket size to consumer sentiment in dining-out
• Execution risk on SG&A efficiency and store portfolio optimization
• Potential normalization of extraordinary gains reducing reported net income

Financial Risks:

• Tight liquidity with current ratio 47.7% and negative working capital of ~¥3.15bn
• High leverage (debt-to-equity 12.81x; financial leverage 11.87x) limiting flexibility
• Negative operating cash flow (¥-318m) despite positive net income
• Exposure to interest rate increases impacting financing costs (interest expense ¥40.3m)
• Refinancing risk if short-term obligations cannot be rolled over on favorable terms

Key Concerns:

• Earnings quality: net income (¥630m) materially exceeds ordinary income (¥222m)
• Cash conversion: OCF/NI ratio of -0.51 indicates weak cash realization
• Sustainability of operating improvements amid high SG&A intensity (EBITDA margin 4.7%)
• Balance sheet thinness and low equity base constraining recovery investment
• Dependence on continued supplier credit and short-term funding given negative working capital

Investment Implications

Key Takeaways:

• Topline growth (+5.2% YoY) with strong operating income rebound (+82.4%) signals improving operations
• Net income uplift appears non-recurring/extraordinary; ordinary income remains modest
• Liquidity is stretched (current ratio 47.7%, negative working capital ~¥3.15bn)
• High leverage (debt-to-equity 12.81x) underpins ROE but elevates risk
• OCF negative despite profitability; cash generation must improve to sustain momentum
• Dividend remains suspended, consistent with balance sheet repair priorities

Metrics to Watch:

• Same-store sales and revenue growth trajectory
• SG&A-to-sales ratio and EBITDA margin progression
• Operating cash flow and working capital days (inventory, payables, receivables)
• Ordinary income vs net income gap and recurrence of special gains
• Interest coverage and net debt/EBITDA
• Implied equity ratio and refinancing schedule for short-term liabilities

Relative Positioning: Within Japan’s restaurant and food service peers, AP Holdings shows improving operating momentum but stands on the weaker side for balance sheet strength and liquidity; profitability at the ordinary level is modest relative to gross margin potential, and leverage is notably higher than many listed peers, leaving limited shock absorption until cash conversion and capital structure improve.

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