| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥3912.1B | ¥3089.4B | +26.6% |
| Operating Income / Operating Profit | ¥140.9B | ¥70.7B | +99.3% |
| Ordinary Income | ¥132.0B | ¥66.6B | +98.3% |
| Net Income / Net Profit | ¥88.8B | ¥42.6B | +108.2% |
| ROE | 10.5% | 5.4% | - |
FY2026 Q2 results delivered significant revenue and profit growth: Revenue ¥3912.1B (YoY +¥822.8B, +26.6%), Operating Income ¥140.9B (YoY +¥70.2B, +99.3%), Ordinary Income ¥132.0B (YoY +¥65.4B, +98.3%), Net Income ¥88.8B (YoY +¥46.2B, +108.2%). Revenue growth continued double-digit for the fourth consecutive period driven by store openings and higher unit sales, while Operating Income nearly doubled year-on-year due to SG&A efficiency. Operating margin improved to 3.6% from 2.3% (+1.3pt), and EPS doubled to ¥113.43 (prior year ¥53.09). Gross margin declined to 16.1% from 17.2% (-1.0pt), but SG&A ratio compressed to 12.5% (-2.3pt) and operating leverage was realized. Progress toward FY guidance (Revenue ¥7460B, Operating Income ¥276B, Net Income ¥171B) stands at 52% of Revenue, 51% of Operating Income, and 52% of Net Income—broadly in line with expectations.
[Revenue] Revenue was ¥3912.1B, up 26.6% YoY. The single segment Automotive Business (vehicle sales and ancillary services) saw growth primarily driven by new store openings and higher same-store unit sales. The ¥822.8B increase from the prior year reflects expanded market coverage from network expansion and higher units handled in the used car market. Contributions from four newly consolidated subsidiaries also underpinned growth. Cost of goods sold was ¥3281.0B, yielding a cost ratio of 83.9%, up 1.1pt from 82.8% a year earlier. As a result, Gross Profit was ¥631.1B (Gross Margin 16.1%), a -1.0pt decline from ¥530.0B (17.2%) in the prior year, but an absolute increase of ¥101.1B (+19.1%).
[Profitability] SG&A was ¥490.2B, up only 6.7% YoY, well below the 26.6% sales growth. SG&A ratio improved to 12.5% from 14.9% (-2.3pt), reflecting economies of scale. Operating Income was ¥140.9B (Operating Margin 3.6%), roughly double the prior-year ¥70.7B (2.3%). Non-operating expenses amounted to ¥12.0B, driven by interest expense ¥4.8B and derivative valuation losses ¥3.6B, resulting in Ordinary Income of ¥132.0B (YoY +98.3%). An impairment loss of ¥1.6B was recorded as an extraordinary loss, bringing Profit Before Tax to ¥130.3B. After corporate taxes of ¥41.5B (effective tax rate 31.8%), Net Income was ¥88.8B (Net Margin 2.3%). In summary, SG&A efficiency from scale expansion offset the decline in gross margin, delivering top-line and bottom-line growth.
[Profitability] Operating margin of 3.6% improved by 1.3pt from 2.3%, marking the third consecutive period of enhanced operating leverage. Gross margin of 16.1% declined 1.0pt from 17.2% but was offset by a 2.3pt contraction in the SG&A ratio to 12.5%. ROE 10.5% is decomposed as Net Margin 2.3% × Total Asset Turnover 1.53x × Financial Leverage 3.02x, with SG&A efficiency improvements and maintenance of asset turnover contributing.
[Cash Quality] Operating Cash Flow (OCF) / Net Income stands at 0.56x, indicating low cash conversion due to working capital demands. OCF/EBITDA is 0.28x (Operating CF ¥50.0B ÷ EBITDA ¥175.7B), suggesting remaining challenges in converting accounting profits to cash.
[Investment Efficiency] Total Asset Turnover is 1.53x; despite inventory increases this was sustained by strong revenue growth. Inventory turnover days extended to 106 days (Inventory ¥955.0B ÷ COGS ¥3281.0B × 365 days/2), indicating prolonged holding periods and room for improvement in inventory efficiency.
[Financial Soundness] Equity Ratio is 33.1%, down 1.8pt from 34.9%, reflecting increased reliance on interest-bearing debt. D/E ratio is 2.02x (Interest-bearing debt ¥778.1B ÷ Equity ¥847.9B × 0.55), and Debt/EBITDA is 4.43x, indicating high leverage. Current ratio is 182.3%, showing liquidity is secured, but Quick Ratio is 75.7%, showing high inventory dependence. Interest coverage is 29.1x (Operating Income ¥140.9B ÷ Interest Expense ¥4.8B), indicating strong interest-paying capacity.
Operating CF was ¥50.0B (prior year ¥18.4B, +171.8%), but relative to Net Income the ratio was only 0.56x. Pre-working-capital subtotal of OCF was a solid ¥86.5B, but net working capital outflow of ¥106.9B occurred (Inventory increase ¥72.4B, Accounts Receivable increase ¥49.4B, Accounts Payable increase ¥14.9B), and corporate tax payments ¥32.1B further pressured cash generation. Investing CF was ▲¥60.6B, primarily due to capital expenditure ¥49.0B (Depreciation ¥34.8B, Capex/Depreciation ratio 1.41x), resulting in Free Cash Flow (FCF) of ▲¥10.6B. Financing CF provided an inflow of ¥167.2B, consisting of new long-term borrowings ¥275.0B, repayments ¥91.9B, share buybacks ¥44.0B, and dividends ¥36.3B. Consequently, cash increased by ¥156.6B during the period to ¥333.4B. The prolonged inventory days (106) and AR increases are burdening OCF; inventory reduction and improved AR collection in H2 are key to profitability improvement.
Quality of earnings has been improving due to SG&A efficiency, but challenges remain from lower gross margin and working capital burdens. Operating Income ¥140.9B versus Ordinary Income ¥132.0B shows a ¥8.9B difference primarily due to interest expense ¥4.8B and derivative valuation losses ¥3.6B. Non-operating income was small at ¥3.0B, indicating a healthy recurring profit structure. The extraordinary impairment loss of ¥1.6B is considered temporary. Comprehensive income ¥89.2B is almost aligned with Net Income ¥88.8B (difference ¥0.4B from retirement benefit adjustments), and unrealized gains/losses on securities were ¥0.0B, so other comprehensive income movements were minimal. The low OCF/Net Income (0.56x) stems from rising working capital; inventory buildup and AR increases have created a gap between profit and cash. Inventory ¥955.0B (37% of total assets) warrants assessment of appropriateness and normalization of inventory turnover is a precondition for improving earnings quality.
Full-year guidance: Revenue ¥7460B (YoY +14.4%), Operating Income ¥276B (YoY +40.8%), Ordinary Income ¥255B (YoY +37.9%), Net Income ¥171B, EPS ¥218.35, DPS ¥50. As of Q2, progress rates are Revenue 52.4%, Operating Income 51.1%, Ordinary Income 51.8%, Net Income 51.9%, slightly above the standard 50% midpoint. Guidance was revised during the period and may have been raised from initial plans. H2 is planned at Revenue ¥3547.9B (▲9.3% vs Q2), Operating Income ¥135.1B (▲4.1% vs Q2), reflecting conservative assumptions for seasonality and inventory adjustments. Achieving full-year guidance requires a bottoming of gross margin and normalization of inventory turnover in H2, while maintaining SG&A efficiency remains important.
No interim dividend was paid; full-year DPS is forecast at ¥50. With issued shares of 80,905 thousand minus treasury stock 2,513 thousand, the year-end shares outstanding are 78,392 thousand, implying an annual dividend payout of approximately ¥3.92B. Payout Ratio versus full-year Net Income forecast ¥171B is approximately 23%, a conservative level. During Q2 the company repurchased shares totaling ¥44.0B; combined with dividends (estimated ¥3.92B) the Total Return Ratio is expected to be about 49%. Current FCF is negative at ▲¥10.6B, so dividends and buybacks are being funded by borrowings. Given high leverage (D/E 2.02x, Debt/EBITDA 4.43x), it would be prudent to restrain further total returns until operating CF improves and deleveraging progresses.
Inventory lengthening risk: Inventory ¥955.0B and inventory days 106 have extended from the prior year. Fluctuations in used-car prices or missed sales plans could trigger valuation losses or markdowns. Inventory represents 37% of total assets and has significant impact on asset health.
Continued gross margin decline risk: Gross margin 16.1% down 1.0pt from 17.2%, likely due to intensified competition in the used-car market and worsening procurement terms. If gross margin further deteriorates in H2, SG&A efficiency alone may not sustain operating margin.
High leverage financial risk: D/E 2.02x and Debt/EBITDA 4.43x indicate increased dependence on interest-bearing debt; in a rising-rate environment higher interest payments could compress profits. Weak cash generation (OCF/Net Income 0.56x) may delay deleveraging and reduce financial flexibility.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 3.6% | – | – |
| Net Margin | 2.3% | – | – |
Relative assessment within the retail segment is difficult due to limited industry data, but an operating margin of 3.6% is estimated to be a standard level for used-car retail.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 26.6% | – | – |
Revenue growth of 26.6% is high for retail overall and reflects an aggressive store-opening and M&A strategy.
※ Source: Company compilation
Operating leverage realized through SG&A efficiency: SG&A ratio improved to 12.5% from 14.9% (-2.3pt), indicating cost efficiency from scale expansion. Operating margin rose to 3.6% from 2.3% (+1.3pt), marking the third consecutive period of strengthened operating leverage. If gross margin bottoms out in H2, further expansion of operating margin is possible.
Focus on inventory turnover and cash generation improvement: Extended inventory days of 106 and low OCF/Net Income of 0.56x point to working capital management improvement opportunities. If inventory compression and AR collection progress in H2, FCF could turn positive and Debt/EBITDA decline could enable deleveraging.
FY guidance progress is healthy but H2 gross margin trajectory is key: Progress to date (Revenue 52%, Operating Income 51%) is standard, but whether the gross margin decline to 16.1% persists in H2 will determine margin sustainability. Stability in used-car market conditions and procurement terms is a prerequisite.
This report was auto-generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on public disclosure. Investment decisions are your own responsibility; consult professionals as necessary before acting.