Hoosiers Holdings Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥34.60B
• Operating Income: ¥329M
• Net Income: ¥-789M
• Earnings per Unit (EPU): ¥-23.57

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Unit Information

Distribution 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

FY2026 Q2 was weak on earnings quality despite strong top-line growth. Revenue rose 35.3% YoY to 346.0, but operating income fell 41.1% YoY to 3.29, and the company booked a net loss of -8.55. Gross profit reached 72.63 with a gross margin of 21.0%, but SG&A of 69.33 absorbed nearly all gross profit, leaving operating margin at 0.95%. Based on last year’s implied operating income (~5.59) and revenue (~255.6), operating margin likely compressed by roughly 124 bps YoY (from ~2.19% to 0.95%). Ordinary income deteriorated to -6.37 as non-operating expenses (15.82), chiefly interest (10.21), exceeded non-operating income (6.15). Interest coverage was a weak 0.32x, underscoring a heavy financing burden. Net margin was -2.5%, driving ROE to -1.6% via negative profitability despite high leverage (financial leverage 4.05x) and low asset turnover (0.164). Operating cash flow was deeply negative at -150.50, diverging from the net loss magnitude; although OCF/NI appears high at 17.6x, this is not a positive indicator because both figures are negative, and the operational cash burn is substantial. Financing inflows of 260.16 suggest dependence on external funding to support working capital and project pipeline. Liquidity at quarter-end appears adequate (current ratio 243.5%; cash 396.90 against short-term loans 136.91), but balance-sheet leverage is elevated (D/E 3.05x; equity ratio ~24.7%). ROIC is very low at 0.3%, far below a typical cost of capital, indicating poor capital efficiency in the period. The effective tax rate is negative (-12.9%) because tax expense was recorded despite a pre-tax loss, likely reflecting non-deductible items or timing differences. Given real estate development seasonality and project-closing volatility, earnings can recover with delivery timing, but the current mix—margin compression, negative ordinary income, and heavy reliance on financing—raises caution. Key forward-looking sensitivities include gross margin per project, SG&A discipline, interest costs, and the cadence of property handovers. The balance sheet can support near-term operations, but sustained negative OCF would increase refinancing and interest-rate risks. Overall, the quarter signals execution and financing pressure that needs clear improvement in 2H through stronger closings and better cost control.

Profitability Analysis

ROE decomposition: ROE (-1.6%) = Net Profit Margin (-2.5%) × Asset Turnover (0.164) × Financial Leverage (4.05x). The most material change is the net profit margin, given the swing to a net loss despite strong revenue growth, while asset turnover remains structurally low for a developer and leverage is high but relatively stable. Business drivers: gross margin was 21.0%, but SG&A consumed 20.0% of sales, compressing operating margin to 0.95%; on top, non-operating expenses—especially interest of 10.21—outpaced non-operating income (6.15), pulling ordinary income negative. This reflects cost inflation (land and construction), sales mix/timing (fewer high-margin closings), and higher funding costs. Sustainability: some margin pressure may normalize with 2H deliveries, but interest burden will persist unless debt is reduced or rates ease; thus, a portion is structural. Concerning trends include: SG&A growth likely outpacing gross profit growth (near one-for-one absorption), operating deleverage despite 35% higher revenue, and a rising financing drag evidenced by the 0.32x interest coverage.

Growth Assessment

Revenue growth of +35.3% indicates strong sales activity or higher handover volume/ASP, but profit did not follow as operating income fell 41.1% YoY. Operating margin compressed by an estimated ~124 bps YoY to 0.95%, implying poor operating leverage. Non-operating line deteriorated with interest costs exceeding non-operating income, flipping ordinary income to -6.37. EBITDA was 9.83 (margin 2.8%), modest relative to revenue scale. Growth sustainability hinges on 2H closings and gross margin recovery; absent improvement in mix and cost control, higher volume alone will not translate into earnings growth. Outlook flags: interest expense headwind, potential construction cost stickiness, and need for SG&A restraint versus sales. With ROIC at 0.3%, current deployment of capital is not yielding adequate returns; improving turnover (faster project cycles) and raising project-level margins are critical for sustaining growth with profitability.

Financial Health

Liquidity: current assets 1,880.01 vs current liabilities 772.21 yields a current ratio of 243.5% (healthy). Cash and deposits are 396.90 versus short-term loans 136.91, providing a cash cushion. Solvency: total liabilities 1,590.89, equity 521.24 implies D/E of 3.05x (warning), equity ratio ~24.7%. Interest-bearing debt detail: short-term loans 136.91 and long-term loans 740.49 indicate heavy reliance on debt funding. No explicit current ratio warning (it is >1.0), but D/E > 2.0 triggers a leverage warning. Maturity mismatch: while near-term liquidity seems comfortable, large noncurrent debt (818.68 in noncurrent liabilities) and weak interest coverage (0.32x) elevate refinancing and debt-service risk if cash flows don’t improve. Off-balance sheet: not disclosed; no data on guarantees or JVs that could add contingent liabilities.

Cash Flow Quality

OCF is -150.50 versus net income -8.55; the OCF/NI ratio of 17.6x is not indicative of quality because both are negative. The magnitude of operating cash burn signals working capital outflows, likely from inventory/land acquisition and progress costs typical in development cycles. Financing CF of +260.16 funded the operational deficit, underscoring dependence on external capital. With investing CF and capex unreported, FCF is not calculable; however, negative OCF implies limited self-funding capacity for dividends or growth without continued financing. No direct signs of manipulation are evident from the limited data, but the divergence between revenue growth and negative OCF suggests significant cash tied in inventories/ongoing projects—a normal but risky feature in this business when leverage is high.

Dividend Sustainability

Dividend data are unreported; calculated payout ratio of -302.9% is not meaningful due to a net loss. Given negative OCF and weak earnings, internally funded dividends would be challenging in the near term without drawing on balance sheet or new financing. Coverage metrics like FCF payout and DPS are unavailable; thus, visibility is low. Policy-wise, sustaining dividends would likely require 2H profitability and positive OCF from project completions; otherwise, prudent preservation of cash would be expected given leverage and interest burden.

Risk Assessment

Business Risks:

• Housing/condominium market cyclicality affecting sales velocity and pricing
• Construction cost inflation and subcontractor capacity constraints compressing gross margins
• Project delivery timing risk creating earnings lumpiness and cash flow volatility
• Land acquisition and inventory valuation risk amid changing demand
• Cancellation risk and slower contract conversions in a softer demand environment

Financial Risks:

• High leverage (D/E 3.05x) with weak interest coverage (0.32x)
• Refinancing risk if credit conditions tighten, given reliance on financing CF (+260.16)
• Negative operating cash flow (-150.50) increasing liquidity pressure if sustained
• ROIC at 0.3% well below cost of capital, risking value dilution
• Potential sensitivity to rising interest rates impacting both financing costs and affordability

Key Concerns:

• Ordinary income negative (-6.37) due to interest burden outpacing non-operating income
• Operating margin compression to 0.95% despite 35% revenue growth
• Dependence on external funding to bridge cash burn
• Tax expense recorded despite loss (effective tax rate -12.9%), implying less P&L relief than expected
• Low asset turnover (0.164) tying up capital for extended periods

Investment Implications

Key Takeaways:

• Strong revenue growth did not translate to profit; margins compressed materially
• Interest burden is a key swing factor, pushing ordinary income into loss
• Liquidity appears adequate short term, but leverage is high and cash generation weak
• ROIC at 0.3% indicates poor capital efficiency in the period
• 2H delivery cadence and margin recovery are critical to repair earnings and cash flows

Metrics to Watch:

• Quarterly operating margin and gross margin per project
• SG&A as a percentage of sales and cost control initiatives
• Interest coverage and average funding cost
• Operating cash flow and inventory/land bank movements
• Debt maturity profile and refinancing activity
• Contracted sales/backlog and cancellation rates

Relative Positioning: Within Japanese residential developers, the company shows above-peer revenue growth this quarter but lags on profitability and cash generation, with higher-than-desired leverage and materially weaker interest coverage; execution on 2H closings and deleveraging will be pivotal to narrow the gap.

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
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