Y.S.FOOD CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥748M
• Operating Income: ¥3M
• Net Income: ¥14M
• Earnings per Unit (EPU): ¥0.42

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Unit Information

Distribution 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

Verdict: A marginally profitable quarter with thin operating margins, heavy reliance on non-operating income, and weak capital efficiency, but ample liquidity and low leverage. Revenue was 7.48, gross profit 3.70 (gross margin 49.4%), and SG&A 3.66 (SG&A ratio 48.9%), yielding operating income of just 0.03 (operating margin ~0.4%). Ordinary income reached 0.20 thanks to 0.16 in non-operating income, which materially exceeded operating profit (non-operating income/operating income ~5.3x). Net income was 0.14 (net margin ~1.9%), with an effective tax rate of 32.0%. Operating cash flow was 0.10, trailing net income (OCF/NI = 0.72x), flagging earnings quality concerns. Liquidity is strong: current ratio 259.6% and quick ratio 231.0%, supported by cash and deposits of 4.58 versus current liabilities of 2.69. Balance sheet leverage is conservative with total liabilities of 5.10, equity of 18.47 (equity ratio ~78.4%), and D/E of 0.28x. Capital expenditure was 0.29, implying negative implied FCF of about -0.19 (OCF 0.10 minus capex 0.29). ROE is 0.8% (DuPont: net margin 1.9% × asset turnover 0.317 × leverage 1.28x), and ROIC is only 0.1%, far below the 5% warning threshold. Retained earnings remain negative at -6.96, highlighting accumulated losses and limiting distributable capacity. Financing cash inflow of 1.99 suggests dependence on external funding (likely equity) to bolster liquidity amidst weak internal cash generation. We cannot quantify YoY growth or margin basis-point changes due to unreported YoY comparatives, a key limitation for momentum assessment. Near term, sustainability hinges on improving store-level economics (expanding the gap between gross margin and SG&A) and converting accounting profit to cash. Forward-looking, any progress in SG&A efficiency or traffic recovery would lift operating leverage, while persistent reliance on non-operating gains presents risk to earnings stability. The company’s ample liquidity and low leverage provide a cushion to execute improvements, but sub-par ROIC indicates the need for sharper capital discipline. Overall, stabilizing but fragile fundamentals; watch cash conversion, cost control, and the composition of profit.

Profitability Analysis

ROE decomposition: ROE 0.8% = Net Profit Margin (1.9%) × Asset Turnover (0.317) × Financial Leverage (1.28x). The binding constraints on ROE are the very low operating margin and modest asset turnover; leverage is conservative and contributes little to ROE uplift. Within the P&L, the gross margin (49.4%) barely covers SG&A (48.9% of sales), leaving operating margin at ~0.4%—the core driver of weak net margin. Ordinary income (2.7% margin) was propped up by non-operating income (0.16), indicating earnings depend on items outside core operations. Business explanation: store-level economics appear tight (food inflation, labor and rent pressure) with limited pricing power and scale, compressing operating income. Sustainability: non-operating contributions are inherently volatile; without structural SG&A efficiency or mix/pricing improvements, the current profit mix is not durable. Concerning trends: SG&A is effectively consuming the entire gross profit, leaving minimal buffer for shocks; non-operating income exceeding operating income suggests low-quality earnings mix; ROIC at 0.1% signals value creation is currently inadequate.

Growth Assessment

Revenue sustainability is uncertain due to lack of disclosed YoY data; current scale (7.48) supports only marginal operating profit. Profit quality is mixed: accounting profit exists, but operating margin is thin and ordinary income relies on non-operating items. Outlook hinges on improving the spread between gross margin and SG&A (menu pricing, procurement efficiencies, labor scheduling, and rationalization of underperforming outlets). Any demand recovery or ticket-size growth would drive operating leverage, but downside risks from input cost volatility (food commodities) and wage pressures remain. Near-term growth catalysts are unreported; execution on cost control and selective capex discipline is more critical than expansion.

Financial Health

Liquidity is strong: current ratio 259.6% and quick ratio 231.0%; no warning (both well > 1.0). Maturity mismatch risk appears low with cash and deposits (4.58) comfortably exceeding current liabilities (2.69). Solvency is conservative: total liabilities 5.10 vs equity 18.47 (equity ratio ~78.4% by calculation) and D/E 0.28x. Long-term loans are modest at 0.24; interest-bearing debt details are otherwise unreported. Financing CF of 1.99 indicates recent external funding (likely equity) bolstering cash. Off-balance sheet obligations were not disclosed in the provided data; lease liabilities (common in food service) may exist but are unreported here.

Cash Flow Quality

OCF/Net Income is 0.72x (<0.8), indicating weaker cash conversion and a potential earnings quality issue. Implied free cash flow is approximately -0.19 (OCF 0.10 minus capex 0.29), suggesting internal cash generation did not cover investment needs this period. Working capital details are limited, but with accounts receivable 1.13 and inventories 0.77, any adverse movement could further pressure OCF; no explicit signs of manipulation are visible from the limited breakdown. Reliance on financing inflows (1.99) to maintain liquidity underscores the need to improve operating cash generation. Sustainability will depend on lifting operating margins and stabilizing working capital.

Dividend Sustainability

Dividend data are unreported, and retained earnings are negative (-6.96), which constrains capacity to pay dividends under typical JGAAP distribution rules. With implied negative FCF (~-0.19) and low ROE (0.8%), coverage for any distribution would be weak without drawing on cash balances or external funding. Policy outlook is likely conservative until sustained positive FCF and a return to positive retained earnings are achieved; no payout ratio can be calculated from the provided data.

Risk Assessment

Business Risks:

• Thin operating margin (~0.4%) with SG&A nearly equal to gross profit, leaving little shock absorption
• Input cost volatility (food commodities) that can pressure gross margin
• Labor and rent cost inflation impacting SG&A for a small-scale operator
• Execution risk in store operations and potential need for outlet rationalization
• Potential impairment risk on goodwill (1.10) and intangibles (1.16) if performance weakens

Financial Risks:

• Earnings quality risk: OCF/NI = 0.72x and implied negative FCF (~-0.19)
• Dependence on non-operating income (0.16) to achieve ordinary income
• Accumulated deficit (retained earnings -6.96) limiting financial flexibility for distributions
• Small absolute earnings base increasing volatility of reported margins

Key Concerns:

• ROIC at 0.1% well below the 5% warning threshold
• Non-operating income exceeding operating income, indicating low durability of earnings
• Potential exposure to further cost inflation without clear pricing power
• Limited disclosure granularity reduces visibility on segment/store performance and costs

Investment Implications

Key Takeaways:

• Accounting profitability achieved, but core operations are barely breakeven at the operating level
• Cash conversion is weak (OCF/NI 0.72x) and implied FCF is negative
• Balance sheet is a strength: high equity ratio (~78%) and ample liquidity
• Profit composition is low quality with heavy reliance on non-operating income
• Capital efficiency is poor (ROE 0.8%, ROIC 0.1%), necessitating operational turnaround and capital discipline

Metrics to Watch:

• Operating margin and SG&A-to-sales ratio (target: widen gap vs gross margin by 200–300 bp+)
• OCF/NI ratio (>1.0 desirable) and working capital movements
• Same-store sales and average ticket (not disclosed here) as leading operating leverage indicators
• Capex discipline and realized FCF
• Any changes in non-operating income composition and recurrence

Relative Positioning: Versus domestic small-cap food service peers, liquidity and leverage are comparatively strong, but profitability and cash conversion are weaker, with earnings more dependent on non-operating items and capital efficiency notably below sector norms.

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