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

Financial Highlights

• Net Sales: ¥748M
• Operating Income: ¥3M
• Net Income: ¥14M
• EPS: ¥0.42

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Share Information

Dividend 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

YS Food Co., Ltd. (TSE: 33580) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥748.0m, flat year on year, indicating a pause in top-line momentum. Gross profit was ¥369.8m, implying a strong gross margin of 49.4%, but operating income was only ¥3.0m, translating to an operating margin of roughly 0.4%, highlighting a heavy SG&A burden. Ordinary income of ¥20.0m benefited from non-operating items, lifting the ordinary margin to about 2.7%, while net income was ¥14.0m for a net margin of 1.87%. DuPont metrics point to modest efficiency and low returns: asset turnover of 0.317x and financial leverage of 1.28x yielded a low ROE of 0.76%. Despite solid gross margins, the very slim operating margin and low ROE suggest profitability is fragile and highly sensitive to cost drift or sales volatility. Liquidity appears strong with a current ratio of 259.6% and a quick ratio of 231.0%, supported by working capital of approximately ¥429.0m. The balance sheet shows low leverage with total liabilities of ¥510.2m and total equity of ¥1,847.0m, equating to a debt-to-equity ratio of ~0.28x. Operating cash flow of ¥10.0m was below net income (OCF/NI of 0.72x), implying weaker cash conversion likely due to working capital outflows; this bears monitoring given the thin operating margin. Financing cash inflow of ¥199.4m suggests external funding (debt or equity) supported liquidity, though the exact instrument is undisclosed in the provided data. Reported interest expense is zero and interest coverage is shown as 0.0x, which should be treated as undisclosed rather than truly zero; hence solvency assessment should not rely on this single data point. The effective tax rate field shows 0.0%, but based on income tax of ¥6.6m and ordinary income of ¥20.0m, an implied tax burden near the low-30% range is plausible (indicative only). Dividend information indicates DPS and payout ratio as zeros in the dataset, which should be interpreted as not disclosed; dividend capacity thus cannot be confirmed from the current data. EBITDA was ¥27.1m, for a margin of about 3.6%, underscoring thin operating cash earnings relative to sales. Free cash flow is shown as zero due to undisclosed investing cash flows; therefore, FCF sufficiency versus any potential dividend or debt service cannot be evaluated. Overall, the company demonstrates robust gross margins and conservative leverage, but faces challenges in translating revenue into operating profit and cash, reflected in low ROE and subpar cash conversion. Data gaps (notably cash balance, investing cash flows, and dividends) constrain the depth of conclusions, so ongoing monitoring of operating margin recovery and cash generation is essential.

Profitability Analysis

ROE of 0.76% decomposes into a 1.87% net margin, 0.317x asset turnover, and 1.28x financial leverage, indicating that low profitability (margin) and modest efficiency (turnover) are the primary drags rather than leverage. Gross margin is high at 49.4%, but the operating margin of ~0.4% reveals significant SG&A absorption and limited operating leverage at current volumes. Ordinary margin of ~2.7% suggests non-operating gains/credits or financial income helped offset weak operating results. EBITDA margin of 3.6% is low for a restaurant/food-service model with franchising elements, implying limited scale benefits and/or elevated fixed costs. With revenue flat YoY and operating income essentially breakeven, incremental operating leverage appears weak; small revenue shortfalls could tip operating income negative. The gap between gross and operating margins highlights margin quality stress focused in overhead and store-level operating expenses, not procurement alone.

Growth Assessment

Revenue was flat at ¥748.0m, suggesting neutral same-store sales or offsetting mix of openings/closures and pricing adjustments; sustainability of revenue is unclear without store count or SSS data. Profit quality is modest: net margin of 1.87% is mostly supported by non-operating items as operating income is only ¥3.0m. EBITDA of ¥27.1m provides limited buffer for reinvestment, given low operating cash conversion (OCF/NI 0.72x). Outlook hinges on SG&A discipline and throughput per store; with high gross margin, even moderate sales growth could improve operating leverage, but execution risk is high. Absent disclosed capex or pipeline initiatives, near-term growth appears dependent on operational efficiencies rather than footprint expansion. Non-operating contributions to ordinary income should not be assumed recurring without disclosure; normalization could pressure growth in bottom-line metrics even if sales are stable.

Financial Health

Liquidity is strong: current assets of ¥697.8m vs. current liabilities of ¥268.9m yield a current ratio of ~2.60x and quick ratio of ~2.31x, indicating ample near-term coverage. Working capital stands at approximately ¥429.0m, providing a cushion against seasonal or input cost volatility. Capital structure is conservative, with total liabilities of ¥510.2m against equity of ¥1,847.0m (debt-to-equity ~0.28x). Financial leverage used in DuPont (assets/equity) is 1.28x, further supporting low balance-sheet risk. Interest expense is shown as zero; given potential underreporting, interest coverage cannot be reliably assessed from this dataset. The reported equity ratio of 0.0% is clearly an undisclosed field; based on the balance sheet, the implied equity ratio is strong (equity/asset ≈ 78.4%). Financing cash inflow of ¥199.4m bolstered liquidity, but the nature (debt vs. equity) is not disclosed; if debt, future interest/repayment obligations must be monitored.

Cash Flow Quality

Operating cash flow of ¥10.0m vs. net income of ¥14.0m yields an OCF/NI ratio of 0.72x, indicating weaker earnings quality this period, likely due to working capital investment or non-cash gains in earnings. Depreciation and amortization of ¥24.1m supports underlying non-cash add-backs, yet OCF remained modest, implying material working capital outflows. Free cash flow is presented as zero, which should be treated as not disclosed given the absence of investing cash flow data; capex levels are therefore unknown. With EBITDA at ¥27.1m, cash earnings capacity remains thin relative to revenue and may be susceptible to timing effects in payables and inventories (inventories at ¥76.8m). The reliance on financing inflows (¥199.4m) to augment liquidity this period suggests internal cash generation was not the primary source of funding. Overall, earnings quality is moderate-to-weak in the quarter, and improved working capital efficiency is needed to align OCF more closely with EBIT/NI.

Dividend Sustainability

Dividend data (DPS 0.00, payout ratio 0.0%) should be interpreted as not disclosed rather than zero; thus, no definitive conclusion on dividends can be drawn from the provided dataset. With EPS of ¥0.42 and modest OCF of ¥10.0m, capacity for distributions appears limited unless profitability and cash conversion improve. FCF coverage is shown as 0.00x but FCF is undisclosed; hence payout coverage cannot be assessed. Policy outlook is unclear absent management guidance; given low ROE (0.76%) and thin operating margin (~0.4%), internal reinvestment into operational recovery would typically take precedence over distributions, but this cannot be confirmed. Monitoring future disclosures on DPS, payout policy, and capex/FCF will be essential to gauge sustainability.

Risk Assessment

Business Risks:

• Thin operating margin (~0.4%) leaves little buffer against sales or cost shocks
• Input cost inflation (pork, wheat, cooking oil) and rising labor costs compress margins
• Execution risk in store-level operations and SG&A control given high gross-to-operating margin gap
• Competition in ramen/quick-service dining intensifying both on price and quality
• Potential geographic concentration risk and exposure to local demand cycles
• Dependence on non-operating items to support ordinary income
• Supply chain volatility and procurement risk for imported ingredients
• Brand and franchise performance risk if franchising is material

Financial Risks:

• Weaker cash conversion (OCF/NI 0.72x) indicating working capital drag
• Reliance on financing inflows (¥199.4m) to support liquidity in the period
• Low ROE (0.76%) may limit internal capital generation
• Undisclosed interest expense and cash balance hinder precise solvency assessment
• Lack of disclosed investing cash flows obscures capex and FCF sustainability

Key Concerns:

• Sustainability of ordinary income if non-operating gains normalize
• Ability to lift operating margin above 1% through SG&A efficiencies
• Working capital management to improve OCF alignment with earnings
• Clarity on capital allocation given financing inflows and undisclosed dividends

Investment Implications

Key Takeaways:

• Revenue flat YoY at ¥748.0m with high gross margin (49.4%) but near-breakeven operating profit (¥3.0m)
• ROE remains low at 0.76% due to thin margins and modest asset turnover
• Liquidity is strong (current ratio ~2.60x; working capital ~¥429m) and leverage is conservative (~0.28x D/E)
• Cash conversion is subpar (OCF/NI 0.72x), suggesting working capital pressure
• Financing inflow of ¥199.4m supplemented liquidity; instrument not disclosed
• Data gaps on cash, investing CF, dividends, and interest expense limit precision of cash and payout analysis

Metrics to Watch:

• Operating margin and SG&A-to-sales ratio trajectory
• Same-store sales, average ticket, and traffic (if disclosed)
• OCF/NI ratio and changes in working capital days (inventory, payables, receivables)
• Capex and disclosed investing cash flows to derive true FCF
• Ordinary income composition (recurring vs. non-operating items)
• Leverage metrics including interest-bearing debt and interest expense once disclosed

Relative Positioning: Versus small-cap Japanese food service/restaurant peers, YS Food exhibits comparatively strong gross margins but materially weaker operating margins and ROE, offset by a relatively conservative balance sheet and strong liquidity; the company appears more operationally constrained than financially constrained.

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