SHIP HEALTHCARE HOLDINGS,INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥333.38B
• Operating Income: ¥8.18B
• Net Income: ¥5.39B
• EPS: ¥58.00

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

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

FY2026 Q2 was a solid but margin-pressured quarter: revenue growth was healthy while operating profit grew more slowly and net profit dipped slightly YoY. Revenue rose 7.5% YoY to 3,333.85, supported by broad demand in the group’s healthcare-related solutions. Operating income increased 5.6% YoY to 81.79, and ordinary income rose 3.7% YoY to 87.22, indicating steady core earnings with a mild lift from non-operating items. Net income declined 1.9% YoY to 54.32, weighed by a higher effective tax rate of 37.4%. Gross profit was 293.18, implying a gross margin of 8.8%, consistent with a low-margin, high-volume business model. The operating margin stood at 2.45%, roughly 5 bps lower YoY, as operating income grew slightly slower than revenue. Ordinary margin compressed by about 9 bps to 2.62%, and net margin contracted by approximately 16 bps to 1.63%. Earnings quality was strong: operating cash flow of 116.21 exceeded net income by 2.14x, with working capital discipline a support. EBITDA was 108.48 (3.3% margin), and interest coverage remained very robust at 35.7x, reflecting low financial stress. Liquidity is adequate (current ratio 138.8%, quick ratio 123.4%), though just below the 150% ‘comfort’ benchmark. The reported D/E ratio of 1.46x sits at the conservative threshold, but coverage ratios and cash on hand (728.11) mitigate risk. ROE calculated by DuPont was 3.7%, indicating modest shareholder returns amid thin margins and moderate leverage. ROIC at 4.9% is below the 5% warning line, signaling capital efficiency remains a key challenge. Non-operating income contributed 9.51 (17.5% of operating income), mostly from interest and dividends, and is helpful but not transformative. Cash returns to shareholders are evident via share repurchases of 47.31, although the calculated payout ratio of 100.7% suggests limited room for aggressive increases without stronger FCF. Looking forward, sustaining margin improvement and lifting ROIC above the 7–8% industry target range will likely require mix upgrades, cost control, and disciplined capital allocation.

Profitability Analysis

ROE (3.7%) = Net Profit Margin (1.6%) × Asset Turnover (0.926) × Financial Leverage (2.46x). The biggest constraint on ROE is the low net margin inherent in the group’s distribution- and project-heavy healthcare model, despite reasonable asset turnover for a solutions integrator. Versus last year, margins compressed slightly: operating margin dipped ~5 bps, ordinary margin ~9 bps, and net margin ~16 bps, consistent with operating income growing slower than revenue and a higher effective tax rate. Business drivers likely include price/mix headwinds in distribution, timing of higher-cost project deliveries, and limited SG&A operating leverage as SG&A reached 211.39. Non-operating income (9.51) supported ordinary income but was not sufficient to offset tax drag at the bottom line. Sustainability: given the structural low-margin nature of the business, meaningful margin expansion will likely be gradual and depend on mix shift toward higher-value services and disciplined project execution. Watch for any instances where SG&A growth outpaces revenue; in this period, revenue growth (+7.5%) modestly outpaced operating income growth (+5.6%), indicating limited operating leverage.

Growth Assessment

Top-line growth of 7.5% YoY to 3,333.85 was solid, indicating stable demand in hospital/clinic solutions and medical supply chains. However, the slower growth in operating income (+5.6%) and decline in net income (-1.9%) point to mild margin pressure and a higher tax burden. Gross margin at 8.8% remains stable for the business model, but operating margin at 2.45% suggests limited capacity absorption benefits this quarter. Non-operating contributions (interest/dividends totaling 2.99 of the 9.51 non-operating income) provided a modest cushion. EBITDA expanded to 108.48, with the EBITDA margin at 3.3%, consistent but not expanding. Outlook hinges on order backlog conversion in the project business, execution on cost controls, and potential price/mix improvements in consumables. Given strong OCF and cash on hand, the company has room to invest selectively; lifting ROIC above 7–8% will require focus on higher-return segments and disciplined capital deployment. Absent a mix upgrade, we expect revenue growth to remain steady but profitability to improve only incrementally.

Financial Health

Liquidity is sound: current ratio 138.8% and quick ratio 123.4% (both above 1.0, though current ratio is below the 1.5x comfort benchmark). Working capital of 664.43 and cash/deposits of 728.11 provide flexibility. Maturity mismatch risk appears low: current assets (2,378.46) comfortably exceed current liabilities (1,714.03), with receivables (1,132.14) and cash supporting payables (1,091.19). The reported D/E ratio is 1.46x, within tolerance and well below the explicit 2.0 warning level; interest coverage is very strong at 35.7x. Long-term loans (294.11) dominate over short-term loans (8.66), limiting near-term refinancing pressure. No off-balance sheet obligations are reported in the provided data. Overall solvency risk is low, aided by stable cash generation.

Cash Flow Quality

OCF/Net Income is 2.14x, indicating high-quality earnings with strong cash conversion. Operating CF of 116.21 comfortably covers reported capex of 19.51, implying a proxy FCF (OCF – capex) of approximately 96.7 barring large M&A or other investing outflows (full investing CF not disclosed). Financing CF of -148.05 reflects active shareholder returns (share repurchases of 47.31) and potentially debt repayments; details of dividends and other financing flows are unreported. Working capital appears well-managed given the large receivables/payables base; no signs of aggressive WC pulls are evident from the limited data. Overall, cash flow quality is strong and supports ongoing investment and measured shareholder returns.

Dividend Sustainability

The calculated payout ratio of 100.7% suggests near-full earnings distribution on a period basis, which is elevated versus a sub-60% sustainability benchmark. However, with strong OCF (116.21) and modest capex (19.51), proxy FCF appears sufficient to fund ordinary dividends, assuming no large investing commitments; exact dividends paid are unreported. Share repurchases of 47.31 indicate an active return policy, which, combined with a high payout ratio, warrants monitoring to avoid over-distribution relative to FCF. Given the lack of disclosed DPS and dividends paid, we assume a continued policy of stable-to-progressive returns balanced against capex and ROIC-improvement investments. Sustainability will hinge on maintaining OCF strength and avoiding step-ups in returns absent earnings and ROIC growth.

Risk Assessment

Business Risks:

• Structural low margins (operating margin 2.45%, gross margin 8.8%) limit shock absorption.
• Project execution and timing risk in hospital/medical facility solutions could affect quarterly profitability.
• Potential price/mix pressure in consumables and equipment distribution.
• Elevated effective tax rate (37.4%) dampens net profitability.

Financial Risks:

• ROIC at 4.9% is below the 5% warning threshold, indicating capital efficiency pressure.
• Reported D/E 1.46x sits at the conservative boundary; combined with high shareholder returns, leverage could drift up if cash generation weakens.
• Large working capital balances (AR 1,132.14; AP 1,091.19) expose earnings to WC swings.

Key Concerns:

• Slight margin compression across operating, ordinary, and net levels despite revenue growth.
• Dependence on non-operating income (9.51; 17.5% of operating income) as a profit cushion.
• Limited disclosure on investing cash flows and dividend outflows complicates FCF assessment.

Investment Implications

Key Takeaways:

• Top-line growth healthy (+7.5% YoY), but margins compressed modestly; net income down 1.9% YoY.
• Earnings quality strong: OCF/NI at 2.14x; proxy FCF likely positive after capex.
• Capital efficiency below target: ROE 3.7%, ROIC 4.9% signals need for mix upgrade and disciplined capex.
• Balance sheet resilient with ample liquidity and strong interest coverage.
• Shareholder returns (buybacks 47.31) active; payout ratio appears high, requiring close FCF alignment.

Metrics to Watch:

• Operating margin trajectory and SG&A efficiency relative to revenue growth.
• ROIC progression toward 7–8% target range.
• Working capital turnover (AR/AP days) and OCF sustainability.
• Effective tax rate normalization potential.
• Scale and timing of capex/M&A versus cash generation.
• Non-operating income contribution and volatility.

Relative Positioning: Within Japan’s healthcare solutions and medical distribution space, the company exhibits steady top-line growth and strong cash conversion but trails best-in-class peers on ROIC and margin profile; balance sheet strength provides optionality to invest for mix improvement while maintaining measured shareholder returns.

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