&Do Holdings Co.,Ltd. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥11.95B
• Operating Income: ¥207M
• Net Income: ¥143M
• EPS: ¥0.92

Income Statement

Balance Sheet

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

And Do Holdings (3457) reported FY2026 Q1 consolidated results under JGAAP showing a notable slowdown in topline and significant compression in bottom-line profitability. Revenue declined 17.9% year over year to 11,946 million yen, indicating a softer demand environment and/or lower transaction volumes in its core real estate-related businesses. Gross profit is disclosed at 3,570 million yen, implying a gross margin of 29.9%, which appears resilient relative to the topline decline; however, the disclosed cost of sales (10,975 million yen) is not arithmetically consistent with the gross profit figure, suggesting classification differences or timing effects in cost recognition. Operating income fell 46.0% YoY to 207 million yen, translating to an operating margin of roughly 1.7%, indicating negative operating leverage as SG&A did not flex down in line with revenue. Ordinary income was 186 million yen, pressured by interest expense of 184 million yen, which effectively consumed most operating profit and highlights a heavy financing burden. Net income dropped sharply by 87.2% YoY to 18 million yen, with EPS of 0.92 yen, implying a high effective tax and/or non-recurring charges between ordinary and bottom line. The DuPont profile is weak: net margin of 0.15%, asset turnover of 0.171x, and financial leverage of 3.98x yield an ROE of 0.10%, underscoring minimal value creation in the quarter. The balance sheet shows total assets of 69,911 million yen and total equity of 17,575 million yen, implying an equity ratio of approximately 25.1% despite an uninformative disclosed equity ratio figure. Liquidity appears adequate with current assets of 54,870 million yen and current liabilities of 31,463 million yen, resulting in a current ratio of 174% and working capital of 23,407 million yen. Leverage remains elevated with a debt-to-equity ratio disclosed at 3.05x and financial leverage of 3.98x from DuPont, consistent with asset-heavy real estate business models. Interest coverage is thin at 1.1x (operating income/interest expense), leaving limited cushion against rate increases or earnings volatility. Cash flow statements are undisclosed this quarter, limiting assessment of operating cash conversion and free cash flow quality. Dividend data for the period show no payout (DPS 0.00; payout ratio 0%), which is not necessarily indicative of policy but reflects the quarter’s weak earnings and lack of cash flow disclosure. Overall, the quarter highlights cyclical sensitivity and financing intensity: declining revenue, compressed operating profit, and high interest burden constrained net income. A key watchpoint will be the trajectory of revenue recovery and SG&A discipline to restore operating margins. Another is debt cost and structure, as the interest burden materially constrains ordinary income. Given several zeros reflect undisclosed items, conclusions on cash flow quality and dividend capacity must be treated as provisional until fuller disclosure.

Profitability Analysis

ROE of 0.10% in Q1 is the product of very thin net margin (0.15%), low asset turnover (0.171x), and high financial leverage (3.98x). Gross margin is indicated at 29.9% (gross profit 3,570 million yen on revenue 11,946 million yen), suggesting underlying unit economics remain acceptable despite revenue softness. However, operating margin compressed to roughly 1.7% (operating income 207 million yen), pointing to negative operating leverage as fixed SG&A likely did not scale down in line with the 17.9% revenue decline. The spread between operating and ordinary income was largely absorbed by interest expense of 184 million yen, yielding an interest coverage ratio of about 1.1x—too thin for comfort. Net margin of 0.15% reflects additional pressure below ordinary income, potentially from taxes and non-operating items. The YoY decline in operating income of 46.0% versus revenue down 17.9% underscores high sensitivity of profits to volume/price, typical of real estate and related services with fixed cost components. With asset turnover at 0.171x, capital intensity is high; improvement in inventory/asset turnover (not disclosed this quarter) will be important to lift ROE absent leverage expansion. Overall profitability quality is mixed: decent gross margin but weak operating leverage and high financing costs result in low earnings resilience.

Growth Assessment

Revenue fell 17.9% YoY to 11,946 million yen, indicating a softer operating backdrop in Q1. The gross margin of 29.9% suggests pricing and mix held up better than volumes, but the sharp drop in operating income (-46.0% YoY) signals limited cost flexibility. Ordinary income (186 million yen) and net income (18 million yen, -87.2% YoY) point to deterioration in profit quality, with financing and below-the-line items magnifying the earnings decline. The sustainability of revenue will depend on recovery in transaction activity and pipeline conversion in subsequent quarters; the low asset turnover (0.171x) indicates sizable assets not fully utilized in Q1. Given the high interest expense, profit outlook is sensitive to funding costs and to the pace of revenue normalization. Without cash flow disclosure, it is difficult to judge the durability of earnings; however, the operating deleverage observed suggests that incremental growth would have a meaningful positive impact on margins if volumes recover. Near-term outlook hinges on stabilizing revenues and improving SG&A efficiency; any cost actions to right-size fixed expenses would support operating margin recovery.

Financial Health

Total assets were 69,911 million yen and total equity 17,575 million yen, implying an equity ratio near 25.1% (vs. disclosed 0.0%, which appears non-informative) and financial leverage of 3.98x. Total liabilities were 53,520 million yen, resulting in a debt-to-equity profile consistent with a leveraged, asset-intensive model. Liquidity is acceptable: current assets of 54,870 million yen and current liabilities of 31,463 million yen yield a current ratio of 174% and working capital of 23,407 million yen. Quick ratio is shown at 174% due to undisclosed inventories; actual quick liquidity may be lower if inventories are material. Interest expense of 184 million yen in the quarter and an interest coverage ratio of 1.1x indicate limited headroom against interest rate or earnings shocks. The capital structure is skewed toward debt funding, amplifying sensitivity to cash flow timing. Overall solvency appears adequate given equity base, but reliance on debt and low coverage are key constraints.

Cash Flow Quality

Operating, investing, and financing cash flows are undisclosed for the quarter, so cash conversion cannot be assessed. The reported OCF/Net Income ratio of 0.00 and FCF of 0 should be treated as placeholders for undisclosed items rather than actual zeros. Earnings quality is therefore uncertain; however, the combination of thin operating margin (1.7%) and high interest burden suggests that strong operating cash generation will be necessary to sustain obligations. Working capital dynamics cannot be evaluated without inventories and receivables/payables detail; the large working capital balance (23,407 million yen) may tie up cash if turnover slows. In the absence of cash flow data, we cannot confirm free cash flow coverage of interest or potential dividends.

Dividend Sustainability

No dividend is indicated for the period (DPS 0.00; payout ratio 0%), which may reflect quarterly practice or prudence given weak earnings. With cash flows undisclosed, free cash flow coverage cannot be assessed; the FCF coverage of 0.00x should be viewed as not reported. Given net income of 18 million yen and interest expense of 184 million yen, near-term distributable capacity appears constrained by earnings and financing costs. Medium-term sustainability will depend on recovery of operating margins, stabilization of revenue, and visibility into operating cash flow. Policy outlook cannot be inferred from the quarter alone; monitoring full-year guidance and historical payout tendencies is necessary.

Risk Assessment

Business Risks:

• Revenue cyclicality in real estate-related activities leading to operating deleverage
• High fixed cost base limiting flexibility when volumes decline
• Execution risk in cost control and SG&A efficiency
• Dependence on asset turnover; slower sales cycles can depress profitability
• Potential margin pressure from competitive dynamics and mix shifts

Financial Risks:

• High leverage (financial leverage 3.98x) and debt-to-equity around 3.05x
• Thin interest coverage (~1.1x) exposing earnings to rate and refinancing risks
• Cash flow visibility low due to undisclosed OCF/FCF in the quarter
• Potentially high effective tax/one-offs depressing net income
• Refinancing and liquidity management risks in a rising rate environment

Key Concerns:

• Sustained decline in revenue (-17.9% YoY) and sharp drop in operating income (-46.0% YoY)
• High interest burden (184 million yen) nearly offsetting operating profit
• Very low ROE (0.10%) driven by slim net margin and low asset turnover
• Data inconsistencies between disclosed cost of sales and gross profit figures
• Lack of cash flow disclosure limiting assessment of earnings quality and dividend capacity

Investment Implications

Key Takeaways:

• Topline weakness and negative operating leverage drove a steep decline in profits
• Gross margin appears resilient at ~29.9%, but SG&A rigidity compressed operating margin to ~1.7%
• High financing costs (interest expense 184 million yen) materially constrain ordinary income
• Liquidity is adequate (current ratio ~174%), but leverage is elevated and interest coverage thin
• ROE at 0.10% reflects low profitability and capital intensity; improving asset turnover is critical

Metrics to Watch:

• Revenue trajectory and booking/pipeline indicators in subsequent quarters
• Operating margin progression and SG&A-to-sales ratio
• Interest coverage and average borrowing cost trends
• Asset turnover (including inventory/receivables turnover when disclosed)
• Operating cash flow and free cash flow once reported
• Equity ratio and debt maturity profile

Relative Positioning: Positioned as an asset-intensive, leveraged operator with adequate liquidity but constrained profitability in the quarter; recovery depends on revenue normalization, cost discipline, and managing financing costs relative to peers in real estate and related services.

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