FORLIFE Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥7.54B
• Operating Income: ¥301M
• Net Income: ¥160M
• EPS: ¥40.04

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

For FY2026 Q2 (single-entity, JGAAP), Forlife Co., Ltd. delivered strong top-line growth with revenue of ¥7,545 million, up 23.8% YoY, driven by higher project deliveries and/or improved sell-through. Gross profit reached ¥695 million, translating to a gross margin of 9.2%, which remains thin but directionally consistent with a housing/development-like model. Operating income rose 96.6% YoY to ¥301 million, lifting the operating margin to roughly 4.0%, indicating solid operating leverage despite modest gross margin expansion. Ordinary income came in at ¥256 million, lower than operating income due to net non-operating costs, including interest expense of ¥32.9 million. Net income declined 45.4% YoY to ¥160 million, implying a net margin of 2.12% and suggesting heavier tax and/or non-operating drag in the period. EPS was ¥40.04, though share count data were not disclosed in XBRL. The provided DuPont bridge indicates ROE of 3.98%, built from a 2.12% net margin, 0.723x asset turnover, and 2.59x financial leverage. Liquidity metrics appear sound on the surface with a current ratio of 167.7% and working capital of ¥3,746 million, consistent with a development model carrying sizable current assets. Total assets were ¥10,442 million and total equity ¥4,024 million; while the equity ratio is shown as 0.0% in the feed, a simple calculation indicates approximately 38.6%. Debt-to-equity is 1.40x, suggesting moderate leverage for a project-based balance sheet. Cash flow is the main weak point this half: operating cash flow was a sizable outflow of ¥1,625 million, typical of inventory and land bank builds and the timing mismatch inherent to the business model. The OCF/Net Income ratio of -10.16 underscores earnings not converting to cash this period, reflecting working capital deployment rather than necessarily poor earnings quality. Interest coverage is a comfortable 9.1x on an EBITDA basis, indicating near-term debt service headroom. The effective tax rate is shown as 0.0% in the summary, but the disclosed income tax charge of ¥132 million against pre-tax profit implies a high effective rate near the low-50% range—likely due to single-entity dynamics and non-deductible items. No dividends were paid (DPS ¥0), consistent with conserving cash amid negative OCF. Overall, the half-year shows improved operating profitability and manageable leverage, offset by heavy working capital outflows and lower net profit after taxes and non-operating items.

Profitability Analysis

ROE of 3.98% is driven by: net profit margin 2.12% × asset turnover 0.723 × financial leverage 2.59. The margin profile remains thin: gross margin 9.2% and operating margin roughly 4.0% (¥301m/¥7,545m). Operating leverage is evident as operating income grew +96.6% YoY on +23.8% revenue, implying better cost absorption and SG&A discipline. The drop from operating income (¥301m) to ordinary income (¥256m) reflects net non-operating costs (notably ¥32.9m interest), moderating the flow-through to net. Net income margin compressed versus operating income due to elevated tax burden (tax expense ¥132m), implying an effective tax rate around ~51% on a single-entity basis, despite the data table listing 0.0%. EBITDA was ¥311.7m (4.1% margin), providing a 9.1x EBITDA/interest coverage buffer. Overall profitability is improving at the operating level, but the business remains sensitive to interest and tax drag given narrow gross margins typical of a development-centric model.

Growth Assessment

Revenue grew 23.8% YoY to ¥7,545m, suggesting robust demand and delivery cadence in the first half. Operating income nearly doubled (+96.6% YoY), indicating quality of growth with margin improvement and operating leverage. Ordinary income growth lagged operating income due to higher non-operating expenses. Net income fell 45.4% YoY to ¥160m, implying that higher taxes and non-operating costs outweighed operating gains. Given the negative OCF, growth appears supported by working capital investment (likely land and project buildup), which should convert if backlog and handovers materialize in H2. Sustainability hinges on execution of the project pipeline and maintaining sell-through at planned prices. Margin resilience amid construction cost inflation and interest rate sensitivity will be key. With single-entity reporting, intra-group effects do not apply, but period-to-period volatility is expected due to delivery timing. Outlook: if H2 deliveries normalize and non-operating/tax drag stabilizes, operating profit strength could carry into bottom-line recovery; however, reliance on timely closings means growth is inherently lumpy.

Financial Health

Total assets ¥10,442m; total liabilities ¥5,645m; total equity ¥4,024m. Calculated equity ratio is ~38.6% (reported 0.0% in the feed is an unreported placeholder). Current assets ¥9,279m versus current liabilities ¥5,533m yield a current ratio of 167.7% and quick ratio displayed as 167.7% (inventories not disclosed; in practice, real estate for sale typically represents a large current asset). Working capital stands at ¥3,746m, supporting ongoing projects. Debt-to-equity is 1.40x, consistent with moderate leverage for a developer-like balance sheet dependent on project financing. Interest expense was ¥32.9m with EBITDA coverage of 9.1x, indicating near-term solvency headroom. Ordinary income below operating income signals non-operating burdens that should be monitored. Overall, balance sheet resilience appears adequate, but liquidity is contingent on converting current assets into cash via deliveries/closings.

Cash Flow Quality

Operating cash flow was a significant outflow of ¥1,625m, resulting in an OCF/Net Income ratio of -10.16, indicating earnings did not translate to cash in the half due to working capital use. This is typical for development businesses where inventory and advances build ahead of revenue recognition. Investing cash flow was not disclosed (shown as 0), so free cash flow cannot be reliably derived; the displayed FCF of 0 reflects non-disclosure rather than actual zero. Financing inflow of ¥950m suggests reliance on debt/equity funding to bridge project working capital. Earnings quality at the operating level looks reasonable (EBITDA ¥312m, operating profit ¥301m), but cash conversion is poor this period and will depend on H2 settlements. Working capital swings (receivables, real estate for sale, deposits) are the primary driver of cash flow volatility.

Dividend Sustainability

No dividend was paid (DPS ¥0, payout ratio 0%). With negative operating cash flow and heavy working capital needs, retaining earnings is prudent to support the pipeline. FCF coverage cannot be assessed because investing cash flow and true FCF are not disclosed; the FCF coverage shown as 0.00x is a placeholder. Policy-wise, a resumption or initiation of dividends would likely require consistent positive OCF across periods, a stabilized tax burden, and visibility on project cash cycles. Near-term, cash preservation appears the focus.

Risk Assessment

Business Risks:

• Project timing risk: revenue and cash highly dependent on delivery/closing schedules
• Housing demand sensitivity and macro conditions affecting sell-through
• Construction cost inflation and subcontractor availability impacting gross margin
• Land acquisition and permitting timing risk
• Concentration risk if the project portfolio is narrow by geography or product
• Pricing power limitations given competitive market and interest-rate sensitivity of buyers

Financial Risks:

• Working capital intensity driving negative OCF and reliance on financing
• Interest rate risk affecting both financing costs and buyer affordability
• Refinancing and covenant risk if project cash inflows are delayed
• Tax burden volatility impacting net income and retained earnings
• Margin of safety limited by thin gross/operating margins

Key Concerns:

• Sizable OCF outflow of ¥1,625m in H1 and uncertain FCF due to undisclosed investing CF
• Net income down 45.4% YoY despite strong operating profit growth
• High implied effective tax rate (~51%) depressing bottom line
• Non-operating costs (interest and others) diluting operating gains

Investment Implications

Key Takeaways:

• Strong revenue growth (+23.8% YoY) with substantial operating profit leverage (+96.6% YoY)
• Thin but improving margin structure: GM 9.2%, operating margin ~4.0%
• Ordinary income below operating income due to non-operating costs; interest expense ¥32.9m
• Net income margin 2.12% and ROE 3.98% reflect non-operating and tax drag
• Moderate leverage (D/E 1.40x) and adequate interest coverage (9.1x)
• Heavy H1 working capital use: OCF -¥1,625m; cash conversion a key overhang
• Equity ratio calculated at ~38.6% (feed shows 0.0% due to non-disclosure)
• Dividend on hold (DPS ¥0) aligned with cash preservation

Metrics to Watch:

• Backlog/contracted sales and H2 delivery schedule
• Gross margin trajectory versus construction costs
• Operating cash flow recovery and inventory turnover
• Net debt and interest coverage under changing rates
• Tax rate normalization and drivers of non-operating income/expense
• Asset turnover and ROE progression via DuPont components

Relative Positioning: Within small to mid-cap Japanese residential/development peers, Forlife shows healthy top-line momentum and operating leverage but faces typical sector headwinds: thin gross margins, working capital-heavy cash cycles, and sensitivity to interest rates. Leverage appears moderate with adequate coverage, but sustained cash generation and margin discipline will determine resilience versus peers.

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