THERMAE-YU HOLDINGS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.23B
• Operating Income: ¥128M
• Net Income: ¥58M
• EPS: ¥2.18

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

Verdict: Strong top-line growth but weaker profitability; margins compressed materially and net earnings declined despite solid operating cash flow. Revenue rose 28.2% YoY to 12.31, while operating income slipped 4.9% YoY to 1.28 and net income fell 29.4% YoY to 0.57. Gross profit was 2.55, yielding a gross margin of 20.7%. Operating margin was 10.4% (1.28/12.31), down sharply versus last year. Using disclosed YoY rates, we estimate prior revenue at 9.60 and prior operating income at 1.35, implying prior operating margin of about 14.1%—a compression of roughly 366 bps YoY. Net margin compressed as well: current 4.6% vs an implied prior ~8.4%, a deterioration of roughly 380 bps. Ordinary income decreased 3.1% YoY to 1.28, indicating that non-operating items (0.04 income, 0.03 expense) had limited buffer effect. The effective tax rate was elevated at 47.9%, amplifying the drop from ordinary income to net income. Earnings quality, however, was strong with operating cash flow of 1.40 exceeding net income (OCF/NI 2.45x). EBITDA was 2.78 with a 22.6% margin, highlighting healthy cash earnings before depreciation relative to revenue. Balance sheet strength is notable: current ratio 261.9%, D/E 0.23x, and interest coverage 36.85x indicate low financial risk. Capital efficiency is weak: ROE is 1.2% and ROIC is 1.6%, well below typical cost of capital benchmarks. Liquidity is ample with cash and deposits of 11.20 against current liabilities of 5.19, and working capital of 8.39. We note the reported payout ratio of 232.2%, but dividends are unreported; this metric likely reflects an estimation and should be viewed cautiously. Forward looking, management will need to stabilize margins (cost control, pricing) and improve ROIC above 5% to create value. Near-term performance hinges on normalizing the tax rate, sustaining demand momentum, and converting topline growth into higher operating leverage.

Profitability Analysis

ROE decomposition (DuPont): ROE 1.2% = Net profit margin 4.6% × Asset turnover 0.206 × Financial leverage 1.23x. The largest driver of the YoY deterioration is net margin compression: despite 28.2% revenue growth, net income fell 29.4%, implying significant cost pressure and a high effective tax rate (47.9%). Operating margin dropped from an estimated ~14.1% to 10.4% (~366 bps compression), suggesting rising cost of sales and/or higher SG&A intensity relative to revenue. Business reasons likely include input cost inflation (utilities/energy), wage pressure, and mix effects; non-operating items were small and did not offset. The high tax rate further compressed net margin; this looks more one-off/volatile than structural, but absent disclosure we cannot confirm. Asset turnover at 0.206 is modest; with revenue growth and a relatively stable asset base (total assets 59.69), turnover likely improved slightly, but not enough to counter margin pressure. Financial leverage at 1.23x is low, which keeps risk contained but also limits ROE uplift. Watch for SG&A growth versus revenue; given operating income decline amid strong sales, cost growth likely exceeded revenue growth (concern for operating leverage). Sustainability: margin headwinds from energy and labor could persist near term; tax rate should normalize over time, offering some margin relief if operating costs stabilize.

Growth Assessment

Revenue growth of 28.2% YoY to 12.31 indicates robust demand recovery/expansion. However, operating income declined 4.9% YoY and ordinary income fell 3.1% YoY, signaling negative operating leverage this quarter. EBITDA of 2.78 (22.6% margin) remains healthy, implying cash earnings resilience even as GAAP margins compress. Net income dropped 29.4% YoY due to operating margin pressure and a high effective tax rate (47.9%). Growth quality is mixed: topline is strong; profit growth lagged due to cost inflation and tax. Outlook hinges on cost normalization (utilities, labor) and pricing power; if tax rate normalizes toward historical levels, net margin could rebound from 4.6%. Near-term catalysts include continued demand strength and efficiency gains; risks include persistent input cost inflation and potential demand volatility. Given low ROIC (1.6%), incremental growth must be higher return to be value accretive.

Financial Health

Liquidity is strong: current ratio 261.9% and quick ratio 261.9%, with cash and deposits of 11.20 exceeding current liabilities of 5.19. No warning triggers: Current Ratio >> 1.0 and D/E = 0.23x (< 2.0). Interest coverage is very strong at 36.85x, indicating low refinancing risk. Total liabilities are 11.14 vs equity 48.55, implying a conservative balance sheet. Long-term loans are 3.06; no short-term loans were reported (unreported items are not zeros). Maturity mismatch risk appears low given sizable cash and working capital (8.39). Off-balance sheet obligations are not disclosed in the provided data; none identified.

Cash Flow Quality

OCF/Net income is 2.45x, indicating high earnings quality and strong cash conversion this period. With OCF of 1.40 and reported capital expenditures of -0.66, a proxy FCF would be approximately 0.74 if no other investing cash flows are material (investing CF is unreported, so this is an estimate). This proxy suggests capacity to fund maintenance capex, though dividends data are unreported. Working capital appears supportive of cash flow; no signs of aggressive working capital manipulation are evident from the limited disclosures. Sustainability: if margin pressure persists, OCF could tighten; continued discipline on capex and cost is important.

Dividend Sustainability

Dividend details are unreported; however, a calculated payout ratio of 232.2% is provided and implies distributions far above earnings if accurate. Given lack of DPS and total dividend paid data, we treat this payout ratio cautiously and cannot validate its basis. Using proxy FCF of ~0.74 (OCF 1.40 minus capex 0.66), dividends would be covered only if actual cash dividends are below this level. Policy outlook is unclear from disclosures; if the implied high payout reflects a temporary factor (e.g., commemorative dividend), sustainability would be questionable. Absent confirmed dividend data, we cannot conclude coverage definitively.

Risk Assessment

Business Risks:

• Margin pressure from energy/utilities cost inflation impacting facilities operations
• Labor cost increases and staffing constraints affecting SG&A intensity
• Demand volatility/seasonality in attendance-driven services
• Potential pricing power limitations amid cost pass-through efforts
• Elevated effective tax rate volatility compressing net margins

Financial Risks:

• Low ROIC (1.6%) relative to cost of capital, risking value dilution
• Potential goodwill/intangible impairment risk if profitability weakens (goodwill 2.01, intangibles 2.89)
• Small scale and possibly thin market liquidity for shares
• Dividend sustainability uncertainty given calculated payout ratio vs unreported DPS

Key Concerns:

• Operating margin compression (~366 bps YoY) despite strong revenue growth
• Net margin compression (~380 bps YoY) exacerbated by a 47.9% effective tax rate
• Capital efficiency well below benchmarks (ROE 1.2%, ROIC 1.6%)

Investment Implications

Key Takeaways:

• Top-line strength (+28.2% YoY) but negative operating leverage this quarter
• Operating and net margins compressed materially; tax rate unusually high
• Balance sheet conservative with ample liquidity and low leverage
• Cash conversion strong (OCF/NI 2.45x), supporting near-term flexibility
• Capital efficiency weak; improving ROIC is a priority

Metrics to Watch:

• Operating margin and cost of sales ratio vs energy and labor cost trends
• Effective tax rate normalization path
• EBITDA margin and OCF/NI ratio as indicators of cash earnings quality
• Capex discipline and project returns (ROIC trajectory)
• Working capital movements (AR and payables turnover)
• Any disclosed dividend policy/DPS to reassess payout sustainability

Relative Positioning: Within small-cap consumer services/leisure peers, the company exhibits stronger liquidity and lower leverage than average, but weaker profitability and capital efficiency this quarter due to cost pressures and a high tax burden. Sustained revenue momentum with margin stabilization would be necessary to close the gap on ROIC/ROE 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