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

Financial Highlights

• Net Sales: ¥1.23B
• Operating Income: ¥128M
• Net Income: ¥82M
• 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

Thermae-Yu Holdings (35210) delivered strong top-line growth in FY2026 Q2, with revenue up 28.2% year over year to ¥1,231 million, but profitability lagged as operating income declined 4.9% to ¥128 million. Net income fell 29.4% to ¥57 million, compressing the net margin to 4.63% despite a double-digit operating margin of 10.4%. The DuPont profile shows modest return metrics: ROE is 1.17%, driven by a low net margin (4.63%), slow asset turnover (0.206x), and conservative leverage (financial leverage 1.23x). EBITDA margin of 22.7% (EBITDA ¥279 million) indicates healthy cash-generating capacity before depreciation, yet heavy depreciation and amortization (¥151 million, 12.3% of sales) materially weighs on EBIT. Operating cash flow was robust at ¥226 million, 3.97x net income and approximately 81% of EBITDA, highlighting solid cash conversion and limited accrual risk in the period. Liquidity appears strong with a current ratio of 338%, quick ratio of 338%, and working capital of ¥1,131.8 million, supporting near-term resilience. The balance sheet is conservatively positioned with total liabilities of ¥1,165.8 million versus equity of ¥4,855 million; effective equity ratio is approximately 81% based on the balance sheet (the reported 0.0% equity ratio is not disclosed rather than actually zero). Interest expense remains low at ¥4.0 million, with EBIT interest coverage at 31.7x, indicating limited refinancing or interest-rate risk. Ordinary income equaled operating income, suggesting negligible non-operating swings; however, the gap between pre-tax profit and net income implies other below-the-line items or minority interests beyond income taxes. Using reported income tax of ¥51.2 million against pre-tax earnings suggests an effective tax burden near 40%, not 0.0% as the placeholder metric suggests. Operating leverage was negative in the quarter: strong revenue growth did not translate into higher operating profit, likely reflecting higher utilities, personnel, or promotional spend consistent with the leisure/wellness format. The margin stack also implies classification effects under JGAAP (e.g., other operating income/expense), as EBITDA exceeds gross profit, which can occur when non-COGS operating income is material. Cash and equivalents, investing cash flows, equity ratio, and per-share balance sheet metrics are undisclosed in XBRL (displayed as zero), limiting depth on liquidity buffers, capex intensity, and per-share valuation trends. No dividend was paid (DPS ¥0), and financing cash outflow of ¥104 million likely reflects debt or lease repayments. Overall, the company combines strong sales momentum and solid cash generation with subdued earnings progression, heavy depreciation, and disciplined leverage; the key debate is whether cost pressures are transient or structural and whether growth can scale margins in subsequent periods.

Profitability Analysis

ROE_decomposition: ROE 1.17% = Net margin 4.63% × Asset turnover 0.206 × Financial leverage 1.23. ROA is approximately 0.96% (NI ¥57m / Assets ¥5,969m). Leverage is conservative and not a major driver of ROE; profitability and asset efficiency are the constraints. margin_quality: Gross margin is 17.6% (¥216.9m/¥1,231m). Operating margin is 10.4% (¥128m/¥1,231m). EBITDA margin is 22.7% (¥279.2m/¥1,231m), indicating significant non-cash D&A (¥151.2m). The fact that EBITDA exceeds gross profit suggests material other operating income or JGAAP classification effects below cost of sales; thus, gross margin alone may understate core unit economics. Net margin is 4.63%, burdened by depreciation and a circa 40% effective tax rate. operating_leverage: Revenue +28.2% YoY with operating income -4.9% YoY indicates negative operating leverage in the half. Likely drivers include higher utilities, labor, or marketing costs associated with facility operations and traffic ramp, and/or an unfavorable mix. Depreciation intensity (12.3% of sales) also caps EBIT scalability until utilization materially increases.

Growth Assessment

revenue_sustainability: Top-line growth of 28.2% suggests healthy demand recovery and/or footprint expansion, supported by leisure and inbound trends. Sustainability will hinge on same-store traffic, average ticket growth, seasonality, and any new openings. profit_quality: Operating income lagged revenue growth, signaling cost pressure and weaker incremental margins. Ordinary income matched operating income, which implies limited reliance on non-operating gains. Net income declined 29.4%, influenced by heavy D&A and taxes. Cash OCF margin of ~18.4% (¥226m/¥1,231m) supports the underlying cash quality despite weaker accounting profits. outlook: If revenue momentum persists and cost headwinds (utilities, labor) normalize, margins could recover via scale. However, depreciation drag will remain until asset intensity moderates. Visibility is constrained by undisclosed investing cash flows and capex plans.

Financial Health

liquidity: Current assets ¥1,607.0m vs current liabilities ¥475.2m yields a current ratio of 338% and working capital of ¥1,131.8m; quick ratio is the same due to undisclosed inventories. Cash on hand is not disclosed. solvency: Total liabilities ¥1,165.8m vs equity ¥4,855.0m imply an effective equity ratio of ~81.3% (based on the balance sheet). Debt-to-equity is 0.24x. Interest coverage (EBIT/interest) is 31.7x, indicating low financial risk. capital_structure: Leverage is modest (financial leverage 1.23x), providing capacity for prudent investment. Financing cash outflow of ¥104.4m indicates de-leveraging or lease repayments; no equity issuance is evident.

Cash Flow Quality

earnings_quality: OCF ¥226.2m is 3.97x net income and ~81% of EBITDA, reflecting strong cash conversion and limited accrual build in the period. FCF_analysis: Free cash flow is not derivable because investing cash flows (capex) are undisclosed in XBRL for the period (reported as zero). As a proxy, OCF margin is 18.4%, but true FCF depends on maintenance and growth capex for facilities. working_capital: Working capital increased to ¥1,131.8m with current ratio at 338%. Specific drivers (receivables, payables, inventories) are not disclosed; however, the high OCF/NI suggests WC was not a material cash drag.

Dividend Sustainability

payout_ratio_assessment: No dividend declared (DPS ¥0; payout 0%). With ROE at 1.17% and depreciation-intensive assets, reinvestment or deleveraging likely takes precedence. FCF_coverage: FCF coverage cannot be assessed due to undisclosed investing cash flows; OCF of ¥226.2m suggests capacity, but capex for bath/spa facilities can be significant and lumpy. policy_outlook: Given modest profitability and ongoing asset intensity, a conservative dividend stance appears consistent. Future distributions would depend on margin recovery, stable OCF, and visibility on maintenance capex.

Risk Assessment

Business Risks:

• Energy and utilities cost inflation impacting bath/spa facility margins
• Labor availability and wage pressure in services and hospitality
• Demand volatility due to seasonality, weather, and macro leisure spending
• Inbound tourism sensitivity (currency, travel restrictions, geopolitical factors)
• Regulatory and compliance requirements for public bathing facilities and water quality
• Brand and safety reputation risks tied to facility operations
• Project execution risk on new openings and renovations

Financial Risks:

• Depreciation-heavy asset base depressing accounting profits and ROE
• Potential capex intensity and renovation cycles affecting free cash flow
• Exposure to utility price volatility not fully hedgeable
• Refinancing and interest-rate risk is currently low but not zero despite modest leverage
• Tax burden variability; effective tax near ~40% in the period

Key Concerns:

• Negative operating leverage despite 28.2% revenue growth
• High D&A (¥151m) constraining EBIT and NI
• Limited disclosure on cash, capex, and investing cash flows
• Net income down 29.4% YoY despite strong sales momentum

Investment Implications

Key Takeaways:

• Strong revenue growth (+28.2% YoY) but operating income declined (-4.9% YoY)
• EBITDA margin healthy at 22.7%, yet heavy D&A (12.3% of sales) compresses EBIT
• Net margin modest at 4.63%; ROE low at 1.17% given conservative leverage
• OCF robust at ¥226m (3.97x NI), supporting liquidity and flexibility
• Balance sheet conservative (equity ~81% of assets; D/E 0.24x)
• Interest coverage strong at 31.7x, indicating low near-term financial stress
• Key debate: cost normalization and scalability vs. structurally higher utilities/labor

Metrics to Watch:

• Same-store sales/traffic and average ticket
• Utility costs and energy intensity (utilities/revenue)
• Personnel expense ratio and staffing efficiency
• SG&A-to-sales and incremental margins
• Capex (maintenance vs. growth) and resulting FCF
• EBITDA-to-OCF conversion and working capital turns
• Occupancy/usage rates of facilities and membership metrics

Relative Positioning: Within Japan’s listed leisure/spa operators, the company shows stronger top-line momentum and more conservative leverage than peers, but lower ROE and weaker operating leverage in the period due to cost pressures and high depreciation; near-term resilience is supported by liquidity, while medium-term upside hinges on margin recapture and capex discipline.

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