JICHODO Co.,Ltd. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥3.43B
• Operating Income: ¥461M
• Net Income: ¥75M
• EPS: ¥111.75

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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: A resilient Q1 with margin improvement and sharp headline profit growth despite modest revenue decline. Revenue was 34.29 (−2.6% YoY), while operating income rose to 4.61 (+2.1% YoY), indicating healthy operating leverage. Gross profit was 11.79, yielding a gross margin of 34.4%. The operating margin reached roughly 13.4%, up about 60 bps YoY by our estimate. Net income printed 3.22 (+331.0% YoY), driving a net margin of 9.4%, though line-item inconsistencies suggest non-recurring or undisclosed non-operating factors influenced the bottom line. Ordinary income was reported at 6.58 (+523.5% YoY), implying a sizable positive swing in non-operating items despite limited disclosure. Profit before tax was 1.06 with tax expense of 0.31 (29.2% rate), which does not reconcile with reported net income of 3.22—indicating data gaps or extraordinary items not disclosed in the extract. Balance sheet strength is notable: total assets of 411.35 against total liabilities of 41.60 implies very low leverage (D/E ~0.11x) and ample liquidity (current ratio ~10.9x; quick ratio ~7.0x). Cash and deposits are 122.34 and inventories are elevated at 106.20, highlighting working capital intensity typical of apparel/workwear. ROE (DuPont) is a low 0.9% with asset turnover of 0.083 and leverage of 1.11x, underscoring capital efficiency challenges. ROIC is 1.3%, below the 5% warning threshold—a key area for improvement. Cash flow statements are unreported, preventing validation of earnings quality via OCF; consequently, FCF and dividend coverage cannot be assessed from this dataset. The calculated payout ratio of 537.2% appears unsustainably high on the face of it, but bases and period mismatches may distort this Q1 view. Forward-looking, maintaining the improved operating margin while reducing inventory intensity and clarifying non-operating drivers will be critical to lift ROIC and sustain shareholder returns.

Profitability Analysis

ROE decomposition: 0.9% ROE = 9.4% Net Profit Margin × 0.083 Asset Turnover × 1.11x Financial Leverage. The weakest component is asset turnover (0.083), which is dragging overall ROE far more than the modest leverage or net margin. Business drivers: inventory-heavy operations and a sizable cash balance suppress turnover; in addition, a slight revenue decline (-2.6% YoY) reduces the numerator for turnover. Operating margin improved to ~13.4% (about +60 bps YoY based on prior-year estimates), driven by cost control (SG&A 7.27 vs. GP 11.79) and likely mix/price discipline. However, reported ordinary income surged (+523.5% YoY), pointing to non-operating swings; details are undisclosed, so we treat this as potentially non-recurring. Sustainability: operating margin gains look more durable than the below-the-line boost, but sustaining them will require demand resilience and disciplined SG&A. Watch for concerning trends: revenue contracted while SG&A is sizeable; if SG&A grows faster than revenue in subsequent quarters, operating leverage could reverse. Given low leverage (1.11x), ROE improvement must primarily come from better turnover (inventory discipline) and steady operating margins, rather than balance sheet leverage.

Growth Assessment

Top line softness (-2.6% YoY) suggests a cautious demand backdrop or timing effects, but operating income still grew (+2.1% YoY) on margin execution. The significant jump in net income (+331% YoY) and ordinary income (+523.5% YoY) likely reflects non-operating gains or reversals; absent detail, we view bottom-line growth quality as mixed. Gross margin at 34.4% supports the thesis of pricing/mix discipline. Revenue sustainability depends on workwear demand across construction/manufacturing services and corporate uniform refresh cycles; no segment detail is provided. Near-term outlook: if operating margin discipline holds and inventories normalize, earnings stability is achievable even with flattish revenue. However, achieving higher capital efficiency (turnover, ROIC) is necessary for structurally better growth in returns.

Financial Health

Liquidity is very strong: current ratio 1090.6% and quick ratio 699.1% comfortably exceed benchmarks; no warning flags (both >> 1.0). Solvency is conservative: total liabilities 41.60 vs equity 369.74 implies D/E ~0.11x; interest-bearing debt breakdown is unreported, but overall leverage is low. Maturity mismatch risk appears minimal given current assets 295.87 vs current liabilities 27.13 and cash 122.34 vs accounts payable 19.50. The balance sheet carries sizable investment securities (46.14), implying some exposure to market valuation swings. No off-balance sheet obligations are disclosed in the provided data.

Cash Flow Quality

Operating cash flow is unreported, so OCF/Net Income and FCF cannot be calculated, limiting our ability to validate earnings quality. With inventories at 106.20 and accounts receivable at 30.28, working capital swings could materially affect OCF; monitoring inventory turnover and receivable collections is key. Absent OCF, we cannot assess coverage of dividends or capex. No signs of working capital manipulation can be inferred from the snapshot alone, but elevated inventories point to potential cash absorption if sales lag.

Dividend Sustainability

The calculated payout ratio of 537.2% suggests potential unsustainability if measured against quarterly net income; however, the basis (trailing dividends vs quarterly profit vs full-year plan) is unclear in this dataset. FCF coverage cannot be assessed due to unreported OCF and capex. Policy outlook is therefore uncertain; with a net-cash, low-leverage balance sheet, the company has capacity to continue distributions near term, but sustainable payouts depend on normalized full-year earnings and cash generation rather than Q1 levels.

Risk Assessment

Business Risks:

• Demand softness in domestic workwear/apparel leading to revenue pressure
• Inventory risk (obsolescence/markdowns) given high inventory balance
• Input cost volatility (cotton, polyester, energy) impacting gross margins
• Channel/customer concentration risk typical in uniform/workwear contracts

Financial Risks:

• Capital efficiency risk (ROIC 1.3% below 5% warning threshold)
• Earnings volatility from non-operating items with limited disclosure
• Mark-to-market or dividend variability from investment securities (46.14)
• Potential cash flow shortfalls if working capital builds (OCF unreported)

Key Concerns:

• Inconsistencies between ordinary income, PBT, tax, and NI suggest undisclosed extraordinary items or data gaps
• Very low asset turnover (0.083) restrains ROE despite improved margins
• Calculated payout ratio appears elevated, raising sustainability questions absent OCF visibility

Investment Implications

Key Takeaways:

• Solid operating margin execution with modest revenue decline, leading to YoY operating profit growth
• Headline bottom-line surge likely aided by non-operating factors; quality uncertain
• Balance sheet is extremely liquid and under-levered, providing resilience
• ROIC at 1.3% and low asset turnover highlight a need for capital efficiency improvement
• Inventory levels are high; normalization is a key lever for OCF and ROE

Metrics to Watch:

• Operating margin and SG&A ratio trajectory
• Inventory turnover days and working capital as a percent of sales
• Ordinary income breakdown (non-operating income/expenses) and any extraordinary items
• OCF and FCF once disclosed; OCF/NI ratio target >1.0
• ROIC improvement toward >5% medium term

Relative Positioning: Within Japan small/mid-cap apparel/workwear peers, the company exhibits superior liquidity and low leverage but lags on capital efficiency (low asset turnover, sub-5% ROIC). Margin execution in Q1 is a relative positive; however, reliance on non-operating items for bottom-line uplift and elevated inventories temper the quality of earnings relative to best-in-class operators.

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