Kitazato Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥5.25B
• Operating Income: ¥2.77B
• Net Income: ¥1.70B
• EPS: ¥45.12

Income Statement

Balance Sheet

Cash Flow Statement

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

Kitasato Corporation (368A0) delivered solid FY2026 Q2 results with revenue of ¥5,247m (+8.3% YoY) and operating income of ¥2,769m (+5.9% YoY), translating to net income of ¥1,804m (+6.0% YoY). Profitability remains very strong, highlighted by a gross margin of 61.4% and an operating margin of approximately 52.8%, underscoring a high-value-added or asset-light business model. DuPont analysis shows a net margin of 34.38%, asset turnover of 0.264x, and financial leverage of 1.08x, yielding an ROE of 9.80% in line with the reported figure. ROE is primarily driven by margins, not leverage, as the balance sheet is equity-heavy (equity of ¥18,414m vs total assets of ¥19,895m). We estimate the equity ratio at around 92.6% (computed from totals), despite the metric being shown as 0.0% in the summary. Asset turnover is modest, which may cap further ROE expansion absent additional margin gains or reinvestment to lift throughput. Operating leverage momentum softened slightly as operating income growth (+5.9%) lagged revenue growth (+8.3%), implying some cost pressure or stepped-up growth investments. Ordinary income (¥2,728m) sits slightly below operating income, indicating minor non-operating losses; interest expense is negligible at ¥1m, suggesting the gap stems from other non-operating items. Tax expense of ¥872m implies an effective tax rate of roughly 32% on ordinary income, despite the summary line showing 0.0% (which appears unreported). Cash conversion was moderate with operating cash flow (OCF) of ¥1,311m, giving an OCF/net income ratio of 0.73, pointing to working capital outflows or timing effects. Liquidity is exceptionally strong, with a current ratio of 1,045% and working capital of ¥13,416m, providing ample buffer for operations and investment. Leverage is minimal (debt-to-equity of 0.08x) and interest coverage is extremely high at 2,769x, materially mitigating solvency risk. Investing cash flow and cash balance were not disclosed (shown as zero), limiting visibility on free cash flow and net cash position; financing cash outflow of ¥1,628m suggests capital returns or debt repayment, but details are not available. Dividend information (DPS and payout ratio) appears unreported, so we cannot assess current distribution policy from the provided data. Overall, the company combines high margins, conservative capitalization, and positive earnings growth, with the main watchpoint being cash conversion and the sustainability of high profitability at relatively low asset turnover. Data gaps (Investing CF, cash, share data, DPS) constrain certain analyses; conclusions are based on the available non-zero financials.

Profitability Analysis

ROE decomposition:

• net_profit_margin: 34.38%
• asset_turnover: 0.264x
• financial_leverage: 1.08x
• calculated_ROE: 9.80%
• commentary: ROE is predominantly margin-driven given very low leverage and modest asset turnover. Sustained high operating efficiency underpins returns. margin_quality:
• gross_margin: 61.4%
• operating_margin: 52.8%
• EBITDA_margin: 54.4%
• ordinary_margin: 52.0% (Ordinary income / Revenue)
• net_margin: 34.4%
• tax_rate_estimate: ≈32% (¥872m tax / ¥2,728m ordinary income)
• observations: Margins are exceptionally strong and broadly stable YoY given revenue +8.3% and operating income +5.9%. Minor non-operating drag is present but interest burden is negligible. operating_leverage:
• YoY_revenue_growth: 8.3%
• YoY_operating_income_growth: 5.9%
• SG&A_implied: ≈¥453m (Gross profit − Operating income)
• commentary: Operating income growth lagging revenue implies modest negative operating leverage in the period, likely due to higher SG&A or investment for growth. Depreciation of ¥85m is small, consistent with an asset-light cost base.

Growth Assessment

revenue_sustainability: Revenue increased 8.3% YoY to ¥5,247m, indicating healthy topline momentum. High gross margins suggest pricing power and/or favorable mix, though low asset turnover indicates growth may be less capex-intensive and more dependent on execution and demand stability. profit_quality: Net income grew 6.0% YoY to ¥1,804m; profit growth trailed revenue slightly, reflecting modest cost creep or investment. The tax rate near 32% is within a normal range, supporting the durability of net margins. outlook: Given strong margins and a robust balance sheet, the company is well positioned to pursue disciplined growth. Near-term profit trajectory will depend on maintaining pricing/mix benefits and managing SG&A as scale increases. Watch for initiatives to lift asset turnover (e.g., higher volume throughput) to sustain ROE expansion.

Financial Health

liquidity:

• current_ratio: 1,045.5%
• quick_ratio: 1,018.1%
• working_capital: ¥13,416m
• commentary: Ample liquidity cushion; near-term obligations are easily covered by current assets. Inventories are modest at ¥388m, reducing obsolescence risk. solvency:
• debt_to_equity: 0.08x
• interest_coverage: 2,769x
• equity_ratio_estimate: ≈92.6% (Total equity / Total assets, computed)
• commentary: Extremely conservative capital structure with minimal financial risk. Ordinary income closely tracks operating income, reflecting limited financial income/expense volatility. capital_structure: Balance sheet is overwhelmingly equity-funded (¥18,414m equity vs ¥1,499m liabilities). The low leverage limits risk but also reduces ROE amplification from gearing, making margin and turnover the key ROE drivers.

Cash Flow Quality

earnings_quality: OCF/Net income of 0.73 indicates moderate cash conversion, likely due to working capital outflows or timing. Given strong margins, sustained sub-1.0 conversion would warrant monitoring. FCF_analysis: Free cash flow cannot be reliably determined because Investing CF is undisclosed (shown as 0). EBITDA of ¥2,854m and low depreciation imply capacity for positive FCF absent large investment outlays. working_capital: Working capital is high at ¥13,416m. The gap between OCF and net income suggests increased receivables or other current asset growth; detailed components are not disclosed.

Dividend Sustainability

payout_ratio_assessment: Payout ratio is shown as 0.0%, but DPS and share data are not disclosed; this likely reflects unreported items rather than a confirmed zero dividend. EPS is ¥45.12. FCF_coverage: FCF coverage cannot be assessed due to missing Investing CF; OCF was ¥1,311m. Financing cash outflow of ¥1,628m hints at potential capital returns or debt repayment, but details are unavailable. policy_outlook: With minimal leverage and strong profitability, the capacity for distributions appears sound; however, absent DPS disclosure and full cash data, visibility on policy is limited.

Risk Assessment

Business Risks:

• Dependence on sustaining premium margins; any pricing pressure could compress profitability.
• Low asset turnover may constrain scalability or expose results to volume fluctuations.
• Potential customer concentration or project timing risk affecting revenue visibility (not disclosed, but typical for high-margin models).
• Regulatory or industry-specific changes that could affect demand or pricing (sector unspecified).
• Execution risk if SG&A investments do not translate into proportional revenue growth.

Financial Risks:

• Moderate cash conversion (OCF/NI 0.73) indicating working capital sensitivity.
• Limited disclosure on cash balance and investing cash flows reduces visibility on liquidity deployment and reinvestment needs.
• Potential non-operating income/expense volatility, though currently small.
• Dividend and share data not disclosed, limiting clarity on capital allocation.

Key Concerns:

• Sustainability of exceptionally high operating margins.
• Improving cash conversion from earnings to OCF.
• Enhancing asset turnover to support future ROE expansion.

Investment Implications

Key Takeaways:

• Strong topline growth (+8.3% YoY) with robust profitability (operating margin ~52.8%).
• ROE of 9.8% is margin-led; leverage is minimal at 0.08x D/E.
• Cash conversion at 0.73x NI warrants monitoring; working capital likely expanded.
• Balance sheet is highly equity-heavy with an estimated 92.6% equity ratio.
• Non-operating impact is minor; interest burden is negligible.
• Data gaps (cash, investing CF, DPS, shares) limit full capital allocation analysis.

Metrics to Watch:

• OCF/Net income ratio and working capital trends (receivables and payables days).
• Operating vs. ordinary income gap to monitor non-operating items.
• Asset turnover (Revenue/Assets) and any capacity/utilization initiatives.
• Gross and operating margin trajectory for signs of pricing or cost changes.
• Disclosure on cash balance, investing CF, and dividend/buyback policy.

Relative Positioning: Appears to be a high-margin, capital-light operator with a fortress balance sheet and moderate ROE driven by profitability rather than leverage; main differentiators are margin strength and conservative solvency profile, with scalability (asset turnover) as the key constraint.

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