Yamachu Co., Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.51B
• Operating Income: ¥451M
• Net Income: ¥324M
• EPS: ¥276.64

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

Verdict: A mixed FY2026 Q2—solid top-line and operating performance but a sharp decline in net income and weak cash conversion. Revenue rose 3.1% year over year to 25.08, while operating income increased 2.4% to 4.51, indicating the core business remained resilient. Gross profit was 8.64, yielding a gross margin of 34.5%, and operating margin stood at roughly 18.0% (4.51/25.08). Ordinary income was flat at 3.95, with a notable non-operating drag (non-operating expenses of 0.61 vs non-operating income of 0.05). Net income fell 43.3% YoY to 3.23, compressing the bottom line despite stable operating results. Net margin printed at 12.9%, and the DuPont-calculated ROE was 6.5% (Net Margin 12.9% × Asset Turnover 0.180 × Financial Leverage 2.83x). Operating cash flow was only 1.22, producing an OCF/Net Income ratio of 0.38, which flags weak cash earnings quality. Financing cash inflow was large at 9.85, indicating reliance on external funding amid muted operating cash generation. The balance sheet shows strong liquidity (current ratio 227%) but elevated leverage (D/E 1.61x; long-term loans 44.06), though interest coverage remains strong at 10.0x. Tax expense of 1.21 implies a 27.3% effective rate, which did not offset the non-operating burden. EBITDA came in at 5.39, with an EBITDA margin of 21.5%, confirming healthy operating efficiency. Working capital build appears to be a headwind to OCF, though inventories and detailed receivables data are limited. Dividend affordability looks reasonable based on a 19.5% payout ratio and estimated FCF of about 1.05 (OCF 1.22 minus CapEx 0.17), but ongoing cash conversion slippage could pressure coverage. Margins likely experienced slight operating margin compression (revenue outpacing operating income growth), and notable net margin compression given the sharp NI decline, though precise basis-point changes are not calculable from the disclosures. Forward-looking, the key swing factors are normalization of non-operating costs, stabilization of working capital, and maintaining strong interest coverage amid elevated leverage.

Profitability Analysis

DuPont ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 12.9% × 0.180 × 2.83x ≈ 6.5%. The component that appears to have changed most YoY is the net profit margin, given net income fell 43.3% while revenue rose 3.1% and operating income was up 2.4%. The primary business reason is higher non-operating expenses (0.61) relative to modest non-operating income (0.05) and the burden of interest expense (0.45), which together compressed ordinary income (flat YoY) and net income. Operating efficiency remains decent with an 18.0% operating margin and a 21.5% EBITDA margin, but the small gap between gross margin (34.5%) and operating margin suggests SG&A discipline is good (SG&A 4.13, ~16% of sales); however, without YoY SG&A detail, we cannot verify operating leverage trends precisely. Asset turnover is low at 0.180, reflecting a relatively asset-heavy structure or low velocity, which limits ROE scalability. Financial leverage is elevated at 2.83x and is a key prop to ROE; this support is risky if non-operating costs persist. Sustainability: the operating margin appears reasonably sustainable given stable OI growth; the net margin compression looks partly driven by non-operating headwinds (not necessarily structural) but could persist if financing costs stay high. Watch for any trend where SG&A growth exceeds revenue growth; at present, revenue growth (+3.1%) modestly outpaced operating income growth (+2.4%), implying slight operating margin compression and limited operating leverage.

Growth Assessment

Top-line growth was moderate at +3.1% YoY to 25.08, suggesting steady demand. Operating income growth of +2.4% indicates the business defended margins reasonably well but did not fully translate revenue growth into operating leverage. Ordinary income was flat, and net income fell sharply (-43.3%), pointing to non-operating pressures as the main detractor to earnings growth. With EBITDA margin at 21.5% and operating margin at ~18.0%, profitability at the operating level remains sound. However, cash generation lagged earnings (OCF 1.22 vs NI 3.23), implying growth is not fully self-funded in this quarter. Outlook hinges on normalizing non-operating items, managing financing costs (interest expense 0.45), and improving working capital to convert profit into cash. Near-term growth quality is mixed: operating momentum is acceptable, but bottom-line volatility and cash conversion are weak.

Financial Health

Liquidity is strong with a current ratio of 227.1% and a quick ratio of 227.1%, supported by cash and deposits of 19.19 against current liabilities of 26.37. No warning on current ratio (<1.0) is warranted. Solvency shows a Debt-to-Equity ratio of 1.61x, above the conservative benchmark of 1.5x but below the 2.0x high-risk threshold; flag as moderately elevated leverage. Interest coverage is strong at 10.04x, mitigating near-term solvency risk. Maturity profile: short-term loans are 6.90 (covered by cash 19.19), while noncurrent liabilities are sizeable at 53.30, including long-term loans of 44.06—refinancing risk exists if rates rise or credit conditions tighten, but current liquidity is ample. Working capital is positive at 33.52, reducing liquidity stress. Off-balance-sheet obligations are not disclosed; no data to assess leases/guarantees. Overall, liquidity is a strength; leverage requires monitoring.

Cash Flow Quality

OCF/Net Income is 0.38x, below the 0.8 threshold, indicating low cash conversion and potential earnings quality concerns this quarter. Operating CF of 1.22 versus NI of 3.23 suggests working capital outflows or timing effects; detailed components (inventories, payables) are not fully disclosed, limiting diagnostics. Using CapEx of 0.17, proxy FCF is approximately 1.05; this is positive but modest relative to net income, and outpaced by financing inflows (9.85), implying reliance on external funding. No signs of aggressive working capital optimization can be confirmed or ruled out due to limited disclosure; however, the gap between OCF and NI suggests either receivable growth, inventory build, or lower payables as potential drivers. Sustainability: to maintain dividends and reduce leverage, OCF needs to converge toward NI in subsequent periods.

Dividend Sustainability

The calculated payout ratio is 19.5%, indicating a conservative distribution relative to earnings. On a cash basis, proxy FCF of ~1.05 appears to cover an estimated dividend outflow implied by the payout ratio (approximately 0.63, assuming payout ratio × net income), providing about 1.7x coverage; however, total dividends paid were not disclosed, so this is an estimate. With OCF currently weak, sustained dividend coverage depends on improving cash conversion. Balance sheet liquidity is strong, which provides a buffer, but leverage is elevated, so management may prioritize deleveraging if OCF remains soft. Dividend policy outlook: sustainable at current levels if OCF normalizes; risk rises if non-operating costs and weak cash conversion persist.

Risk Assessment

Business Risks:

• Non-operating cost burden (net non-operating expense of ~0.56) compressing bottom line
• Low asset turnover (0.180) limiting ROE scalability and sensitivity to sales fluctuations
• Potential demand softness or mix shifts given modest revenue growth (+3.1%)
• Execution risk in working capital management given weak OCF/NI (0.38x)

Financial Risks:

• Elevated leverage (D/E 1.61x) increasing sensitivity to interest rates and refinancing conditions
• Refinancing risk from sizable long-term loans (44.06) and noncurrent liabilities (53.30)
• Dependence on financing inflows (Financing CF 9.85) amid weak operating cash flow
• Interest expense (0.45) as a meaningful drag on net income

Key Concerns:

• Earnings quality flagged by low OCF/NI ratio
• Sharp net income decline (-43.3% YoY) despite stable operating profit
• Limited disclosure on key SG&A and working capital components, obscuring drivers
• Potential margin pressure if non-operating costs persist or rise

Investment Implications

Key Takeaways:

• Core operations resilient: revenue +3.1%, operating income +2.4%, operating margin ~18.0%
• Net income down 43.3% due to non-operating headwinds and interest burden
• Cash conversion weak (OCF/NI 0.38), raising earnings quality questions
• Liquidity strong (current ratio 227%), but leverage moderately high (D/E 1.61x)
• Interest coverage robust at 10x, mitigating near-term solvency risk
• Proxy FCF positive (~1.05), likely covers dividends at a 19.5% payout ratio
• ROE at 6.5% is supported by leverage rather than asset efficiency

Metrics to Watch:

• OCF/NI ratio and working capital movements (receivables, inventories, payables)
• Non-operating expenses and interest expense trend
• Operating margin trajectory versus revenue growth (operating leverage)
• Debt levels and refinancing schedule, especially long-term loans
• Dividend cash coverage (dividends paid vs FCF) and any policy updates

Relative Positioning: Relative to typical TSE peers with similar scale, the company shows stronger-than-average liquidity, moderate-to-elevated leverage, solid operating margins, but weaker cash conversion and higher sensitivity of net income to non-operating items.

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