CHIeru Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.65B
• Operating Income: ¥406M
• Net Income: ¥255M
• EPS: ¥30.45

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 solid FY2026 Q2 with strong top-line growth and healthy cash conversion, albeit with slight operating margin compression. Revenue surged 84.6% YoY to 46.50, propelling operating income up 73.4% to 4.06 and net income up 60.8% to 2.27. Gross profit reached 20.96, yielding a gross margin of 45.1%. Operating margin was 8.7% (4.06/46.50), down modestly from an estimated 9.3% in the prior-year period, implying roughly 56 bps compression as SG&A intensity remained elevated. Ordinary income was 3.96, with non-operating items netting a small expense (0.17 income vs 0.27 expense), keeping results largely driven by core operations. Net margin printed 4.9%, consistent with the DuPont net profit margin used in the ROE calculation. Cash generation was a key highlight, with operating cash flow of 8.38, translating to OCF/NI of 3.69x, indicating high earnings quality. The balance sheet shows total assets of 109.25 and equity of 41.52 (equity ratio ~38%), with cash and deposits of 34.94 comfortably exceeding total interest-bearing loans of approximately 17.12, implying a net cash posture despite a reported D/E of 1.63x. Liquidity is adequate with a current ratio of 141.9% and quick ratio of 141.9%, though both sit slightly below the 1.5x “healthy” benchmark. Interest coverage is robust at 19x, mitigating near-term solvency concerns. ROE stands at 5.5% via DuPont (4.9% margin × 0.426 asset turnover × 2.63x leverage), while ROIC is a healthy 10.9%, comfortably above common 7–8% targets. Depreciation and amortization were 1.10, supporting an EBITDA of 5.16 and an EBITDA margin of 11.1%. Taxes appear elevated with a 36.3% effective tax rate, which dampened net income growth relative to operating income. Goodwill (9.34) and intangible assets (11.81) are meaningful, pointing to acquisition-driven capabilities but also potential future impairment risk if growth underperforms. Forward-looking, the combination of strong revenue momentum, positive operating leverage potential, and net cash provides flexibility for investment and returns, but management will need to arrest margin compression, manage SG&A discipline, and normalize the tax rate to drive ROE higher.

Profitability Analysis

DuPont breakdown: ROE 5.5% = Net Profit Margin (4.9%) × Asset Turnover (0.426x) × Financial Leverage (2.63x). The key driver this quarter was the surge in asset turnover on the back of 84.6% YoY revenue growth, while net margin modestly compressed and leverage remained moderate. Operating margin slipped to 8.7% from an estimated 9.3% a year ago (~56 bps compression), suggesting SG&A absorption lagged the rapid revenue expansion. Business context: rapid top-line expansion likely required higher go-to-market, delivery, or support costs in the near term, limiting drop-through. Given gross margin at 45.1% and SG&A at 36.3% of revenue, incremental scale could still improve operating margin if SG&A growth decelerates versus sales. Sustainability: asset turnover improvements can persist if demand remains strong and execution keeps lead times and receivables under control; however, net margin recovery hinges on SG&A discipline and maintaining pricing power. Watch for signs of cost normalization and productivity gains in H2. Concerning trends: none severe, but note that revenue growth outpaced operating income growth, and the elevated effective tax rate (36.3%) capped net profitability.

Growth Assessment

Revenue growth of +84.6% YoY to 46.50 is exceptional, with operating income +73.4% to 4.06 and net income +60.8% to 2.27. The growth mix is predominantly operating, as non-operating items net to a small expense, indicating underlying demand rather than one-offs. Operating margin compressed ~56 bps YoY, implying only partial operating leverage so far. With gross margin at 45.1%, there remains room for operating margin improvement if SG&A intensity moderates in subsequent quarters. The strong OCF (8.38) relative to net income underscores real cash conversion, likely aided by favorable working capital. Goodwill (9.34) and intangible assets (11.81) suggest prior investments/acquisitions contributing to scale; integration efficiency will influence margin trajectory. Outlook hinge points: sustenance of order momentum, seasonality in the education ICT market, and ability to normalize the tax rate. If revenue growth stabilizes at a lower double-digit run-rate while SG&A scales slower than sales, operating margin could expand from the current 8.7%. Absent detailed backlog or segment disclosure, we assume growth is primarily organic with potential boosts from installed-base upgrades and institutional procurement cycles.

Financial Health

Liquidity: Current ratio 141.9% and quick ratio 141.9% indicate adequate short-term coverage, above the critical 1.0 threshold (no warning) but slightly below the 1.5x comfort benchmark. Solvency: Total liabilities 67.73 vs equity 41.52 implies an equity ratio of ~38% (calculated), and reported D/E of 1.63x; however, cash (34.94) exceeds total loans (ST 5.91 + LT 11.21 = 17.12), implying net cash and cushioning leverage risk. Interest coverage is strong at 18.97x, reducing refinancing risk. Maturity mismatch: Current assets 62.93 exceed current liabilities 44.36, indicating low near-term rollover risk; accounts receivable (12.30) vs accounts payable (8.24) appear manageable. Off-balance sheet: No disclosures provided; cannot assess guarantees/commitments. No explicit warnings triggered (Current Ratio > 1.0 and D/E < 2.0).

Cash Flow Quality

OCF/Net Income at 3.69x signals high-quality earnings and strong cash conversion. Free cash flow is not fully reported; investing CF is N/A, but reported capex is modest at 0.14, suggesting low capital intensity. Financing CF was -3.36, indicating net outflows (potential debt repayment or dividends), consistent with confidence in liquidity. Working capital: Strong OCF alongside modest AR (12.30) and robust cash suggests timely collections; no signs of aggressive working capital release (e.g., unsustainably stretching payables) are evident from the limited data. With OCF comfortably exceeding net income, cash generation appears sustainable absent a sharp reversal in receivables or order timing.

Dividend Sustainability

The calculated payout ratio is 41.6%, below the 60% prudence threshold, indicating room for continued distributions. Although total dividends paid and FCF are unreported, strong OCF (8.38) and low capex (0.14) imply likely coverage of ordinary dividends. The balance sheet shows net cash, further supporting dividend capacity. Policy visibility is limited given the lack of DPS disclosures; any upward revision would depend on margin stabilization and tax normalization. Near-term sustainability: sound, provided earnings and cash conversion remain on track.

Risk Assessment

Business Risks:

• Potential margin pressure if SG&A scaling lags revenue growth (operating margin down ~56 bps YoY).
• Reliance on education ICT demand and public/institutional procurement cycles, which can be seasonal and lumpy.
• Pricing and competitive pressures in edtech solutions potentially eroding gross margin (45.1% currently).
• Execution risk around integration and utilization of acquired intangibles/goodwill (total 21.15).

Financial Risks:

• Reported D/E of 1.63x (though mitigated by net cash) could tighten if cash is deployed aggressively.
• Elevated effective tax rate (36.3%) dampens net margin and ROE; limited clarity on normalization.
• Goodwill (9.34) and intangibles (11.81) carry impairment risk if growth slows.
• Receivables concentration risk tied to institutional clients (AR 12.30) if collection cycles extend.

Key Concerns:

• Operating margin compression despite rapid sales growth.
• Limited disclosure on investing CF, dividends, and segment/backlog data limits visibility.
• Dependence on H1/H2 seasonality could skew interim results.
• Tax rate volatility impacting bottom-line leverage.

Investment Implications

Key Takeaways:

• Top-line acceleration (+84.6% YoY) with core-driven profit growth.
• OCF/NI of 3.69x highlights high earnings quality.
• Operating margin at 8.7% leaves room for improvement via SG&A discipline.
• Net cash position despite reported D/E of 1.63x supports flexibility.
• ROIC 10.9% is healthy and above common targets, while ROE at 5.5% can improve with margin expansion and tax normalization.

Metrics to Watch:

• Operating margin and SG&A/revenue ratio trajectory.
• Working capital turns (AR days) and OCF sustainability.
• Effective tax rate normalization path.
• Equity ratio and any change in net cash due to capital allocation.
• Order intake/backlog and seasonality cues into H2.

Relative Positioning: Within Japan small-cap edtech/ICT peers, the company combines rapid growth, strong cash conversion, and a net cash balance with mid-single-digit ROE and mid- to high-30s equity ratio; improving operating efficiency and tax rate could enhance competitiveness and capital returns.

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