Synchro Food Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.85B
• Operating Income: ¥362M
• Net Income: ¥210M
• EPS: ¥7.46

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 weak FY2026 Q2 with sharp profit compression despite healthy liquidity and strong operating cash conversion. Revenue declined 5.8% YoY to 18.52, while operating income fell 38.2% to 3.62, and net income dropped 46.9% to 2.09. Gross margin remained very high at 80.1%, but the operating margin contracted to 19.5%, implying significant deleveraging on SG&A. Based on the YoY rates, prior-year operating margin is estimated at ~29.8%, indicating an ~1,030 bps margin compression YoY. Net margin fell to 11.3% from an estimated ~20.0% last year, a contraction of ~870 bps. Ordinary income decreased 45.5% to 3.19, with ordinary margin now ~17.2%. Earnings quality, however, is solid this quarter: operating cash flow of 6.27 is 3.0x net income, signaling high cash conversion. EBITDA was 3.67 (margin 19.8%), and interest coverage is exceptionally strong at ~94x despite a notable long-term loan balance. The balance sheet shows total assets of 116.95 and equity of 47.08, implying an equity ratio of ~40.3% and a D/E of 1.48x (near the conservative threshold but not excessive). Liquidity is ample with a current ratio of 238% and cash and deposits of 36.94 covering all current liabilities 2.1x. Intangible intensity is high: goodwill of 53.03 (intangible assets 53.58) exceeds total equity, elevating impairment risk if growth stalls. ROE is subdued at 4.4% per DuPont (NPM 11.3% × AT 0.158 × leverage 2.48x), reflecting both profit compression and low asset turnover. ROIC is reported at 5.3%, below typical 7–8% targets, suggesting returns have slipped toward the warning zone. Financing cash inflow of 22.29 and share repurchases of 4.18 indicate active balance sheet management, but investing cash flows and DPS are unreported; the calculated payout ratio of 209% should be treated cautiously due to data gaps. Forward-looking, restoring operating margin through SG&A discipline and re-acceleration of topline will be key to improving ROE/ROIC and mitigating intangible asset risk.

Profitability Analysis

ROE decomposition (DuPont): ROE 4.4% = Net Profit Margin 11.3% × Asset Turnover 0.158 × Financial Leverage 2.48x. The largest adverse change YoY appears in the margin component: net margin fell from an estimated 20.0% to 11.3% (-870 bps), while operating margin fell from 29.8% to 19.5% (-1,030 bps). Business driver: SG&A grew unfavorably relative to revenue (exact SG&A YoY not disclosed), eroding operating leverage despite a stable gross margin profile typical of a platform/marketplace model. Asset turnover is structurally low at 0.158, reflecting a balance sheet heavy in goodwill/intangibles from past M&A, which depresses turnover on an accounting basis. Leverage at 2.48x is moderate and not the primary driver of the ROE drop. Sustainability: the margin compression could partially reverse if current SG&A reflects upfront growth investments; however, without disclosed SG&A breakdown, sustainability is uncertain. Concerning trends: profit contraction (-38% OI vs -6% revenue) indicates negative operating leverage; watch if SG&A growth continues to outpace revenue or if customer acquisition/retention costs remain elevated.

Growth Assessment

Topline contracted 5.8% YoY to 18.52, indicating demand softness or deliberate pruning of lower-margin lines. Operating income declined 38.2% and net income 46.9%, evidencing significant deleveraging and potential mix/price pressure. Non-operating items were modest (non-op income 0.09, expenses 0.51), so the earnings drop is predominantly operational. With EBITDA margin at 19.8% and OCF strong, the core franchise still monetizes, but growth efficiency deteriorated. Given the high goodwill balance, past M&A-driven growth requires renewed organic momentum to avoid impairment risk. Outlook depends on re-accelerating revenue in H2 and tightening SG&A; without improvement, ROE/ROIC will remain subpar.

Financial Health

Liquidity: current ratio 238.1% and quick ratio 237.3% are strong; no warning triggers (both >1). Solvency: D/E at 1.48x is at the conservative upper bound but acceptable; equity ratio ~40.3% supports resilience. Interest coverage is very strong at ~93.9x, indicating manageable debt service. Maturity profile: current liabilities 17.98 are well covered by cash 36.94 and current assets 42.81; noncurrent liabilities are sizable at 51.88 with long-term loans 34.29, implying refinancing/interest-rate exposure over the medium term but limited short-term mismatch risk. Off-balance items: none disclosed. Intangible concentration: goodwill 53.03 exceeds equity (goodwill/equity ~113%), heightening impairment sensitivity to underperformance.

Cash Flow Quality

OCF/Net income is 3.00x (>1.0), a positive signal for earnings quality this quarter. Working capital indicators: accounts receivable 2.17 and inventory 0.14 are small relative to revenue and cash, consistent with a low-working-capital, platform-like model; no signs of aggressive working capital release are evident from reported items. Free cash flow cannot be precisely calculated due to missing investing CF, though reported capex is minimal (-0.01), suggesting FCF likely positive given OCF strength. Financing CF inflow of 22.29 alongside share repurchases of 4.18 suggests net debt issuance or other financing activities; this supports liquidity but should not mask underlying profitability trends.

Dividend Sustainability

Dividend data are largely unreported; the calculated payout ratio of 209.0% conflicts with the absence of DPS details and should be treated cautiously. With OCF strong and capex light, normalized FCF capacity appears adequate for modest dividends; however, without disclosed total dividends and investing CF, coverage cannot be verified. Given profit compression and ROE at 4.4%, sustaining a high payout would risk underinvestment or balance sheet strain; policy clarity is needed from management updates.

Risk Assessment

Business Risks:

• Revenue contraction (-5.8% YoY) and pronounced operating margin compression (~-1,030 bps) suggest weakened operating leverage.
• High goodwill/intangible concentration (goodwill 53.03 > equity 47.08) increases impairment risk if growth/returns do not recover.
• Dependence on SG&A efficiency; lack of SG&A breakdown obscures cost pressures (e.g., marketing, personnel).
• Potential end-market cyclicality in restaurant/food-service related advertising/recruitment/listing demand.
• Execution risk in monetization and retention if customer acquisition costs are rising.

Financial Risks:

• Leverage near the conservative threshold (D/E 1.48x) with sizable long-term loans (34.29), exposing the company to refinancing and interest rate risk.
• ROIC at 5.3% is below target levels (7–8%), risking value dilution if WACC is not covered.
• Intangible asset impairments would directly hit equity and covenants if any exist (not disclosed).

Key Concerns:

• Sustained profit pressure with limited visibility on SG&A drivers.
• Goodwill exceeding equity (~113%) magnifies downside in a downside scenario.
• Data gaps (dividends, investing CF, SG&A detail) limit assessment of capital allocation and cost structure.

Investment Implications

Key Takeaways:

• Core cash generation is robust (OCF/NI 3.0x), but profitability has deteriorated sharply.
• Operating margin fell to ~19.5% from ~29.8% YoY; rapid SG&A normalization is required to stabilize earnings.
• Balance sheet liquidity is strong (current ratio ~2.38x), but intangibles dominate assets and exceed equity.
• ROE (4.4%) and ROIC (5.3%) sit below desirable levels, underscoring the need for revenue re-acceleration and cost control.
• Financing inflows and buybacks indicate active capital management; sustainability hinges on underlying profit recovery.

Metrics to Watch:

• Operating margin and SG&A-to-revenue ratio (discipline vs growth spend).
• OCF/NI and working capital movements (sustainability of cash conversion).
• ROIC vs WACC and asset turnover (particularly given high goodwill).
• Goodwill impairment indicators and intangible-to-equity ratio.
• Net debt trend and interest expense trajectory amid rate environment.
• Topline growth re-acceleration in H2 and any pricing/mix improvements.

Relative Positioning: Versus domestic digital-platform peers, liquidity and cash conversion are strengths, but the combination of declining revenue, sharp margin compression, and high goodwill intensity leaves the company relatively weaker on profitability quality and balance-sheet tangibility until operating metrics recover.

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