CYND Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.22B
• Operating Income: ¥157M
• Net Income: ¥86M
• EPS: ¥14.28

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 double-digit top-line growth and modest operating margin expansion, underpinned by very strong cash conversion but tempered by low capital efficiency and a high intangible asset base. Revenue rose 13.1% YoY to 12.21, while operating income increased 15.6% YoY to 1.57, outpacing sales growth. Net income surged 56.3% YoY to 0.86, lifting the net margin to 7.0%. Operating margin improved to roughly 12.9%, up about 27 bps from an estimated ~12.6% a year ago. Net margin expanded by about 190 bps YoY (from ~5.1% to 7.0%), aided by stronger operating leverage and minimal non-operating drag. Gross margin remained high at 77.4%, supporting an EBITDA margin of 15.0% (EBITDA 1.83). Ordinary income reached 1.53 (+16.9% YoY), showing healthy core profitability with limited reliance on non-operating items (non-op income 0.03; expenses 0.07). Earnings quality was excellent: operating cash flow of 2.72 was 3.16x net income, indicating robust cash realization. Liquidity is strong with a current ratio of 314% and cash of 22.29 far in excess of current liabilities of 7.81. Leverage remains conservative (D/E 0.45x) and interest coverage is very strong at 22.6x. However, capital efficiency remains a key overhang: ROE is 2.5% and ROIC is 4.7% (below the 5% warning threshold), reflecting low asset turnover (0.247x) and a large intangible base. Intangible assets of 21.65 (including goodwill 20.22) represent roughly 44% of total assets (49.48), posing future impairment risk if growth underperforms. The effective tax rate is elevated at ~43.9%, dampening bottom-line conversion and a potential lever for future improvement if normalized. With minimal capex (0.03), implied FCF generation is strong near-term, offering flexibility for debt repayment or shareholder returns, though dividend data are unreported. Forward-looking, sustaining margin discipline and improving ROIC via better asset turns and scaling will be crucial, while monitoring tax rate normalization and goodwill impairment risk.

Profitability Analysis

ROE is decomposed as Net Profit Margin (7.0%) × Asset Turnover (0.247) × Financial Leverage (1.45x) = ~2.5%. The weakest component is asset turnover at 0.247x, which most constrains ROE despite acceptable leverage and an improved net margin. The business driver is a balance sheet heavy in intangibles (goodwill/intangibles totaling 21.65), depressing turns relative to the current revenue scale. Margin improvement appears modest but real—OI +15.6% vs revenue +13.1%—suggesting slight operating leverage and SG&A control (SG&A ratio 64.5%). This change is likely sustainable if growth continues and fixed costs are leveraged; however, the elevated tax rate (43.9%) caps net margin upside unless it normalizes. Non-operating items had a small net negative contribution (0.03 income vs 0.07 expense), largely interest expense, but strong interest coverage mitigates risk. A concerning trend to watch is the high SG&A intensity (64.5% of sales); without further scale, operating margin expansion could stall. Overall, ROE is low primarily due to low asset turnover; improving utilization of the intangible-heavy asset base is the key lever.

Growth Assessment

Revenue grew 13.1% YoY to 12.21, with operating income up 15.6% to 1.57, indicating modest positive operating leverage. Net income grew 56.3% to 0.86, materially outpacing sales due to margin expansion and controlled non-operating impacts. Gross margin remained high at 77.4%, underpinning profitability resilience. Operating margin rose about 27 bps YoY to ~12.9%, and net margin expanded ~190 bps to 7.0%, signaling improved cost absorption. EBITDA margin of 15.0% suggests healthy cash earnings quality alongside OCF strength. Given minimal capex needs (0.03), growth appears asset-light on a cash basis but accounting intangibles keep reported asset turns low. Sustainability hinges on continued topline momentum and SG&A discipline; any slowdown could compress margins given the high SG&A ratio (64.5%). The elevated effective tax rate is a headwind to EPS growth; any normalization would be a tailwind. With non-operating income/expense relatively small, growth is primarily driven by core operations. Outlook: cautiously positive if demand persists and overhead is contained, but capital efficiency must improve to lift ROE/ROIC.

Financial Health

Liquidity is strong: current ratio 314% and quick ratio 314%, with cash and deposits of 22.29 comfortably covering current liabilities of 7.81. No warnings on thresholds (Current Ratio well >1.0; D/E 0.45x well <2.0). Solvency is solid with total equity 34.01 vs total liabilities 15.47 (equity ratio derivable at ~68.7% from provided figures). Interest-bearing debt detail is limited, but long-term loans total 6.86, and interest coverage is 22.6x, indicating low refinancing risk. Maturity mismatch risk appears low given large cash vs current liabilities; short-term loans are unreported, but cash adequacy is strong. The balance sheet is intangible-heavy (intangible assets 21.65, goodwill 20.22), which does not aid liquidity and introduces impairment risk. Off-balance sheet obligations are not disclosed in the provided data.

Cash Flow Quality

OCF of 2.72 is 3.16x net income (0.86), indicating high-quality earnings and strong cash conversion. Capex is minimal at 0.03, implying an OCF–capex proxy FCF of ~2.69; however, full investing CF is unreported, so this is an approximation. Financing outflows of -1.07 suggest debt service or shareholder returns; specific dividend or buyback details are unreported. Working capital quality appears sound with negligible inventories and low accounts payable, but period-over-period movements are not available, limiting manipulation assessment. No red flags from OCF/NI (well above the 0.8 threshold). Cash generation comfortably supports routine capex and likely leaves capacity for dividends or debt reduction.

Dividend Sustainability

Dividend data (DPS, payout, total dividends) are unreported, so we assess capacity rather than policy. Cash generation is strong (OCF 2.72) versus minimal capex (0.03), implying ample room for distributions after operating needs, assuming no large investing outflows. Balance sheet flexibility is high given cash 22.29 and modest leverage (D/E 0.45x). Potential constraints include ROIC at 4.7% (below 5%) and an elevated effective tax rate, which may prioritize reinvestment to improve efficiency over higher payouts. Without disclosed DPS or payout targets, sustainability appears supported by cash flow, but policy outlook is indeterminate.

Risk Assessment

Business Risks:

• High SG&A intensity (64.5% of sales) could cap operating margin expansion if growth slows.
• Large intangible and goodwill balance (intangible 21.65; goodwill 20.22) increases impairment risk if performance underwhelms.
• Elevated effective tax rate (~43.9%) reduces net margin and EPS conversion.
• Low asset turnover (0.247x) limits ROE/ROIC improvement absent stronger scaling.

Financial Risks:

• Capital efficiency risk: ROIC at 4.7% is below the 5% warning level, potentially below cost of capital.
• Potential sensitivity to interest rates despite strong coverage; long-term loans of 6.86 could face higher refinancing costs.
• Concentration risk cannot be assessed due to limited disclosures; reliance on a few customers would elevate volatility (data not provided).

Key Concerns:

• Sustaining double-digit growth to leverage fixed costs and lift margins.
• Monitoring for goodwill impairment triggers given high goodwill-to-assets ratio (~41%).
• Tax rate normalization uncertainty affecting net margins.
• Data gaps (dividends, full investing CF, segment detail) limit visibility into payout capacity and growth investments.

Investment Implications

Key Takeaways:

• Top-line +13.1% with operating income +15.6% demonstrates modest positive operating leverage.
• Net margin expansion (~190 bps YoY) and strong OCF/NI (3.16x) indicate high-quality earnings.
• Liquidity is ample (current ratio 314%; cash 22.29 > current liabilities 7.81) and leverage conservative (D/E 0.45x).
• ROE 2.5% and ROIC 4.7% highlight capital efficiency as the main improvement area.
• Intangible-heavy balance sheet concentrates impairment risk and suppresses asset turns.

Metrics to Watch:

• ROIC trend (targeting >7–8% over time) and asset turnover improvement from 0.247x.
• Operating margin vs SG&A ratio (currently ~12.9% vs 64.5%).
• Effective tax rate trajectory from ~43.9%.
• Cash conversion (OCF/NI) and FCF after full investing CF, not just capex.
• Goodwill impairment indicators and intangible amortization burden.
• Debt profile and interest expense sensitivity despite strong coverage.

Relative Positioning: Within domestic small-cap tech/services peers, the company shows superior liquidity and solid mid-teens EBITDA margin with strong cash conversion, but lags on capital efficiency (ROE/ROIC) due to low asset turnover and a large intangible base; improving scalability and tax efficiency would be needed to converge toward higher-quality peer 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