IPS HOLDINGS CO.,LTD. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥742M
• Operating Income: ¥60M
• Net Income: ¥18M
• EPS: ¥15.03

Income Statement

Balance Sheet

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

IPS Holdings (4335) delivered a solid FY2026 Q1 profit rebound despite top-line softness. Revenue declined 7.5% YoY to 7.42, but operating income more than doubled to 0.60 (+125.1% YoY), lifting profitability materially. Gross profit reached 1.96, implying a gross margin of 26.5%. Operating margin expanded to 8.1%, up approximately 477 bps YoY by our reconstruction. Ordinary income rose 129.9% YoY to 0.59, with ordinary margin improving roughly 475 bps to 8.0%. Net income increased 95.4% YoY to 0.34, taking the net margin to 4.6%, up about 241 bps YoY. The margin gains came despite a lighter revenue base, pointing to strong cost control and operating leverage. SG&A of 1.70 equates to a 22.9% ratio to sales; prior-year SG&A is unreported, but the uplift in operating margin suggests improved expense discipline and/or mix. Non-operating items were negligible (net -0.01), indicating earnings quality leaned on core operations this quarter rather than one-offs. Balance sheet strength is notable: cash and deposits of 13.02 cover all current liabilities (6.35) 2.1x, and the current ratio stands at 321.5%. Leverage is moderate with D/E at 0.65x and no disclosed interest-bearing debt breakdown; interest expense is minimal. Cash flow data are unreported, so we cannot validate earnings conversion to cash; this is the key limitation to our quality assessment. A calculated payout ratio of 275.6% (methodology unclear) looks elevated and likely not comparable to a quarterly result; dividend data are otherwise unreported. Forward-looking, sustaining the improved margin profile while reaccelerating revenue will be critical; cost discipline appears to be gaining traction, but durability needs confirmation as volumes recover. Net margin and ROE (2.1% for the quarter via DuPont) improved with margin gains, but full-year returns will depend on volume normalization and cost containment. Overall, Q1 prints as a positive inflection on profitability with strong liquidity and conservative leverage, tempered by missing cash flow visibility and revenue contraction.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 4.6% × 0.277 × 1.65 ≈ 2.1%. The largest positive driver QoQ/YoY is the net profit margin, which improved to 4.6% from roughly 2.2% a year ago (net income 0.34 vs ~0.17 on higher prior revenue), reflecting operating margin expansion to 8.1% (from ~3.3%). Asset turnover at 0.277 is modest, consistent with a cash-rich balance sheet and small scale; we lack prior-period turnover to quantify the change. Financial leverage at 1.65x is moderate and stable given D/E of 0.65x. Business drivers: the margin lift likely stems from tighter SG&A control (SG&A/sales 22.9%) and better gross margin mix (26.5%), alongside negligible non-operating drag, amplifying operating leverage even on lower sales. Sustainability: structural SG&A discipline can persist; however, with revenue down 7.5% YoY, sustained margin gains may require continued mix/pricing execution and cost discipline—some operating leverage could reverse if volumes remain weak. Flags: revenue contraction alongside strong SG&A relative to sales warrants monitoring; we cannot verify whether SG&A grew faster than revenue YoY due to unreported prior SG&A.

Growth Assessment

Top-line declined 7.5% YoY to 7.42, indicating demand softness or timing effects. Despite this, operating income rose 125.1% YoY to 0.60, showing strong operating leverage from cost controls and/or improved mix. Ordinary income (+129.9% YoY) and net income (+95.4% YoY) followed suit, with net margin expanding by ~241 bps YoY to 4.6%. Gross margin is 26.5%; prior gross margin is unreported, but operating margin expansion of ~477 bps confirms profitability gains. Non-operating contributions were negligible (interest income/expense near zero), suggesting the improvement is core-driven. Outlook: sustaining profitability will hinge on stabilizing revenue, maintaining SG&A discipline, and protecting gross margin through pricing/mix. With cash of 13.02 and strong liquidity, the company has room to invest in growth initiatives; however, absent cash flow and order/backlog data, near-term revenue trajectory uncertainty remains.

Financial Health

Liquidity is strong: current ratio 321.5% and quick ratio 321.5%, with cash of 13.02 covering current liabilities of 6.35 by 2.1x. No warning on current ratio (<1.0) or D/E (>2.0); D/E is 0.65x (conservative). Maturity mismatch risk appears low given current assets (20.41) comfortably exceed current liabilities (6.35). Interest coverage is effectively very high (reported 3333x), supported by minimal interest expense. Off-balance sheet obligations are not disclosed; no information on lease liabilities or guarantees. Noncurrent liabilities of 4.23 are manageable relative to total assets (26.83) and equity (16.26). Overall solvency is sound with ample liquidity buffer.

Cash Flow Quality

Operating, investing, and financing cash flows are unreported, so OCF/Net Income and FCF cannot be assessed. Therefore, we cannot determine earnings-to-cash conversion or working capital-driven distortions this quarter. Balance-sheet proxies indicate reasonable working capital efficiency: accounts receivable of 2.73 vs quarterly sales of 7.42 implies an estimated DSO of ~33 days; accounts payable of 1.48 vs cost of sales of 6.07 implies an estimated DPO of ~22 days. Inventory is unreported, so cash conversion cycle cannot be completed. With sizeable cash reserves (13.02), near-term liquidity is not a concern, but FCF sustainability remains unverified without OCF and capex data.

Dividend Sustainability

Dividend data are largely unreported. A calculated payout ratio of 275.6% is flagged in the dataset, but methodology is unclear (and quarterly NI vs annual DPS can distort the ratio), so its interpretive value is limited. FCF coverage is not calculable due to missing OCF and capex. Balance sheet capacity for dividends is adequate in the short term given cash of 13.02 and low leverage; however, sustainable dividends require positive, recurring FCF, which we cannot confirm. Absent formal guidance or DPS disclosure, we view visibility on dividend sustainability as low this quarter.

Risk Assessment

Business Risks:

• Revenue contraction (-7.5% YoY) indicates demand softness or timing risk affecting near-term growth.
• Margin sustainability risk if mix/pricing benefits fade or if SG&A creeps up with growth.
• Small scale (total assets 26.83) increases sensitivity to customer concentration and project timing.
• Intangible assets (1.94) introduce potential impairment risk if acquired businesses underperform.

Financial Risks:

• Cash flow visibility risk due to unreported OCF and capex; FCF sustainability cannot be verified.
• Potential hidden leverage if lease liabilities or off-balance sheet obligations exist (not disclosed).
• Interest rate risk is low currently given minimal interest expense, but funding structure is unreported.

Key Concerns:

• Earnings quality cannot be validated without cash flow data (OCF/NI unknown).
• Calculated payout ratio appears elevated (275.6%) but lacks clarity; dividend policy and coverage uncertain.
• Dependency on continued cost discipline to uphold margins while revenue is declining.

Investment Implications

Key Takeaways:

• Profitability inflected positively: operating margin expanded ~477 bps YoY to 8.1% despite lower sales.
• Core-driven improvement with negligible non-operating impact; quality of profit appears better, pending CF.
• Balance sheet strong: current ratio 321.5%, D/E 0.65x, cash covers current liabilities 2.1x.
• Revenue softness (-7.5% YoY) remains the main overhang; growth visibility is limited.
• Dividend outlook unclear due to missing DPS/FCF data and an opaque payout ratio figure.

Metrics to Watch:

• Revenue trajectory and order/backlog indicators in Q2–Q3.
• Gross margin and SG&A-to-sales ratio to assess durability of margin gains.
• Operating cash flow and capex to confirm FCF generation and dividend capacity.
• AR and AP days (DSO/DPO) and any inventory disclosure for working capital health.
• Any updates on dividend policy or guidance.
• Tax rate stability (32.5% this quarter) and its impact on net margin.

Relative Positioning: Within small-cap peers, IPS shows improving operating efficiency and conservative leverage, but lags on disclosure depth (cash flow and dividend details) and faces near-term growth headwinds from a declining top line.

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