M - mart Inc. FY2026 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥1.01B
• Operating Income: ¥462M
• Net Income: ¥303M
• EPS: ¥61.99

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

Verdict: Strong quarter with accelerating profitability and robust balance sheet, underpinned by operating leverage and a sizable net cash position. Revenue grew 6.2% year over year to 10.08 (100M JPY), while operating income rose 27.1% to 4.62 (100M JPY), and net income increased 27.8% to 3.03 (100M JPY). Operating margin improved to 45.8% from approximately 38.3% a year ago, an expansion of about 750 basis points. Net margin rose to 30.1% from roughly 25.0% a year ago, an expansion of about 510 basis points. Ordinary income was 4.64 (100M JPY), up 27.9% YoY, with an ordinary margin around 46.0%, up roughly 770 basis points YoY. The effective tax rate was 34.6%, which is on the higher side and partially offsets bottom-line leverage. DuPont ROE is calculated at 15.0% (Net Profit Margin 30.1% × Asset Turnover 0.336 × Financial Leverage 1.49x), reflecting margin strength with modest leverage. Liquidity is very strong: current ratio 304.9% and quick ratio 304.9%, supported by cash and deposits of 22.22 (100M JPY) against current liabilities of 8.47 (100M JPY). Debt-to-equity stands at 0.42x, conservative by typical benchmarks. Earnings quality cannot be fully assessed because operating cash flow and free cash flow were not disclosed; this is a limitation rather than a red flag. Nonetheless, the large net cash position provides a buffer against cash flow variability. The implied payout ratio is 33.9%, suggesting room to maintain or modestly grow dividends, though actual DPS was not disclosed. Non-operating income and expenses were negligible, indicating profit growth is largely operational. Forward-looking, the key focus is sustaining the improved margin structure while monitoring the high tax rate and potential reinvestment needs. Given the asset-light profile and low receivables (0.44 (100M JPY)), working capital discipline appears tight. Overall, the quarter demonstrates healthy top-line growth translating into outsized profit gains, with a strong balance sheet positioning the company well for continued disciplined expansion.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin 30.1% × Asset Turnover 0.336 × Financial Leverage 1.49x = ROE 15.0%. The most material change vs last year appears in the margin component: operating margin expanded by about 750 bps (from ~38.3% to 45.8%), and net margin expanded by about 510 bps (from ~25.0% to 30.1%), while leverage remains modest. Business drivers likely include operating leverage on a largely fixed-cost base (evidenced by revenue +6.2% vs operating income +27.1%) and limited drag from non-operating items. Asset turnover of 0.336 suggests an asset-light model, with significant cash holdings depressing turnover; a change here is unlikely the primary ROE driver this quarter. The margin expansion looks operational (lower relative SG&A intensity and possibly pricing/take-rate discipline), which could be partially sustainable if volume growth and cost control persist. Risks to sustainability include potential reinvestment in growth (sales/marketing, platform, IT security) that could raise SG&A ahead of revenue and normalize margins. Concerning trend check: none evident from disclosed data; importantly, revenue growth (6.2%) was outpaced by operating profit growth (27.1%), indicating positive operating leverage rather than SG&A growth pressure.

Growth Assessment

Revenue growth of 6.2% YoY to 10.08 (100M JPY) indicates steady expansion, likely volume-led with stable pricing given limited non-operating effects. Profit growth outpaced sales (operating income +27.1%, net income +27.8%), pointing to improved unit economics and cost efficiency. Margin gains (operating +750 bps YoY; net +510 bps YoY) suggest favorable mix or scale benefits on a relatively fixed cost base. Ordinary income tracked operating income, indicating limited reliance on financial items. While the momentum is positive, the durability of margin expansion depends on maintaining growth without materially increasing SG&A intensity and on keeping the tax rate from rising further. With many cost-line disclosures unreported (COGS, gross profit, SG&A detail), the exact sources of efficiency are unclear, so we treat part of the expansion as potentially cyclical. Medium-term outlook is supported by an asset-light balance sheet, strong cash reserves, and absence of material financing costs, enabling continued selective investment in platform capabilities.

Financial Health

Liquidity is robust: current ratio 304.9% and quick ratio 304.9%, well above healthy thresholds. There is no warning for Current Ratio < 1.0 or D/E > 2.0; the reported D/E is 0.42x, indicating a conservative capital structure. Cash and deposits of 22.22 (100M JPY) comfortably exceed current liabilities of 8.47 (100M JPY), minimizing short-term refinancing risk. Maturity mismatch risk appears low given high liquid assets; noncurrent liabilities were unreported, but total liabilities are entirely classified as current in the dataset, further emphasizing the importance of the cash buffer. Interest-bearing debt details were not disclosed; however, given strong liquidity and low D/E, solvency risk is limited. Note: Some balance sheet subtotals may not fully reconcile due to unreported line items and rounding; this is a disclosure limitation rather than a definitive inconsistency. No off-balance sheet obligations were mentioned in the provided data.

Cash Flow Quality

Operating cash flow, investing cash flow, and free cash flow were not disclosed, so OCF/Net Income and FCF coverage cannot be calculated. As a result, we cannot validate earnings quality via cash conversion metrics or identify working capital-driven earnings management. Available balance-sheet signals are supportive: accounts receivable are low at 0.44 (100M JPY) relative to quarterly revenue, implying tight collections, and no inventories were reported (likely minimal for an asset-light platform model). The sizable net cash position provides a cushion to fund operations and investments even if cash conversion were temporarily weak. Without capex and OCF data, FCF sustainability for dividends and growth capex cannot be fully assessed; monitor upcoming filings for cash flow statements and capex disclosures.

Dividend Sustainability

Payout ratio is calculated at 33.9% based on reported EPS and net income, which is comfortably below the 60% benchmark for sustainability. Actual DPS and total dividends paid were not disclosed, so cash coverage (FCF/Dividends) cannot be computed. Given strong liquidity (cash 22.22 (100M JPY)) and no visible strain from financing costs, dividends appear supportable under current earnings, assuming normalized capex needs. Policy outlook is unclear due to lack of guidance; with ROE at 15.0% and a net cash balance, the company retains flexibility to balance reinvestment with shareholder returns.

Risk Assessment

Business Risks:

• Margin normalization risk if SG&A needs to scale ahead of revenue to support growth (sales, marketing, platform investments).
• Platform competition potentially pressuring take rates and transaction volumes.
• Customer concentration or vertical concentration risk typical of niche B2B marketplaces.
• Operational risks including cybersecurity, system outages, and data privacy affecting platform reliability.
• Regulatory or compliance changes impacting digital marketplaces and data handling.

Financial Risks:

• Earnings quality uncertainty due to unreported operating cash flow and capex.
• High effective tax rate (34.6%) dampening net profitability and sensitive to policy changes.
• Potential classification/maturity concentration with all liabilities shown as current (disclosure-driven), necessitating strong cash management.
• Interest rate and deposit yield volatility affecting returns on large cash balances.

Key Concerns:

• Limited disclosure of COGS, gross margin, and SG&A details obscures drivers of margin expansion.
• Inability to calculate OCF/Net Income and FCF coverage for dividends.
• Possible future investment needs (IT/security/platform scaling) could weigh on margins if growth slows.

Investment Implications

Key Takeaways:

• Solid top-line growth (+6.2% YoY) translated into outsized operating profit growth (+27.1%).
• Substantial margin expansion: operating margin up ~750 bps YoY; net margin up ~510 bps YoY.
• ROE at 15.0% is driven primarily by high net margin, with modest leverage (1.49x).
• Balance sheet is strong with current ratio ~305% and significant net cash.
• Non-operating items are negligible; profit growth is operational in nature.
• Dividend capacity appears adequate with a 33.9% payout ratio, pending FCF confirmation.

Metrics to Watch:

• Operating cash flow and free cash flow conversion (OCF/Net Income > 1.0 target).
• SG&A intensity and operating margin trajectory as growth investments scale.
• Effective tax rate trend and any one-off tax items.
• Accounts receivable turnover and any buildup in receivables.
• User/merchant activity metrics and take rate (for marketplace health).
• Capex requirements for platform and security.
• Dividend policy disclosures (DPS, payout, and any share repurchases).

Relative Positioning: Asset-light, high-margin B2B marketplace with strong net cash and conservative leverage, offering better profitability and liquidity resilience than many peers, contingent on sustaining operating leverage and maintaining platform competitiveness.

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