CHUKYO IYAKUHIN CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥3.32B
• Operating Income: ¥32M
• Net Income: ¥28M
• EPS: ¥2.66

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

Chukyo Yakuhin Co., Ltd. (45580) reported FY2026 Q2 standalone results under JGAAP with moderate top-line growth and slim but improving profitability. Revenue rose 4.7% year over year to ¥3,321 million, supported by a high gross profit margin of 53.7% that suggests a relatively defensible pricing/mix in its product portfolio. Operating income increased 71.1% YoY to ¥32 million, translating to an operating margin of approximately 1.0%, indicating still-lean earnings leverage but a clear recovery trend. Ordinary income reached ¥41 million and net income ¥28 million, with a net margin of 0.84%, reflecting limited bottom-line conversion of gross profits. DuPont analysis shows ROE at 1.10%, driven by a low net margin (0.84%), modest asset turnover (0.618x), and moderate financial leverage (about 2.12x). Gross profitability appears solid relative to the low operating margin, implying elevated SG&A intensity or insufficient scale to absorb overhead. EBITDA was ¥59 million, implying an EBITDA margin of roughly 1.8%, which remains thin for the sector, underscoring constrained operating leverage. Interest coverage is 8.9x (operating income/interest expense), suggesting manageable interest burden at current earnings levels. Liquidity looks comfortable with a current ratio of 167% and a quick ratio of 138%, supported by working capital of about ¥1,174 million. The balance sheet indicates total assets of ¥5,378 million and total equity of ¥2,538 million, implying an equity ratio of roughly 47% (computed), despite the reported equity ratio field showing 0.0% (treated as unreported). Cash flow from operations was negative at ¥203 million despite positive net income, yielding an OCF/NI ratio of -7.25, which flags near-term cash conversion challenges, likely from working capital outflows. Financing cash flow was a net inflow of ¥371 million, consistent with external funding offsetting operating cash needs. Investing cash flow and cash/equivalents were shown as zero, which should be interpreted as not disclosed and not as actual zero values; therefore, free cash flow cannot be reliably determined from the provided data. The company did not pay dividends (DPS ¥0), resulting in a payout ratio of 0%, which conserves cash amid weak operating cash generation. Overall, the quarter demonstrates resilient gross margins and improving operating profit, but persistent cash conversion weakness and modest ROE constrain the quality of earnings. Management’s ability to improve SG&A efficiency, stabilize working capital, and enhance operating leverage will be pivotal for sustaining profit growth and improving returns.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 0.84%
• asset_turnover: 0.618x
• financial_leverage: 2.12x (Assets/Equity ≈ 5,378/2,538)
• calculated_ROE: 1.10%
• commentary: ROE is primarily constrained by a very low net margin. Asset turnover is modest for a distributor/marketer model, and leverage is moderate, offering limited ROE amplification. margin_quality:
• gross_margin: 53.7%
• operating_margin: 0.96% (Operating income ¥32m / Revenue ¥3,321m)
• ordinary_margin: 1.23% (Ordinary income ¥41m / Revenue ¥3,321m)
• net_margin: 0.84%
• insights: High gross margin against a sub-1% operating margin indicates heavy SG&A burden or underutilized scale. The spread between gross and operating margins suggests meaningful operating efficiency opportunity. operating_leverage: EBITDA margin is 1.8% and operating margin ~1.0%, indicating limited operating leverage. The 71% YoY increase in operating income on 4.7% revenue growth implies some fixed-cost leverage, but from a low base; sustained revenue growth and SG&A discipline are required to translate high gross margins into bottom-line gains.

Growth Assessment

revenue_sustainability: Top-line growth of 4.7% YoY appears steady; with high gross margin, product mix and pricing seem supportive. However, without segment breakdown, sustainability drivers (volumes vs. price) are unclear. profit_quality: Net income improved 66.1% YoY to ¥28m, but cash earnings quality is weak with OCF at -¥203m. EBITDA and operating margins remain thin, indicating that profit growth is fragile and reliant on SG&A control. outlook: If management stabilizes working capital and improves SG&A efficiency, incremental revenue could yield outsized operating profit gains. Conversely, continued working capital drag or input cost inflation could pressure cash and limit profit scalability.

Financial Health

liquidity:

• current_ratio: 167.1%
• quick_ratio: 138.2%
• working_capital: ¥1,174,161,000
• commentary: Near-term liquidity is sound on reported balances, though negative OCF suggests liquidity relies on balance-sheet resources and financing inflows. solvency:
• debt_to_equity: 1.00x
• interest_coverage: 8.9x (Operating income/Interest expense)
• equity_ratio_computed: ≈47.2% (2,538/5,378), treating the reported 0.0% equity ratio as not disclosed
• commentary: Moderate leverage and adequate interest coverage mitigate solvency risk at current earnings, but persistent OCF deficits could erode this cushion. capital_structure: Assets ¥5.38bn funded roughly half by equity and half by liabilities. The financing inflow of ¥371m suggests increased borrowings or similar funding to support operations and working capital.

Cash Flow Quality

earnings_quality: OCF/Net income is -7.25, indicating poor cash conversion in the period. This likely reflects working capital outflows (e.g., receivables build or inventory increases), rather than non-cash profit inflation, given low D&A (¥27m) and thin margins. FCF_analysis: Investing CF is presented as 0, which should be treated as undisclosed; thus, true capex and free cash flow cannot be determined. On an indicative basis, negative OCF suggests FCF likely negative absent asset disposals. working_capital: Inventories stand at ¥506m; with current assets of ¥2,925m and current liabilities of ¥1,751m, the company holds a sizable net working capital position. The swing to negative OCF alongside financing inflows points to a working capital build in the half.

Dividend Sustainability

payout_ratio_assessment: Payout ratio is 0% with DPS at ¥0. Given negative OCF and thin operating margins, retaining earnings appears prudent to preserve liquidity. FCF_coverage: FCF coverage cannot be assessed reliably because investing cash flows are not disclosed. Based on negative OCF, coverage would likely be insufficient for a sustained dividend at this stage. policy_outlook: Resumption of dividends would likely require sustained positive OCF, improved operating margin, and better working capital discipline. Management may prioritize balance-sheet strength over distributions near term.

Risk Assessment

Business Risks:

• Low operating margin leaves limited buffer against input cost or SG&A inflation.
• Revenue concentration risks if dependent on specific products or channels (not disclosed).
• Execution risk in improving SG&A efficiency to unlock operating leverage.
• Potential pricing pressure in healthcare-related distribution/marketing.
• Supply chain or procurement volatility affecting gross margin sustainability.

Financial Risks:

• Negative operating cash flow necessitating reliance on external financing.
• Working capital volatility (receivables/inventories) impacting cash conversion.
• Exposure to interest rate increases given financing inflows and 1.00x D/E.
• Thin interest coverage if operating profit softens.

Key Concerns:

• Sustained negative OCF despite positive earnings.
• Sub-1% operating margin amid high gross margin, implying SG&A pressure.
• Dependence on financing inflows to fund operations in the period.

Investment Implications

Key Takeaways:

• Top-line growth of 4.7% with high gross margin (53.7%) shows revenue resilience and favorable mix.
• Operating income up 71% YoY but margin still ~1.0%, highlighting limited operating leverage to date.
• ROE is low at 1.10%, constrained by thin net margin despite moderate leverage.
• Negative OCF (¥203m) contrasts with positive earnings, indicating cash conversion challenges.
• Liquidity appears adequate (current ratio 167%), but cash burn was financed by ¥371m in financing inflows.

Metrics to Watch:

• Operating margin progression and SG&A ratio to sales.
• Cash conversion cycle: days receivable, inventory turns, and payable terms.
• OCF trajectory and capex disclosures to assess true FCF.
• Interest coverage and net debt trend post-financing inflow.
• Gross margin stability amid input cost or pricing changes.

Relative Positioning: Within domestic small-cap healthcare distribution/consumer health peers, the company exhibits strong gross margin but weaker operating margins and cash conversion, implying below-average earnings quality yet potential operating leverage if cost discipline improves.

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
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