DUSKIN CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥95.08B
• Operating Income: ¥4.69B
• Net Income: ¥4.27B
• EPS: ¥90.47

Income Statement

Balance Sheet

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

Verdict: Solid top-line growth and clear margin expansion drove a strong FY2026 Q2 performance for Duskin, albeit with low capital efficiency and elevated reliance on non-operating income. Revenue grew 3.7% YoY to 950.8, while operating income rose 19.5% YoY to 46.9, outpacing sales growth. Net income increased 21.7% YoY to 42.5, lifting net margin to 4.5%. Operating margin improved to 4.9% (46.9/950.8), up roughly 65 bps from an estimated 4.3% in the prior-year period. Net margin also expanded by about 66 bps (from ~3.8% to 4.5%), helped by higher ordinary income. Non-operating income was sizable at 19.9 versus non-operating expenses of 1.1, contributing approximately 46.8% of net income, a noteworthy support to the bottom line. Gross margin stood at 44.4%, and the SG&A ratio was 39.4%, indicating positive operating leverage as revenue growth exceeded fixed-cost growth. ROE calculated at 2.8% remains modest, constrained by low asset turnover (0.473x) and deliberately low financial leverage (1.31x). Balance sheet strength is a clear positive: equity totals 1,536.7 (equity ratio ~76%), cash and deposits are 161.4, and interest-bearing debt appears de minimis (reported long-term loans of 0.03). Liquidity is adequate with a current ratio of 146.5% and quick ratio of 123.8%, though just shy of the >150% “healthy” benchmark. The effective tax rate was 35.9%, a headwind to net margin. Cash flow data were not disclosed, limiting earnings quality assessment (OCF/NI not calculable). The reported payout ratio of 126.6% looks stretched versus earnings, raising sustainability questions absent FCF disclosure. Forward-looking, the key watch-points are sustaining operating margin gains, reducing dependence on non-operating income, and improving ROIC (currently 2.2%, below the 5% warning threshold). Overall, the quarter was operationally better with expanding margins and strong balance sheet resilience, but capital efficiency and dividend coverage warrant scrutiny.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 4.5% × 0.473 × 1.31 ≈ 2.8%. The biggest change driver YoY appears to be net margin expansion, given operating income grew 19.5% versus revenue at 3.7% and leverage stayed low. Operating margin improved from ~4.28% (prior-year estimate) to 4.93% (+65 bps), indicating operating leverage from SG&A discipline and/or mix improvement. Asset turnover is low at 0.473x, consistent with a cash-rich, securities-heavy balance sheet; no evidence of a meaningful YoY lift. Financial leverage remains conservative at ~1.31x, unchanged in direction and not a ROE driver. Business reason for margin gains likely includes efficiency gains in SG&A (SG&A ratio 39.4%) and better gross margin capture (44.4%), possibly aided by pricing/mix and moderated input cost pressure; non-operating income also supported ordinary income. Sustainability: operating margin gains are more durable if tied to structural cost control, but the current quarter’s bottom line relied materially on non-operating income (46.8% of NI), which is less controllable. Concerning trends: capital efficiency is weak (ROIC 2.2% vs 7–8% target for quality operators), and if SG&A growth re-accelerates above revenue, operating leverage could reverse.

Growth Assessment

Revenue rose 3.7% YoY to 950.8, a steady but not high-growth pace for a mature franchise/service portfolio. Operating income growth of 19.5% suggests improved cost efficiency and/or pricing/mix tailwind. Ordinary income of 65.7 (+19.4% YoY) benefited from non-operating gains (19.9) such as interest (1.79) and dividends (2.38). Net income rose 21.7% to 42.5, with net margin at 4.5%. Profit quality is mixed: core operating profit improved, but the contribution from non-operating income is large at 46.8% of NI. Without cash flow data, we cannot validate whether working capital or accruals amplified earnings. Outlook considerations: margin preservation amid wage and input cost dynamics, franchise/store productivity, and the return environment on investment securities (715.1) which can influence non-operating and comprehensive income. Given low asset turnover, growth via asset-light initiatives and store-level productivity would be more ROIC-accretive than balance-sheet expansion. Overall, revenue growth looks sustainable at low-single digits, but profit trajectory will hinge on maintaining operating discipline and reducing reliance on financial income.

Financial Health

Liquidity is adequate: current ratio 146.5% (>1.0 benchmark) and quick ratio 123.8% (>1.0), though the current ratio is slightly below the >150% ‘healthy’ reference. No warning on Current Ratio <1.0. Solvency is strong: total equity 1,536.7 versus total liabilities 475.2 (equity ratio ~76.4%), and reported long-term loans are negligible at 0.03. Debt-to-equity is 0.31x (conservative), though interest-bearing debt details are unreported; cash and deposits of 161.4 imply net cash. Maturity mismatch risk appears low: current assets 561.1 comfortably exceed current liabilities 383.0 (working capital 178.1). Off-balance sheet obligations are not disclosed; none can be assessed from the data provided.

Cash Flow Quality

OCF was not disclosed, so OCF/Net Income and FCF cannot be calculated; this is a key limitation to assessing earnings quality. Absence of cash flow data prevents validation of working capital discipline and cash conversion. Dividend coverage by FCF cannot be assessed. Given the large investment securities balance (715.1) and material non-operating income, headline earnings could diverge from cash flows if income stems from non-cash or market-related items; this requires monitoring when CF statements are released. No clear signs of working capital manipulation can be assessed without CF detail; receivables (120.0) and inventories (87.0) levels are visible but turnover metrics are not computable from quarterly data provided.

Dividend Sustainability

The calculated payout ratio of 126.6% exceeds the <60% sustainability benchmark, indicating potential pressure if this reflects the current earnings base; however, DPS and total dividends paid were not disclosed. With OCF and FCF unreported, we cannot confirm cash coverage for dividends. Balance sheet strength (net cash, high equity ratio) provides near-term flexibility to maintain dividends, but structurally low ROE (2.8%) and ROIC (2.2%) argue for careful capital allocation. Policy outlook likely hinges on management’s stance toward stable shareholder returns versus reinvestment needs; absent FCF, we flag the payout as potentially unsustainably high if maintained at this level.

Risk Assessment

Business Risks:

• Cost inflation risk in labor and raw materials affecting gross margin and SG&A leverage
• Franchise/store productivity risk in core cleaning services and food (e.g., Mister Donut) segments
• Competitive intensity in domestic service and quick-service food markets impacting pricing power
• Execution risk on efficiency programs needed to sustain recent margin gains

Financial Risks:

• High dependence on non-operating income (46.8% of NI) which is less controllable and potentially volatile
• Investment securities valuation and income risk (large balance of 715.1) affecting ordinary and comprehensive income
• High effective tax rate (35.9%) limiting net margin expansion
• Dividend sustainability risk given a calculated payout ratio of 126.6% and absent FCF data

Key Concerns:

• ROIC at 2.2% is below the 5% warning threshold, indicating weak capital efficiency
• Low asset turnover (0.473x) constrains ROE (2.8%) despite margin improvements
• Cash flow statement unreported, obscuring earnings quality and dividend coverage
• Potential reversal of operating leverage if SG&A growth outpaces revenue

Investment Implications

Key Takeaways:

• Operational margin expansion is clear (+~65 bps OPM), driving double-digit profit growth on modest sales growth
• Bottom line quality is mixed due to heavy non-operating income contribution
• Balance sheet is very strong (equity ratio ~76%, net cash), providing resilience
• Capital efficiency remains a structural weakness (ROIC 2.2%, ROE 2.8%)
• Dividend payout looks high on earnings (126.6%), with FCF coverage unknown

Metrics to Watch:

• Operating margin and SG&A ratio trajectory
• OCF/Net Income and FCF once disclosed
• Non-operating income ratio to net income and composition (interest, dividends, others)
• ROIC progression and asset turnover improvements
• Same-store sales and store count productivity in key segments
• Effective tax rate and any structural tax planning impacts
• Investment securities performance and OCI volatility

Relative Positioning: Versus domestic service/franchise peers, Duskin offers a fortressed balance sheet and improving operating margins but lags on capital efficiency and ROIC. Earnings are more exposed to non-operating income than many consumer/service peers, making cash flow disclosure and core profitability trends particularly important.

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