DUSKIN CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥95.08B
• Operating Income: ¥4.69B
• Net Income: ¥3.51B
• 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

Duskin (4665) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥95.08bn, up 3.7% year on year, indicating steady top-line momentum across its cleaning/rental and food service franchises. Operating income rose 19.5% to ¥4.69bn, evidencing solid operating leverage as cost control and mix offset cost inflation. Ordinary income of ¥6.57bn exceeded operating income, suggesting a meaningful contribution from non-operating items (e.g., financial income or equity method gains). Net income increased 21.7% to ¥4.25bn, with a net margin of 4.47%. Gross profit was ¥40.97bn, implying a robust gross margin of 43.1%, consistent with a service/franchise model supported by recurring rental and consumable supply revenue. Operating margin improved to roughly 4.9%, up materially vs. revenue growth, highlighting improved SG&A efficiency. DuPont analysis shows calculated ROE of 2.76%, composed of a 4.47% net margin, 0.473x asset turnover, and 1.31x financial leverage. Balance sheet strength remains a differentiator: total assets were ¥201.19bn and equity ¥153.67bn, implying an equity ratio of ~76.4% (the reported 0.0% equity ratio appears undisclosed in XBRL), and liabilities are modest at ¥51.78bn. Liquidity looks comfortable with a current ratio of 144% and a quick ratio of 124%, supported by working capital of ¥18.50bn. The effective tax burden, inferred from net income and income tax expense, appears around the low-to-mid 30% range, aligning with Japan’s statutory range. Cash flow statements are not disclosed here (zeros represent unreported items), limiting assessment of operating cash conversion and free cash flow. Depreciation, interest expense, and EBITDA are also undisclosed in this dataset, so interest coverage and cash-based profitability cannot be evaluated from the provided figures. Dividend data are likewise not provided (DPS shown as 0.00), leaving payout policy assessment to qualitative inference from historical conservatism and balance sheet capacity. Overall, the company delivered higher-quality earnings in the half, driven by margin expansion and non-operating income, against a backdrop of modest sales growth. The capital structure remains conservative, providing resilience against macro and cost pressures. Key watchpoints include sustainability of margin gains, the composition and recurrence of non-operating income, and cash flow generation to underpin future shareholder returns and reinvestment.

Profitability Analysis

ROE decomposition: Net margin 4.47% × Asset turnover 0.473 × Financial leverage 1.31 = ROE 2.76%. Gross margin is 43.1% (¥40.97bn/¥95.08bn), indicative of strong value-add in rental/consumables and franchise support. Operating margin is approximately 4.9% (¥4.69bn/¥95.08bn), expanding faster than revenue (+19.5% OI vs. +3.7% revenue), demonstrating favorable operating leverage from SG&A discipline and/or improved mix. Ordinary margin (~6.9%) exceeds operating margin, indicating material non-operating contributions; the quality and repeatability of these items should be monitored. The implied effective tax rate, approximated as income tax of ¥2.15bn divided by pre-tax profit (net income + tax ≈ ¥6.40bn), is around 33–34%, consistent with norms. EBITDA and depreciation are not disclosed; therefore, we cannot parse the D&A intensity or underlying cash margins, a notable limitation. Nonetheless, the expansion in operating income suggests underlying efficiency gains or pricing power in core segments. Operating leverage is evident this period, but sustainability depends on volume trends, store traffic in food services, and cost inflation in labor and materials.

Growth Assessment

Revenue growth of 3.7% YoY to ¥95.08bn reflects steady but subdued expansion, consistent with a mature domestic services and franchise portfolio. Profit growth outpaced sales, with operating income +19.5% and net income +21.7%, driven by margin expansion and non-operating gains. The gross margin at 43.1% supports the view that rental and consumables continue to anchor profitability; however, mix shifts between cleaning services and Mister Donut food services will influence future margins. Sustainability of top-line growth will hinge on same-store performance, franchise recruitment/retention, and customer acquisition in hygiene-related services. Given macro headwinds (cost inflation, wage pressures) and consumer demand variability, maintaining price discipline and efficiency will be key to sustaining profit growth. Non-operating income bolstered ordinary profit; visibility on its drivers will affect the quality of earnings outlook. Near-term outlook appears cautiously positive on margins given demonstrated cost control, but upside likely requires acceleration in volumes or additional mix improvements. Data limitations (no segment breakdown, no CF) constrain precision of forward assessments; we assume a mid-single-digit sales trajectory with focus on incremental margin gains.

Financial Health

Total assets ¥201.19bn, total equity ¥153.67bn, total liabilities ¥51.78bn. Implied equity ratio ≈ 76.4% (equity/assets), despite the reported 0.0% equity ratio field being undisclosed in this dataset. Debt-to-equity is 0.34x (liabilities/equity), reflecting very conservative leverage. Liquidity is strong: current ratio 143.9% and quick ratio 124.0%; working capital stands at ¥18.50bn. Current assets are ¥60.59bn vs. current liabilities ¥42.10bn; inventories are modest at ¥8.39bn, supporting the quick ratio. Interest expense is undisclosed; however, low leverage suggests limited interest burden. The balance sheet provides ample flexibility to absorb shocks, invest in growth, or fund shareholder returns. Absent cash and cash flow disclosures, we cannot opine on cash holdings or near-term funding needs from internal cash generation.

Cash Flow Quality

Operating CF, investing CF, financing CF, and cash balances are undisclosed in this dataset (zeros indicate non-reporting). As a result, OCF/Net Income and FCF figures shown as zero are not meaningful for analysis. Earnings quality cannot be triangulated to cash at this time; we cannot evaluate working capital release/consumption or the cash conversion cycle. Depreciation and amortization are undisclosed, preventing construction of EBITDA or assessment of maintenance vs. growth capex needs. Given the franchise/service model, OCF typically tracks earnings with moderate working capital needs; however, confirmation requires actual CF statements. Key items to review upon full disclosure: OCF conversion (>80% of NI over the half), capex levels versus depreciation, and changes in receivables/inventories.

Dividend Sustainability

Dividend per share is undisclosed in this dataset (DPS shown as 0.00 is not a reported value). Payout ratio and FCF coverage are likewise not available. From a balance sheet perspective, the high equity ratio and modest liabilities indicate capacity to sustain distributions, subject to cash generation. Net income of ¥4.25bn in the half provides earnings capacity, but without OCF and capex data, we cannot assess cash coverage. Historically, Duskin has maintained a conservative financial policy; we would expect dividends to align with medium-term earnings and cash flows rather than aggressive payouts. Monitoring guidance, interim dividend announcements, and full-year CF will be critical to evaluating sustainability.

Risk Assessment

Business Risks:

• Consumer demand volatility affecting Mister Donut and other food service sales.
• Cost inflation in raw materials, energy, and labor compressing margins.
• Labor availability and wage pressure impacting store operations and service delivery.
• Franchise system risks, including franchisee health, compliance, and retention.
• Competition in cleaning/hygiene services and QSR/coffee/donut segments.
• Potential normalization of hygiene-related demand post-pandemic tailwinds.
• Brand and food safety risks in the food service business.

Financial Risks:

• Earnings reliance on non-operating income this period; potential volatility if such items are non-recurring.
• Limited visibility on cash generation due to undisclosed cash flow statements.
• Potential capex needs for equipment renewal and store refurbishment not observable from disclosed data.
• Currency exposure is likely limited but could affect procurement costs if imported inputs rise.

Key Concerns:

• Sustainability of operating margin gains amid cost pressures.
• Quality and recurrence of non-operating contributions to ordinary income.
• Lack of interim cash flow and D&A disclosure constraining earnings quality assessment.

Investment Implications

Key Takeaways:

• Solid top-line growth (+3.7% YoY) with outsized operating profit growth (+19.5%), indicating positive operating leverage.
• Strong gross margin (43.1%) and improved operating margin (~4.9%).
• Ordinary income exceeded operating income, highlighting non-operating contributions that warrant scrutiny.
• Conservative balance sheet with implied equity ratio ~76% and D/E ~0.34x.
• Insufficient CF disclosure limits assessment of earnings-to-cash conversion and dividend coverage.

Metrics to Watch:

• SG&A ratio and operating margin trajectory by segment.
• Composition and recurrence of non-operating income items.
• Same-store sales and traffic in food services; service utilization in rental/cleaning.
• Working capital metrics (receivable days, inventory turns) once disclosed.
• OCF/NI conversion (>80% target) and FCF after maintenance capex.
• Capital allocation: capex plans, franchise investments, and dividend guidance.

Relative Positioning: Within Japan’s services/franchise peer set, Duskin appears defensively positioned with a strong equity base and modest leverage, delivering mid-single-digit margins and stable growth; however, transparency on cash flows and the durability of recent non-operating gains will influence its relative quality premium.

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