COTA CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥3.54B
• Operating Income: ¥153M
• Net Income: ¥133M
• EPS: ¥4.82

Income Statement

Balance Sheet

Cash Flow Statement

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

For FY2026 Q2, COTA Co., Ltd. (単体, JGAAP) posted revenue of ¥3,541 million, down 1.5% YoY, with strong gross profitability but weaker operating performance and notably strained operating cash flow. Gross profit was ¥2,536 million, yielding a very high gross margin of 71.6%, indicative of premium pricing and/or a favorable product mix. Operating income fell to ¥153 million (-22.6% YoY), compressing the operating margin to roughly 4.3%, reflecting higher SG&A or promotional intensity against slightly softer sales. Ordinary income of ¥205 million exceeds operating income by ¥52 million, implying positive non-operating contributions (e.g., interest/dividend income, FX gains, or other non-operating items). Net income rose 9.4% YoY to ¥133 million, with EPS of ¥4.82, aided by non-operating gains and a normalized tax burden. Using the provided numbers, the implied effective tax rate is approximately 32.6% (¥64 million tax on about ¥197 million pre-tax), despite the “0.0%” placeholder in the data. DuPont indicates modest ROE of 1.23%, driven by a low asset turnover of 0.266 and modest financial leverage of 1.23, despite acceptable net margin of 3.76%. Balance sheet quality appears strong: total assets are ¥13,288 million against total equity of ¥10,785 million, implying an equity ratio of roughly 81% (the reported 0.0% is an unreported placeholder), and a low liabilities-to-equity ratio of 0.34x. Liquidity is ample, with a current ratio of 389% and quick ratio of 326%, supported by sizable working capital of ¥6,611 million. The main negative surprise is operating cash flow of -¥808 million versus positive net income, producing an OCF/NI ratio of -6.1x; this points to a significant working capital build and/or timing effects in H1. Investing cash flow was not disclosed (shown as zero), and financing cash flow was -¥1,134 million, likely reflecting shareholder returns or liability reductions (detail not disclosed). With investing CF undisclosed and DPS/payout data not reported, dividend sustainability cannot be firmly assessed from this release, though the strong equity base and low leverage are positives. Operating leverage appears unfavorable this period, as a small revenue decline translated into a larger drop in operating profit, suggesting elevated fixed-cost absorption or increased marketing expenses. Overall, the company retains high gross profitability and a very conservative balance sheet, but near-term cash conversion and operating margin pressure warrant close monitoring. Data gaps (notably cash and investing flows, DPS, share counts) limit precision of some analyses; comments below rely only on disclosed non-zero figures and standard reconciliations.

Profitability Analysis

ROE_decomposition: - Net margin: 3.76%; Asset turnover: 0.266x; Financial leverage: 1.23x; Implied ROE: 1.23% (matches reported). ROE is constrained primarily by low asset turnover and subdued operating margin. margin_quality: Gross margin is very high at 71.6%, implying strong pricing power/brand or efficient COGS. However, operating margin of ~4.3% is modest, indicating elevated SG&A (sales support, promotions, or fixed costs) absorbing gross profits. Ordinary margin (5.8%) benefits from non-operating income (¥52 million above operating income), partially supporting net earnings. operating_leverage: A 1.5% revenue decline coincided with a 22.6% drop in operating income, suggesting negative operating leverage this half (fixed costs and/or increased marketing/sales expenses). Depreciation of ¥181 million (≈5.1% of sales) indicates a non-trivial fixed-cost base. Monitoring SG&A intensity and sales mix is key to restoring operating leverage.

Growth Assessment

revenue_sustainability: Revenue declined 1.5% YoY to ¥3,541 million. While modest, the drop alongside high inventories (¥1,436 million) raises questions on sell-through and demand pacing in the salon channel. Absence of segment/regional detail limits visibility on where softness occurred. profit_quality: Net income rose 9.4% YoY to ¥133 million despite lower operating income, supported by non-operating gains. This mix indicates lower quality of profit growth versus pure operating expansion. The implied effective tax rate (~32.6%) appears normal, but ordinary-to-operating spread indicates reliance on non-operating items this period. outlook: Key to near-term growth is normalization of working capital and stabilization of operating margin. With a strong balance sheet and high gross margin, the company has capacity to invest in distribution and brand; however, revenue trajectory must inflect positively for operating leverage to improve. Data is mid-year (Q2), so seasonality and timing effects could reverse in H2.

Financial Health

liquidity: Current ratio 389% and quick ratio 326% reflect ample liquidity; working capital stands at ¥6,611 million. Cash and equivalents were not disclosed (shown as zero), so the quality of liquidity depends on the mix of receivables and marketable assets. solvency: Total liabilities of ¥3,670 million vs equity of ¥10,785 million yields a low liabilities-to-equity ratio of 0.34x and an estimated equity ratio of ~81% (reported 0% is an undisclosed placeholder). Interest expense was not disclosed; leverage appears conservative with minimal financial risk evident. capital_structure: Financial leverage at 1.23x (Assets/Equity) is low. The company appears under-levered relative to peers, providing flexibility but dampening ROE in the absence of higher operating margins or asset turnover.

Cash Flow Quality

earnings_quality: Operating CF of -¥808 million versus net income of ¥133 million results in OCF/NI of -6.08x, signaling weak cash conversion this half. Likely drivers include inventory build and/or receivables expansion; exact components are not disclosed. FCF_analysis: Investing CF is undisclosed (shown as zero), so Free Cash Flow cannot be determined reliably. Given negative OCF, FCF is likely negative unless offset by asset disposals (not indicated). Capex levels are unknown this period. working_capital: Inventories are ¥1,436 million; without prior-period comparatives we cannot quantify the change, but the negative OCF suggests a build in working capital. Monitoring inventory turnover and receivables collection will be critical to cash normalization in H2.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are not disclosed (zeros indicate unreported). EPS is ¥4.82 for H1; historical policy and full-year guidance are not provided here, limiting payout assessment. FCF_coverage: With OCF negative and investing CF undisclosed, FCF coverage of dividends cannot be assessed. If shareholder returns drove the -¥1,134 million financing CF, sustainability would hinge on H2 cash recovery and overall liquidity (which appears strong structurally). policy_outlook: Given the strong equity base and low leverage, the company has capacity to sustain returns if operating cash flow normalizes. However, without disclosed DPS or policy commentary, visibility on near-term dividend trajectory is low.

Risk Assessment

Business Risks:

• Demand softness in core channels leading to inventory build and promotional pressure
• Negative operating leverage from fixed SG&A and manufacturing overhead
• Reliance on non-operating income to support net earnings in periods of weak operations
• Product mix shifts impacting gross margin sustainability
• Potential seasonality effects that may exacerbate H1/H2 volatility

Financial Risks:

• Weak cash conversion in H1 (OCF negative) increasing reliance on working capital release in H2
• Concentration of liquidity in non-cash current assets (cash balance undisclosed)
• Potential for higher promotional/credit terms affecting receivables collection
• Limited disclosure of investing cash flows, obscuring capex commitments

Key Concerns:

• OCF/NI at -6.08x indicates near-term cash strain despite reported profitability
• Operating income decline (-22.6% YoY) against a small sales dip signals cost pressure
• High inventories (¥1,436 million) relative to sales heighten execution risk if demand lags

Investment Implications

Key Takeaways:

• High gross margin (71.6%) underscores strong unit economics, but operating margin is under pressure
• ROE is low at 1.23% due to low asset turnover and minimal leverage
• Balance sheet strength is a clear positive (estimated equity ratio ~81%, liabilities/equity 0.34x)
• Operating cash flow turned sharply negative in H1, likely from working capital build
• Non-operating gains cushioned earnings; sustainability of these items is uncertain
• Disclosure gaps (cash, investing CF, DPS) limit precision on FCF and shareholder return outlook

Metrics to Watch:

• H2 sales growth and sell-through by channel to gauge demand recovery
• Operating margin trajectory and SG&A ratio normalization
• Inventory turnover days and receivables days to confirm working capital release
• OCF recovery and FCF after capex disclosure
• Non-operating income components and durability
• Equity ratio and any changes in financing CF (buybacks/dividends/debt)

Relative Positioning: Within Japan beauty/personal care peers, the company exhibits superior gross margins and a very conservative balance sheet but currently trails on operating margin momentum and cash conversion. Execution on cost discipline and working capital normalization is needed to translate strong unit economics into higher ROE.

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