AXXZIA Inc. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥3.63B
• Operating Income: ¥61M
• Net Income: ¥28M
• EPS: ¥3.05

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: A reasonably solid FY2026 Q1 with double-digit top-line growth and sharply higher ordinary and net profits, but operating margin remained thin and earnings quality is hard to validate due to missing cash flow data. Revenue rose 17.9% year over year to 36.31, while gross profit reached 22.23, implying a strong gross margin of 61.2%. Operating income increased 7.1% YoY to 0.61, ordinary income surged 148.3% YoY to 1.27, and net income jumped 138.0% YoY to 0.69. Operating margin was 1.7% (0.61/36.31), ordinary margin 3.5%, and net margin 1.9%. Using the reported growth rates to infer last year’s margins, operating margin likely compressed by roughly 17 bps YoY (about 1.68% vs 1.85% a year ago), while ordinary margin expanded by about 184 bps (3.50% vs 1.66%) and net margin by about 96 bps (1.90% vs 0.94%). SG&A consumed 59.6% of sales (21.66/36.31), indicating heavy operating cost intensity despite strong gross margin. Balance sheet liquidity is strong with a current ratio of 436.6% and quick ratio of 339.7%, and leverage is conservative at a 0.26x D/E. Cash and deposits of 39.90 comfortably exceed short-term loans of 4.49. Inventory of 16.74 looks elevated relative to quarterly COGS (8.56), suggesting inventory days near six months, which may reflect seasonality or channel build and bears watching. Effective tax rate was high at 45.9%, adding volatility to after-tax earnings. There are data inconsistencies between ordinary income, profit before tax, and net income that suggest unreported extraordinary items or mapping differences; thus, bottom-line comparisons should be interpreted cautiously. Earnings quality cannot be validated given unreported operating cash flow; OCF/NI is not calculable. Dividend metrics are largely unreported, and the calculated payout ratio (349.4%) is likely not meaningful given timing mismatches with quarterly earnings. Looking ahead, sustaining revenue momentum while reining in SG&A should be the key to improving operating leverage. The strong liquidity position provides resilience, but high inventory and a thin operating margin present near-term execution risk. Overall, the quarter shows good demand traction and improved below-OP line items, but the path to healthier operating margins and cash conversion remains the focus.

Profitability Analysis

ROE decomposition (DuPont): ROE 0.9% = Net profit margin (1.9%) × Asset turnover (0.372) × Financial leverage (1.28x). The largest change driver YoY appears to be net profit margin, which improved meaningfully (approx. +96 bps), while operating margin likely compressed by ~17 bps, and leverage remained low and stable. The net margin improvement despite a thin operating margin suggests positive contributions from non-operating items and/or below-the-line effects (ordinary income +148.3% YoY), as well as a favorable comparison at the net level. Business drivers likely include sales mix and pricing supporting a 61.2% gross margin, while SG&A intensity (59.6% of sales) limited operating leverage. The improvement below operating income could reflect FX, financial income/expenses, or extraordinary items, though disclosures are limited; sustainability is therefore uncertain. Given the thin operating margin and high SG&A, the margin structure is vulnerable if revenue growth moderates; sustaining ROE improvement will require operating margin expansion rather than reliance on non-operating gains. Watch for SG&A growth relative to revenue; this quarter, operating income growth (+7.1%) lagged revenue growth (+17.9%), implying operating deleverage at the OI level.

Growth Assessment

Revenue grew 17.9% YoY to 36.31, indicating healthy demand momentum. Gross profit of 22.23 supports a robust gross margin at 61.2%, suggesting pricing power or favorable mix. However, SG&A at 21.66 (59.6% of sales) absorbed most of the gross profit, yielding a modest operating income of 0.61 (+7.1% YoY). Ordinary and net income growth (+148.3% and +138.0% YoY) far outpaced operating income, implying significant non-operating/extraordinary contributions; without detail, sustainability is uncertain. Operating margin likely compressed by ~17 bps YoY, while net margin expanded by ~96 bps, highlighting the divergence between core and bottom-line metrics. Inventory levels appear elevated relative to quarterly COGS, which could dampen near-term cash conversion if not worked down by subsequent sales. Overall growth sustainability hinges on maintaining top-line momentum while improving operating cost discipline; near-term outlook depends on channel sell-through and inventory normalization.

Financial Health

Liquidity is strong: current ratio 436.6% and quick ratio 339.7% both exceed healthy thresholds by a wide margin; no warning for Current Ratio < 1.0. Solvency is conservative with D/E at 0.26x; well below the 2.0 warning threshold. Cash and deposits (39.90) cover short-term loans (4.49) multiple times, limiting maturity mismatch risk; current assets (75.46) exceed current liabilities (17.29) by 58.18. Long-term loans are modest at 1.68, and total liabilities (19.93) are low relative to assets (97.60). Interest coverage is strong at 23.38x per reported metric. No off-balance sheet obligations are disclosed in the provided data. Overall capital structure is robust with ample liquidity and low leverage, providing flexibility to manage working capital and invest.

Cash Flow Quality

Operating cash flow is unreported, so OCF/Net Income and FCF cannot be calculated; earnings quality cannot be validated quantitatively. The combination of high inventory (16.74) versus quarterly COGS (8.56) suggests potential cash tied up in working capital, which could weigh on near-term OCF unless followed by strong sell-through. With capex and dividends unreported, FCF coverage of dividends and capex is not assessable. No clear signs of working capital manipulation can be concluded from the limited data, but the inventory build is a watch point. Until OCF data is available, treat bottom-line gains as higher risk in terms of cash conversion.

Dividend Sustainability

Dividend data (DPS, total dividends, FCF coverage) is largely unreported. The calculated payout ratio of 349.4% likely reflects a timing mismatch (e.g., annual dividends versus a single quarter’s earnings) and should not be used to infer sustainability. Without OCF and FCF, coverage cannot be assessed. The strong balance sheet and liquidity provide theoretical capacity to maintain dividends in the near term, but sustainable distributions depend on converting earnings to cash and stabilizing operating margins. Policy outlook cannot be inferred from the provided data; monitor forthcoming guidance and full-year payout intentions.

Risk Assessment

Business Risks:

• High SG&A intensity (59.6% of sales) limits operating leverage; margin sensitive to revenue fluctuations.
• Inventory build (16.74) relative to quarterly COGS may lead to obsolescence risk in fast-moving beauty categories.
• Competitive pressures in cosmetics/personal care may require sustained marketing spend, pressuring margins.
• Potential reliance on specific geographies/channels (e.g., cross-border e-commerce) exposes regulatory and demand volatility.
• Pricing and mix risk despite strong gross margin; promotional shifts could compress gross margin.

Financial Risks:

• Earnings quality uncertainty due to unreported operating cash flow; OCF/NI not calculable.
• Data inconsistencies between ordinary income, profit before tax, and net income imply possible undisclosed extraordinary items.
• High effective tax rate (45.9%) creates volatility in net income.
• Working capital concentration in inventory could constrain cash if sell-through slows.
• Refinancing risk is limited but present on 4.49 of short-term loans; mitigated by cash on hand.

Key Concerns:

• Thin operating margin (1.7%) despite strong gross margin.
• Operating income growth (+7.1% YoY) lagging revenue growth (+17.9%), indicating operating deleverage.
• Lack of cash flow and SG&A breakdown disclosures restricts visibility into underlying drivers.
• Potential FX sensitivity affecting non-operating results and ordinary income.
• Possible mismatch between PBT (0.51) and net income (0.69) requires clarification.

Investment Implications

Key Takeaways:

• Top-line momentum strong (+17.9% YoY) with robust gross margin (61.2%).
• Operating margin remains thin at 1.7%; SG&A discipline is the key unlock.
• Ordinary and net income rose sharply, but sustainability is unclear without detail and cash flow support.
• Balance sheet strength (current ratio 436.6%, D/E 0.26x) provides resilience.
• Inventory levels elevated versus COGS; cash conversion risk near term.

Metrics to Watch:

• Operating cash flow and OCF/NI once disclosed.
• Inventory turnover and sell-through trends by channel/region.
• SG&A as a percentage of sales and marketing ROI.
• Gross margin stability amid promotions and mix changes.
• Effective tax rate normalization.
• Short-term loan balances versus cash
• Ordinary income drivers (non-operating items, FX impacts, extraordinary gains/losses).

Relative Positioning: Within Japan-listed beauty/cosmetics peers, Axesia exhibits strong gross margins and a very solid balance sheet but weaker operating margin leverage; near-term positioning hinges on translating sales growth into operating profit and cash flow while managing inventory.

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