HOKKAN HOLDINGS LIMITED FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥46.89B
• Operating Income: ¥4.25B
• Net Income: ¥3.27B
• EPS: ¥276.20

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

Hokkan Holdings (59020) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥46.9bn (-2.1% YoY), gross profit of ¥13.0bn, and operating income of ¥4.25bn (-4.2% YoY). Despite softer top line and negative operating leverage, net income rose 7.0% YoY to ¥3.40bn, implying non-operating support and/or tax effects. Operating margin was 9.1%, ordinary income margin 9.6%, and net margin 7.25%, indicating solid profitability for a packaging/beverage-related business. DuPont analysis shows ROE of 5.24% driven by a 7.25% net margin, asset turnover of 0.343x, and financial leverage of 2.11x. The company converted earnings to cash effectively: operating cash flow (OCF) reached ¥8.95bn, 2.63x net income, signaling strong earnings quality and likely working capital release or disciplined receivables/ payables management. Liquidity appears comfortable with a current ratio of 153% and quick ratio of 141%, supported by ¥51.7bn in current assets versus ¥33.8bn in current liabilities. Balance sheet leverage is moderate: total liabilities of ¥70.1bn versus total equity of ¥64.9bn (debt-to-equity 1.08x); the implied equity ratio based on provided balances is approximately 47.5%, though the reported equity ratio field shows 0.0% (undisclosed). Interest burden looks manageable with interest expense of ¥222m and coverage of 19.2x. Gross margin of 27.7% and EBITDA margin of 15.5% (EBITDA ¥7.29bn) suggest healthy cost pass-through and scale effects, despite the modest revenue decline. Ordinary income exceeded operating income by ~¥255m, indicating positive net non-operating contributions even after interest. Taxes reported at ¥1.28bn imply a non-zero tax rate, although the “effective tax rate” metric shows 0.0% (undisclosed), highlighting a data limitation. Cash and equivalents are shown as 0 (undisclosed); nonetheless, liquidity ratios based on current assets remain solid. Investing cash flow is also shown as 0 (undisclosed), preventing a reliable free cash flow (FCF) calculation despite strong OCF. Dividend fields show 0 (undisclosed), so payout policy assessment relies on historical tendencies rather than the current period’s reported figures. Overall, the company demonstrates resilient profitability, strong cash conversion, and moderate leverage, with key uncertainties around cash balances, investing cash flows, and dividend disclosures.

Profitability Analysis

ROE of 5.24% is decomposed into a 7.25% net margin, 0.343x asset turnover, and 2.11x financial leverage, indicating profitability is primarily margin-driven rather than efficiency-driven. Operating margin stands at 9.1% (¥4.253bn/¥46.894bn), down modestly YoY in line with operating income (-4.2%) and a slight negative operating leverage effect as revenue fell 2.1%. Gross margin of 27.7% supports a stable cost structure; EBITDA margin of 15.5% (¥7.291bn) points to solid operating cash earnings capacity. Ordinary income margin of 9.6% exceeded operating margin by ~0.5ppt due to net non-operating gains, even after ¥222m in interest expense, improving bottom-line resilience. Interest coverage is robust at 19.2x, suggesting ample buffer against borrowing costs. The net margin of 7.25% improved YoY (given net income +7.0% vs revenue -2.1%), reflecting improved non-operating items and/or tax effects. Overall, profitability quality is good, with healthy conversion from gross to operating profit and additional support at the ordinary level.

Growth Assessment

Top-line declined 2.1% YoY to ¥46.9bn, indicating softer demand or pricing pressures in the period. Operating income fell 4.2% YoY, demonstrating modest negative operating leverage as fixed costs weighed on profitability amid lower sales. Net income rose 7.0% YoY to ¥3.40bn, implying supportive non-operating items or improved tax mix, cushioning the operating shortfall. Given ordinary income exceeded operating income by ~¥255m, financial and other income likely contributed positively to growth. The EBITDA trend (¥7.29bn; 15.5% margin) suggests underlying operating cash profitability remains robust despite revenue pressure. Sustainability of earnings will hinge on volume recovery, input cost stability (metals, energy), and pricing power with key customers. Without segment and regional disclosure for this quarter, we assume beverage OEM/packaging demand softness is cyclical rather than structural. Outlook is cautiously stable: if volumes normalize and cost pass-through continues, operating leverage can turn positive; conversely, further volume declines would pressure margins. Data gaps (e.g., CAPEX, investing CF) constrain assessment of growth investments and future capacity expansion.

Financial Health

Total assets ¥136.6bn, total equity ¥64.9bn, and total liabilities ¥70.1bn indicate moderate leverage (liabilities/equity 1.08x). Implied equity ratio is ~47.5% (equity/assets), but the reported equity ratio field is undisclosed (0.0%), so we rely on the balance sheet totals. Liquidity is sound: current assets ¥51.7bn vs current liabilities ¥33.8bn yield a current ratio of 153% and quick ratio of 141% (inventories ¥4.20bn). Working capital stands at ¥17.9bn, providing operational flexibility. Interest expense of ¥222m is well covered by operating income (coverage 19.2x), indicating low near-term solvency risk. Asset turnover of 0.343x is modest, typical for asset-intensive packaging/beverage operations; improvement here would enhance ROE. With no disclosed cash balance (0 indicates undisclosed), we infer adequate liquidity from current ratios but cannot comment on cash headroom or net cash/debt. Overall solvency risk appears contained, contingent on maintaining stable operating cash flows.

Cash Flow Quality

OCF was ¥8.95bn versus net income of ¥3.40bn, yielding an OCF/NI ratio of 2.63, which signifies strong earnings quality and favorable working capital dynamics. EBITDA of ¥7.29bn underpins cash generation relative to non-cash D&A of ¥3.04bn. Investing CF is undisclosed (reported as 0), preventing a reliable FCF calculation; the presented “FCF: 0” should be treated as not available rather than zero. In the absence of CAPEX and investing outflows, we cannot assess maintenance vs growth investment intensity or the sustainability of cash generation post-investment. Financing CF was an outflow of ¥4.32bn, indicating net debt reduction, dividends, or share activity; without cash balance data, the change in liquidity cannot be reconciled. Working capital appears well-managed given high OCF/NI and quick ratio, and inventories of ¥4.20bn look lean relative to COGS, but detailed turnover metrics are not disclosed. Overall, cash flow quality is strong on an operating basis, with assessment of long-term FCF constrained by missing investing data.

Dividend Sustainability

Dividend metrics (DPS 0.00, payout ratio 0.0%, FCF coverage 0.00x) are undisclosed placeholders rather than actual zeros. With EPS at ¥276.20 and net income of ¥3.40bn, capacity to pay dividends exists in principle, but we lack current-period DPS or policy updates. OCF of ¥8.95bn comfortably covers earnings, implying potential capacity to fund both CAPEX and shareholder returns; however, absent investing CF/CAPEX data, sustainable FCF coverage cannot be determined. Balance sheet strength (implied equity ratio ~47.5%, D/E 1.08x) provides flexibility, but recurring payout decisions depend on medium-term CAPEX for line upgrades and metal packaging equipment. Policy outlook cannot be inferred from the provided data; we assume continuity with past practices unless company guidance indicates a change. In summary, dividend sustainability appears supported by earnings and OCF, but confirmation requires actual DPS and CAPEX disclosure.

Risk Assessment

Business Risks:

• Raw material price volatility (tinplate, aluminum, resin) impacting margins
• Energy and logistics cost fluctuations affecting COGS and distribution
• Demand cyclicality in beverage and food end-markets; OEM order variability
• Customer concentration risk with large beverage/food companies
• Pricing pressure from key accounts and competitive packaging environment
• FX exposure on imported materials and overseas operations
• Regulatory and ESG trends (recyclability, plastic substitution) affecting product mix

Financial Risks:

• Moderate leverage (liabilities/equity 1.08x) and potential interest rate increases
• Working capital swings that can compress OCF in weaker demand periods
• CAPEX intensity for can/packaging lines potentially elevating investing outflows
• Limited visibility on cash balance and investing CF due to undisclosed items
• Negative operating leverage risk if volumes decline further

Key Concerns:

• Top-line softness (-2.1% YoY) and slight margin compression at the operating level
• Data gaps: equity ratio, cash balance, investing cash flows, and dividends undisclosed
• Reliance on non-operating items to lift ordinary income above operating income

Investment Implications

Key Takeaways:

• Resilient profitability: operating margin 9.1%, net margin 7.25%, EBITDA margin 15.5%
• ROE 5.24% driven by margins and moderate leverage; asset turnover remains a drag
• Strong operating cash conversion with OCF/NI of 2.63
• Liquidity is comfortable (current ratio 153%, quick ratio 141%) and leverage moderate (D/E 1.08x)
• Ordinary income exceeds operating income by ~¥255m, indicating supportive non-operating items
• YoY: revenue -2.1%, operating income -4.2%, net income +7.0% (non-operating/tax support)

Metrics to Watch:

• Revenue growth and volume/pricing trends by segment and customer
• Operating margin trajectory and cost pass-through vs raw material/energy prices
• OCF/NI ratio sustainability and working capital movements
• CAPEX and investing CF to assess true FCF and payout capacity
• Interest coverage and liability mix amid interest rate changes
• Inventory and receivables turnover as indicators of demand and cash discipline

Relative Positioning: Within Japan’s packaging and beverage OEM space, Hokkan shows healthy profitability and cash conversion with moderate leverage, suggesting operational resilience; however, asset intensity caps ROE and current top-line softness, coupled with undisclosed cash/investing/dividend details, tempers visibility relative to more asset-light peers.

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