ONEX Corporation FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥1.26B
• Operating Income: ¥89M
• Net Income: ¥-22M
• EPS: ¥62.24

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 and operating recovery with clear margin expansion, but low capital efficiency and opaque below-the-line items temper the quality of the quarter. Revenue grew 2.7% YoY to 12.63, while operating income rose 26.7% YoY to 0.89, evidencing operating leverage. Gross profit was 2.26, implying a gross margin of 17.9%. The operating margin improved to 7.1% this quarter from an estimated 5.7% a year ago, a ~134 bps expansion. Ordinary income was 0.93 (-4.7% YoY), indicating a margin of 7.4% and a YoY compression of roughly 56 bps. Net income came in at 1.03 (EPS 62.24 JPY), producing an 8.2% net margin and a reported payout ratio of 32.2%. Interest expense was modest at 0.04 with an interest coverage of ~21.8x, reflecting strong short-term solvency. Liquidity is robust (current ratio ~254%), supported by cash and deposits of 27.52 against current liabilities of 17.37. Leverage is moderate (D/E 0.61x; assets/equity 1.61x). ROE is low at 1.9% and ROIC is just 2.0%, well below the 5% warning threshold, highlighting capital efficiency issues. Operating cash flow and capex were unreported, preventing validation of earnings quality via cash conversion or FCF durability. Notably, profit before tax is shown as -0.23 while net income is +1.03; undisclosed below-the-line items (or classification differences) likely explain the gap, but this constrains confidence in earnings quality assessment. Non-operating items were small (income 0.11; expenses 0.05), so the quarter’s improvement primarily stemmed from core operations. Equity is solid at 53.85 (BVPS ~3,252 JPY), providing balance sheet resilience for investment or downturns. Forward-looking, the operating margin trajectory is constructive, but sustaining ROIC improvement will require tighter asset utilization and profitable growth. Absence of OCF/FCF disclosures and inventory data remain key monitoring gaps for the next quarter.

Profitability Analysis

ROE decomposition: ROE (1.9%) = Net Profit Margin (8.2%) × Asset Turnover (0.146) × Financial Leverage (1.61x). The most notable driver this quarter versus last year is margin improvement at the operating level: revenue +2.7% YoY while operating income +26.7% YoY implies operating margin expansion from ~5.7% to 7.1% (+134 bps). Asset turnover is low at 0.146 (quarterly revenue vs total assets), reflecting a capital-heavy/underutilized asset base; there is no evidence of improvement given limited history disclosed. Financial leverage is moderate (1.61x assets/equity), broadly stable in the context of 0.61x D/E. Business reason: better operating margin likely came from improved cost discipline and mix (gross margin at 17.9%) with SG&A absorption; non-operating effects were small. Sustainability: incremental operating leverage can persist if volumes hold and pricing remains firm, but low ROIC (2.0%) indicates structural efficiency constraints; without higher asset turnover or sustained margins, ROE will remain subdued. Watchpoint: ordinary income declined YoY (-4.7%) despite operating gains, suggesting non-operating headwinds vs. prior year; also, if SG&A growth outruns revenue in coming quarters, the margin gains could reverse.

Growth Assessment

Top-line growth was modest (+2.7% YoY), likely volume-led or small price/mix tailwind. Operating income growth (+26.7% YoY) signals positive operating leverage and cost control. Ordinary income decline (-4.7% YoY) implies that last year benefited from stronger non-operating contributions or that this quarter faced mild non-operating headwinds. Net income margin at 8.2% appears strong, but the lack of transparency below PBT reduces confidence in the durability of net profit. With cash, receivables, and payables disclosed, working capital seems manageable, but missing inventory data precludes a full view of revenue sustainability and potential stock build. No segment or order/backlog data is available, limiting forward visibility. Near-term outlook hinges on maintaining the current operating margin and improving asset turnover; ROIC at 2.0% underscores the need for disciplined capex and tighter asset use to compound profits.

Financial Health

Liquidity: very healthy. Current ratio 253.9% and quick ratio 253.9% (cash and deposits 27.52 vs current liabilities 17.37) indicate ample coverage; no warning flags (current ratio well >1.0). Solvency: conservative to moderate. Debt-to-equity 0.61x; interest coverage ~21.8x (0.89/0.04) is strong; no D/E >2.0 risk. Maturity profile: short-term loans 6.82 vs current assets 44.10 and cash 27.52—low near-term refinancing risk; long-term loans 9.30 manageable vs equity 53.85. Maturity mismatch risk appears low given cash dominance in current assets. Off-balance sheet obligations: none disclosed in the provided data. Equity base remains strong (owners’ equity 53.85), supporting resilience.

Cash Flow Quality

OCF and capex were not reported, so OCF/Net Income and FCF cannot be assessed; this is a key limitation. Without OCF, earnings quality cannot be corroborated—normally we would expect OCF/NI >1.0 for high quality. The PBT negative versus NI positive outcome indicates material below-the-line classification that could affect cash conversion (e.g., non-cash gains or adjustments), but the specific drivers are undisclosed. Dividend and capex coverage by FCF cannot be evaluated. Working capital movements (AR 7.73, AP 1.19, inventory N/A) are insufficient to detect manipulation or timing effects; monitoring inventory and payable days next quarter is important.

Dividend Sustainability

A calculated payout ratio of 32.2% appears conservative relative to current net income, implying room to maintain distributions if earnings persist. However, DPS and total dividends paid were not reported, and OCF/FCF are unavailable, so cash coverage cannot be verified. With strong liquidity (cash 27.52) and low interest burden, short-term dividend capacity is supported by the balance sheet, but long-term sustainability depends on translating operating gains into cash and lifting ROIC above the cost of capital. Policy outlook cannot be inferred from the data; watch for guidance or historical payout trends in the next disclosure.

Risk Assessment

Business Risks:

• Low capital efficiency: ROIC 2.0% (<5% threshold) risks value dilution if capex rises without commensurate returns.
• Margin sensitivity to volume and mix: modest gross margin (17.9%) could compress with input cost or pricing pressure.
• Operational concentration risk typical of small-cap manufacturers (limited customer diversification not disclosed).
• Execution risk in cost control if SG&A growth re-accelerates vs revenue.

Financial Risks:

• Information gap on OCF/FCF limits assessment of cash coverage for dividends and debt service.
• Potential classification/one-off items below PBT influencing NI, creating earnings volatility.
• Refinancing risk is low near term but persists structurally due to ongoing short-term borrowings (6.82).

Key Concerns:

• Negative profit before tax (-0.23) with positive net income (1.03) points to undisclosed below-the-line drivers; earnings quality uncertain.
• ROE 1.9% and asset turnover 0.146 are low; without improvement, shareholder returns may lag.
• Inventory data absent—cannot assess stock build or potential future margin headwinds.

Investment Implications

Key Takeaways:

• Core operations improved: operating margin expanded ~134 bps YoY to ~7.1% on +2.7% revenue growth.
• Ordinary income fell 4.7% YoY, suggesting less favorable non-operating contribution vs prior year.
• Liquidity is strong (current ratio ~254%; cash 27.52), leverage moderate (D/E 0.61x), interest burden light (coverage ~21.8x).
• Capital efficiency remains a major overhang (ROIC 2.0%; ROE 1.9%).
• Earnings quality cannot be validated without OCF; below-PBT disclosure gaps are material.

Metrics to Watch:

• Operating cash flow and free cash flow conversion (OCF/NI target >1.0).
• Inventory levels and turnover, receivable and payable days.
• Sustainability of operating margin at or above ~7%.
• Capex intensity and project-level returns (ROIC trajectory toward >5% first, then >7–8%).
• Non-operating items and extraordinary gains/losses to reconcile PBT to NI.
• Debt maturity profile and interest rate sensitivity on short-term loans.

Relative Positioning: Versus domestic small-cap metal processing/industrial peers, Onex shows stronger liquidity and manageable leverage but lags on capital efficiency (ROIC/ROE) and transparency (cash flow and below-the-line disclosures). Margin momentum is improving, yet overall returns remain below industry norms, leaving execution on asset utilization and cash conversion as the key differentiators to close the gap.

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