KeePer Technical Laboratory Co.,Ltd. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥5.77B
• Operating Income: ¥1.38B
• Net Income: ¥910M
• EPS: ¥33.35

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: A mixed quarter—solid top-line growth but margin compression led to lower profits. Revenue grew 6.7% YoY to 57.74, while operating income declined 7.8% YoY to 13.80, and net income fell 10.7% YoY to 9.10. Operating margin was approximately 23.9% this quarter (13.80/57.74). Based on implied prior-period figures, operating margin compressed by roughly 370 bps YoY (from about 27.6% to 23.9%). Net margin also compressed by about 308 bps YoY (from ~18.8% to ~15.8%). Gross margin is reported at 46.8%, but there is an internal inconsistency among the reported cost of sales and gross profit figures; we rely on the stated gross margin ratio for analysis. SG&A was 12.04 (20.8% of sales), indicating either cost pressure or operating deleverage as revenue growth did not translate into profit growth. Ordinary income decreased 10.0% YoY to 13.52, with a small net positive from non-operating items (0.40 income vs 0.34 expenses), implying core operations drove the decline. Profit before tax exceeded ordinary income (15.02 vs 13.52), suggesting unreported extraordinary gains contributed; details are not disclosed. Leverage remains conservative with D/E at 0.33x and a net cash position (cash and deposits 41.73 vs long-term loans 9.43), supporting resilience. Liquidity is strong (current ratio 180%), and interest burden is negligible (interest expense near zero; coverage effectively >20,000x). ROE (DuPont) is 4.4%, reflecting modest asset turnover (0.203) and moderate leverage (1.37x); profitability rather than leverage is the main ROE driver. Cash flow data are unreported, limiting earnings quality assessment; OCF/NI cannot be verified. A calculated payout ratio of 186.5% (despite DPS unreported) raises a flag on dividend sustainability if sustained absent special factors. Forward-looking, stabilization of operating margin and confirmation of cash conversion will be key, alongside monitoring cost controls and any one-off gains that inflated pre-tax profit.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 15.8% × 0.203 × 1.37 ≈ 4.4%. The largest driver of YoY change appears to be Net Profit Margin, which compressed by ~308 bps (from ~18.8% to ~15.8%), outweighing modest shifts in asset turnover and leverage. Business reason: despite 6.7% revenue growth, operating income fell 7.8%, implying either higher cost of sales (pressure on gross margin) or elevated SG&A intensity (current SG&A is 20.8% of sales). The non-operating balance was only marginally positive and does not explain the decline; core cost pressure or deleverage is the likely cause. Sustainability: if the margin pressure stems from temporary factors (e.g., input cost inflation, promotional intensity, or one-off expenses), margins could normalize; if structural (wage inflation, rent increases, service mix shift), the compression may persist. Concerning trends: operating income contracted while revenue expanded, signaling operating deleverage; SG&A growth likely outpaced gross profit growth (given the OI decline). Asset turnover is low (0.203), reflecting sizeable cash and investment securities, which dampens ROE unless reinvested at higher returns or returned to shareholders.

Growth Assessment

Top-line growth of 6.7% YoY is healthy, indicating steady demand. However, profit growth lagged: OI down 7.8% and NI down 10.7% show negative operating leverage. With operating margin at ~23.9% versus an implied ~27.6% a year ago, the growth quality is mixed, driven more by volume/price with cost pressure. Non-operating items are small; PBT exceeding ordinary income suggests unreported extraordinary gains; recurring earnings power is better proxied by ordinary income at 13.52 (-10.0% YoY). Outlook hinges on restoring margin discipline—tight control of labor and other SG&A, and stabilizing gross margin. Given seasonality in consumer services and potential input/labor inflation, near-term margin recovery may be gradual unless pricing or mix improves. ROIC at 5.3% is below the 7–8% benchmark; improving asset productivity or trimming low-return assets would support sustainable growth.

Financial Health

Liquidity is strong: current ratio 179.7% (>150% benchmark) and quick ratio equivalent due to unreported inventory detail. No explicit red flags (current ratio is not <1.0). Solvency is conservative: D/E 0.33x and long-term loans of 9.43 are well covered by cash and deposits of 41.73, resulting in a net cash position. Interest coverage is effectively >20,000x due to negligible interest expense. Maturity mismatch risk appears low: current assets of 77.35 comfortably exceed current liabilities of 43.04; cash (41.73) plus receivables (17.67) cover the majority of short-term obligations. No off-balance sheet obligations were disclosed in the data provided.

Cash Flow Quality

Operating cash flow is unreported, so OCF/Net Income cannot be assessed (cannot flag <0.8). Free cash flow and capex are also unreported, limiting visibility on cash generation versus investment needs. Without working capital details beyond receivables and without inventory data, potential WC swings (e.g., receivable days, inventory buildup) cannot be evaluated; no signs of manipulation can be inferred from the limited dataset. Given the drop in operating income and the high calculated payout ratio, confirming OCF strength in subsequent quarters is critical for assessing earnings quality.

Dividend Sustainability

DPS is unreported, but a calculated payout ratio of 186.5% suggests payouts exceeded earnings in the period—potentially unsustainable if persistent, unless supported by excess cash or special dividends. FCF coverage is unreported; thus, we cannot verify if dividends are covered by free cash flow. With net cash on hand, near-term liquidity supports dividends, but medium-term sustainability requires payout to align with normalized earnings and cash generation.

Risk Assessment

Business Risks:

• Operating margin compression amid rising SG&A intensity (20.8% of sales) and possible cost of sales pressure
• Service/labor cost inflation impacting profitability in a labor-intensive model
• Potential seasonality and weather sensitivity affecting service demand
• Execution risk in store operations and capacity utilization
• Customer demand sensitivity to macro conditions and discretionary spending

Financial Risks:

• Dividend sustainability risk given the calculated 186.5% payout ratio
• ROIC at 5.3% below the 7–8% benchmark, implying suboptimal capital efficiency
• Limited visibility on cash flows (OCF/FCF unreported), constraining assessment of earnings quality
• Data inconsistencies in gross profit vs cost of sales figures could mask margin dynamics (though not treated as a definitive data quality issue)

Key Concerns:

• Negative operating leverage: OI down 7.8% despite +6.7% revenue growth
• Net margin compressed ~308 bps YoY to ~15.8%
• Ordinary income down 10.0% YoY suggests recurring profit softness
• Reliance on extraordinary gains (PBT > ordinary income) in the quarter is possible but undisclosed

Investment Implications

Key Takeaways:

• Healthy revenue growth but margin compression led to weaker profits
• Strong balance sheet with net cash and ample liquidity provides downside protection
• ROE at 4.4% constrained mainly by low asset turnover and margin pressure
• ROIC at 5.3% needs improvement to meet typical 7–8% targets
• Dividend sustainability is a watch-point given the calculated payout ratio

Metrics to Watch:

• Operating margin trajectory (target stabilization back toward mid- to high-20% range)
• OCF/Net Income ratio once disclosed (>1.0 desired)
• SG&A as a percentage of sales and labor cost trends
• Gross margin confirmation and reconciliation in subsequent disclosures
• ROIC progression and capital allocation (capex, store openings, returns to shareholders)

Relative Positioning: Within domestic consumer service peers, KeePer exhibits above-average liquidity and low leverage but currently faces profitability headwinds, with ROE and ROIC trailing benchmarks due to margin compression and low asset turnover.

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