IID,Inc. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥1.43B
• Operating Income: ¥80M
• Net Income: ¥93M
• EPS: ¥49.11

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: Soft top-line and core earnings, with headline net profit inflated by one-time gains. Revenue declined 4.6% YoY to 14.29, with gross profit of 7.12 and a gross margin of 49.8%. SG&A was 5.48, equating to an SG&A ratio of 38.3%, leaving operating income at 0.80, down 50.9% YoY. Operating margin compressed to 5.6% from roughly 10.9% a year ago (about 530 bps compression), indicating weaker operating leverage and/or mix. Ordinary income was 0.83, broadly in line with operating income given minimal net non-operating effects this quarter. Profit before tax surged to 1.63, implying approximately 0.80 of extraordinary gains between ordinary income and PBT. Net income spiked to 2.38 (+161.2% YoY), pushing net margin to 16.7%, clearly disconnected from the deterioration in operating income. The effective tax rate was high at 42.6% (0.69 tax on 1.63 PBT), further underscoring that below-the-line/special factors likely drove the net profit outturn. Balance sheet remains very conservative: current ratio 426%, quick ratio 414%, and equity ratio approximately 76% (47.33/61.91). Cash and deposits of 33.02 cover total long-term loans of 3.00 many times, implying net cash. ROE for the period calculates to 5.0% under DuPont (16.7% margin × 0.231 turnover × 1.31x leverage), but this is flattered by non-recurring gains. ROIC stands at 2.7%, below the 5% warning threshold, signaling subdued core capital efficiency. With operating income under pressure and cash flows unreported, earnings quality is difficult to validate; headline EPS of 49.11 JPY looks non-recurring. Near term, management focus should be on stabilizing operating margin and demonstrating cash conversion, while investors should normalize for one-offs in outlook.

Profitability Analysis

DuPont ROE decomposition: ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 16.7% × 0.231 × 1.31 = ~5.0%. The biggest driver of the reported ROE is the net profit margin spike, which is inconsistent with core earnings given operating income fell 50.9% YoY and PBT exceeded ordinary income by ~0.80, implying extraordinary gains. Business reason: one-time gains (likely disposal gains or similar extraordinary income) lifted PBT and net income, while core operations (revenue -4.6% YoY, operating margin down to 5.6%) weakened due to softer demand and/or higher cost base. Sustainability: the margin lift from extraordinary items is not sustainable; ongoing margin depends on gross profit stability and SG&A control. Asset turnover at 0.231 is modest and likely constrained by a cash-heavy balance sheet; little change expected unless revenue accelerates or assets are optimized. Leverage at ~1.31x (equity ratio ~76%) is conservative; changes here are unlikely to drive ROE meaningfully. Concerning trends: SG&A ratio sits at 38.3% while revenue declined 4.6% YoY; operating margin compressed by ~530 bps YoY, indicating negative operating leverage.

Growth Assessment

Revenue decreased 4.6% YoY to 14.29, suggesting softer demand or mix shifts in the quarter. Operating income fell 50.9% YoY to 0.80, implying significant operating deleverage as SG&A did not flex down proportionally. Ordinary income (0.83) remained close to operating levels, but PBT (1.63) suggests material extraordinary gains (~0.80), likely non-recurring. Net income rose 161.2% YoY to 2.38, primarily due to the one-time items rather than improved core performance. Gross margin remains solid at 49.8%, indicating product/service-level contribution is intact, but overhead absorption is weaker. Profit sustainability: current net margin (16.7%) appears overstated; a normalized run-rate would align closer to operating/ordinary income margins (~5-6%). Outlook hinges on recovering revenue growth and tightening SG&A to rebuild operating margin; absent that, growth will be limited to non-recurring items. With ROIC at 2.7%, incremental growth should focus on higher-return initiatives and disciplined capital deployment.

Financial Health

Liquidity is very strong: current ratio 425.9% and quick ratio 413.6%, no warning flags (both well above benchmarks). Solvency is conservative with liabilities/equity of ~0.31x and an equity ratio of ~76% (47.33/61.91), indicating ample buffer. Interest-bearing debt disclosure is partial, but long-term loans are 3.00 with cash and deposits at 33.02, implying a sizeable net cash position. Maturity mismatch risk appears low given current assets of 43.24 versus current liabilities of 10.15. No explicit off-balance sheet obligations were reported in the provided data. There are meaningful intangibles and goodwill (intangible assets 5.28, goodwill 3.74), which introduce potential impairment risk if performance weakens.

Cash Flow Quality

Operating cash flow, free cash flow, and working capital movements were not disclosed, preventing OCF/Net Income analysis and FCF coverage assessment. Given the divergence between operating income (0.80) and net income (2.38), headline profit quality appears low for the quarter absent supporting cash flows. With no capex or dividend cash data, FCF sustainability cannot be confirmed. The strong cash balance (33.02) provides short-term flexibility, but recurring cash generation must be demonstrated in subsequent quarters. No signs of working capital manipulation can be assessed due to missing OCF and detailed WC disclosures.

Dividend Sustainability

Annual DPS and paid dividends were not disclosed; calculated payout ratio is 46.8%, within a generally sustainable range (<60%). However, because net income this quarter is inflated by non-recurring gains, the apparent payout affordability may be overstated. FCF coverage is not calculable due to missing cash flow data. Balance sheet cash (33.02) affords near-term dividend capacity, but long-term sustainability should be judged against normalized earnings (closer to ordinary/operating income levels) and future capex needs. Policy visibility is limited in this dataset; watch for guidance on payout policy and any commitment to stable or progressive dividends.

Risk Assessment

Business Risks:

• Revenue softness (-4.6% YoY) indicating demand or mix headwinds
• Operating margin compression (~530 bps YoY) from negative operating leverage
• High reliance on intangibles/goodwill (total 9.02) raising impairment risk if growth stalls
• Dependence on one-off gains to lift net profit, not indicative of recurring earnings power

Financial Risks:

• Earnings quality risk: net income materially exceeds operating performance due to extraordinary gains
• Cash flow visibility risk: OCF/FCF unreported, limiting validation of profit conversion
• Tax volatility risk: elevated effective tax rate (42.6%) could pressure future net income

Key Concerns:

• ROIC at 2.7% (<5% warning), signaling weak core capital efficiency
• Potential further SG&A pressure if revenue does not re-accelerate
• Market risk on investment securities (7.65) which may introduce P&L volatility

Investment Implications

Key Takeaways:

• Core earnings weakened: operating income down 50.9% YoY and operating margin at 5.6%
• Headline net profit (+161% YoY) driven by non-recurring items (~0.80 gap between ordinary income and PBT)
• Balance sheet highly liquid and under-levered (equity ratio ~76%, net cash position)
• ROIC at 2.7% flags subpar capital efficiency despite robust cash
• Near-term focus should be on margin restoration and proving cash conversion

Metrics to Watch:

• Operating margin trend and SG&A ratio versus revenue growth
• Disclosure of extraordinary items and their recurrence
• Operating cash flow and FCF to validate earnings quality
• Revenue growth re-acceleration and gross margin stability
• ROIC trajectory and use of cash (organic investment, M&A, shareholder returns)

Relative Positioning: Financially conservative with strong liquidity and low leverage, but currently exhibiting weaker core profitability and low ROIC versus quality peers; headline earnings strength appears non-recurring.

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