Japan Animal Referral Medical Center Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥3.03B
• Operating Income: ¥591M
• Net Income: ¥243M
• EPS: ¥159.88

Income Statement

Balance Sheet

Cash Flow Statement

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

Japan Animal Referral Medical Center (6039) delivered a strong FY2026 Q2 performance under JGAAP on a consolidated basis, with clear signs of operating leverage and margin expansion. Revenue rose 18.1% year over year to ¥3,033 million, while operating income surged 68.4% to ¥591 million, indicating strong cost discipline and improving utilization of fixed assets and personnel. Ordinary income of ¥589 million and net income of ¥413 million (+70.2% YoY) underscore broad-based profitability improvement beyond operating items. Gross margin stood at 29.4%, and operating margin improved to 19.5%, reflecting lower SG&A intensity relative to sales. EBITDA reached ¥856 million, yielding a robust 28.2% EBITDA margin, supported by ¥265 million in depreciation and amortization that reflects a sizable capital base typical of advanced veterinary hospitals. DuPont decomposition indicates ROE of 9.26% driven by a 13.62% net margin, asset turnover of 0.336, and modest financial leverage of 2.03x (assets/equity). Interest coverage is strong at 49.7x (operating income/interest expense), suggesting manageable financial risk despite some leverage. Liquidity is adequate but tight, with a current ratio of 102.8% and quick ratio of 97.9%, and working capital of only ¥44 million, which warrants monitoring given the business’s fixed-cost nature. The balance sheet shows total assets of ¥9,034 million and total liabilities of ¥4,605 million; while the reported equity ratio field is 0.0% (undisclosed), the implied equity ratio is approximately 49.4% (equity/assets), indicating a balanced capital structure. Operating cash flow of ¥565 million exceeded net income (OCF/NI = 1.37), signaling sound earnings quality; however, investing cash flow and cash balances are not disclosed (zeros indicate unreported), limiting free cash flow analysis. Dividend data show no payout disclosed this period (DPS and payout ratio listed as 0.0%), consistent with a reinvestment-oriented stance or simply non-disclosure in this quarter. The effective tax rate metric is shown as 0.0% in the provided summary, but using non-zero disclosed figures (income tax of ¥109 million vs. pre-tax income proxied by ordinary income of ¥589 million) implies a tax rate around the high teens, suggesting the 0.0% figure is a placeholder. Operating leverage appears favorable as revenue growth translated into outsized operating profit growth, implying improved case mix, utilization, and/or pricing. The company’s advanced care positioning likely benefits from rising pet healthcare demand and insurance penetration in Japan, though staffing constraints and capex intensity remain structural considerations. Overall, the quarter reflects solid growth, strengthened margins, strong cash conversion, and manageable leverage, with liquidity the main area to monitor. Data gaps, particularly around cash, capex, investing flows, and share count, constrain precision on FCF and per-share metrics, but the core profitability and cash generation trends are clearly positive.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 13.62%
• asset_turnover: 0.336
• financial_leverage: 2.03
• calculated_ROE: 9.26%
• commentary: ROE of 9.26% reflects healthy margins and moderate leverage; asset turnover is modest given a capital-intensive specialty hospital model. margin_quality:
• gross_margin: 29.4%
• operating_margin: 19.5%
• EBITDA_margin: 28.2%
• ordinary_income_margin: 19.4%
• net_margin: 13.6%
• drivers: ['SG&A ratio estimated near 9.9% of sales (¥300 million SG&A on ¥3,033 million sales), indicating disciplined overhead.', 'Favorable operating leverage from higher volumes and/or improved case mix.', 'D&A at ¥265 million underscores capital intensity, yet EBITDA margins remain strong.'] operating_leverage:
• evidence: Revenue +18.1% YoY versus operating income +68.4% YoY.
• interpretation: High fixed-cost base allows incremental revenue to translate into disproportionate operating profit gains.
• sustainability_considerations: ['Dependent on maintaining high utilization of specialized equipment and medical staff.', 'Case mix and pricing power in advanced procedures are key to sustaining margins.']

Growth Assessment

revenue_sustainability:

• current_growth: +18.1% YoY to ¥3,033 million
• context: Growth likely supported by rising pet ownership spend and insurance penetration in Japan, as well as potential footprint expansion or capacity utilization gains.
• risks: ['Capacity constraints and staffing availability (specialist veterinarians, nurses).', 'Competitive encroachment from other advanced veterinary centers.'] profit_quality:
• evidence: ['OCF/Net Income = 1.37, indicating earnings backed by cash.', 'Interest coverage 49.7x suggests profits are not reliant on financial leverage.', 'Net margin 13.6% and operating margin 19.5% point to solid underlying economics.']
• caveats: ['Investing cash flows and capex not disclosed; maintenance vs. growth capex intensity unknown.', 'Effective tax rate in provided metrics shows 0.0% but implied tax burden ~18–19% using disclosed tax expense.'] outlook:
• near_term: Continued margin support if utilization remains high through H2; watch for seasonality in case volumes and staffing costs.
• medium_term: Scalable growth contingent on adding specialists and equipment capacity; expansion projects would elevate capex and D&A but can enhance throughput and ROIC if well-executed.

Financial Health

liquidity:

• current_ratio: 102.8%
• quick_ratio: 97.9%
• working_capital: ¥43.8 million
• assessment: Adequate but tight liquidity; limited buffer against shocks. Close monitoring of receivables collection and payables terms is warranted. solvency:
• debt_to_equity: 1.03x (liabilities/equity)
• interest_coverage: 49.7x
• equity_ratio_implied: ≈49.4% (¥4,461m equity / ¥9,034m assets)
• assessment: Balanced capital structure with strong coverage; solvency risk appears low. capital_structure:
• assets: ¥9,034 million
• liabilities: ¥4,605 million
• equity: ¥4,461 million
• commentary: Moderate leverage fits a capital-intensive, cash-generative model; refinancing risk appears limited given coverage.

Cash Flow Quality

earnings_quality:

• OCF: ¥565 million
• net_income: ¥413 million
• OCF_to_NI: 1.37
• interpretation: Cash conversion is strong, indicating limited accrual build and good working capital management in the period. FCF_analysis:
• reported_FCF: Not determinable from disclosed data (investing CF unreported)
• proxy_indicators: ['D&A of ¥265 million suggests ongoing maintenance capex needs; actual capex level unknown.', 'Financing CF outflow of ¥263 million may reflect debt service and/or shareholder returns (specifics not disclosed).']
• takeaway: Underlying OCF is healthy; FCF directionally likely positive if capex is near maintenance, but cannot be confirmed without capex/investing CF data. working_capital:
• current_assets: ¥1,598 million
• current_liabilities: ¥1,554 million
• inventories: ¥76 million
• notes: ['Quick ratio near 1.0x implies limited reliance on inventory for liquidity.', 'Further granularity (receivables, payables, cash) not disclosed; collection cycles and payor mix remain key variables.']

Dividend Sustainability

payout_ratio_assessment: No dividend payout disclosed for the period (DPS and payout ratio presented as 0.0% may reflect non-disclosure). With NI of ¥413 million and strong OCF, the capacity exists, but policy focus may be on reinvestment. FCF_coverage: Not assessable due to lack of investing CF/capex disclosure. policy_outlook: Given capital intensity and growth opportunities, a conservative dividend stance or reinvestment preference would be consistent; explicit guidance is needed to confirm.

Risk Assessment

Business Risks:

• Specialist staffing constraints (surgeons, anesthesiologists, diagnostic specialists) affecting capacity and wage inflation.
• High fixed-cost base and utilization sensitivity in advanced procedures.
• Competitive dynamics among advanced veterinary hospitals and clinics.
• Case mix volatility and discretionary nature of certain high-cost procedures.
• Supply chain and equipment maintenance risks for advanced imaging/surgical devices.
• Reputation and clinical outcome risks inherent in complex procedures.

Financial Risks:

• Tight liquidity (current ratio ~1.03x; low working capital buffer).
• Capex intensity and potential need for periodic large equipment replacements.
• Limited disclosure on cash balances and investing CF, constraining FCF visibility.
• Potential refinancing risk if debt maturities cluster (interest expense indicates some borrowings).
• Sensitivity of margins to wage inflation and consumables costs.

Key Concerns:

• Sustainability of operating leverage if volume growth moderates.
• Visibility on capex pipeline and resulting FCF profile.
• Dependence on maintaining high clinical capacity utilization with scarce specialist labor.

Investment Implications

Key Takeaways:

• Strong topline growth (+18.1% YoY) converted into outsized operating profit growth (+68.4% YoY).
• Margin expansion evident: operating margin 19.5%, EBITDA margin 28.2%.
• Healthy cash conversion (OCF/NI = 1.37) underpins earnings quality.
• Adequate but tight liquidity (current ratio 1.03x; quick ratio 0.98x) requires monitoring.
• Balanced solvency profile with implied equity ratio ~49% and interest coverage ~50x.
• Data gaps (cash, investing CF, share count) limit precision on FCF and per-share analytics.
• Dividend not disclosed; policy likely skewed to reinvestment given capital intensity.

Metrics to Watch:

• Same-facility case volumes, ASP, and utilization rates of key equipment (MRI/CT/OR).
• Specialist headcount, turnover, and labor cost ratio.
• Capex commitments, investing cash flows, and maintenance vs. growth capex split.
• OCF/NI ratio sustainability and working capital turns (DSO/DPO).
• Operating and EBITDA margins by service line/case mix.
• Interest expense trajectory and debt maturity profile.

Relative Positioning: Within Japan’s advanced veterinary care niche, the company exhibits above-average profitability and cash conversion with moderate leverage, though liquidity is tighter than ideal and disclosure on capex/FCF is more limited than peers focused on investor communications.

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