Cocolonet CO., LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.80B
• Operating Income: ¥351M
• Net Income: ¥302M
• EPS: ¥86.64

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

FY2026 Q2 was a solid profitability beat despite a slight top-line decline. Revenue fell 1.5% YoY to 48.04, but operating income rose 30.7% YoY to 3.51 and ordinary income increased 37.9% YoY to 4.13. Net income jumped 138.1% YoY to 3.01, lifting net margin to 6.3%. Operating margin expanded to 7.3% (3.51/48.04), up an estimated ~180 bps YoY given higher operating income on a smaller revenue base. Gross margin printed 35.6%, and the SG&A ratio was 28.3%, indicating tighter cost control. Non-operating income of 0.82 provided an additional boost, mainly from interest income (0.10), lifting ordinary margin to 8.6%. Cash generation was strong: operating cash flow was 5.51, 1.83x net income, signaling high earnings quality. Using reported capex (-2.61), estimated free cash flow was positive at roughly 2.90, despite investing CF details being unreported. The balance sheet shows robust liquidity with a current ratio of 389.9% and quick ratio of 358.8%, while interest coverage is exceptionally strong at 268x. Leverage measured by the provided D/E of 1.19x is moderate, though interest-bearing debt disclosures are limited; long-term loans reported were only 1.12. ROE is modest at 3.4% (DuPont: NPM 6.3% × AT 0.248 × leverage 2.19x), constrained by low asset turnover. ROIC is 4.3%, below the 5% warning threshold, highlighting capital efficiency pressure. Despite the margin gains, revenue contracted, which warrants caution on demand momentum. The effective tax rate of 33.6% appears normal. Dividend data are limited, but an indicative payout ratio of 38.3% looks conservative against positive FCF. Looking forward, the key will be sustaining cost discipline while stabilizing revenue and improving asset turns to lift ROE/ROIC.

Profitability Analysis

ROE (3.4%) decomposes as Net Profit Margin (6.3%) × Asset Turnover (0.248) × Financial Leverage (2.19x). The biggest driver of the YoY improvement appears to be margin expansion: operating income rose 30.7% on a 1.5% revenue decline, implying operating margin increased from ~5.5% to 7.3% (+180 bps). Non-operating contributions (0.82), notably interest income (0.10), also supported ordinary income (8.6% margin). Business drivers likely include SG&A discipline (28.3% of sales) and stable gross margin at 35.6%. The low asset turnover (0.248) reflects a relatively asset-heavy model versus sales, which caps ROE despite better margins. Sustainability: cost control gains can be sticky if structural (e.g., procurement, efficiency), but non-operating income is inherently less predictable. Watch for any normalization of non-operating items or tax. Concerning trend to monitor: revenue contraction (-1.5% YoY) while SG&A remains sizable; if SG&A growth outpaces sales in future quarters, operating leverage could reverse.

Growth Assessment

Top line decreased 1.5% YoY to 48.04, indicating near-term demand softness or pricing pressure. Profit growth was strong: operating income +30.7% YoY to 3.51, ordinary income +37.9% to 4.13, and net income +138.1% to 3.01, driven by cost control and non-operating tailwinds. Gross profit of 17.08 implies gross margin 35.6%, adequate for the model. EBITDA reached 5.44 (11.3% margin), suggesting improved operating leverage. With ordinary margin at 8.6% and net margin at 6.3%, profitability is trending positively despite the sales dip. However, sustainability hinges on stabilizing sales and maintaining SG&A discipline. Near-term outlook: continued focus on efficiency and selective growth initiatives could sustain mid-single-digit operating margins, but revenue trajectory is the swing factor. Any reacceleration in volumes or price/mix would provide incremental operating leverage.

Financial Health

Liquidity is strong: current ratio 389.9% and quick ratio 358.8% are well above benchmarks; no warning on current ratio. Working capital stands at 36.72, supported by cash and deposits of 35.56 versus current liabilities of 12.67. Solvency: reported D/E is 1.19x (within conservative range), interest coverage is 268x (very strong). Long-term loans are only 1.12, while noncurrent liabilities are 92.72, indicating obligations other than traditional bank debt (e.g., leases, provisions); details are unreported. Maturity mismatch risk appears low given current assets of 49.39 covering current liabilities of 12.67 comfortably. No explicit off-balance sheet obligations were provided.

Cash Flow Quality

OCF/Net Income is 1.83x (5.51/3.01), indicating high earnings quality with cash conversion well above the 1.0x benchmark. Using available capex (-2.61), estimated FCF is approximately +2.90, supporting internal funding capacity; full investing CF detail is unreported, so this is a capex-based proxy. Financing CF was -1.18, consistent with dividends and/or debt service; specific breakdown is unreported. No clear signs of working capital manipulation emerge from the limited disclosure; cash is high versus payables and receivables are modest.

Dividend Sustainability

Dividend specifics (DPS, total dividends paid) are unreported, but the calculated payout ratio is 38.3%, within a sustainable range (<60%). Based on capex-based FCF of ~2.90 and net income of 3.01, implied dividend capacity looks comfortable; a proxy dividend outflow at a 38.3% payout (~1.15) would be covered ~2.5x by estimated FCF. Cash on hand (35.56) further underpins distribution capacity. Policy outlook: with ROIC at 4.3% and ROE at 3.4%, management may balance shareholder returns with reinvestment to improve capital efficiency.

Risk Assessment

Business Risks:

• Revenue decline (-1.5% YoY) signals potential demand softness or pricing pressure.
• Margin reliance on cost control amid a sizable SG&A base (28.3% of sales).
• Goodwill and intangibles (5.13 and 5.73) introduce impairment risk if performance weakens.
• Non-operating income contribution (0.82) adds earnings volatility if it normalizes.
• Inflationary pressure on labor and facility costs could compress margins.

Financial Risks:

• Low asset turnover (0.248) depresses ROE and ROIC, raising capital efficiency risk.
• Noncurrent liabilities are large (92.72) relative to loans, implying potential lease or long-duration obligations not fully detailed.
• Interest rate changes have limited direct P&L impact given low reported interest expense (0.01), but could affect discount rates and valuations.

Key Concerns:

• ROIC at 4.3% is below the 5% warning threshold (capital efficiency flag).
• ROE at 3.4% is modest despite improved margins due to low asset turns.
• Top-line contraction may limit further operating leverage gains.

Investment Implications

Key Takeaways:

• Profitability inflected positively: operating margin ~7.3% and net margin 6.3% with strong OCF.
• Cash conversion is robust (OCF/NI 1.83x), and capex-based FCF is positive (~2.90).
• Balance sheet liquidity is ample; interest coverage is exceptionally high.
• Capital efficiency is the main overhang (ROIC 4.3%, ROE 3.4%) due to low asset turnover.
• Revenue softness is the principal operational watchpoint.

Metrics to Watch:

• Revenue growth trajectory and same-store/volume trends (to lift asset turnover).
• Operating margin sustainability and SG&A ratio discipline.
• Non-operating income stability (interest/dividends/other).
• ROIC progression versus a 7–8% target range; actions to recycle underperforming assets.
• OCF and capex cadence to confirm ongoing FCF coverage of dividends.

Relative Positioning: Within domestic service peers, the company exhibits stronger liquidity and cash conversion, but lags in capital efficiency (low asset turnover, sub-5% ROIC). Continued cost discipline narrows the profitability gap, yet sustained top-line improvement is needed to elevate ROE/ROIC to sector norms.

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