SHIBUYA CORPORATION FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥30.60B
• Operating Income: ¥1.50B
• Net Income: ¥2.32B
• Earnings per Unit (EPU): ¥40.13

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Unit Information

Distribution 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: FY2026 Q1 was a mixed quarter with solid topline growth but a sharp earnings contraction due to heavy margin compression and the presence of extraordinary items. Revenue rose 9.1% YoY to 305.97, showing demand resilience, likely in core packaging and automation lines. Gross profit reached 61.29 with a gross margin of 20.0%, but operating income declined 56.7% YoY to 15.00 as operating margin contracted materially. Based on last year’s implied operating profit of 34.65 and revenue of 280.45, operating margin likely fell about 746 bps YoY (from roughly 12.4% to 4.9%). Ordinary income dropped 53.2% YoY to 15.75, but profit before tax spiked to 33.66, indicating approximately 17.9 in extraordinary gains this quarter. Net income declined 52.1% YoY to 11.10 (EPS 40.13), reflecting tax expense of 10.49 (31.2% effective rate) and sizable non-controlling interest impact implied by the gap from PBT. ROE printed at 1.0% (DuPont: NPM 3.6%, asset turnover 0.193, leverage 1.47x), signaling weak capital efficiency alongside a low ROIC of 1.4% (quality alert). Liquidity remains strong: current ratio 243.8% and cash/deposits of 396.51 provide ample near-term coverage against current liabilities of 418.42. Leverage is conservative with D/E at 0.47x and interest coverage robust at 166.7x (15.00 OI vs 0.09 interest). However, earnings quality is hard to assess this quarter as operating cash flow was not disclosed; the divergence risk (OCF vs NI) cannot be measured. The calculated payout ratio of 240.9% appears elevated and likely unsustainable on quarterly earnings alone, though seasonality could be distorting the ratio; cash coverage cannot be verified without OCF/FCF. Working capital is healthy with 601.83 and receivables of 264.81 supported by strong cash. The combination of margin compression and reliance on extraordinary gains to lift PBT raises questions about underlying run-rate profitability. If order intake and pricing normalize while cost pressures abate, margins could recover, but visibility is limited without backlog and segment detail. Near-term focus should be on restoring operating margin, managing SG&A and project execution, and converting orders to cash. Overall, the quarter underscores resilient sales but pressured core profitability and low capital efficiency, with a clean balance sheet providing time to execute improvements.

Profitability Analysis

ROE decomposition: ROE (1.0%) = Net Profit Margin (3.6%) × Asset Turnover (0.193) × Financial Leverage (1.47x). The largest change vs last year is in margin, as operating income fell 56.7% despite 9.1% sales growth, implying a sharp compression in operating margin from ~12.4% to ~4.9% (≈746 bps). Business driver: likely gross margin pressure (input cost inflation, mix shift, project cost overruns) and operating deleverage (fixed cost absorption) given SG&A ratio at ~8.7% of sales; extraordinary gains boosted PBT but do not support core operations. Sustainability: margin compression may be partly cyclical/one-off depending on project timing and mix; extraordinary gains are non-recurring by nature and should not be extrapolated. Concerning trends: revenue growth outpacing profit growth indicates negative operating leverage; without OCF, we cannot confirm if working capital tied up in receivables is contributing to the profit-to-cash gap. Monitoring points: pricing power, backlog quality, cost pass-through, and SG&A discipline.

Growth Assessment

Revenue grew 9.1% YoY to 305.97, indicating solid demand conditions. Profit growth was negative with operating income down 56.7% and ordinary income down 53.2%, signaling reduced profitability at current volume and mix. The operating margin of ~4.9% is well below the implied prior-year level (~12.4%), suggesting project mix, cost inflation, or lower factory utilization. Extraordinary gains (~17.9) lifted PBT to 33.66, masking the weakness in recurring profit. Absent detail on segment/backlog, sustainability of revenue growth is unclear; however, the strong balance sheet enables continued execution and potential selective investment. Outlook sensitivities: input cost trends, supply chain normalization, and ability to pass through costs in new orders. If margin recovers toward historical levels, earnings could rebound materially; if pressure persists, ROIC will likely remain sub-par. Near-term, focus on conversion of receivables (264.81) to cash and improving project profitability is key.

Financial Health

Liquidity is strong: current ratio 243.8% and quick ratio 243.8% (inventories unreported). No warning on liquidity thresholds (both >1.0). Working capital stands at 601.83, with cash/deposits of 396.51 providing substantial cushion versus current liabilities of 418.42. Solvency is conservative: D/E at 0.47x (below the 1.5x benchmark), and interest-bearing loans total 34.49 against equity of 1,082.94. Interest coverage is very strong at 166.7x. Maturity mismatch risk appears low given cash and receivables (661.32 combined) comfortably exceed current liabilities. No off-balance sheet obligations were reported in the provided data. Equity base is solid at 1,082.94, supporting risk absorption and investment capacity.

Cash Flow Quality

Operating cash flow was not disclosed, so OCF/Net Income cannot be assessed and earnings quality remains unverified. Without OCF and capex disclosure, we cannot compute FCF or its coverage of dividends and strategic investments. Working capital signals to watch include receivables at 264.81; timing of collections will drive OCF. No direct signs of working capital manipulation can be identified from the limited data, but the divergence risk is elevated whenever profits fall and receivables are significant. Extraordinary gains (implied ~17.9) affected PBT and do not contribute to cash from operations, reinforcing the need to focus on core OCF.

Dividend Sustainability

The calculated payout ratio of 240.9% appears elevated and would be unsustainable if based on underlying quarterly earnings; however, seasonality can distort a single-quarter ratio, and DPS was not disclosed. Without OCF and FCF data, cash coverage cannot be verified. Balance sheet cash (396.51) and low leverage provide short-term flexibility to maintain dividends, but long-term sustainability requires operating margin recovery and consistent OCF generation. Policy outlook cannot be inferred from the data set; monitor full-year guidance, DPS announcements, and capital allocation commentary.

Risk Assessment

Business Risks:

• Margin pressure from input cost inflation and adverse project mix reducing gross margin.
• Execution risk on large projects leading to cost overruns and schedule delays.
• Demand cyclicality in packaging/automation end-markets affecting order intake and utilization.
• Supply chain constraints impacting parts availability and lead times.

Financial Risks:

• Earnings quality uncertainty due to undisclosed OCF and reliance on extraordinary gains for PBT.
• Potential cash conversion risk with sizable receivables (264.81) amid profit contraction.
• ROIC at 1.4% is below the 5% warning threshold, indicating weak capital efficiency.
• Dividend coverage risk if payout remains high relative to quarterly earnings.

Key Concerns:

• Operating margin compressed by an estimated 746 bps YoY to ~4.9%.
• Ordinary profit decline (-53.2% YoY) despite revenue growth indicates negative operating leverage.
• Extraordinary gains (~17.9) inflated PBT, masking underlying weakness.
• Lack of OCF/FCF data limits visibility on cash earnings and dividend capacity.

Investment Implications

Key Takeaways:

• Topline grew 9.1% YoY, but core profitability weakened sharply.
• Operating margin likely fell from ~12.4% to ~4.9%, driving a 56.7% YoY drop in operating income.
• PBT boosted by extraordinary gains (~17.9), not reflective of recurring performance.
• Balance sheet strength (cash 396.51, current ratio 243.8%, D/E 0.47x) provides resilience.
• Capital efficiency is weak (ROE 1.0%, ROIC 1.4%); margin restoration is critical.

Metrics to Watch:

• Order intake/backlog and pricing to gauge revenue sustainability and pricing power.
• Gross margin trajectory and cost pass-through effectiveness.
• Operating cash flow and receivables collection to validate earnings quality.
• SG&A trend versus revenue to assess operating leverage.
• Extraordinary/one-time items to separate core vs non-core profit.

Relative Positioning: Within Japanese industrial machinery/packaging peers, the company shows healthy liquidity and low leverage but currently lags on profitability and capital efficiency due to margin pressure; recovery in core margins and improved cash conversion would be needed 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