KIKUKAWA ENTERPRISE,INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.82B
• Operating Income: ¥210M
• Net Income: ¥173M
• EPS: ¥143.31

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

For FY2026 Q2 (non-consolidated, JGAAP), the company delivered modest topline growth but experienced meaningful margin compression at the operating level. Revenue increased 3.0% year over year to ¥1,822 million, while operating income declined 23.0% to ¥210 million, indicating negative operating leverage in the period. Gross profit is reported at ¥843 million, implying a gross margin of 46.3%, which remains solid and suggests pricing power and/or a favorable mix despite cost or SG&A headwinds. Ordinary income of ¥251 million exceeded operating income by ¥41 million, reflecting positive non-operating contributions; interest expense was negligible at ¥6 thousand, underscoring a very low financial burden. Net income decreased 18.5% to ¥173 million, and the implied effective tax rate is approximately 35.4% (¥95.0 million tax on an estimated pre-tax income of ~¥268 million). The DuPont profile shows a net margin of 9.5%, asset turnover of 0.128x, and financial leverage of 1.14x, yielding an ROE of 1.38%, which is low due primarily to weak asset turnover and a sizable equity base. Liquidity is exceptionally strong: current assets of ¥10.50 billion vs. current liabilities of ¥1.30 billion result in a current ratio of roughly 806%. The balance sheet is conservative, with total equity of ¥12.51 billion representing approximately 87.7% of total assets, and a low debt-to-equity ratio of 0.18x. Working capital is sizeable at ¥9.20 billion, supporting resilience and delivery capacity but dampening asset turnover. Cash flow statement items were not disclosed (zeros indicate unreported), constraining assessment of cash conversion and free cash flow in the period. Dividends are also unreported (DPS shown as 0), so payout behavior cannot be assessed from the data provided. There is a minor inconsistency between the reported cost of sales and gross profit; using the reported gross profit (and the 46.3% margin) appears more internally consistent. Overall, the period reflects stable demand but a step-down in operating margin, likely from higher SG&A, cost inflation, or mix, while financial health remains very strong. The key watchpoints are operating margin recovery, working capital efficiency, and confirmation of cash generation once cash flow data are available. Given the limited disclosure of cash flow and per-share data, conclusions focus on the non-zero items provided.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 9.50% (¥173m / ¥1,822m)
• asset_turnover: 0.128x (¥1,822m / ¥14,269m)
• financial_leverage: 1.14x (Assets/Equity = ¥14,269m / ¥12,514m)
• calculated_ROE: 1.38%
• drivers_commentary: Low ROE is driven by subdued asset turnover and a large equity base; margin remains adequate at the net level. margin_quality: Gross margin is a healthy 46.3%, but operating margin compressed to ~11.5% (¥210m / ¥1,822m). Using the YoY change, prior-year operating margin is estimated at ~15.4%, implying a ~3.9pp decline. Net margin of 9.5% remains solid after a ~35% effective tax rate, supported by small positive non-operating income. operating_leverage: Revenue grew 3.0% YoY, while operating income fell 23.0%, indicating negative operating leverage. This suggests higher SG&A, cost inflation, or less favorable project/mix offsetting volume/pricing gains.

Growth Assessment

revenue_sustainability: Topline growth of 3.0% YoY to ¥1.822bn suggests stable demand. Without order/backlog disclosure, sustainability beyond the half is uncertain; however, the strong gross margin indicates some pricing power. profit_quality: Ordinary income exceeded operating income by ¥41m, indicating supportive non-operating items with negligible interest burden. Net income decline (-18.5% YoY) largely reflects operating margin compression rather than financial costs. outlook: Near-term growth appears modest with pressure on operating profitability. Margin stabilization will hinge on cost pass-through, SG&A control, and mix. Confirmation from orders/backlog and cash flows (not disclosed) will be important for the outlook.

Financial Health

liquidity: Current assets ¥10,497.9m vs. current liabilities ¥1,302.9m; current ratio ~806%, quick ratio shown as the same due to unreported inventories. Working capital is ¥9,195.0m, providing ample buffer. solvency: Total liabilities ¥2,231.8m vs. equity ¥12,514.0m; debt-to-equity ~0.18x. Equity ratio, computed from disclosed balances, is ~87.7% despite the reported 0.0% field being unreported. capital_structure: Leverage is very low (financial leverage 1.14x). Interest expense is minimal (¥6k), and interest coverage is effectively very high (~35,000x using operating income), implying minimal refinancing or interest-rate risk.

Cash Flow Quality

earnings_quality: With OCF unreported, we cannot assess cash conversion. Net income of ¥173m and strong gross margin suggest underlying profitability, but working capital movements are unknown. FCF_analysis: Free cash flow was not disclosed. Capex and depreciation are also unreported, limiting insight into reinvestment needs and maintenance vs. growth spending. working_capital: Large working capital (¥9.20bn) supports operations but depresses asset turnover (0.128x). Efficiency of receivables, inventories, and WIP cannot be evaluated due to missing detail.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio are shown as 0.00, which indicates non-disclosure rather than confirmed zero. Withholding judgment on payout until dividend policy data is available. FCF_coverage: FCF coverage cannot be assessed because OCF and capex are unreported. policy_outlook: No dividend or policy information was provided in the period. Strong balance sheet could support distributions in general, but policy and cash generation evidence are required before drawing conclusions.

Risk Assessment

Business Risks:

• Potential cost inflation or SG&A step-ups compressing operating margin despite stable revenue.
• Cyclical demand exposure typical for capital goods/industrial end-markets (timing of orders and capex cycles).
• Mix risk if higher-margin product lines or projects decline relative to lower-margin ones.
• Execution risk on large projects that can swing quarterly/half-year profitability.

Financial Risks:

• Asset turnover is low (0.128x), indicating potential capital intensity or heavy working capital tying up cash.
• Cash flow non-disclosure limits visibility on cash conversion, capex, and liquidity deployment.
• Tax burden (~35%) is material; changes in effective tax rate can influence net margins.

Key Concerns:

• Operating margin compression of ~3.9pp YoY despite 3% revenue growth.
• Insufficient cash flow disclosure to validate earnings quality and FCF.
• Large working capital base depressing ROE and asset efficiency.

Investment Implications

Key Takeaways:

• Topline grew 3% YoY to ¥1.822bn, but operating income fell 23% to ¥210m, signaling negative operating leverage.
• Gross margin remains robust at 46.3%, yet operating margin dropped to ~11.5% from an estimated ~15.4% a year ago.
• ROE is low at 1.38%, driven by low asset turnover (0.128x) and a large equity base.
• Balance sheet strength is a key positive: equity ratio ~87.7% and debt-to-equity ~0.18x with negligible interest expense.
• Cash flow and dividend data are not disclosed, limiting assessment of cash conversion and distribution capacity.

Metrics to Watch:

• Operating margin trajectory (cost pass-through, SG&A control, and mix).
• Order intake/backlog (if disclosed) to gauge revenue sustainability.
• Working capital efficiency and asset turnover improvements.
• Cash flow from operations and capex to confirm FCF and dividend capacity.
• Non-operating items (ordinary income vs. operating income) and effective tax rate stability.

Relative Positioning: Financially conservative with strong liquidity and low leverage versus typical industrial peers, but profitability momentum is weaker this period due to margin compression and low asset turnover, resulting in subdued ROE.

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
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