JALCO Holdings Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥5.45B
• Operating Income: ¥1.28B
• Net Income: ¥242M
• EPS: ¥2.53

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

JALCO Holdings reported FY2026 Q2 consolidated results under JGAAP showing solid top-line momentum but visible pressure from financing costs and weak cash conversion. Revenue was 5,445 million yen, up 22.9% year over year, indicating healthy demand and/or effective pricing and volume execution. Reported gross profit margin was 34.9%, implying gross profit of roughly 1,901 million yen, though the separately disclosed cost of sales figure suggests classification differences within cost lines. Operating income was 1,283 million yen, down 5.9% YoY, indicating margin pressure and/or higher operating expenses despite strong revenue growth. Ordinary income dropped sharply to 290 million yen, reflecting a heavy interest expense burden of 789 million yen, with interest coverage at 1.6x. Net income improved 15.3% YoY to 278 million yen, suggesting the presence of non-operating/extraordinary items and/or timing effects that mitigated the weak ordinary result. DuPont decomposition shows a net profit margin of 5.11%, low asset turnover of 0.069 (mid-year), and high leverage of 4.56, yielding a calculated ROE of 1.60% for the half-year. Liquidity appears adequate with a current ratio of 187% and working capital of approximately 10,839 million yen. On solvency, total liabilities of 58,608 million yen versus total equity of 17,354 million yen imply leverage is elevated; an equity ratio estimated at roughly 22% suggests a leveraged but not distressed balance sheet. Cash flow quality was weak in the period: operating cash flow was -2,382 million yen versus net income of 278 million yen (OCF/NI of -8.57), pointing to sizable working capital outflows or timing effects. Financing cash inflow of 5,691 million yen funded cash needs, while investing cash flow was unreported. Dividend payout and FCF coverage are both reported as zero, likely reflecting interim timing or non-disclosure rather than a definitive policy shift. The combination of strong sales growth, compressed operating-to-ordinary profits due to interest costs, and negative operating cash flow highlights execution and funding risk into 2H. Given several unreported items (depreciation/amortization, investing cash flows, cash balance, share data) and apparent classification inconsistencies, conclusions should be treated as provisional. Overall, the company demonstrates revenue strength but faces a high cost of capital and cash conversion challenges that will be important to monitor. Sustainability of growth will depend on stabilizing operating margins and managing the interest burden. Balance sheet flexibility exists but is constrained by leverage and reliance on financing inflows.

Profitability Analysis

ROE_decomposition: ROE 1.60% = Net margin 5.11% × Asset turnover 0.069 × Financial leverage 4.56. The low asset turnover (mid-year basis) and elevated leverage are the dominant drivers, with margin modest at 5.11%. margin_quality: Revenue 5,445m; reported gross margin 34.9% (~1,901m gross profit). Operating income 1,283m indicates solid operating margin on revenue, but the decline of 5.9% YoY despite +22.9% revenue growth implies higher SG&A or cost inflation. Ordinary income fell to 290m, with interest expense of 789m compressing pre-tax profitability; interest coverage is 1.6x, leaving limited buffer against rate or earnings shocks. operating_leverage: Top-line grew +22.9% YoY but operating income declined, indicating negative operating leverage in the period (cost growth outpaced sales). The drop from operating to ordinary income underscores high financial leverage amplifying earnings volatility.

Growth Assessment

revenue_sustainability: The +22.9% YoY revenue growth to 5,445m suggests healthy demand or increased deployment of earning assets/projects. Sustainability will hinge on retention of customers/contracts and the ability to pass through costs, given margin pressure. profit_quality: Net income rose +15.3% YoY to 278m despite lower operating income, suggesting non-operating/extraordinary support and/or mix/timing effects. The large interest expense (789m) weakens the recurring profit base. Cash conversion was poor (OCF/NI -8.57), indicating earnings quality risk. outlook: Near-term growth prospects appear supported by backlog/activity implicit in sales momentum, but profitability depends on cost control and funding costs. Improving ordinary margin via refinancing, deleveraging, or better operating efficiency is key to sustaining earnings growth into 2H.

Financial Health

liquidity: Current assets 23,294m vs current liabilities 12,454m yield a current ratio of 187% and quick ratio of 187% (inventories unreported), indicating adequate short-term coverage. Working capital stands at ~10,839m. solvency: Total liabilities 58,608m and equity 17,354m imply an equity ratio around 22% (equity/total assets ~17,354/79,052), indicating a leveraged structure. Debt-to-equity is 3.38x, consistent with high financial leverage. capital_structure: Interest burden is heavy (789m in the half), with interest coverage at 1.6x, limiting flexibility. Financing CF inflow of 5,691m indicates reliance on external funding during the period. Balance sheet can support operations, but sensitivity to rates and refinancing is high.

Cash Flow Quality

earnings_quality: OCF of -2,382m versus net income of 278m (OCF/NI -8.57) signals weak cash realization, likely from working capital investments or timing of receivables/payables. Reported EBITDA is unreported, and D&A is unreported, limiting assessment of non-cash components of earnings. FCF_analysis: Free cash flow is not disclosed (reported as 0), and investing CF is unreported; therefore, true FCF cannot be calculated. Negative OCF in H1 suggests internal cash generation did not cover operations and potential capex. working_capital: The large negative OCF implies a material working capital outflow in the period, consistent with growth-driven receivables buildup or project advances. Monitoring receivables days, payables discipline, and contract cash terms will be critical.

Dividend Sustainability

payout_ratio_assessment: Annual DPS is reported as 0.00 and payout ratio as 0.0%; this likely reflects interim timing or non-disclosure rather than a definitive policy. Without EPS policy guidance, sustainability cannot be inferred. FCF_coverage: With OCF negative and FCF unreported, coverage cannot be assessed. Financing inflows funded cash needs in H1, which is not a basis for sustainable distributions. policy_outlook: Given elevated leverage and interest burden, prudence would favor balance sheet reinforcement until cash conversion improves. Any distribution policy should be assessed against stabilized OCF and visibility on 2H cash needs.

Risk Assessment

Business Risks:

• Margin pressure from cost inflation and/or higher SG&A amid growth
• Execution risk in converting revenue growth into operating and ordinary profit
• Customer/project concentration risk if growth is driven by a limited number of large contracts
• Cash flow timing risk tied to receivables collection and milestone billing

Financial Risks:

• High leverage (D/E 3.38x) and low interest coverage (1.6x)
• Refinancing and interest rate risk given sizable interest expense (789m in H1)
• Negative operating cash flow (-2,382m) increasing reliance on external funding
• Potential covenant constraints if profitability weakens

Key Concerns:

• Ordinary income compressed to 290m despite 1,283m operating income due to financing costs
• Weak cash conversion (OCF/NI -8.57) during a growth phase
• Limited disclosure on D&A, investing CF, cash balance, and share data constrains analysis

Investment Implications

Key Takeaways:

• Strong top-line growth (+22.9% YoY) but declining operating income (-5.9% YoY) indicates negative operating leverage in H1
• Interest burden is substantial (789m), reducing ordinary income to 290m and interest coverage to 1.6x
• Cash conversion is weak (OCF -2,382m vs NI 278m), heightening funding reliance
• Liquidity is acceptable (current ratio 187%) but solvency is stretched (equity ratio ~22%, D/E 3.38x)
• ROE of 1.60% reflects modest margins, low mid-year asset turnover, and high leverage

Metrics to Watch:

• Ordinary income trajectory and interest coverage improvement
• Operating cash flow and working capital days (AR/AP/cycle)
• Gross and operating margins vs 2H cost trends
• Leverage (net debt/EBITDA when disclosed) and refinancing terms
• Capex/investing CF disclosure and FCF generation in 2H

Relative Positioning: Versus typical TSE peers, JALCO shows stronger near-term revenue growth but weaker cash conversion and heavier reliance on debt, with profitability constrained at the ordinary level by financing costs.

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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