YA-MAN LTD. FY2026 Q2 Earnings Report

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Executive Summary

Although the Company returned to profitability from an operating loss in the same period of the previous year, its operating margin remained at 0.5%, indicating that a full recovery in earnings power is still incomplete. Revenue was ¥137.2B (+19.2% YoY), Operating Income was ¥0.7B (compared with ¥-11.6B in the previous year), Ordinary Income was ¥2.0B (+117.9% YoY), and Net Income was ¥1.3B (+111.0% YoY). The primary driver of revenue growth was the rapid expansion of the overseas business, while the improvement in earnings was largely attributable to the operating leverage effect from higher revenue, in addition to the boost from non-operating income (including dividend income and foreign exchange gains).

Factors Affecting Performance

【Revenue】Revenue was ¥137.2B, up +19.2% YoY. By segment, Overseas led the overall growth with ¥54.4B (39.6% of total, YoY +75.2%), while StoreSales also continued to expand at ¥39.1B (+23.3% YoY). In contrast, DirectSales declined to ¥30.2B (-17.4% YoY), resulting in divergent performance across channels. OnLine was ¥11.9B (+2.9% YoY), remaining broadly flat.

【Profit and Loss】Gross profit after deducting cost of sales of ¥58.4B was ¥78.8B (gross margin: 57.4%). However, SG&A expenses of ¥78.2B (SG&A ratio: 56.9%) almost entirely offset gross profit, leaving Operating Income at ¥0.7B (operating margin: 0.5%). Against total segment profit of ¥26.8B, unallocated corporate expenses of ¥26.2B absorb the majority, reflecting the Company’s cost structure. Ordinary Income of ¥2.0B exceeded Operating Income, primarily because non-operating income of ¥1.5B (including dividend income of ¥0.4B and foreign exchange gains of ¥0.3B) made a significant contribution, exceeding the earnings generated by the core business. Extraordinary gains of ¥0.1B and extraordinary losses of ¥0.1B were largely offset, resulting in a negligible impact on Net Income. In conclusion, the Company achieved both revenue and profit growth.

Segment Analysis

Segment profit margins were high at 28.4% for StoreSales, 34.7% for OnLine, and 25.4% for DirectSales, while Overseas, the largest segment, remained at 6.1%. Overseas recorded substantial increases in both revenue and profit compared with the previous year (profit was up YoY +4628.6%, a sharp increase due to the previous year being approximately breakeven), but its profit margin remains low relative to the other businesses, meaning that scale expansion has not translated directly into an improvement in the consolidated profit margin. Corporate expenses of ¥26.2B almost entirely offset total segment profit of ¥26.8B. Improving cost efficiency to convert revenue growth into consolidated Operating Income will therefore be the key focus for improving profit margins going forward.

Key Financial Indicators

【Profitability】Operating margin of 0.5%, Net Income margin of 1.0%, and ROE of 0.5% (cumulative figures) were all low. Against a gross margin of 57.4%, the SG&A ratio was 56.9%, indicating that most of the gross profit generated was consumed by SG&A expenses.【Cash Flow Quality】Operating Cash Flow (OCF) was ¥14.3B, approximately 10.8 times Net Income of ¥1.3B, indicating favorable cash conversion. However, the primary factor was a ¥25.1B decrease in trade receivables, which must be evaluated separately from sustainable earnings power based on Operating Income.【Investment Efficiency】Capital expenditures of ¥0.5B were only approximately 0.3 times depreciation and amortization expense of ¥1.4B, indicating that asset replacement investment remains below depreciation levels.【Financial Soundness】The Equity Ratio was 89.5%, while cash and deposits were ¥156.4B (57.5% of total assets), indicating exceptionally strong liquidity and capital strength.

Cash Flow Analysis

OCF was positive at ¥14.3B, a significant improvement from ¥-10.9B in the same period of the previous year. This improvement was largely attributable to a ¥25.1B decrease in trade receivables. Inventories increased by ¥1.6B, while trade payables decreased by ¥15.9B; both inventory accumulation and shorter payment terms had a negative impact on OCF. Investing Cash Flow was a modest ¥-0.4B, mainly reflecting capital expenditures of ¥0.5B. As a result, Free Cash Flow was positive at ¥13.8B. Financing Cash Flow was ¥-2.7B, primarily due to dividend payments of ¥2.6B. Overall cash generation was strong, but because its source included the one-off factor of progress in collecting receivables, the trend in trade receivables and inventory levels should also be monitored from the next period onward.

Quality of Earnings

Ordinary Income of ¥2.0B significantly exceeded Operating Income of ¥0.7B, with the main reason for the difference being non-operating income of ¥1.5B (including dividend income of ¥0.4B and foreign exchange gains of ¥0.3B). Foreign exchange gains of ¥0.3B were equivalent to nearly half of Operating Income, indicating that non-core fluctuations have a meaningful impact on earnings. Extraordinary income of ¥0.1B (gain on sale of fixed assets) and extraordinary loss of ¥0.1B (loss on disposal of fixed assets) were largely offset, resulting in a limited net impact on Net Income. The fact that OCF substantially exceeded Net Income is positive as evidence of cash backing; however, its underlying strength was supported by a decrease in trade receivables, and it should therefore be discounted when used as an indicator of recurring earnings power.

Earnings Forecast and Guidance

Progress against the Full-Year forecast was broadly at standard levels for Revenue at 49.9%, Ordinary Income at 40.4%, and Net Income at 37.7%, while progress for Operating Income was substantially lower at 15.1%. To achieve the Company’s plan of Operating Income of ¥4.5B, approximately ¥3.8B of Operating Income will be required in the second half, implying that the operating margin must improve from 0.5% in the first half to approximately 2.8% in the second half. The earnings forecast and dividend forecast remain unchanged.

Shareholder Returns

The interim dividend was ¥4.25 per share, while the Full-Year dividend forecast was ¥9.0 per share (implying a year-end dividend of ¥4.75). Based on the average number of shares outstanding during the period, total interim dividend payments exceeded first-half Net Income of ¥1.3B, resulting in a Payout Ratio of more than 100%. However, Free Cash Flow of ¥13.8B substantially exceeded the interim dividend amount, with financial capacity supported by cash and deposits of ¥156.4B and retained earnings of ¥230.8B serving as the source of shareholder returns. The annual dividend forecast also exceeds forecast Full-Year Net Income of ¥3.5B, creating a structure in which dividend sustainability depends on the extent of recovery in core business profits.

Risk Factors

1. Low profitability: Operating margin of 0.5% and Net Income margin of 1.0% are both low. Against a gross margin of 57.4%, the SG&A ratio was 56.9%, meaning that most gross profit was consumed by SG&A and corporate expenses.

2. Foreign exchange sensitivity: Foreign exchange gains of ¥0.3B were equivalent to approximately half of Operating Income of ¥0.7B. Together with the expansion of the Overseas business, which accounted for 39.6% of consolidated revenue, this indicates a structure in which foreign exchange fluctuations have a substantial impact on Ordinary Income.

3. Working capital and inventory efficiency: Inventories were ¥30.8B, all of which consisted of products at ¥30.8B. Given that the primary driver of OCF was the one-off factor of a decrease in trade receivables, improving the efficiency of inventory and receivables management remains a key challenge.

Industry Benchmark (Reference; Compiled by the Company)

Industry Benchmark (manufacturing)

Profitability and Returns

The Company’s Operating Margin and Net Income Margin were both substantially below the industry median, placing its profitability in the lower range within the industry.

Growth and Capital Efficiency

The Revenue Growth Rate exceeded the industry median, placing the Company among the higher-growth businesses within the industry.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. Revenue growth was driven by the Overseas and StoreSales businesses, resulting in a return to consolidated Operating Income profitability from an operating loss in the same period of the previous year. However, with a gross margin of 57.4% and an SG&A ratio of 56.9%, the operating margin remained at 0.5%.

2. First-half progress toward the Full-Year Operating Income plan was low at 15.1%, requiring a substantial improvement in the second-half operating margin from 0.5% to approximately 2.8%.

3. The financial foundation is exceptionally strong, with cash and deposits of ¥156.4B and an Equity Ratio of 89.5%. However, the fact that the OCF increase included the one-off factor of a decrease in trade receivables, as well as the trend in inventory levels, will be key monitoring points going forward.

Theoretical Share Price (Reference Value)

Sensitivity: ¥339–¥358 at Cost of Equity ±1%; ¥345–¥350 at ω ±0.1.

Notes:

• As forecast ROE is below the Cost of Equity, the theoretical value is below Book Value per Share.
• Net assets as of the end of the quarter are used (there is a timing difference relative to the Full-Year forecast).
• As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson-type; explicit 5-year fade) / Interest rate reference month: 2026-07 / This is a mechanically calculated value based solely on publicly disclosed data; it is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting with a professional adviser as necessary.

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AI Financial Analysis

Executive Summary

FY2026 Q2 marked a sharp earnings recovery for YA-MAN, with revenue growth restoring the group to a small operating profit after the prior-year loss. Revenue increased 19.2% year on year to ¥13.73bn. Operating income improved to ¥0.68bn from an operating loss of ¥1.16bn in FY2025 Q2. Ordinary income was ¥2.02bn and net income attributable to owners was ¥1.32bn, compared with prior-year losses of ¥1.13bn and ¥1.20bn, respectively. The gross margin improved to 57.4% from 58.0% in the prior period, a compression of approximately 60bp, indicating that the recovery was not driven by gross-margin expansion. However, SG&A declined marginally by 0.2% despite the 19.2% sales increase, creating substantial positive operating leverage. As a result, the operating margin improved by approximately 1,060bp to 0.5% from -10.1%, although the absolute margin remains very low. Segment operating contribution before corporate costs rose to ¥2.68bn from ¥1.18bn, led by store sales and a strong recovery in overseas revenue. Corporate and unallocated expenses increased to ¥2.62bn from ¥2.34bn, absorbing nearly all segment profit and leaving consolidated operating income at only ¥0.68bn. Cash generation was strong, with operating cash flow of ¥1.43bn exceeding net income by 10.8x. This cash-flow outcome was materially supported by a ¥2.51bn reduction in trade receivables, while a ¥1.62bn inventory build and a ¥1.59bn reduction in trade payables partly offset the benefit. Free cash flow was ¥1.39bn, comfortably positive despite low operating profitability. The balance sheet remains exceptionally conservative, with cash and deposits of ¥15.64bn, interest-bearing debt of only ¥0.10bn, and equity representing 89.5% of total assets. The Q2 dividend of ¥4.25 per share is covered by free cash flow but exceeds interim net income, resulting in a reported dividend payout ratio of 187.9%. Full-year sales guidance of ¥27.50bn is broadly on track, with first-half sales progress at 49.9%. In contrast, first-half operating-profit progress is only 15.1% of the ¥0.45bn full-year forecast, making second-half profit-margin delivery the principal issue. Overall, the result demonstrates meaningful revenue and segment-profit recovery, but the investment case remains dependent on converting this recovery into a sustainable consolidated operating margin after corporate costs.

Profitability Analysis

Annualized DuPont ROE is 1.1%, comprising a 1.0% net profit margin, 1.010x asset turnover, and 1.12x financial leverage. The low ROE is principally a margin issue rather than an asset-utilization or balance-sheet leverage issue: the company is nearly debt-free and operates with modest financial leverage. Annualized asset turnover of 1.010x is reasonable for the current asset base, but it cannot compensate for the 1.0% net margin. EBIT margin was only 0.5%, below the 5% efficiency benchmark and consistent with the LOW_OPERATING_EFFICIENCY quality alert. The primary year-on-year change was operating leverage: revenue rose ¥2.21bn while SG&A was broadly flat at ¥7.82bn, allowing operating income to improve by ¥1.23bn. Gross margin fell roughly 60bp year on year, so the turnaround did not yet demonstrate pricing or procurement-led margin improvement. The store-sales division is the core business by operating-income contribution, generating ¥1.11bn of segment profit on ¥3.91bn of revenue, for a segment margin of 28.4%. Direct sales generated ¥0.77bn of profit on ¥3.02bn of revenue, a 25.4% margin. Mail-order generated ¥0.41bn on ¥1.19bn of revenue, a 34.7% margin. Overseas revenue increased 75.2% to ¥5.44bn, but its ¥0.33bn segment profit implies a much lower 6.1% margin, highlighting that the largest revenue growth driver remains less profitable than domestic channels. Segment profit across the four reportable businesses rose to ¥2.62bn from ¥0.97bn, but unallocated corporate costs increased ¥0.28bn to ¥2.62bn. Accordingly, corporate-cost absorption remains the central constraint on consolidated profitability and capital efficiency. R&D expense increased 11.5% to ¥0.41bn, equivalent to 3.0% of sales; this is at the low end of the stated manufacturing/technology benchmark and is flagged as LOW_RD_INVESTMENT. The ROIC quality alert of 1.0% similarly reflects that operating earnings remain insufficient relative to the large cash-rich capital base. Sustainable improvement requires both retention of revenue scale and a higher conversion of segment contribution into consolidated operating profit.

Growth Assessment

Revenue growth was broad enough to support a credible top-line recovery, although its quality differs materially by channel. Store sales rose 23.3% year on year to ¥3.91bn and segment profit increased to ¥1.11bn from ¥0.29bn. Overseas sales were the largest source of incremental revenue, rising ¥2.33bn year on year to ¥5.44bn, but overseas segment margin remained only 6.1%. Mail-order sales grew 2.9% to ¥1.19bn, with segment profit increasing to ¥0.41bn. Direct sales declined 17.4% to ¥3.02bn, although segment profit more than doubled to ¥0.77bn, suggesting improved channel profitability despite lower sales. The other business segment declined 60.0% in revenue to ¥0.17bn and its segment profit fell to ¥0.06bn. Full-year revenue guidance is ¥27.50bn, and Q2 cumulative revenue represents 49.9% of that target, essentially aligned with the standard 50% first-half progress rate. No earnings forecast revision was announced. Operating-income progress is only 15.1% against the ¥0.45bn full-year target, 34.9 percentage points below the standard first-half pace. Ordinary-income progress is 40.4% against the ¥0.50bn target, while net-income progress is 37.7% against the ¥0.35bn target. The weaker operating-profit progress versus net-income progress indicates that non-operating income is important to the current earnings profile. Non-operating income of ¥0.15bn was 10.8% of revenue and exceeded operating income by ¥0.80bn. Dividend income of ¥0.04bn, interest income of ¥0.02bn, and foreign-exchange gains of ¥0.03bn contributed to non-operating income, alongside other items. The second half must therefore generate substantially stronger operating profit to achieve guidance without relying disproportionately on non-operating gains. The two-period consistency score of 2/10 also indicates that the available earnings record remains volatile rather than consistently compounding.

Financial Health

Financial health is very strong. The current ratio is 935.9% and the quick ratio is 815.4%, far above conventional liquidity thresholds. Current assets total ¥23.93bn versus current liabilities of ¥2.56bn, yielding working capital of ¥21.37bn. Cash and deposits of ¥15.64bn account for 57.5% of total assets and provide substantial liquidity for operations, shareholder distributions, and investment. Interest-bearing debt is only ¥0.10bn, entirely represented by long-term loans, while the debt-to-equity ratio is 0.12x and debt-to-capital is 0.4%. Debt/EBITDA is 0.47x, indicating negligible refinancing and covenant risk. There is no maturity mismatch concern because current assets are more than nine times current liabilities and the reported interest-bearing borrowing is long term. Total liabilities are only ¥2.84bn, or 10.5% of total assets, while total equity is ¥24.35bn. Receivables fell ¥2.48bn, or 47.1% year on year, to ¥2.79bn, improving liquidity and contributing materially to operating cash flow. Accounts payable fell ¥0.93bn, or 52.7%, to ¥0.84bn; while this reduces supplier financing, the balance sheet has ample liquidity to absorb it. Inventories stand at ¥3.08bn, equal to 11.3% of assets, and therefore remain a material working-capital commitment despite the net-cash balance sheet. Investment securities amount to ¥1.42bn, or 5.2% of total assets, adding financial-asset exposure but not straining liquidity. Treasury stock of ¥2.89bn is equivalent to 10.6% of total assets and is a meaningful deduction from gross shareholders' equity. No balance-sheet leverage warning is triggered: current ratio is well above 1.0x and D/E is far below 2.0x.

Notable B/S Changes

Accounts receivable: -¥2.48bn (-47.1%) to ¥2.79bn - strengthened liquidity and drove much of the ¥1.43bn operating cash inflow; the benefit may normalize as receivables stabilize. Accounts payable: -¥0.93bn (-52.7%) to ¥0.84bn - reduced supplier financing and consumed operating cash, although the effect is readily absorbable given the ¥15.64bn cash balance. Cash and deposits: +¥1.14bn to ¥15.64bn - reflects positive free cash flow and reinforces the group's net-cash financial flexibility. Investment securities: +¥0.07bn (+5.3%) to ¥1.42bn - remain a meaningful 5.2% of total assets and contribute exposure to market-value movements through comprehensive income.

Cash Flow Quality

Cash-flow quality was strong in the reported half year, with operating cash flow of ¥1.43bn versus net income of ¥0.13bn and an OCF/net-income ratio of 10.80x. The ratio is well above the 0.8x warning threshold, so there is no indication that reported earnings are unsupported by cash collection. The accruals ratio was -4.8%, also consistent with strong cash realization in the period. However, operating cash flow was driven predominantly by working-capital movements rather than by the ¥0.07bn operating-profit base. Trade receivables decreased by ¥2.51bn, providing the largest cash inflow. Inventory increased by ¥0.16bn, consuming cash, while trade payables decreased by ¥1.59bn, also consuming cash. The reduction in receivables is positive for collection discipline, but it is not a recurring operating cash-flow source at the same scale once the receivable balance normalizes. Free cash flow was ¥1.39bn after ¥0.05bn of capital expenditure. CapEx/depreciation was 0.31x, triggering both the UNDERINVESTMENT and CAPEX_UNDERINVESTMENT alerts: capital expenditures covered only about one-third of ¥0.15bn depreciation and amortization. This supports near-term cash flow but may constrain product renewal, production capability, and digital or retail-channel investment if it persists. Inventory efficiency remains a risk. Quality alerts identify inventory days of 96 days and 123 days under the reported methodologies, both above the relevant 60- to 90-day benchmarks, and identify a long cash-conversion cycle of 134 days. High finished-goods inventory is particularly relevant, as finished goods of ¥3.08bn represent the reported inventory balance and expose the company to sell-through, discounting, and product-obsolescence risk. The long cash-conversion-cycle alert indicates that strong reported operating cash flow should not be interpreted as eliminating underlying working-capital intensity. EBITDA was ¥0.21bn and OCF/EBITDA was 6.69x; this unusually high conversion is again principally attributable to the receivables release rather than a normalized cash conversion rate.

Dividend Sustainability

The interim dividend is ¥4.25 per share. Based on Q2 cumulative EPS of ¥2.41, the reported interim payout ratio is 187.9%, exceeding the 100% warning threshold. The dividend is nevertheless covered by reported free cash flow, with stated FCF coverage of 5.59x. Cash dividends paid during the half year were ¥0.26bn, modest relative to ¥15.64bn of cash and deposits. The full-year dividend forecast is ¥9.00 per share, implying a second-half dividend of ¥4.75 per share if the interim dividend is maintained. Relative to full-year forecast EPS of ¥6.36, the implied full-year dividend payout ratio is approximately 141.5%. Thus, the distribution appears balance-sheet affordable but is not covered by forecast accounting earnings. The sustainability question is consequently not near-term liquidity but whether operating profit can improve sufficiently to support dividends from recurring earnings. The company has no meaningful debt burden, reducing financial pressure on distributions. However, low operating profitability, working-capital demands, and CapEx below depreciation argue for caution in evaluating the durability of earnings-funded dividends. No dividend forecast revision was announced.

Risk Assessment

Business risks include Margin-conversion risk: consolidated operating margin is only 0.5%, despite segment profit of ¥2.68bn, because ¥2.62bn of unallocated corporate costs absorb almost all segment contribution., Channel-mix risk: overseas revenue grew 75.2% to ¥5.44bn but carried only a 6.1% segment margin, materially below domestic channel margins; further mix shift could limit group-margin expansion., Direct-sales demand risk: direct-sales revenue declined 17.4% year on year, notwithstanding a recovery in segment profitability., Inventory and sell-through risk: reported inventory-day alerts of 96-123 days and finished-goods inventory of ¥3.08bn raise risks of discounting, obsolescence, and slower cash conversion in a beauty-device and consumer-products lifecycle., Product innovation risk: R&D expense is 3.0% of sales and is flagged as low relative to growth-oriented technology and electronics benchmarks, potentially limiting product-refresh capacity and differentiation., Foreign-exchange risk: FX gains of ¥0.03bn equaled 48.5% of operating income, exceeding the 20% quality-alert threshold; this creates earnings volatility, particularly alongside a rapidly expanding overseas business..

Financial risks include Dividend-coverage risk: the reported interim payout ratio is 187.9%, and the ¥9.00 full-year dividend forecast implies approximately 141.5% of forecast EPS., Cash-flow normalization risk: operating cash flow of ¥1.43bn was materially enhanced by a ¥2.51bn receivables reduction, which may not recur at the same scale., Capital-allocation risk: CapEx/depreciation of 0.31x is below the 0.7x warning level, preserving cash near term but potentially deferring maintenance and growth investment., Low return-on-capital risk: annualized ROE is 1.1% and the ROIC quality alert is 1.0%, leaving a large cash and equity base underutilized..

Key concerns include Highest priority: ability to deliver the full-year operating-income target, given Q2 cumulative progress of only 15.1% versus the normal 50% first-half pace., Highest priority: sustainable reduction of corporate and unallocated costs relative to segment contribution., High priority: whether elevated finished-goods inventory can be monetized without margin-dilutive promotions., High priority: whether dividends become covered by recurring earnings rather than cash reserves and working-capital releases., Moderate priority: maintaining profitability while overseas revenue becomes a larger share of group sales..

Investment Implications

Key takeaways include Revenue recovery is strong, with sales up 19.2% and consolidated operating profit returning to ¥0.68bn from a ¥1.16bn loss., Store sales are the core business by segment profit, contributing ¥1.11bn, while overseas is the largest revenue segment at ¥5.44bn but has the lowest reportable-segment margin., The balance sheet is a major support, with ¥15.64bn of cash, 89.5% equity ratio, and only ¥0.10bn of interest-bearing debt., The recovery is not yet reflected in attractive returns: annualized ROE is 1.1%, EBIT margin is 0.5%, and reported ROIC is 1.0%., Reported free cash flow is strong, but its quality should be assessed alongside the large receivables reduction and elevated inventory-day alerts., The dividend is cash-covered but exceeds interim and implied full-year earnings coverage..

Metrics to watch include Second-half operating-income conversion and progress toward ¥0.45bn full-year operating-income guidance, Corporate and unallocated expenses relative to segment profit, Overseas segment margin and the profitability of incremental overseas revenue, Direct-sales revenue trend and segment-profit resilience, Finished-goods inventory, inventory days, and cash-conversion-cycle trend, Receivables balance after the Q2 collection-driven operating cash-flow improvement, CapEx/depreciation ratio and R&D intensity, Dividend payout ratio relative to recurring EPS and free cash flow, FX gains or losses relative to operating income.

Regarding relative positioning, YA-MAN is financially defensive relative to leveraged consumer and manufacturing peers because of its large net-cash position and exceptionally high liquidity. Operationally, however, it ranks as a low-return recovery situation rather than a mature high-margin consumer franchise: the 0.5% operating margin, 1.1% annualized ROE, high inventory-day alerts, and sub-replacement capital expenditure contrast with the strength of the balance sheet.