SUN-LIFE HOLDING CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥6.79B
• Operating Income: ¥512M
• Net Income: ¥319M
• EPS: ¥52.02

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

Verdict: Solid Q2 with modest top-line growth and slight margin expansion, supported by healthy cash conversion but tempered by high leverage and a one-off below-the-line loss. Revenue rose 3.9% YoY to 67.88, while operating income increased 6.3% YoY to 5.12, outpacing sales. Gross profit reached 16.12, placing gross margin at 23.7%, and SG&A was 10.99 (16.2% of sales). Operating margin improved to 7.6% from roughly 7.4% a year ago, indicating about 16 bps of expansion based on reported growth rates. Ordinary income climbed 10.2% YoY to 5.88, aided by higher non-operating income of 0.94 (notably 0.27 of interest income), partially offset by non-operating expenses of 0.17. Profit before tax of 5.43 sits below ordinary income, implying an approximate extraordinary loss of 0.45 in the quarter. Net income increased 2.3% YoY to 3.18, with an elevated effective tax rate of 41.4% weighing on bottom-line growth. Cash generation was strong: operating cash flow of 4.80 covered 151% of net income, supporting earnings quality. Liquidity is ample in the near term (current ratio 471%), bolstered by cash and deposits of 97.03, but the balance sheet is structurally leveraged with total liabilities of 293.74 and D/E at 4.33x. Asset turnover remains low at 0.188, a drag on overall capital efficiency, while financial leverage of 5.33x is the main driver of the 4.7% ROE. Non-operating income contributed meaningfully (interest income tailwind), but reliance on below-the-line items increases earnings variability. The reported ROIC of -10.3% flags a capital efficiency challenge and suggests returns lag the cost of capital, though methodology differences and data gaps may influence this figure. Dividend visibility is limited (DPS unreported), and the calculated payout ratio of 70.8% looks elevated versus typical sustainability thresholds. Forward-looking, incremental operating leverage, interest income on sizable cash balances, and aging demographics are supportive, but high financial leverage, potential rate and tax pressures, and any recurrence of extraordinary losses are key watch items.

Profitability Analysis

ROE decomposition: ROE ≈ Net Profit Margin × Asset Turnover × Financial Leverage = 4.7% × 0.188 × 5.33 ≈ 4.7% (as reported). The component exerting the most influence is financial leverage (5.33x), while asset turnover (0.188) is low and net margin (4.7%) is modest. Operating margin stands at 7.6% with ~16 bps expansion YoY (from ~7.4% last year, inferred from revenue/OP growth deltas), indicating slight operating leverage. Ordinary margin is 8.7%, reflecting a 0.94 boost from non-operating income (notably 0.27 interest income) and 0.17 drag from non-operating expenses. The quarter also saw an estimated extraordinary loss (~0.45), creating a gap between ordinary income and PBT and diluting bottom-line conversion. Business drivers: modest SG&A discipline (SG&A at 16.2% of sales) and stable gross margin (23.7%) underpinned operating profit, while higher interest income on cash balances supported ordinary income. Sustainability: leverage-driven ROE is inherently fragile if borrowing costs rise or if non-operating gains normalize; incremental operating margin gains could be sustainable with cost control, but the extraordinary loss appears one-time. Watch for any trend where SG&A growth exceeds revenue—insufficient disclosures prevent a precise check this quarter.

Growth Assessment

Revenue grew 3.9% YoY to 67.88, a steady but not high-growth pace consistent with a mature services mix. Operating income rose 6.3% to 5.12, evidencing mild operating leverage and improving margin quality. Non-operating income (0.94) was a meaningful contributor, aided by 0.27 of interest income—a tailwind that could persist while cash balances remain high and yields are supportive. Net income increased 2.3% to 3.18, constrained by a high effective tax rate (41.4%) and an estimated extraordinary loss (~0.45) below ordinary income. Profit quality is reasonable given OCF/NI of 1.51x, indicating earnings backed by cash. With asset turnover at 0.188, capital efficiency remains a headwind to growth in ROE absent stronger throughput or asset lightening. Outlook: stable to mildly improving margins are plausible if cost discipline persists; interest income may continue to support ordinary income; however, bottom-line growth could remain modest if tax rates stay elevated and if extraordinary losses recur.

Financial Health

Liquidity is strong near-term: current assets 115.75 vs current liabilities 24.55 yield a current ratio of 471.5% and quick ratio of 471.5%, supported by cash and deposits of 97.03. Solvency is the main concern: total liabilities of 293.74 against equity of 67.90 produce a high D/E of 4.33x (warning threshold >2.0). Maturity profile suggests limited near-term pressure (current liabilities only 24.55) but substantial noncurrent liabilities of 269.19 indicate long-dated obligations that constrain flexibility. Maturity mismatch risk is low in the next 12 months given excess liquidity and positive OCF, but large long-term liabilities elevate refinancing and interest-rate sensitivity over the medium term. Interest-bearing debt is unreported; given the liability structure and D/E, leverage is likely driven by borrowings and/or lease liabilities, but exact composition is unknown. No off-balance sheet obligations are disclosed in the provided data. Note: component equity line items appear high relative to reported total equity; this may reflect treasury stock deductions or classification differences rather than an error, but we cannot reconcile with available data.

Cash Flow Quality

OCF/Net Income of 1.51x indicates good earnings quality and cash conversion. Operating cash flow of 4.80 comfortably covers reported net income of 3.18, reducing accrual risk. Free cash flow cannot be assessed due to unreported investing CF and capex; dividend and buyback cash outlays are also unreported, limiting coverage analysis. Working capital appears stable: accounts receivable of 7.63 equals about 11% of first-half revenue, not suggesting aggressive revenue recognition; inventories are unreported, and payables are modest at 5.58. No signs of working capital manipulation are evident from the limited data. Financing cash flow was -1.07, indicating net outflows (debt repayment, dividends, or other), but the breakdown is unavailable.

Dividend Sustainability

The calculated payout ratio of 70.8% is above the typical <60% sustainability benchmark, implying limited headroom for increases absent faster earnings growth. DPS and total dividends are unreported, preventing cross-checks to cash distributions. OCF was 4.80 vs NI of 3.18, which is supportive from a cash perspective, but FCF coverage cannot be computed without capex and investing CF. High leverage (D/E 4.33x) and a reported ROIC of -10.3% argue for a conservative capital return stance until capital efficiency improves. Policy outlook is uncertain due to data gaps; absent improved ROIC and deleveraging, dividend growth capacity appears constrained.

Risk Assessment

Business Risks:

• Modest top-line growth (+3.9% YoY) in a mature services market may cap earnings expansion.
• Dependence on non-operating income (interest income 0.27) introduces variability if rates or cash balances change.
• High effective tax rate (41.4%) depresses net profit conversion.
• Potential one-off extraordinary losses (~0.45) create volatility between ordinary and pre-tax profit.

Financial Risks:

• High leverage (D/E 4.33x) increases sensitivity to refinancing and interest-rate changes.
• Large noncurrent liabilities (269.19) concentrate obligations in longer maturities, limiting flexibility.
• Reported ROIC of -10.3% signals capital efficiency challenges vs cost of capital.
• Interest coverage cannot be assessed due to unreported interest expense, obscuring downside protection.

Key Concerns:

• Sustained reliance on leverage to support ROE (5.33x financial leverage) with low asset turnover (0.188).
• Dividend sustainability risk given a calculated payout ratio of 70.8% and unknown FCF.
• Data gaps (capex, interest expense, debt composition) hinder full solvency and coverage analysis.
• Potential earnings volatility from extraordinary items and tax rate swings.

Investment Implications

Key Takeaways:

• Operational execution improved slightly: operating margin expanded by ~16 bps with OP +6.3% vs sales +3.9%.
• Cash conversion is healthy (OCF/NI 1.51x), underpinning earnings quality.
• Balance sheet risk is elevated: D/E 4.33x and heavy long-term liabilities constrain flexibility.
• Non-operating income (interest income) provided a meaningful boost to ordinary profit, but may not be durable.
• ROE (4.7%) is largely leverage-driven; structural improvements would require higher asset turnover and/or margins.
• ROIC (-10.3%) flags a need for better capital deployment or asset-light growth to lift returns.
• Dividend capacity looks tight with a 70.8% payout and unverified FCF coverage.

Metrics to Watch:

• Operating margin trend and SG&A ratio vs revenue growth
• Composition of liabilities and interest expense to assess coverage and rate sensitivity
• Extraordinary gains/losses bridging ordinary income to PBT
• OCF/NI and working capital cycles (receivables, payables)
• Capex and investing CF to evaluate FCF sustainability
• Effective tax rate normalization
• ROIC and asset turnover improvements

Relative Positioning: Within Japan’s life-event services space, the company exhibits sound near-term liquidity and improving operating efficiency but is hampered by high leverage and weak capital efficiency. Its earnings quality is better than peers with lower cash conversion, yet balance sheet risk and limited visibility on FCF and dividends may place it at a more cautious stance relative to conservatively financed operators.

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