| Indicator | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥256.0B | ¥238.2B | +7.5% |
| Operating Income | ¥28.0B | ¥37.4B | -25.1% |
| Ordinary Income | ¥27.9B | ¥38.1B | -26.8% |
| Net Income | ¥19.0B | ¥26.9B | -29.5% |
| ROE | 5.0% | 7.4% | - |
For the cumulative Q2 of the fiscal year ending March 2026 (October 2025 – March 2026), Revenue was ¥256.0B (YoY +¥17.8B +7.5%), Operating Income was ¥28.0B (YoY -¥9.4B -25.1%), Ordinary Income was ¥27.9B (YoY -¥10.2B -26.8%), and Net Income attributable to owners of the parent was ¥19.0B (YoY -¥7.9B -29.5%). Revenue growth was secured through expansion of the Ishinkan Business network and a sharp increase in the Comprehensive Medical Support Business. However, startup costs for new facilities, rising personnel expenses, and higher outsourced service costs reduced the gross profit margin from 32.5% in the prior year to 27.6% (-4.9pt), compressing the operating margin from 15.7% to 11.0% (-4.7pt). As a result, the company reported higher revenue but lower profits.
[Revenue] Revenue of ¥256.0B (YoY +7.5%) comprised ¥250.3B from the Ishinkan Business (YoY +6.1%) and ¥5.7B from the Comprehensive Medical Support Business (YoY +149.6%). The Ishinkan Business, accounting for 97.8% of total revenue, is the core business and maintained stable growth via higher utilization at existing locations and opening of new facilities. The Comprehensive Medical Support Business expanded 2.5x from ¥2.3B in the prior year, advancing portfolio diversification.
[Profitability] Operating Income of ¥28.0B (YoY -25.1%) was mainly driven by an increase in cost of sales ratio from 67.5% to 72.4% (+4.9pt). Low initial utilization rates during new site ramp-ups, higher costs to secure nursing and caregiving staff, and increased medical-related outsourcing costs pressured gross margin. SG&A expenses rose to ¥42.6B (prior year ¥40.0B), a 6.5% increase, but the SG&A ratio improved slightly to 16.6% from 16.8% (-0.2pt), indicating some effectiveness in cost control. Non-operating items included subsidy income of ¥2.2B, while interest expense increased to ¥3.4B (prior year ¥2.5B), raising interest burden by ¥0.9B. Extraordinary items had a net positive effect of ¥0.2B, immaterial. Profit before tax was ¥28.1B less corporate tax etc. of ¥9.1B, resulting in Net Income of ¥19.0B (net margin 7.4%, down 3.9pt from 11.3% prior year). In conclusion, the result was higher revenue but lower profits.
The Ishinkan Business reported Revenue of ¥250.3B (YoY +6.1%), Operating Income of ¥24.8B (YoY -32.5%), and margin of 9.9% (down 5.7pt from 15.6% prior year). As the core business it maintains a stable earnings base, but profit margin declined significantly due to startup costs for new facilities and rising personnel expenses. The Comprehensive Medical Support Business recorded Revenue of ¥5.7B (YoY +149.6%), Operating Income of ¥3.2B (YoY +376.5%), and margin of 56.9% (improved 27.1pt from 29.8% prior year), strengthening its position as a high-return segment. This segment contributed 11.4% of total Operating Income, improving portfolio quality.
[Profitability] Operating margin was 11.0%, net margin 7.4%, and ROE 5.0%. Operating margin declined 4.7pt from 15.7% prior year, and net margin contracted 3.9pt from 11.3% prior year. ROE of 5.0% indicates substantial room for improvement in returns on equity. [Cash Quality] Operating Cash Flow (OCF) was ¥37.7B, 1.98x Net Income of ¥19.0B, indicating solid cash backing; the accrual ratio was -2.2%. OCF/EBITDA was 0.86x, slightly below the benchmark (>0.9x), but considering higher interest payments and increased working capital, cash generation remains intact. [Investment Efficiency] Capital expenditures of ¥32.3B were 2.03x depreciation of ¥15.9B, showing an aggressive growth investment stance. Free Cash Flow (FCF) of ¥5.4B (OCF ¥37.7B - Investing CF ¥32.3B) was secured, allowing coexistence of growth investment and dividends. [Financial Soundness] Equity Ratio improved to 45.2% (up 2.2pt from 43.0% prior year), cash and deposits were ¥92.1B (11.0% of total assets), and current ratio was 116.8%, ensuring minimum short-term liquidity. Interest-bearing debt totaled ¥248.5B (short-term borrowings ¥50.0B, long-term borrowings ¥198.5B), with Debt/EBITDA at 5.66x — a high level — but interest coverage vs. EBITDA (EBITDA = Operating Income ¥28.0B + Depreciation ¥15.9B = ¥43.9B) was 12.9x, which is healthy.
OCF was ¥37.7B (prior year ¥32.8B, +14.8%), 1.98x Net Income of ¥19.0B, demonstrating strong cash generation. From OCF subtotal of ¥42.4B, changes in working capital (increase in trade receivables -¥0.7B, increase in inventories -¥0.1B, increase in trade payables ¥0.3B, other +¥3.2B) resulted in after-tax-and-interest OCF of ¥37.7B. Investing CF was -¥32.3B, entirely capital expenditures primarily for opening new facilities and refurbishing/upgrading existing ones. Financing CF was -¥21.6B: cash inflows from long-term borrowings ¥39.1B were offset by long-term borrowings repayment -¥28.9B, net decrease in short-term borrowings -¥27.0B, dividend payments -¥3.9B, and lease liability repayments -¥1.0B. As a result, FCF remained positive at ¥5.4B and cash and deposits decreased by ¥16.2B from opening balance ¥108.3B to closing ¥92.1B, while maintaining funding for growth investments and dividends.
The ¥8.9B difference between Ordinary Income ¥27.9B and Net Income ¥19.0B is mainly explained by corporate tax etc. of ¥9.1B and net extraordinary items of ¥0.2B. Extraordinary items were nearly neutral (loss on disposal of fixed assets ¥0.1B and gain on business transfer ¥0.3B). The impact of one-off factors is minor. Non-operating income of ¥3.4B comprised subsidy income ¥2.2B and other ¥1.2B; subsidies reflect use of public support schemes due to business expansion, but their repeatability is uncertain. Non-operating expenses of ¥3.6B were mainly interest expense ¥3.4B, which increased by ¥0.9B from ¥2.5B prior year due to higher borrowings and rising interest rates. The accrual ratio of -2.2% indicates earnings are being generated below cash, confirming high earnings quality. Comprehensive income of ¥19.0B equaled Net Income for the period; other comprehensive income was minimal (adjustment for retirement benefits ¥0.01B), indicating very little accounting noise.
Full Year guidance remains unchanged: Revenue ¥517.0B (YoY +5.1%), Operating Income ¥38.0B (YoY -38.3%), Ordinary Income ¥33.0B (YoY -48.0%), Net Income ¥21.0B, EPS ¥21.53, and dividend ¥4 per share. Progress toward the full-year forecast at the cumulative Q2 result is: Revenue 49.5%, Operating Income 73.7%, Ordinary Income 84.5%, Net Income 90.5%. Progress rates below Operating Income are high, suggesting the second half will continue to see margin deterioration due to new facility startup costs, staffing increases, and higher interest burden. A one-off gain of ¥0.3B in the first half also boosted Net Income progress. The full-year operating margin is assumed at 7.4% (first half 11.0%) and net margin at 4.1% (first half 7.4%), reflecting a conservative plan that incorporates anticipated second-half profitability deterioration.
No interim dividend was paid as of the end of this Q2. Full-year dividend forecast is ¥4 per share, to be paid as a year-end lump-sum. Forecast payout ratio is 18.6% (dividend ¥4 vs. forecast EPS ¥21.53), indicating a low payout consistent with a capital allocation policy prioritizing growth investment. On the cash flow statement, dividend payments of ¥3.9B were covered within FCF of ¥5.4B, supporting dividend sustainability. No share buyback has been disclosed; shareholder returns are concentrated on dividends.
Business Concentration Risk: The Ishinkan Business accounts for 97.8% of Revenue, creating single-business dependence. Fluctuations in demand for home medical care and nursing, medical fee revisions, regulatory changes, and intensified regional competition directly impact performance. Although the Comprehensive Medical Support Business is expanding and diversifying the portfolio, concentration in Ishinkan remains extremely high.
Talent Acquisition & Personnel Cost Risk: Tight supply-demand balance for nurses and caregivers continues to make hiring difficult and raises personnel costs. In the current period, higher personnel expenses compressed gross margin by 4.9pt; ongoing labor market tightness could further erode margins and utilization rates.
Leverage & Interest Rate Risk: Interest-bearing debt of ¥248.5B and Debt/EBITDA of 5.66x are high; in a rising interest-rate environment interest expense will increase. Interest expense rose from ¥2.5B to ¥3.4B (+¥0.9B), and high reliance on borrowings could pressure profitability.
Profitability & Returns
| Indicator | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 11.0% | 14.0% (3.8%–18.5%) | -3.0pt |
| Net Margin | 7.4% | 9.2% (1.1%–14.0%) | -1.8pt |
Operating margin of 11.0% is 3.0pt below the industry median of 14.0%, and net margin of 7.4% is 1.8pt below the median 9.2%. Profitability ranks mid-to-lower within the industry.
Growth & Capital Efficiency
| Indicator | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 7.5% | 21.0% (15.5%–26.8%) | -13.5pt |
Revenue growth rate of 7.5% is significantly below the industry median of 21.0%, placing growth speed low within the industry.
※ Source: Company compilation
Structure of higher revenue but lower profits and recovery scenarios: Revenue grew by 7.5%, but operating margin fell from 15.7% to 11.0% (-4.7pt) and ROE is 5.0%, indicating weak capital efficiency. The main drivers of gross margin decline are new site startup costs and rising personnel expenses. There is medium-term potential for margin recovery via higher utilization and scale effects, but near-term second-half margin pressure is expected to continue.
High profitability in the Comprehensive Medical Support Business: This business grew rapidly to Revenue ¥5.7B (YoY +149.6%) with an operating margin of 56.9%, and now accounts for 11.4% of total Operating Income. It partly offsets profit declines in Ishinkan and provides signs of revenue stabilization through portfolio diversification.
Progress against full-year plan and conservatism: First-half operating profit progress was 73.7% and net profit progress 90.5%, indicating the full-year plan retains conservatism. However, second-half margin deterioration is expected from new facility openings, workforce expansion, and higher interest burden; upside to the plan is limited. Cash generation is solid (OCF/Net Income 1.98x) and FCF of ¥5.4B was secured, enabling concurrent growth investment and dividend payments.
This report is an AI-generated financial analysis document produced by analyzing XBRL earnings release data. It does not constitute a recommendation to invest in specific securities. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your own responsibility; please consult a professional advisor as needed.