JAIC Co.,Ltd. FY2026 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥3.45B
• Operating Income: ¥226M
• Net Income: ¥73M
• EPS: ¥137.94

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

Verdict: A solid quarter with double-digit profit growth and tangible margin expansion, albeit with limited cash flow visibility and a slightly elevated leverage ratio for a small-cap services name. Revenue rose 9.9% YoY to 34.52, while operating income increased 42.7% YoY to 2.26, and net income climbed 75.7% YoY to 1.27. Operating margin improved to 6.6% (2.26/34.52), up roughly 150 bps vs. an estimated ~5.1% in the prior-year period based on reported growth rates. Net margin improved to 3.7%, up an estimated 138 bps vs. ~2.3% last year, driven by improved operating leverage and despite non-operating expense drag and a high effective tax rate. Gross margin remains very high at 79.0%, underscoring a scalable service model with relatively low cost of sales. SG&A intensity remains heavy at 74.5% of sales, but the delta between revenue growth (+9.9%) and operating income growth (+42.7%) signals positive operating leverage. Interest coverage is strong at 32.4x, and liquidity is healthy with a current ratio of 181.6% and quick ratio of 181.6%. The balance sheet shows ample cash (14.01) relative to debt (short-term 0.64, long-term 7.38), implying a net cash position of roughly 6.0, which tempers solvency concerns despite a reported D/E ratio of 1.77x. There is a minor inconsistency between reported profit before tax (1.51) and the combination of income tax (0.78) and net income (1.27); we rely on ordinary income and net income for our analysis. Earnings quality cannot be assessed fully due to unreported operating cash flow; OCF/NI and FCF are not calculable. Intangibles (goodwill 3.68; total intangibles 5.66) are meaningful relative to equity, introducing potential impairment risk. The calculated ROE of 12.0% (DuPont-consistent) is healthy for a training/HR services model. Forward-looking, continued SG&A discipline and conversion of backlog to revenue are key to sustaining margin gains, while cash flow disclosure in coming quarters will be critical for validating earnings quality and supporting dividends.

Profitability Analysis

DuPont decomposition: ROE ≈ Net Profit Margin × Asset Turnover × Financial Leverage = 3.7% × 1.039 × 3.15 ≈ 12.0%. The largest driver this quarter is the improvement in net profit margin, evidenced by operating income growth (+42.7% YoY) outpacing revenue growth (+9.9% YoY), which implies operating margin expansion of roughly +150 bps (from ~5.1% to ~6.6%). Business reason: better operating leverage from SG&A (74.5% of sales) likely held more tightly relative to revenue, while gross margin remained structurally high at 79.0%. Asset turnover at 1.04 is stable for a services company; no evidence of significant capital intensity changes. Financial leverage at 3.15x is moderate for the sector but above our conservative benchmark, amplifying ROE. Sustainability: Operating leverage benefits can persist if revenue growth continues and SG&A is controlled; however, the high effective tax rate (~52%) and modest non-operating expense may cap net margin upside. Flags: SG&A remains high in absolute terms; if SG&A growth re-accelerates above revenue, margin gains could reverse. Also, the tax burden volatility could distort bottom-line margin sustainability.

Growth Assessment

Revenue growth of +9.9% YoY to 34.52 indicates steady demand, consistent with an ongoing recovery in training/HR solutions. Profit growth outpaced revenue (OI +42.7%, NI +75.7%), reflecting improving operating leverage and cost discipline. With gross margin at 79.0% and interest coverage at 32.4x, the growth quality appears supported by operations rather than financial engineering. However, lack of OCF and FCF data constrains assessment of cash-backed growth. Outlook hinges on maintaining sales momentum and SG&A productivity; if bookings and customer acquisition remain robust, mid-single-digit to low-teens revenue growth should translate into incremental margin expansion. Elevated tax rate is a headwind to net profit growth. Intangible-heavy balance sheet introduces impairment risk if growth slows.

Financial Health

Liquidity is healthy: current ratio 181.6% and quick ratio 181.6% comfortably above benchmarks; no warning triggered (<1.0). Solvency: reported D/E is 1.77x, modestly above our conservative 1.5x benchmark but below the 2.0x warning threshold; interest coverage is strong at 32.4x, mitigating near-term risk. Capital structure: cash and deposits 14.01 vs. total loans 8.02 (0.64 short-term, 7.38 long-term) imply ~6.0 of net cash. Maturity profile: current assets 19.04 vs. current liabilities 10.49 suggests low near-term refinancing pressure; short-term debt (0.64) is well-covered by cash. Off-balance sheet obligations: none reported in the provided data. Intangibles (5.66 including goodwill 3.68) are sizable relative to total equity (10.56), which could affect tangible equity buffers.

Cash Flow Quality

Operating cash flow, investing cash flow, and free cash flow are unreported; OCF/Net Income and FCF coverage cannot be computed. As such, earnings quality cannot be validated via cash conversion metrics. Working capital balances indicate ample liquidity (cash 14.01; receivables 3.90; payables 0.66), but without period-to-period flow data we cannot assess timing effects or potential working capital pulls that may have supported earnings. No signs of working capital manipulation can be inferred from static balances alone, but the absence of cash flow disclosure is a key limitation. Dividend and capex cash coverage cannot be assessed without OCF/FCF; caution warranted until cash conversion is disclosed.

Dividend Sustainability

The calculated payout ratio is 33.1%, which is within a generally sustainable range (<60%) based on reported net income. However, DPS and total dividends paid are unreported, and FCF coverage cannot be assessed. Given the ~6.0 net cash position and strong interest coverage, balance sheet capacity supports modest dividends, assuming no sharp increase in capex or acquisitions. Policy outlook likely prioritizes reinvestment for growth with a disciplined payout, but confirmation awaits cash flow disclosure and management guidance.

Risk Assessment

Business Risks:

• Demand cyclicality in HR/training and hiring markets affecting enrollment and corporate training budgets
• Execution risk in scaling programs while controlling SG&A intensity (currently 74.5% of revenue)
• Pricing pressure and competitive intensity in HR services and education segments
• Customer concentration or contract renewal risk (not disclosed but typical for niche service providers)

Financial Risks:

• Effective tax rate volatility (~52%) impacting bottom-line predictability
• Intangible asset and goodwill impairment risk (intangibles 5.66 vs. equity 10.56)
• Leverage metrics above conservative benchmark (D/E 1.77x) despite net cash, potentially sensitive to equity base fluctuations
• Cash flow disclosure gap: inability to verify OCF and FCF sustainability

Key Concerns:

• Lack of cash flow data limits assessment of earnings quality and dividend coverage
• Minor inconsistency between reported PBT (1.51) and tax/NI figures; adds uncertainty to below-the-line items
• Sustaining margin gains requires ongoing SG&A discipline; any cost drift could compress margins from 6.6% OPM
• High tax burden could cap net margin despite operating improvements

Investment Implications

Key Takeaways:

• Solid topline (+9.9% YoY) with outsized profit growth (OI +42.7%, NI +75.7%) indicates improving operating leverage
• Operating margin expanded by ~150 bps to 6.6%; net margin improved by ~138 bps to 3.7%
• Liquidity strong with current ratio 182% and net cash ~6.0, supporting flexibility
• ROE at 12.0% is healthy, driven mainly by margin improvement and moderate leverage
• Earnings quality unverified due to missing cash flow data; watch OCF/NI and FCF
• Intangibles meaningful vs. equity; impairment would pressure book value and ROE
• Tax rate elevated (~52%), dampening net profit leverage

Metrics to Watch:

• Operating cash flow and OCF/NI ratio (target >1.0)
• Free cash flow and dividend coverage
• SG&A growth vs. revenue growth (ensure SG&A grows below revenue)
• Bookings/pipeline and client retention to sustain revenue growth
• Effective tax rate normalization
• Receivables and DSO trends vs. revenue
• Goodwill impairment indicators and intangible amortization impact
• Net cash position and any changes in debt mix

Relative Positioning: Within Japanese HR/training service peers, the company shows above-average gross margin, improving operating leverage, and a net cash position that offsets a somewhat elevated D/E ratio; visibility is weaker than best-in-class due to absent cash flow disclosure, and high tax rate limits net margin parity with top performers.

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