WDB coco CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.41B
• Operating Income: ¥400M
• Net Income: ¥279M
• EPS: ¥116.06

Income Statement

Balance Sheet

Cash Flow Statement

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: FY2026 Q2 was a weaker quarter operationally with sharp profit contraction despite solid liquidity and strong cash generation. Revenue fell 7.0% YoY to 24.14, while operating income declined 40.3% YoY to 4.00, compressing operating profitability. Gross profit was 10.36, implying a 42.9% gross margin for the period. SG&A was 3.65, putting the SG&A-to-sales ratio at 15.1%, which, alongside softer revenue, squeezed operating leverage. Ordinary income dropped 40.0% YoY to 4.03, and net income declined 39.3% YoY to 2.79, taking the net margin to 11.6%. Based on YoY trajectories, operating margin contracted by roughly 920 bps YoY (from about 25.8% to 16.6%). Net margin compressed by about 610 bps YoY (from roughly 17.7% to 11.6%). Earnings quality was strong: operating cash flow (6.77) exceeded net income (2.79) by 2.43x, suggesting cash conversion more than offset the profit decline. Balance sheet resilience is high with a current ratio of 453% and cash and deposits of 34.79, providing ample buffer against volatility. Leverage is conservative with total liabilities of 12.90 against equity of 43.82 (D/E ~0.29x), and interest expense is effectively negligible. EBITDA was 4.27 (17.7% margin), indicating meaningful but reduced operating profitability. The effective tax rate was 31.7%, broadly in line with the statutory range, so tax effects were not the primary driver of net profit decline. ROE sits at 6.4% on low financial leverage (1.21x) and a mid-teens operating margin, underscoring margin pressure as the key headwind. With capex minimal (0.04), the business remains structurally cash generative even in a softer topline environment. The calculated payout ratio of 69% suggests a generous dividend stance; however, coverage appears adequate given cash flow strength. Forward-looking, the main focus is on restoring operating margin via revenue stabilization and SG&A discipline, while maintaining high cash conversion and a conservative balance sheet.

Profitability Analysis

ROE decomposition (DuPont): ROE 6.4% = Net profit margin (11.6%) × Asset turnover (0.454x) × Financial leverage (1.21x). The most significant negative change versus last year is in the profitability leg (margins), inferred from operating income down 40.3% on a 7.0% revenue decline, implying substantial operating margin compression (~920 bps). Business drivers likely include weaker pricing/mix and/or utilization against largely fixed personnel and overhead costs, inflating the SG&A ratio and reducing operating leverage. Non-operating items were immaterial (non-operating income ratio 0.7%), so core operations drove the change. Sustainability: margin pressure may be cyclical if driven by demand softness; if driven by structural cost inflation, recovery will require pricing and cost actions. Flags: the SG&A-to-sales ratio rose (to 15.1%), and revenue contraction outpaced any evident cost cuts, indicating negative operating leverage.

Growth Assessment

Revenue declined 7.0% YoY to 24.14, pointing to soft demand or reduced project volume in the period. Operating income fell 40.3% to 4.00 as operating leverage turned negative. Net income contracted 39.3% to 2.79, reflecting margin compression rather than one-off non-operating effects. Gross margin held at 42.9% for the period; the main squeeze appears below gross profit via SG&A absorption. EBITDA margin was 17.7%, indicating reduced but still solid core profitability. With non-operating items nearly flat and interest expense de minimis, earnings dynamics are predominantly operational. Outlook hinges on revenue stabilization and SG&A control; even modest topline recovery could lift margins given the cost base. Low capex (0.04) supports agility and cash generation through cycles. Management’s ability to balance pricing, capacity utilization, and hiring discipline will be key to re-expanding operating margin toward prior-year levels.

Financial Health

Liquidity is very strong: current assets 48.95 vs current liabilities 10.80 yield a current ratio of 453% and a quick ratio of 453%. No warning on liquidity thresholds (CR well above 1.0). Solvency is conservative: total liabilities 12.90 vs equity 43.82 imply D/E ~0.29x; interest expense is effectively zero, and interest coverage is extremely high (reported 5882x). Maturity mismatch risk appears low with cash and deposits of 34.79 comfortably exceeding current liabilities by over 3x. Interest-bearing debt details are unreported, but total liabilities are modest relative to equity and cash. No off-balance sheet obligations were disclosed in the provided data.

Cash Flow Quality

OCF/Net income is 2.43x, indicating high-quality earnings and strong cash conversion. Operating cash flow of 6.77 comfortably covers the period’s capex of 0.04, implying ample internal funding capacity. While full investing cash flows are unreported, a proxy FCF (OCF − capex) approximates 6.73, suggesting significant flexibility for dividends and potential strategic spend. Working capital appears to have contributed positively to cash, given the divergence between OCF and NI, though exact drivers (receivables, payables, accruals) are unreported. No signs of aggressive working capital manipulation are evident in the limited data; cash and deposits increased to a very strong level relative to liabilities.

Dividend Sustainability

The calculated payout ratio is 69%, above the 60% benchmark but potentially sustainable given the strong cash conversion. DPS is unreported; however, with EPS at 116.06 JPY, an implied DPS around the high-70s/low-80s JPY range would be consistent with the calculated payout. On a cash basis, proxy FCF of ~6.73 (OCF − capex) appears to more than cover likely dividend cash outflows (exact dividend paid unreported), indicating adequate coverage. Balance sheet strength (net cash position implied by high cash and low liabilities) provides additional cushion. Policy outlook: if margin recovery is uncertain, management may prioritize maintaining the dividend but could avoid hikes until operating margin stabilizes. Monitoring the payout ratio versus OCF through the year remains prudent.

Risk Assessment

Business Risks:

• Topline softness: revenue down 7.0% YoY raises risk of continued demand or volume pressure.
• Margin compression: operating margin fell ~920 bps YoY, indicating negative operating leverage.
• Cost inflation risk: labor and SG&A pressures could persist, limiting margin recovery.
• Execution risk: need to align capacity and pricing to demand to restore profitability.

Financial Risks:

• Limited: leverage is low (D/E ~0.29x) and liquidity is ample; primary risk is operational not balance sheet.
• Potential dependence on working capital timing for elevated OCF versus NI (drivers unreported).

Key Concerns:

• Sustained SG&A ratio elevation (15.1%) if revenue does not recover.
• Visibility into receivables and inventories is limited (key items unreported), obscuring working capital risk.
• Dividend sustainability if profit compression persists and payout remains near 70%.

Investment Implications

Key Takeaways:

• Operational downturn: revenue −7% YoY and operating income −40% indicate negative operating leverage.
• Margins compressed materially: operating margin ~16.6% and net margin 11.6%; recovery is the fulcrum for ROE.
• Cash generation strong: OCF/NI 2.43x and minimal capex support balance sheet and dividends.
• Balance sheet robust: cash of 34.79 and low liabilities (D/E ~0.29x) minimize financial risk.

Metrics to Watch:

• Operating margin trajectory and SG&A-to-sales ratio
• Order intake/revenue growth and utilization indicators
• OCF sustainability vs NI as working capital normalizes
• Dividend policy signals vs payout ratio and cash balance
• Effective tax rate and any non-operating income changes

Relative Positioning: Compared to typical small/mid-cap domestic service peers, the company exhibits weaker near-term operating momentum but superior liquidity and cash conversion, positioning it defensively from a balance sheet perspective while it works to restore margins.

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