J-LEASE CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥9.74B
• Operating Income: ¥1.77B
• Net Income: ¥1.17B
• EPS: ¥65.51

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: Strong topline-led quarter with solid double-digit profit growth, but cash conversion was weak and leverage/intangibles warrant attention. Revenue rose 26.3% YoY to 97.36, with operating income up 24.9% to 17.71 and net income up 28.2% to 11.74, indicating continued demand and operating resilience. Gross profit reached 67.33, driving a high gross margin of 69.2%, consistent with a fee-based model. Operating margin printed at approximately 18.2% (17.71/97.36), while net margin was 12.1%, reflecting limited reliance on non-operating items (non-operating income ratio 1.3%). Because operating income growth (24.9%) trailed revenue growth (26.3%), operating margin likely saw slight YoY compression; exact basis points are not disclosed but the direction is modestly negative. The SG&A ratio stands at about 50.9% of sales, suggesting continued investment in growth and operations. EBITDA was 18.57 with a 19.1% margin, underpinned by light D&A (0.86), highlighting an asset-light operating base but balance sheet intangibles remain sizable. ROE was a robust 17.6% (DuPont: 12.1% margin × 0.505 asset turnover × 2.88x leverage), with reported ROIC at 14.2%, comfortably above typical 7–8% targets. Interest coverage is very strong at 64.9x, indicating low immediate debt service risk. Liquidity is adequate with a current ratio of 1.25x and positive working capital of 24.63, though below our >1.5x comfort benchmark. Earnings quality is the quarter's main blemish: OCF was only 3.02 versus net income of 11.74, yielding an OCF/NI of 0.26x, which is weak. This gap likely reflects working capital outflows/timing in the guarantee/fee cycle rather than structural profitability issues, but bears monitoring. Goodwill and intangible assets total 51.86, equating to roughly 77.6% of equity, implying higher sensitivity to any impairment or acquisition underperformance. Leverage (D/E 1.88x) is above our conservative benchmark (1.5x) but below a warning level (2.0x), manageable given strong coverage. The implied dividend payout ratio of 69.1% is above the <60% benchmark, and with weak OCF this raises medium-term distribution discipline questions if growth capex remains elevated. Forward-looking, sustaining double-digit growth appears plausible given momentum and ROIC, but improving cash conversion and safeguarding the balance sheet (particularly intangibles and short-term funding) will be critical to maintain returns and dividend capacity.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin (12.1%) × Asset Turnover (0.505) × Financial Leverage (2.88x) = ROE 17.6%. The margin is the largest absolute driver of ROE, with leverage also contributing meaningfully; asset turnover is modest at ~0.5x, consistent with a service/guarantee model. Relative movement YoY: operating income growth (+24.9%) lagged revenue (+26.3%), implying slight operating margin compression; net income grew slightly faster than revenue (+28.2%), suggesting favorable items below EBIT (lower non-operating drag or tax/timing), but exact basis-point changes are not disclosed. Business drivers: higher volumes and pricing supported revenue, while SG&A intensity (~50.9% of sales) likely rose to support growth (people, systems, marketing), pinching operating margin at the margin. Sustainability: gross margin at 69.2% and low D&A support recurring profitability; however, sustaining ROE at ~17–18% likely requires either operating leverage (SG&A growth below revenue) or maintaining current leverage—both carry execution and risk trade-offs. Watch for any trend where SG&A growth exceeds revenue growth; this period’s slight margin compression hints operating leverage was limited.

Growth Assessment

Topline expanded 26.3% YoY to 97.36, with operating income up 24.9% to 17.71 and net income up 28.2% to 11.74, indicating broad-based growth and cost control sufficient to preserve high-teens operating margins. Gross margin of 69.2% underscores a resilient fee/guarantee profile; non-operating items were minor (net -0.30) and did not drive results. ROIC at 14.2% suggests growth is value-accretive at current cost of capital. However, operating cash flow (3.02) trailed profit, indicating growth is absorbing working capital or experiencing timing effects; if persistent, this could constrain self-funded expansion. Revenue sustainability appears supported by underlying demand, but profitability sustainability depends on SG&A discipline and claims/cost-of-sales behavior (cost ratio ~30.8%). Near-term outlook: maintain double-digit growth with stable-to-slightly pressured margins unless operating leverage improves; cash conversion improvement is a key swing factor.

Financial Health

Liquidity: Current ratio 1.25x and quick ratio 1.25x—adequate but below the >1.5x benchmark; no explicit warning threshold breach (<1.0) observed. Working capital is positive at 24.63, with cash and deposits of 24.20 providing some cushion. Solvency: D/E is 1.88x (elevated vs <1.5x benchmark but below the 2.0x warning line); interest coverage is very strong at 64.9x, mitigating near-term debt service risk. Balance sheet quality: Equity/Assets ≈ 34.7%; goodwill and intangibles total 51.86, roughly 77.6% of equity—heightened sensitivity to impairment and lower tangible buffer (tangible equity ~15). Maturity profile: short-term loans 19.98 versus current assets 124.54 and current liabilities 99.91 indicate no immediate maturity mismatch, though reliance on short-term funding requires continued access to credit lines. Off-balance sheet obligations: none reported in the provided data.

Cash Flow Quality

OCF/Net Income is 0.26x, below the 0.8 threshold—an earnings quality flag. The divergence suggests working capital outflows or timing of cash collections relative to revenue recognition; without detail on receivables/contract assets or guarantee-related reserves, we cannot precisely attribute the shortfall. Capital expenditures were 1.57; with OCF of 3.02, implied FCF is approximately +1.45 (indicative only, as full investing cash flows are unreported). Given the calculated payout ratio (69.1%), dividend coverage by OCF/FCF looks tight this period. No clear signs of manipulation are observable from the high level data, but sustained OCF shortfalls alongside rising revenue would merit scrutiny of receivables, claims paid (cost of sales), and advances/deposits.

Dividend Sustainability

The calculated payout ratio is 69.1%, above the <60% benchmark for comfort. With OCF at 3.02 and implied FCF of roughly 1.45 (OCF − Capex), cash coverage of dividends appears thin this half. Financing cash inflow of 9.30 indicates some reliance on external funding during the period, which reduces dividend resilience if replicated. Absent disclosed DPS and dividend cash paid, we infer moderate pressure on sustainability unless cash conversion improves in H2; however, strong profitability and ROIC provide some buffer if working capital normalizes. Policy outlook: if management targets stable or progressive dividends, maintaining payout likely requires better OCF or tempered capex/investments.

Risk Assessment

Business Risks:

• Claims/cost-of-sales volatility impacting gross margin (current cost ratio ~30.8%).
• SG&A intensity (~50.9% of sales) limiting operating leverage if growth slows.
• Execution risk on integrating/intangible-heavy assets (goodwill 22.57, intangibles 29.29).
• Regulatory and compliance changes in the guarantee/financial services domain.
• Competitive pricing pressure in rent/credit guarantee services.

Financial Risks:

• Elevated leverage (D/E 1.88x) despite strong interest coverage.
• Weak cash conversion (OCF/NI 0.26x) raising funding and liquidity management needs.
• High intangibles relative to equity (~77.6%), increasing impairment risk and lowering tangible capital.
• Refinancing risk on short-term borrowings (19.98) if credit conditions tighten.

Key Concerns:

• Earnings quality flag due to low OCF vs NI.
• Slight implied operating margin compression with rising SG&A ratio risk.
• Dividend payout (~69%) potentially ahead of internally generated cash this period.
• Sensitivity of equity to any impairment given large intangibles.

Investment Implications

Key Takeaways:

• Strong growth: revenue +26.3%, OP +24.9%, NP +28.2% with high gross margin (69.2%).
• ROE 17.6% and ROIC 14.2% indicate value-accretive operations.
• Operating margin ~18.2% is solid but likely compressed slightly YoY.
• Cash conversion is weak (OCF/NI 0.26x), a key watchpoint.
• Balance sheet quality constrained by high intangibles (~78% of equity) and elevated D/E (1.88x).
• Interest coverage is very strong (64.9x), mitigating near-term debt service risk.
• Dividend payout (~69%) looks high relative to OCF in H1.

Metrics to Watch:

• OCF/Net Income ratio and working capital movements.
• SG&A ratio and operating margin trajectory (bps change).
• Cost-of-sales/claims ratio and credit cost trends.
• Leverage (D/E) and short-term debt rollover profile.
• Intangible asset trends and any impairment indicators.
• ROIC by business line (if disclosed) to validate capital discipline.

Relative Positioning: Within domestic non-bank financial/guarantee peers, the company shows above-average ROE/ROIC and strong margins, offset by weaker cash conversion and a higher reliance on leverage and intangibles; execution on cash discipline will determine whether current returns are sustained.

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