SBI ARUHI Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥11.79B
• Net Income: ¥824M
• EPS: ¥18.80

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 mixed, with decent topline and stable profitability ratios but softer bottom line and pressured cash generation. Revenue reached 117.95, while profit before tax was 11.76 and net income was 8.34, down 10.1% YoY. The net profit margin stood at 7.1% (8.34/117.95), but we lack prior-period revenue and operating data to quantify margin expansion or compression in basis points. SG&A expenses were 69.67, implying a high SG&A-to-revenue ratio of roughly 59.1%, which likely constrained operating leverage. ROE calculated via DuPont was 2.0%, driven by modest net margin (7.1%), very low asset turnover (0.058x), and high financial leverage (4.86x). The equity ratio is 20.5%, highlighting a leveraged balance sheet consistent with a mortgage/finance business model but above our leverage caution threshold. Operating cash flow of 6.48 was below net income (8.34), giving an OCF/NI ratio of 0.78x, which signals weaker earnings quality this quarter. Free cash flow was only 1.46, while dividends paid were 8.87, implying FCF coverage of 0.08x and a calculated payout ratio of 214.4%, not covered by internally generated cash. Cash and equivalents were 196.76, offering some liquidity buffer, but the absence of current asset/liability detail limits our short-term liquidity assessment. Depreciation and amortization totaled 5.76, suggesting a moderate non-cash component, but not enough to close the OCF-earnings gap. The effective tax rate was 29.9%, broadly in line with expectations. Goodwill and intangibles were sizable at 244.64 and 62.95, respectively, raising sensitivity to impairment if performance weakens. With operating income and gross profit unreported, margin diagnostics are constrained; nevertheless, the SG&A intensity points to limited operating margin headroom. The balance sheet shows total assets of 2,048.65 and total equity of 421.13, consistent with the high financial leverage ratio of 3.86x D/E. Going forward, cash conversion, dividend coverage, and leverage discipline are the key watch points, especially amid interest rate and housing market dynamics.

Profitability Analysis

ROE decomposition: 2.0% ROE = 7.1% Net Profit Margin × 0.058x Asset Turnover × 4.86x Financial Leverage. The level analysis indicates the major drag is extremely low asset turnover, typical for balance-sheet-heavy mortgage finance models, while high leverage partially compensates. Due to missing prior-period breakdown, we cannot determine which component changed the most; however, the 10.1% YoY decline in net income suggests net margin or other below-the-line items may have compressed. Business drivers likely include elevated SG&A intensity (59.1% of revenue) and possibly lower spreads or fee income, though operating profit is unreported. The sustainability of current ROE is challenged by low turnover and high leverage; any margin pressure (higher funding costs, weaker origination volumes) would further depress ROE. Watch for concerning trends such as SG&A growing faster than revenue; with revenue YoY unreported, we cannot confirm, but the current SG&A burden limits operating leverage upside.

Growth Assessment

Revenue was 117.95, but YoY growth is unreported, limiting our ability to assess momentum. Net income declined 10.1% YoY to 8.34, indicating earnings pressure. Profit composition detail (operating income, non-operating breakdown) is unavailable, so we cannot attribute the decline to core operations versus one-off items. With D&A at 5.76, non-cash support exists but did not translate to strong OCF (6.48), indicating weaker cash conversion. Given mortgage-related exposure, revenue sustainability will hinge on loan origination volumes, spreads, securitization gains, and fee income resilience in a shifting rate environment. Outlook hinges on cost discipline (high SG&A ratio), funding costs, and housing demand. In the near term, expect cautious growth until cash conversion improves and margin drivers become clearer.

Financial Health

Leverage is high: D/E of 3.86x (warning threshold >2.0), equity ratio 20.5%. Liquidity assessment is constrained since current assets and liabilities are unreported; current ratio is not calculable. Cash and equivalents of 196.76 provide some buffer, but we cannot assess short-term debt maturities or a potential maturity mismatch. Interest-bearing debt details are unreported, preventing interest coverage analysis. Goodwill (244.64) and intangibles (62.95) are material, increasing impairment risk under stress. No off-balance sheet obligations are disclosed in the provided data.

Cash Flow Quality

OCF of 6.48 versus net income of 8.34 yields OCF/NI of 0.78x (below 0.8 threshold), a potential earnings quality concern. FCF was 1.46, insufficient to cover dividends paid of 8.87 (FCF coverage 0.08x). Working capital components are unreported, limiting our ability to diagnose whether the OCF shortfall stems from receivables, payables, or other items; however, the gap suggests either working capital outflows or accrual-heavy earnings. Sustained dividend and capex (capex unreported) would require either improved OCF, reduced payouts, or reliance on financing/cash balances.

Dividend Sustainability

Calculated payout ratio is 214.4%, and FCF coverage is 0.08x—both indicate current dividends are not covered by earnings or free cash flow this period. With OCF below NI and high leverage, funding dividends from the balance sheet or incremental debt would raise financial risk. Unless cash conversion improves and earnings recover, the present dividend level appears stretched relative to internal cash generation. Dividend policy visibility is limited without DPS data, but prudence would favor aligning payouts with sustainable FCF.

Risk Assessment

Business Risks:

• Interest rate risk affecting mortgage spreads and origination volumes
• Housing market cyclicality impacting loan demand and credit quality
• Operational cost pressure given high SG&A-to-revenue ratio (~59%)
• Goodwill and intangible impairment risk if performance softens

Financial Risks:

• High leverage (D/E 3.86x, equity ratio 20.5%) increasing sensitivity to shocks
• Earnings-cash divergence (OCF/NI 0.78x) and weak FCF versus dividends
• Potential maturity mismatch risk (current items unreported)
• Refinancing/liquidity risk if funding markets tighten

Key Concerns:

• Net income down 10.1% YoY without clarity on operating drivers
• Dividend not covered by FCF (0.08x) and payout ratio 214.4%
• Low asset turnover (0.058x) limiting ROE uplift absent margin expansion
• Limited disclosure on operating profit and non-operating items

Investment Implications

Key Takeaways:

• ROE is low at 2.0%, constrained by very low asset turnover despite high leverage
• OCF trails net income (0.78x), pointing to weaker cash conversion
• FCF insufficient to fund dividends; payout looks stretched this quarter
• Balance sheet leverage is elevated (D/E 3.86x), with equity ratio at 20.5%
• SG&A intensity (~59% of revenue) likely caps operating margin

Metrics to Watch:

• Operating margin and SG&A trend versus revenue
• OCF/NI ratio and working capital movements
• Dividend coverage by FCF and any payout policy updates
• Leverage (D/E) and funding cost trends
• Credit metrics and delinquency/impairment indicators in mortgage portfolio

Relative Positioning: Versus Japanese non-bank mortgage/consumer finance peers, profitability (ROE 2.0%) is below typical mid-single to low-double-digit levels, leverage is on the high side, and dividend coverage is weaker given the current FCF shortfall.

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