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

SBI ARUHI (7198) reported FY2026 Q2 consolidated results under IFRS with revenue of 117.95 (hundred million JPY) and net income of 8.34, down 10.1% YoY, indicating earnings pressure despite positive operating cash generation. Profit before tax was 11.76, implying a PBT margin of roughly 10.0%, while the effective tax rate stood at a relatively high 35.5%, weighing on bottom-line conversion. DuPont metrics show modest profitability: net margin of 7.1%, low asset turnover of 0.058, and high financial leverage of 4.86x, yielding a calculated ROE of 2.0% that matches the reported figure. The equity ratio is 20.5% (equity of 421.13 vs total assets of 2,048.65), reflecting a highly leveraged balance sheet typical of financial businesses that carry sizable interest-bearing assets. OCF was 15.95, 1.91x net income, signaling solid earnings-to-cash conversion for the period; FCF was 6.63 after -9.32 in investing CF. Financing CF was a large outflow at -55.35, likely driven by debt repayments and shareholder returns, while dividends paid were -8.85. Liquidity comfort appears supported by cash and equivalents of 201.49, though current and quick ratios are unreported; the cash balance is approximately 9.8% of total assets. Expense discipline remains a focus area: SG&A was 68.02, representing about 57.7% of revenue, constraining operating leverage amid unreported gross profit and operating income line items. The payout profile looks stretched on reported metrics: a calculated payout ratio of 214.4% and FCF coverage of 0.37x suggest dividend sustainability could be pressured unless earnings and FCF improve; however, period mismatches between dividends and earnings may distort these indicators. Book value per share is 948.19 JPY, while basic EPS for the period was 18.80 JPY, implying subdued value creation relative to the equity base. With limited disclosure on gross profit, operating income, interest expense, and working capital details, margin quality and interest coverage cannot be fully assessed. Balance sheet solvency, measured by a debt-to-equity ratio of 3.88x (liabilities/equity), is elevated but not unusual for a mortgage and housing finance-oriented group; nonetheless, sensitivity to funding markets and interest rate shifts remains a key consideration. The YoY decline in net income and high tax burden point to a need for cost control and margin stabilization to sustain returns. Overall, cash flow quality is better than earnings suggest for the half, but dividend metrics flag caution, and the outlook hinges on origination volumes, funding spreads, and credit costs. Data limitations (numerous unreported items) restrict a full margin and coverage analysis, so conclusions are conditional on the available non-zero data.

Profitability Analysis

ROE_decomposition: ROE 2.0% = Net Profit Margin 7.1% x Asset Turnover 0.058 x Financial Leverage 4.86x. Low asset turnover (Revenue/Assets) and moderate net margin are the primary drags, while high leverage provides most of the ROE lift. margin_quality: - Net income: 8.34 on revenue 117.95 → net margin ~7.1%. - PBT margin ~10.0% (11.76/117.95). - Effective tax rate 35.5% reduces net margin. - SG&A/revenue ~57.7% indicates heavy operating cost load. - Gross profit and operating income unreported, limiting assessment of core margin drivers and cost of revenue dynamics. operating_leverage: With SG&A at 68.02, incremental revenue growth could improve margins if SG&A is partly fixed; however, given the YoY decline in net income and lack of gross/operating profit disclosure, demonstrated operating leverage is currently weak or obscured.

Growth Assessment

revenue_sustainability: Revenue was 117.95, but YoY revenue growth is unreported. Sustainability will depend on mortgage origination volumes, fee income, and net interest-related spreads within housing finance. profit_quality: Net income declined 10.1% YoY, suggesting margin compression or higher costs/taxes. Cash conversion is strong (OCF/NI 1.91x), implying earnings are backed by cash in the period. outlook: Near-term earnings trajectory hinges on housing demand, interest rate trends, funding costs, and securitization/secondary market conditions. Cost discipline (SG&A control) and tax optimization could support margin recovery, while elevated leverage means funding spread volatility will flow through to profits.

Financial Health

liquidity: Cash and equivalents are 201.49 (~9.8% of total assets). Current and quick ratios are unreported, so short-term liquidity ratios cannot be assessed. OCF positive at 15.95 provides operating liquidity. solvency: Equity ratio 20.5% and D/E (liabilities/equity) 3.88x reflect a leveraged structure consistent with financial asset-heavy models. Interest coverage is unreported; hence, serviceability under stress cannot be quantified. capital_structure: Total assets 2,048.65 funded by liabilities 1,635.27 and equity 421.13. Financial leverage (Assets/Equity) is 4.86x, a key driver of ROE. Financing cash outflow (-55.35) suggests deleveraging or distributions during the period.

Cash Flow Quality

earnings_quality: OCF/Net income of 1.91x indicates good cash realization of earnings. The effective tax rate of 35.5% implies cash taxes are a material headwind. FCF_analysis: FCF was 6.63 (OCF 15.95 minus investing CF -9.32). This level covers only a portion of shareholder returns and any debt reduction if sustained. working_capital: Working capital details are unreported; however, the strong OCF relative to NI suggests favorable working capital movements or solid cash profitability in the period.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 214.4%, indicating dividends exceed period earnings on the metric provided. Note potential timing/base mismatches between dividends (possibly annualized) and Q2 earnings. FCF_coverage: FCF coverage reported at 0.37x signals undercoverage from free cash flow. Based on period figures, dividends paid (-8.85) exceed FCF (6.63), reinforcing caution. policy_outlook: Without disclosed DPS and with limited visibility on full-year earnings, sustainability depends on H2 earnings recovery and stable cash generation. If profitability remains pressured and FCF modest, maintaining a high payout would constrain balance sheet flexibility.

Risk Assessment

Business Risks:

• Housing market and mortgage origination volume volatility
• Interest rate and funding spread fluctuations affecting margins
• Securitization and secondary market conditions for mortgage assets
• Regulatory changes in mortgage programs and underwriting standards
• Competitive pressure on pricing and fees
• Operational risk in loan processing, IT systems, and compliance

Financial Risks:

• High leverage (equity ratio 20.5%, D/E 3.88x)
• Potential refinancing and liquidity risk amid large financing cash outflows
• Interest rate mismatch and duration risk on mortgage assets vs liabilities
• Earnings sensitivity to credit costs (credit loss details unreported)
• Dividend overcommitment risk given payout metrics
• Tax rate volatility impacting net margins

Key Concerns:

• Net income down 10.1% YoY with high effective tax rate (35.5%)
• Payout ratio at 214.4% and weak FCF coverage (0.37x) on the provided basis
• Limited disclosure on operating income, gross profit, and interest expense hampers assessment of core profitability and coverage

Investment Implications

Key Takeaways:

• ROE is modest at 2.0%, primarily supported by high leverage rather than strong margins or turnover
• Cash conversion is solid (OCF/NI 1.91x), but financing outflows and dividends exceed FCF
• Equity ratio of 20.5% underscores leverage typical for a mortgage-focused balance sheet
• SG&A intensity (~57.7% of revenue) constrains operating leverage
• Earnings decline (-10.1% YoY) and elevated tax rate pressure bottom line

Metrics to Watch:

• Origination volumes and revenue growth trajectory
• Net interest-related spreads and funding costs
• SG&A-to-revenue ratio and cost initiatives
• Credit costs and asset quality indicators
• OCF/NI and FCF sustainability vs dividends
• Equity ratio, D/E, and financing cash flows
• Effective tax rate normalization

Relative Positioning: Within Japan’s housing finance space, profitability (ROE ~2%) appears subdued and reliant on leverage, with cash generation acceptable but shareholder returns outpacing FCF based on period data; visibility on core operating margins and interest coverage is weaker than ideal due to unreported items.

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