SERENDIP HOLDINGS Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥19.29B
• Operating Income: ¥699M
• Net Income: ¥178M
• EPS: ¥673.77

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

Serendip Holdings (73180) reported strong topline growth for FY2026 Q2 with revenue of ¥19.29bn, up 96.9% YoY, and operating income of ¥699m, up 139.8% YoY, indicating meaningful operating leverage. Gross profit is stated at ¥1.744bn, yielding a low gross margin of 9.0%, which implies either a structurally low-margin mix or potential classification differences in cost lines; however, we analyze based on the disclosed figures. Ordinary income of ¥585m sits below operating income due to finance costs and non-operating items, which is consistent with the reported interest expense of ¥34m. Net income surged to ¥3.064bn despite ordinary income of ¥585m, implying sizable non-operating/extraordinary gains and a very low effective tax burden (calculated effective tax rate shown as 0.0%); this likely includes one-off gains (e.g., bargain purchase, investment securities remeasurement, or extraordinary income). The DuPont bridge shows a calculated ROE of 21.53%, driven by a net margin of 15.88%, asset turnover of 0.350x, and financial leverage of 3.87x; the elevated net margin versus the low gross margin reinforces the likelihood of one-time gains inflating bottom-line profitability. Operating cash flow was ¥301m, only ~0.10x of net income, signaling weak cash conversion and further supporting the view that earnings were boosted by non-cash items. Liquidity appears adequate with a current ratio of 123.6% and quick ratio of 118.0%, underpinned by working capital of ¥3.094bn; however, cash and cash equivalents are not disclosed, limiting visibility on immediate liquidity. The balance sheet shows total assets of ¥55.051bn and total equity of ¥14.231bn, implying a financial leverage multiple (assets/equity) of 3.87x; the reported equity ratio of 0.0% should be treated as undisclosed rather than zero. Debt-to-equity is 1.69x, suggesting a moderately levered capital structure that is manageable given the 20.5x interest coverage on operating income. EBITDA is ¥1.269bn with a 6.6% margin, indicating modest operating cash earnings relative to revenue scale. The dividend line shows DPS and payout at 0.0%, which appears to be undisclosed rather than an explicit zero-dividend policy; therefore, dividend capacity cannot be confirmed. Inventory is ¥732m, which is small relative to sales, but broader working capital movements and capex are not available, constraining free cash flow analysis. Overall, the company exhibits strong growth and improved operating leverage, but the quality of earnings is mixed due to non-cash, non-recurring contributors and limited cash flow support. Near-term focus should be on sustainability of revenue growth, normalization of margins absent extraordinary gains, and cash conversion. Data limitations, including several items reported as zero (undisclosed), warrant caution when interpreting ratios that depend on those inputs.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin 15.88% x Asset turnover 0.350x x Financial leverage 3.87x = ROE 21.53%. The high ROE is largely a function of an unusually high net margin relative to the low gross margin, indicating material non-operating or extraordinary gains. Gross margin is 9.0% (gross profit ¥1.744bn on revenue ¥19.29bn), consistent with a low-margin business structure or different cost classification; operating margin is 3.6% (operating income ¥699m), showing operating leverage benefits from the near-doubling of revenue (+96.9% YoY) and faster growth in operating income (+139.8% YoY). EBITDA margin is 6.6% (¥1.269bn), suggesting moderate operating cash earnings despite scale. Interest coverage is strong at 20.5x (operating income/interest expense), indicating healthy ability to service debt from operations. Margin quality: the significant gap between ordinary income (¥585m) and net income (¥3.064bn) implies non-recurring or non-cash items elevating net margin; hence, core profitability is better represented by operating metrics rather than bottom line. Operating leverage: revenue growth outpaced cost growth at the operating level, evidenced by operating income expanding faster than revenue; sustaining this will depend on mix, pricing, and SG&A discipline.

Growth Assessment

Revenue grew 96.9% YoY to ¥19.29bn, a step-change in scale suggestive of organic expansion, acquisitions, or large program wins. Operating income rose 139.8% YoY to ¥699m, indicating positive operating leverage and cost absorption. Ordinary income (¥585m) trails operating income due to finance costs/other items, while net income (¥3.064bn, -53.0% YoY per disclosure) reflects significant extraordinary factors; the YoY decline at the bottom line despite stronger operations reinforces volatility from one-offs. Sustainability: given the low gross margin and modest EBITDA margin, maintaining profit growth will require volume retention, efficient procurement, and SG&A control; absent further one-offs, net margin should normalize closer to operating margins. Profit quality: OCF of ¥301m versus net income of ¥3.064bn (OCF/NI 0.10x) suggests earnings supported by non-cash items; we therefore place higher weight on operating income and EBITDA trends for quality assessment. Outlook: near-term growth hinges on order backlog, integration of any acquired businesses, and end-market demand; monitoring repeatability of H1 revenue cadence into H2 is key.

Financial Health

Liquidity: current ratio 123.6% and quick ratio 118.0% indicate adequate short-term coverage of liabilities; working capital stands at ¥3.094bn. Cash and cash equivalents are undisclosed (reported as zero), limiting assessment of immediate liquidity buffers. Solvency: total assets ¥55.051bn, total equity ¥14.231bn imply leverage (assets/equity) of 3.87x; debt-to-equity is 1.69x, within a moderate range for a growing platform but sensitive to earnings volatility. Interest coverage of 20.5x provides cushion against rate increases. The reported equity ratio of 0.0% appears undisclosed; based on available figures, the implied equity ratio would be approximately 25-26% (equity/total assets), which is acceptable but not conservative. Capital structure: mix of debt and equity supports expansion; however, reliance on leverage elevates sensitivity to cash flow swings, making cash conversion and working capital management critical.

Cash Flow Quality

Earnings quality is mixed: OCF of ¥301m versus net income of ¥3.064bn yields a low cash conversion (0.10x), pointing to significant non-cash/one-off contributors to earnings. EBITDA of ¥1.269bn indicates capacity for cash generation before working capital and interest, but the low gross margin and working capital needs may constrain free cash flow. Free cash flow cannot be reliably assessed because investing cash flow and capex details are undisclosed (figures shown as zero), and therefore the reported FCF of 0 should be treated as not available. Working capital: inventories are ¥732m; broader movements in receivables/payables are not disclosed here, but the scale-up in revenue likely increased receivables, weighing on OCF. Overall, cash flow quality trails reported earnings quality in the period.

Dividend Sustainability

DPS and payout ratio are shown as 0.0% but should be considered undisclosed in this dataset. With EPS at ¥673.77 and strong reported net income, nominal coverage capacity appears ample, but low cash conversion (OCF/NI 0.10x) and unknown capex/FCF limit confidence in distributable capacity. FCF coverage is shown as 0.00x but is not meaningful given FCF is undisclosed. Policy outlook cannot be inferred from the data provided; given growth and leverage, internal reinvestment and balance sheet reinforcement could take precedence, but confirmation requires management guidance.

Risk Assessment

Business Risks:

• Low gross margin profile susceptible to input cost inflation and pricing pressure
• Dependence on scale and mix to realize operating leverage
• Potential customer or program concentration given step-change in revenue
• Execution and integration risk if growth is acquisition-driven
• Cyclical end-market exposure impacting orders and utilization

Financial Risks:

• Earnings volatility due to non-operating/extraordinary items
• Weak cash conversion (OCF/NI 0.10x) increasing liquidity reliance
• Moderate leverage (D/E 1.69x; leverage multiple 3.87x) heightening sensitivity to downturns
• Interest rate and refinancing risk amid rising rates
• Working capital swings tied to rapid growth potentially straining OCF

Key Concerns:

• Sustainability of profit absent one-off gains boosting net income
• Normalization of net margin closer to operating margin
• Limited visibility on cash and capex constraining FCF assessment
• Data inconsistencies in cost/gross profit classification cannot be resolved from disclosures provided
• Ability to maintain 20.5x interest coverage if operating momentum slows

Investment Implications

Key Takeaways:

• Topline nearly doubled (+96.9% YoY) with operating income up 139.8%, evidencing operating leverage
• ROE of 21.53% is elevated by one-offs; core profitability better reflected by operating metrics
• Gross margin at 9.0% and EBITDA margin at 6.6% indicate a low-to-mid margin model
• Cash conversion is weak (OCF/NI 0.10x), highlighting earnings quality concerns
• Balance sheet leverage is moderate (D/E 1.69x) but supported by strong interest coverage (20.5x)

Metrics to Watch:

• OCF to net income ratio and working capital days (DSO/DPO/DIO)
• Recurring operating margin and EBITDA margin excluding one-offs
• Order backlog and revenue visibility into H2
• Net debt and liquidity (cash balance disclosure) and equity ratio
• Nature and magnitude of extraordinary gains affecting net income
• Capex and investing cash flows to gauge true FCF

Relative Positioning: Relative to TSE peers in low-to-mid margin industrial/services segments, the company exhibits above-peer revenue growth and operating leverage but below-average cash conversion and heavier reliance on non-operating items to support net profit; leverage is moderate with strong interest coverage, positioning it as growth-oriented but with earnings quality caveats.

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