HYOJITO Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.04B
• Operating Income: ¥436M
• Net Income: ¥316M
• EPS: ¥67.07

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

Verdict: Solid Q2 with double-digit bottom-line growth and healthy cash conversion, though margins remain reliant on tight cost discipline and non-operating tailwinds are modest. Revenue reached 40.38 (100M JPY units), with operating income of 4.36 (+5.8% YoY), ordinary income of 4.80 (+9.5% YoY), and net income of 3.16 (+11.3% YoY). Gross profit stood at 27.71, implying a high gross margin of 68.6%, while SG&A was 23.58 (58.4% of sales). Operating margin is 10.8% and EBITDA margin is 17.2%, indicating reasonable operating efficiency for an advertising/signage-focused business. Non-operating income was 0.32 and expenses 0.07; the net non-operating contribution helped lift ordinary income above operating income. OCF was 5.70, outpacing net income (3.16) with an OCF/NI ratio of 1.80x, signaling strong earnings quality this quarter. Capex was 1.35, implying calculated FCF of roughly 4.35, comfortably covering estimated dividends at the stated payout ratio. The DuPont-calculated ROE is 3.9% (net margin 7.8%, asset turnover 0.281, financial leverage 1.79x), reflecting a cash-heavy balance sheet and modest turnover. Liquidity is adequate with a current ratio of 118% and a cash-to-current liabilities ratio of 96%, supported by cash and deposits of 61.14. Equity stands at 80.47 (owners’ equity 100% of total equity), implying an equity ratio of about 56% and conservative solvency. While operating income rose 5.8% YoY, revenue YoY data is not disclosed, preventing precise basis-point margin change analysis; however, bottom-line growth outpaced operating profit, aided by a modest non-operating lift and a normalized tax rate of 34%. SG&A remains heavy (85% of gross profit), so further earnings gains require continued cost control or revenue acceleration. The reported payout ratio of 91.1% appears high versus typical sustainability benchmarks (<60%), but near-term FCF coverage looks adequate given low capex intensity this quarter. Forward-looking, the company enters H2 with healthy liquidity and cash generation, but sustaining earnings growth likely depends on maintaining high gross margins, avoiding SG&A creep, and defending demand. Absence of detail on receivables and debt composition is a constraint, but current assets exceed current liabilities, lowering near-term refinancing risk. Overall, Q2 exhibits quality earnings and sound cash conversion, yet medium-term upside hinges on improving asset turnover and operating leverage.

Profitability Analysis

ROE decomposition: ROE 3.9% = Net Profit Margin (7.8%) × Asset Turnover (0.281) × Financial Leverage (1.79x). The weakest driver is asset turnover at 0.281, reflecting a cash-rich, low-turnover asset base. Net margin is decent at 7.8%, supported by a high gross margin (68.6%) but tempered by SG&A at 58.4% of sales. Financial leverage is moderate (equity multiplier ~1.79), consistent with an equity ratio near 56%. The most material component limiting ROE is asset turnover, not leverage or margin. Business drivers: the model appears service/project-oriented with limited inventories (1.20) and significant cash (61.14), which depresses turnover while supporting stability. Sustainability: gross margin appears strong and could be sustainable if pricing power and mix (e.g., higher-value placements/services) persist; however, SG&A discipline is critical as SG&A consumed 85% of gross profit this quarter. Watch for concerning trends: any SG&A growth in excess of revenue growth would quickly compress operating margin given the current cost structure. Non-operating income contributed modestly to ordinary income (non-operating income ratio ~10%), but core profitability remains the main driver.

Growth Assessment

Top-line sustainability cannot be fully assessed due to missing YoY revenue, but net income growth of +11.3% and operating income growth of +5.8% suggest some operating leverage and/or mix improvements. The 17.2% EBITDA margin and 10.8% OPM indicate reasonable efficiency; further upside likely requires revenue scale or SG&A optimization. Depreciation is 2.60 vs capex 1.35 (capex at ~52% of D&A), implying limited growth capex in Q2; absent an uptick, capacity-driven growth may be constrained, though the business may be asset-light. Ordinary income outpacing operating income highlights a small tailwind from non-operating items; reliance here should not be a core growth thesis. ROIC is cited at 14.9%, comfortably above typical 7–8% targets, implying that incremental investments, if identified, could be value-accretive. Outlook: sustained earnings growth will likely depend on demand resilience in core advertising/signage channels, maintaining high gross margins, and avoiding SG&A inflation. Monitor pricing power, order intake/backlog (if disclosed), and any macro sensitivity to corporate ad budgets.

Financial Health

Liquidity is adequate: current ratio 118.2% and quick ratio 116.3%. Explicit warning thresholds are not breached (Current Ratio > 1.0). Cash to current liabilities is approximately 96% (61.14 cash / 63.57 current liabilities), limiting near-term liquidity risk. Solvency looks conservative with total equity of 80.47 vs total assets of 143.78 (equity ratio ~56%). Reported D/E is 0.82x, but interest-bearing debt details are unreported; we cannot assess interest burden precisely. Maturity mismatch risk appears manageable as current assets (75.11) exceed current liabilities (63.57) with positive working capital of 11.54. Noncurrent liabilities are small (2.41), indicating limited long-term leverage. No off-balance sheet obligations are disclosed in the provided data. Overall capital structure supports operational flexibility and dividend payments in the near term.

Cash Flow Quality

Earnings quality is strong: OCF/Net Income is 1.80x (>1.0 benchmark), indicating robust cash conversion. Calculated FCF is approximately 4.35 (OCF 5.70 minus capex 1.35), positive and ample for internal needs. Working capital details are limited due to unreported receivables/payables movement breakdowns; however, the high cash balance and positive OCF suggest limited aggressive working capital manipulation this quarter. With D&A at 2.60 and capex at 1.35, reinvestment needs appear manageable; maintenance vs growth split is not disclosed. Financing CF was -1.43, likely reflecting dividends and/or debt service; exact components are unreported. Overall, cash generation comfortably supports operations and moderate shareholder returns near term.

Dividend Sustainability

The calculated payout ratio is 91.1%, above the <60% benchmark for conservative sustainability. Translating net income of 3.16 (≈¥3.16bn? Note: units are 100M JPY, so ≈¥316m) implies potential dividends near ¥288m if the 91% payout is realized. Against calculated FCF of ~4.35 (≈¥435m), dividend coverage would be around 1.5x this quarter, acceptable in the short term. However, sustaining a >90% payout through cycles can be challenging, especially if OCF normalizes or capex rises. Cash on hand (61.14) provides a buffer, but relying on cash reserves for dividends is not a long-term strategy. Policy outlook is unclear due to missing DPS disclosures; unless management commits to a high fixed payout, a moderated payout aligned with FCF would enhance resilience.

Risk Assessment

Business Risks:

• Demand cyclicality in advertising/signage spending tied to corporate marketing budgets
• Execution risk in maintaining high gross margins amid competitive pricing
• Potential SG&A drift outpacing revenue growth, compressing operating margins
• Dependence on project timing and order intake given limited visibility (receivables/unbilled data unreported)

Financial Risks:

• Concentration of liabilities in current maturities (~96% of total liabilities), elevating rollover/working capital management needs despite strong cash
• High dividend payout ratio (>90%) reducing retained earnings available for reinvestment if sustained
• Limited disclosure on interest-bearing debt and interest expense, obscuring true coverage metrics

Key Concerns:

• Asset turnover at 0.281 constrains ROE despite acceptable margins
• Non-operating tailwinds (net +0.25) supported ordinary income; reliance could add volatility if it reverses
• Data gaps (revenue YoY, receivables, interest-bearing debt, DPS) limit full risk quantification

Investment Implications

Key Takeaways:

• Q2 delivered double-digit net profit growth with strong cash conversion (OCF/NI 1.80x)
• Operating margin at 10.8% supported by a high 68.6% gross margin; SG&A intensity remains elevated
• Balance sheet is conservative with ~56% equity ratio and cash covering ~96% of current liabilities
• ROE of 3.9% is limited primarily by low asset turnover (0.281), not leverage
• Payout ratio at 91% is high; near-term FCF coverage looks adequate but long-term sustainability requires caution

Metrics to Watch:

• Revenue growth trajectory and backlog/order intake (to gauge operating leverage)
• SG&A growth versus revenue growth (cost discipline)
• Operating margin and gross margin stability (bps changes when YoY data becomes available)
• Working capital movements (receivables and payables) and OCF sustainability
• Capex trend versus D&A (signs of growth investment)
• Dividend policy disclosures (DPS, payout framework) and cash coverage

Relative Positioning: Within small-cap domestic services/advertising peers, the company exhibits stronger-than-average cash conversion and a conservative balance sheet, but lower asset turnover suppresses ROE; maintaining high gross margins and curbing SG&A are key to improving relative returns.

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