DN HOLDINGS CO.,LTD. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥7.72B
• Operating Income: ¥-252M
• Net Income: ¥-117M
• EPS: ¥-25.23

Income Statement

Balance Sheet

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

DN Holdings (73770) reported FY2026 Q1 consolidated results under JGAAP with revenue of ¥7,722 million, up 3.6% year over year, indicating modest topline growth. Despite higher sales, profitability deteriorated, with operating income at -¥252 million (operating loss widened approximately 8% YoY). Ordinary income was -¥254 million and net income was -¥205 million (loss widened ~7.4% YoY), translating to EPS of -¥25.23. Gross profit was ¥2,188.8 million, implying a gross margin of 28.3%, but operating margin fell to approximately -3.3%, indicating SG&A or other operating costs grew faster than gross profit. The DuPont bridge highlights a net margin of -2.65%, asset turnover of 0.279x, and financial leverage of 1.88x, yielding an ROE of -1.39%. Liquidity appears solid, with current assets of ¥16,533.5 million vs. current liabilities of ¥7,642.4 million (current ratio 216.3%) and working capital of ¥8,891.1 million. While the reported equity ratio is shown as 0.0% (likely undisclosed), balance sheet figures imply equity of ¥14,696 million against assets of ¥27,651 million, suggesting a calculated equity ratio of roughly 53.1%. Interest expense was modest at ¥7.8 million, but interest coverage is negative (-32.2x) due to operating losses. The company recorded a small tax benefit (income tax -¥6.5 million), consistent with a loss-making quarter. Cash flow data, depreciation and amortization, cash and equivalents, and inventories were not disclosed (displayed as zeros), limiting assessment of cash conversion and capital intensity. Dividend per share is indicated as zero, which aligns with loss-making conditions and the prudent preservation of capital. Overall, Q1 shows resilient revenue but negative operating leverage, pressuring earnings and ROE, offset by a relatively strong balance sheet position. Near-term priorities likely include cost discipline, improving utilization/mix, and protecting gross margins to restore positive operating leverage. Given missing cash flow disclosures and potential seasonality in Q1, conclusions on full-year trajectory require caution. Monitoring expense run-rate versus revenue growth will be key to assessing profit normalization in subsequent quarters.

Profitability Analysis

ROE_decomposition: -1.39% ROE = (-2.65% net margin) × (0.279x asset turnover) × (1.88x leverage). The negative net margin is the primary drag, while turnover is low and leverage is moderate. margin_quality: Gross margin of 28.3% indicates reasonable value-add, but operating margin of approximately -3.3% shows SG&A/other operating costs outweigh gross profits. Net margin at -2.65% reflects operating loss with limited non-operating impact (interest expense ¥7.8m, small tax benefit). D&A undisclosed, so EBITDA-based margin analysis is not meaningful. operating_leverage: Revenue grew 3.6% YoY, yet operating loss widened ~8% YoY, indicating negative operating leverage this quarter (cost growth > gross profit growth). Focus areas likely include SG&A containment, pricing, and mix to recover operating leverage.

Growth Assessment

revenue_sustainability: Topline increased to ¥7,722m (+3.6% YoY). Without backlog/orders data, sustainability cannot be firmly assessed; however, growth despite a soft profit profile suggests underlying demand remains intact. profit_quality: Profitability is negative at all levels below gross profit. The small ordinary-to-operating gap indicates limited financial drag, so core operating cost structure is the issue. Tax benefit suggests no cash tax outflow this quarter. outlook: To restore profitability, the company must improve cost absorption and protect gross margin. If revenue momentum persists and cost controls take hold, operating losses could narrow. Seasonality and mix shifts may influence upcoming quarters; missing cash flow data limits visibility on execution capacity.

Financial Health

liquidity: Current assets ¥16,533.5m vs. current liabilities ¥7,642.4m → current ratio 216.3% and working capital ¥8,891.1m. Quick ratio shows as 216.3% due to undisclosed inventories; true quick ratio may be lower, but liquidity appears strong. solvency: Total assets ¥27,651m, liabilities ¥10,055.9m, equity ¥14,696m. Calculated equity ratio ≈ 53.1% (reported 0.0% is undisclosed). Interest expense is low at ¥7.8m; negative coverage stems from operating loss rather than heavy leverage. capital_structure: Debt-to-equity ratio reported at 0.68x likely references total liabilities/equity given absent debt breakdown. Leverage (assets/equity) at 1.88x is moderate, offering balance sheet resilience if losses persist short term.

Cash Flow Quality

earnings_quality: Cash flow items (operating, investing, financing), D&A, and cash balance were not disclosed; OCF/NI and FCF metrics shown as zero are placeholders, not actual zeros. Therefore, accrual intensity and cash conversion cannot be evaluated. FCF_analysis: Free cash flow cannot be computed without OCF and capex. Profitability is negative, so near-term FCF resilience hinges on working capital release and capex discipline, both undisclosed. working_capital: Receivable/payable/inventory details are not available. Working capital stands at ¥8,891.1m, but the quality (aging of receivables, advance billings, etc.) cannot be assessed.

Dividend Sustainability

payout_ratio_assessment: DPS is reported as ¥0, consistent with a net loss (EPS -¥25.23). A positive payout ratio cannot be calculated given negative earnings and undisclosed cash flow. FCF_coverage: FCF is undisclosed; thus coverage cannot be assessed. With losses and absent OCF data, maintaining dividends would be challenging; non-payment is prudent for capital preservation. policy_outlook: Resumption of dividends would likely require a return to sustained operating profit and visible cash generation; timing depends on restoring positive operating leverage and clarity on cash flows.

Risk Assessment

Business Risks:

• Negative operating leverage: costs rising faster than gross profit
• Potential margin pressure from pricing, mix, or input/wage inflation
• Execution risk in cost controls and utilization improvements
• Demand variability and seasonality affecting revenue visibility
• Customer concentration or contract renewal risk (not disclosed but typical for service-oriented models)

Financial Risks:

• Sustained operating losses leading to negative interest coverage
• Cash flow uncertainty due to undisclosed OCF and cash balances
• Potential working capital build increasing funding needs
• Refinancing/interest rate risk if interest-bearing debt exists (breakdown not disclosed)

Key Concerns:

• Operating loss widened despite revenue growth
• Low asset turnover (0.279x) constrains ROE
• Missing cash flow and D&A disclosures inhibit assessment of earnings quality
• Equity ratio reported as 0.0% in disclosures, requiring reliance on calculated figures

Investment Implications

Key Takeaways:

• Revenue grew 3.6% YoY to ¥7.7bn, but operating loss widened to -¥252m
• Gross margin solid at 28.3%, yet operating margin -3.3% indicates cost pressure
• ROE -1.39% driven by negative net margin; leverage moderate at 1.88x
• Liquidity strong (current ratio 216%), calculated equity ratio ~53%
• Cash flow data absent; dividend suspended (DPS ¥0) aligns with losses

Metrics to Watch:

• SG&A-to-sales ratio and operating margin trajectory
• Gross margin resilience vs. input and wage inflation
• Order backlog/book-to-bill or pipeline indicators (if disclosed)
• Operating cash flow, capex, and working capital movements
• Interest-bearing debt levels and cash balance disclosure in subsequent filings

Relative Positioning: Compared with typical mid-cap Japanese service/solutions peers, DN Holdings shows healthier balance sheet metrics (strong liquidity and moderate leverage) but weaker near-term profitability due to negative operating leverage; visibility is further constrained by missing cash flow disclosures.

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