KAPPA・CREATE CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥37.05B
• Operating Income: ¥832M
• Net Income: ¥463M
• EPS: ¥14.97

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

Kappa Create Co., Ltd. (consolidated, JGAAP) delivered a solid profitability inflection in FY2026 Q2 despite muted top-line growth. Revenue was ¥37.049bn (+0.2% YoY), while operating income rose 54.4% YoY to ¥0.832bn and net income increased 56.8% YoY to ¥0.738bn, lifting the net margin to 1.99%. Operating margin improved to roughly 2.25%, from about 1.46% a year ago, implying successful cost discipline and operating leverage. Gross profit is disclosed at ¥19.244bn, implying a 51.9% gross margin; while the arithmetic difference from revenue and cost of sales suggests a higher implied gross profit, we analyze using the reported gross profit per instruction. EBITDA was ¥1.951bn (5.3% margin), indicating modest but improving earnings capacity. DuPont analysis shows ROE of 6.49%, driven by a 1.99% net margin, 1.171x asset turnover, and 2.78x financial leverage. Cash conversion was strong: operating cash flow reached ¥1.666bn, equating to 2.26x net income and ~4.5% of sales, supported by non-cash D&A of ¥1.119bn and likely positive working capital effects. Liquidity is adequate with a current ratio of 115.4% and quick ratio of 111.5%, and working capital of ¥1.79bn. The balance sheet shows total assets of ¥31.648bn and equity of ¥11.376bn; although the reported equity ratio field is 0.0%, the implied equity ratio is approximately 35.9%, indicating a moderate capital buffer. Leverage measured as total liabilities to equity is 1.77x, and interest coverage is 8.9x, both acceptable for the restaurant sector. Dividends remain suspended (DPS ¥0), appropriate given the still-thin margins and the need to solidify free cash flow. The revenue trajectory is flat, so sustaining margin gains will hinge on continued cost control and mix improvement, as well as traffic and ticket size recovery. Key risks include input cost volatility (seafood, rice), wage inflation, and competitive pressures in conveyor-sushi. Several data points (cash balance, investing cash flows, shares outstanding) are undisclosed in XBRL and show as zero; our analysis focuses on the available non-zero figures. Overall, the quarter indicates improving earnings quality and financial resilience, but the growth engine requires reinvigoration for durable ROE expansion.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 1.99%
• asset_turnover: 1.171
• financial_leverage: 2.78
• calculated_ROE: 6.49%
• interpretation: ROE is primarily constrained by a thin net margin, while asset turnover is healthy for a multi-unit restaurant operator and leverage is moderate. margin_quality:
• gross_margin: 51.9% (reported GP/Revenue)
• operating_margin: 2.25% (¥0.832bn/¥37.049bn)
• EBITDA_margin: 5.3%
• net_margin: 1.99%
• commentary: Margin expansion is evident: operating income rose 54.4% on just 0.2% sales growth, indicating improved cost structure and operating efficiency. Interest burden (¥93m) is manageable; tax burden appears light this half based on disclosed income tax, but normalized rates could be higher. operating_leverage: High positive operating leverage this period: prior-year operating income estimated at ~¥0.539bn vs. ¥0.832bn currently, implying +0.8ppt OPM expansion despite flat sales. This suggests tighter food cost control, labor scheduling, or mix/pricing benefits.

Growth Assessment

revenue_sustainability: Top-line was essentially flat (+0.2% YoY), suggesting limited traffic or pricing momentum. Sustained growth will likely require same-store sales improvement, menu innovation, or selective new store openings. profit_quality: Profit growth outpaced sales, supported by better cost discipline and non-cash D&A. Interest coverage improved to 8.9x, underpinned by higher operating income. outlook: If cost efficiencies hold and inflationary pressures ease, operating margin could continue to normalize. However, without stronger demand, further margin gains may taper. Monitoring same-store sales and input costs (seafood procurement, FX impacts) is critical.

Financial Health

liquidity:

• current_ratio: 115.4%
• quick_ratio: 111.5%
• working_capital: ¥1.79bn
• assessment: Short-term liquidity is adequate, with minimal inventory dependence given a quick ratio over 1.1x. solvency:
• total_assets: ¥31.648bn
• total_liabilities: ¥20.182bn
• total_equity: ¥11.376bn
• equity_ratio_implied: 35.9% (Total Equity / Total Assets)
• debt_to_equity: 1.77x (Liabilities/Equity)
• interest_coverage: 8.9x
• assessment: Moderate leverage with a reasonable equity cushion; solvency metrics are acceptable for the sector. capital_structure: Leverage primarily from operating liabilities and potential leases typical of restaurants; interest expense remains modest relative to EBIT.

Cash Flow Quality

earnings_quality: OCF/Net Income at 2.26x indicates strong cash conversion, supported by ¥1.119bn D&A and favorable working capital. Net income quality appears solid this half. FCF_analysis: Investing cash flow is undisclosed (reported as 0), so free cash flow cannot be reliably derived; headline FCF listed as 0 reflects missing data rather than true zero. working_capital: Positive working capital of ¥1.79bn and high OCF suggest either collection efficiencies or payables/inventory discipline. Inventory is modest at ¥0.449bn relative to current assets.

Dividend Sustainability

payout_ratio_assessment: Payout ratio is reported as 0.0% due to DPS of ¥0. With thin but improving margins, resumption would require consistent profitability and clearer FCF. FCF_coverage: Not assessable this period given undisclosed investing cash flows; reported 0.00x should be treated as a placeholder. policy_outlook: Given ongoing operational recovery and the need to prioritize reinvestment and balance sheet resilience, a conservative dividend stance is likely until earnings and cash generation are demonstrably durable.

Risk Assessment

Business Risks:

• Input cost volatility for seafood and other foodstuffs; potential FX exposure for imports
• Labor cost inflation and staffing constraints in food service
• Intense competitive dynamics in conveyor-sushi and casual dining
• Same-store sales variability due to consumer sentiment and seasonality
• Food safety/reputation risks inherent to raw seafood handling
• Execution risk in pricing, menu mix, and promotions

Financial Risks:

• Margin sensitivity to commodity spikes could compress coverage ratios
• Lease and fixed-cost operating leverage amplifying downturn impact
• Potential increases in interest rates raising finance costs
• Limited liquidity buffer if working capital reverses and OCF normalizes lower

Key Concerns:

• Flat revenue trajectory (+0.2% YoY) limits scale-driven margin expansion
• Sustainability of cost improvements amid inflationary pressures
• Incomplete disclosure (cash, investing CF) complicates FCF visibility

Investment Implications

Key Takeaways:

• Strong profit rebound on stable sales highlights improved operating efficiency
• ROE at 6.49% is improving but still constrained by slim net margin
• Liquidity and solvency are adequate, with implied equity ratio ~36% and interest coverage 8.9x
• Cash conversion robust this half (OCF/NI 2.26x), but FCF visibility is limited
• Dividend remains suspended; priority likely on operational strengthening and cash preservation

Metrics to Watch:

• Same-store sales growth and average ticket size
• Food cost ratio and gross margin trajectory
• Labor cost ratio and store-level profitability
• Operating margin and EBITDA margin progression
• OCF margin and capex (to assess true FCF)
• Net debt/EBITDA and interest coverage
• Inventory and payables days as indicators of working capital health

Relative Positioning: Within Japan’s conveyor-sushi and casual dining space, profitability remains thin but is recovering; leverage and liquidity appear moderate, positioning the company in a middle tier on financial resilience while revenue momentum trails peers showing stronger post-pandemic SSS recoveries.

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