DAIICHIKOSHO CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥80.28B
• Operating Income: ¥8.43B
• Net Income: ¥9.62B
• EPS: ¥58.93

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

Daiichikosho Co., Ltd. (7458) reported FY2026 Q2 (cumulative) revenue of ¥80.3bn, up 8.0% YoY, indicating ongoing demand recovery and/or successful monetization in core businesses. Despite the top-line growth, operating income declined 6.3% YoY to ¥8.43bn, signaling margin pressure and negative operating leverage through the first half. Gross margin stood at 32.8%, while the operating margin was 10.5%, implying elevated SG&A and/or cost inflation outpacing revenue growth. EBITDA was ¥15.27bn with a 19.0% margin, suggesting healthy underlying cash earnings capacity even as EBIT contracted. Ordinary income of ¥8.61bn modestly exceeded operating income, implying net non-operating gains that more than offset interest expense of ¥0.21bn. Net income dropped 36.3% YoY to ¥6.12bn, far more than the decline in operating profit, indicating the impact of extraordinary items and/or a higher tax burden in the period. The provided “effective tax rate” metric shows 0.0%, but this appears to be an unreported placeholder; using the disclosed income tax expense of ¥4.58bn suggests an elevated tax burden relative to ordinary income or the presence of special items. DuPont decomposition yields ROE of 5.14% based on a 7.62% net margin, 0.398x asset turnover, and 1.69x financial leverage—pointing to modest profitability on a sizable balance sheet. Liquidity is strong with a current ratio of 187.7% and a quick ratio of 149.4%, supported by working capital of ¥31.6bn. The balance sheet appears conservative: total equity of ¥119.1bn against total assets of ¥201.6bn implies an equity ratio around 59% (the reported 0.0% equity ratio is clearly unreported rather than zero), and debt-to-equity of 0.77x is moderate. Interest coverage is robust at 39.4x (operating income basis), limiting refinancing risk. Operating cash flow of ¥10.01bn is 1.64x net income, indicating good earnings quality and favorable working capital dynamics. Investing cash flow is not disclosed (shown as zero), preventing precise free cash flow estimation; accordingly, the reported FCF of zero should be treated as a data gap. Financing cash flow was an outflow of ¥16.58bn, likely reflecting a mix of debt reduction and/or shareholder returns, though dividends are not disclosed in this dataset. Overall, the company shows solid cash generation and a strong balance sheet, but profitability headwinds and the sharp drop in net income warrant scrutiny of one-offs and tax normalization. Data limitations (notably equity ratio, cash balance, investing CF, share count, and DPS) constrain parts of the analysis; conclusions rely on the available non-zero items and derived ratios.

Profitability Analysis

ROE decomposition: ROE 5.14% = Net margin 7.62% × Asset turnover 0.398 × Financial leverage 1.69. The result reflects moderate profitability on a relatively low asset turnover base, typical for asset-intensive models, with restrained leverage. margin_quality: Gross margin 32.8% and EBITDA margin 19.0% indicate healthy unit economics, but the operating margin at 10.5% compressed versus revenue growth (+8.0% YoY), pointing to higher SG&A or input costs. Ordinary income (¥8.61bn) slightly above operating income (¥8.43bn) suggests modest positive non-operating items offsetting interest expense (¥0.21bn). The large decline in net income (-36.3% YoY) versus operating income (-6.3% YoY) implies extraordinary factors and/or tax effects weighing on the bottom line. operating_leverage: Negative operating leverage in the half: revenue rose 8.0% while operating income fell 6.3%, implying rising fixed cost absorption or higher discretionary spending (e.g., sales promotion, maintenance) that did not scale with revenue. Monitoring the SG&A-to-sales ratio and gross-to-operating spread will be key for 2H margin trajectory.

Growth Assessment

revenue_sustainability: Top-line growth of 8.0% YoY suggests steady demand and recovery momentum. Sustainability hinges on retention/ARPU in core solutions and venue traffic trends; no segment breakdown is provided to disaggregate drivers. profit_quality: EBITDA of ¥15.27bn underscores underlying earnings capacity, but the conversion to operating profit weakened as costs scaled faster than sales. The sharp decline in net income versus operating trends points to low visibility on one-off items and taxation; recurring earnings power is likely better proxied by operating income and EBITDA. outlook: If cost inflation normalizes and fixed costs are leveraged in 2H, operating margins could recover in line with the revenue base. Conversely, persistent cost pressures or additional extraordinary charges would cap net profit growth. Tax rate normalization will be a swing factor for full-year net income.

Financial Health

liquidity: Current ratio 187.7%, quick ratio 149.4%, working capital ¥31.6bn—ample near-term liquidity. Inventories are ¥13.77bn within current assets of ¥67.54bn, with quick assets still comfortably exceeding current liabilities. solvency: Debt-to-equity 0.77x indicates moderate leverage. Interest coverage 39.4x (operating income/interest) highlights strong debt service capacity. Based on disclosed totals, an inferred equity ratio of ~59.1% (¥119.1bn/¥201.6bn) indicates a conservative capital base despite the unreported equity ratio metric. capital_structure: Total assets ¥201.6bn, equity ¥119.1bn, liabilities ¥91.45bn. The balance sheet supports ongoing investment and shareholder returns, though exact cash balances are not disclosed in this dataset.

Cash Flow Quality

earnings_quality: OCF/Net income at 1.64x (¥10.01bn / ¥6.12bn) points to solid earnings conversion, aided by working capital. Depreciation and amortization of ¥6.84bn provide non-cash support to cash earnings. FCF_analysis: Investing cash flow is not disclosed (shown as zero), so free cash flow cannot be reliably calculated. Given OCF of ¥10.01bn and D&A of ¥6.84bn, the company likely incurs material maintenance and growth capex; OCF appears sufficient to cover maintenance capex in many asset-heavy models, but confirmation requires actual investing CF. working_capital: With current assets of ¥67.54bn and current liabilities of ¥35.99bn, working capital is ¥31.55bn. The strong liquidity combined with OCF outpacing net income indicates favorable working capital management in the period.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are shown as 0.00 and 0.0%, which should be treated as unreported values rather than actual zero. EPS for the half is ¥58.93; without full-year EPS and actual dividend disclosure, a payout ratio cannot be assessed. FCF_coverage: FCF is shown as 0 due to missing investing CF; therefore, dividend coverage by FCF cannot be evaluated. OCF of ¥10.01bn suggests capacity for shareholder returns subject to capex needs and leverage policy. policy_outlook: Given strong liquidity, moderate leverage, and robust interest coverage, the balance sheet could support stable dividends; however, absent disclosed DPS and investing CF, no firm conclusion can be drawn from the provided data.

Risk Assessment

Business Risks:

• Margin compression from cost inflation or higher SG&A needed to drive growth.
• Demand cyclicality in entertainment/venue-related businesses affecting utilization and ARPU.
• Execution risk in product refresh cycles and installed base upgrades.
• Competitive pressure in content, hardware, and subscription services impacting pricing.
• Potential regulatory or public health-related disruptions to customer traffic.

Financial Risks:

• Visibility on net income impacted by extraordinary items and tax volatility.
• Capex intensity potentially high relative to OCF; investing CF undisclosed.
• Refinancing and interest rate risk, albeit mitigated by 39.4x coverage and moderate D/E (0.77x).
• Working capital swings tied to inventory and receivables could affect OCF timing.

Key Concerns:

• Net income declined 36.3% YoY despite single-digit revenue growth; need to identify drivers (one-offs vs. structural).
• Unreported investing cash flows and cash balances obscure FCF and liquidity buffers.
• Tax expense of ¥4.58bn appears elevated relative to ordinary income; outlook depends on normalization.
• Negative operating leverage in H1; cost control and SG&A efficiency are pivotal for 2H recovery.

Investment Implications

Key Takeaways:

• Top-line growth (+8.0% YoY) but operating margin compression (operating income -6.3% YoY) indicates near-term cost pressure.
• ROE at 5.14% derives mainly from margin and modest leverage; asset turnover remains low at 0.398x.
• Strong liquidity (current ratio 187.7%, quick ratio 149.4%) and solvency (interest coverage 39.4x, inferred equity ratio ~59%).
• OCF robustness (OCF/NI 1.64x) supports earnings quality, but FCF is indeterminable due to missing investing CF.
• Net income volatility driven by extraordinary/tax items is a key determinant of bottom-line trajectory.

Metrics to Watch:

• SG&A-to-sales ratio and operating margin progression in 2H.
• Gross margin trends versus input cost inflation.
• Investing cash flow and capex (maintenance vs. growth) to gauge true FCF.
• Effective tax rate normalization and any extraordinary gains/losses.
• Leverage (net debt/EBITDA if cash is disclosed) and interest coverage durability.
• Revenue drivers: installed base growth, ARPU, and venue utilization indicators.

Relative Positioning: Within leisure/entertainment and equipment-driven models, the company exhibits stronger balance sheet resilience and interest coverage than many cyclicals, but current-period profitability is pressured; clarity on capex and tax/extraordinary items is needed to benchmark sustained ROE and FCF.

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