CAPITA Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.06B
• Operating Income: ¥13M
• Net Income: ¥112M
• EPS: ¥31.28

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

For FY2026 Q2 (JGAAP, non-consolidated), CAPITA reports a sharp top-line contraction with revenue of ¥1,056 million, down 46.4% year over year. Operating income fell 77.5% to ¥13 million, indicating significant margin compression at the core business level. Ordinary income was ¥6 million, showing additional non-operating cost drag versus operating profit. Despite subdued operating and ordinary profits, net income surged 169.8% to ¥112 million and EPS was ¥31.28, implying the presence of non-recurring or below-ordinary items under JGAAP (e.g., extraordinary gains or tax effects). The DuPont framework shows a calculated ROE of 7.01%, driven by a 10.61% net margin, asset turnover of 0.274, and financial leverage of 2.41x. Asset turnover is low, reflecting the steep revenue decline relative to the asset base. Gross profit margin is cited at 46.7%, suggesting a relatively high contribution margin on reported revenues, although the presented cost of sales figure is not internally consistent with the gross profit disclosed. EBITDA is ¥23.9 million with an EBITDA margin of 2.3%, pointing to limited operating leverage in the current period. Interest coverage (operating income basis) is 2.0x, providing only a modest buffer against financing costs. Liquidity is decent with a current ratio of 139% and working capital of ¥310.6 million. The debt-to-equity ratio is 0.85x, indicating moderate leverage for a small-scale issuer. Operating cash flow was strong at ¥523.6 million, far exceeding net income (OCF/NI of 4.67x), likely reflecting a large working capital release. Financing cash flow was negative at ¥379.4 million, consistent with debt repayment or other outflows; investing cash flow is shown as zero, likely unreported rather than truly absent. The equity ratio is shown as 0.0% (likely unreported), while the balance sheet values imply an equity-to-asset ratio around the low-40% range, which would be healthy if confirmed. Data gaps (e.g., inventories, cash and equivalents, investing cash flows) and internal inconsistencies (cost of sales versus gross profit) warrant caution when interpreting margin quality and cash conversion. Overall, profitability at the operating level is weak, headline net profit is elevated by non-core items, and cash generation appears strong but working-capital-driven; sustainability into the next quarters remains uncertain.

Profitability Analysis

DuPont: ROE = 7.01% = Net margin (10.61%) × Asset turnover (0.274) × Financial leverage (2.41x). The net margin is elevated at the bottom line versus operating performance, implying non-recurring or below-ordinary gains and/or tax effects. Operating income of ¥13 million on ¥1,056 million revenue implies an operating margin near 1.2%, markedly weaker year over year given the 77.5% decline in operating income. Gross margin is cited at 46.7%, but the reported cost of sales figure is inconsistent with the disclosed gross profit; analysis therefore relies on the provided margin metric rather than the raw COGS figure. EBITDA margin of 2.3% indicates limited operating leverage in the current run-rate and suggests fixed-cost absorption pressure amid the revenue decline. Ordinary income of ¥6 million below operating income signals net non-operating expense (e.g., interest and other non-operating items). Interest expense is ¥6.4 million; interest coverage (operating income basis) is 2.0x, thin for a cyclical or low-margin business. Asset turnover of 0.274 is low, reflecting either an inflated asset base relative to current sales or a temporary demand shock; this depresses ROE despite moderate leverage. Overall, core profitability is weak, headline net margin is flattered by non-core items, and operating leverage currently works against the company due to the steep revenue contraction.

Growth Assessment

Revenue declined 46.4% YoY to ¥1,056 million, indicating a significant demand or volume shock or deliberate portfolio rationalization. Operating income fell 77.5% to ¥13 million, magnifying the effect of revenue decline on profits and highlighting fixed-cost burden. Ordinary income at ¥6 million shows additional non-operating headwinds, while net income rose 169.8% to ¥112 million, pointing to extraordinary factors (e.g., asset sales, insurance proceeds, subsidies, or tax items) rather than core growth. Given the weak operating trend and low asset turnover, current profit growth is not indicative of sustainable earnings momentum. The robust OCF of ¥524 million versus net income suggests working capital unwinding (e.g., receivables collection or inventory reduction), which is supportive for cash but not necessarily for recurring earnings. Without disclosed backlog, segment detail, or order trends, revenue sustainability into 2H remains uncertain. Outlook hinges on stabilizing sales, restoring operating margin through cost controls, and normalizing non-recurring items. Near-term, the company faces a challenging comp base and needs to demonstrate recovery in ordinary income from the current low level.

Financial Health

Liquidity appears adequate with a current ratio of 139% and working capital of ¥311 million. The quick ratio equals the current ratio due to inventories being undisclosed; real quick liquidity may be lower depending on actual inventory levels. Debt-to-equity of 0.85x indicates moderate leverage; interest coverage of 2.0x suggests limited headroom if earnings weaken further. Total assets are ¥3,849 million and total equity ¥1,597 million; this implies an equity ratio around 41–42% (versus the reported 0.0%, likely unreported), which would be solid if confirmed. Financing cash outflow of ¥379 million indicates deleveraging or other financing uses, supportive of balance sheet strength if it reflects debt repayment. Cash and equivalents are undisclosed, preventing precise assessment of near-term funding flexibility. Overall solvency appears acceptable, but thin profitability and low coverage ratios warrant monitoring.

Cash Flow Quality

OCF of ¥523.6 million is 4.67x net income, signaling strong cash conversion driven likely by working capital release rather than earnings strength. Investing CF is shown as zero, likely an undisclosed item rather than true absence; therefore, the calculated free cash flow (OCF + Investing CF) of zero is not reliable. Depreciation and amortization total ¥10.9 million, modest relative to revenue, implying limited non-cash charges supporting EBITDA. The discrepancy between weak operating income and strong OCF suggests significant reductions in receivables and/or inventories and possibly payables timing; without working capital detail, sustainability is unclear. Financing CF of -¥379.4 million suggests debt repayment or other outflows, potentially funded by the working capital release. Overall earnings quality appears mixed: statutory net income is boosted by non-core items, while cash generation is strong but likely non-recurring if driven by one-off working capital movements.

Dividend Sustainability

Annual DPS is currently ¥0.00 with a payout ratio of 0.0%, implying dividends are suspended or not declared. Given the weak operating profitability and reliance on non-operating items for bottom-line strength, a conservative payout stance is prudent. Free cash flow metrics are not reliable due to undisclosed investing cash flows; hence FCF coverage of dividends cannot be assessed. Balance sheet appears moderately leveraged but potentially stable, suggesting capacity could exist for dividends once operating earnings normalize. Near-term policy outlook likely remains cautious until revenue recovers and ordinary income improves.

Risk Assessment

Business Risks:

• Sharp revenue contraction (-46.4% YoY) indicating demand weakness or lost business
• Thin operating margin (~1.2%) and limited operating leverage
• Low asset turnover (0.274) reducing ROE and highlighting utilization risk
• Dependence on non-recurring items to support net income
• Potential customer concentration or cyclical exposure (not disclosed)
• Execution risk in cost control and margin restoration

Financial Risks:

• Interest coverage only ~2.0x, vulnerable to further earnings pressure
• Moderate leverage (D/E 0.85x) amid declining profits
• Working capital-driven OCF may not be repeatable
• Data gaps on cash balance and investing flows complicate liquidity assessment

Key Concerns:

• Internal inconsistency between reported cost of sales and gross profit; reliance on provided margin metric
• Net income strength not aligned with operating/ordinary income, implying non-sustainable drivers
• Undisclosed cash, inventories, and investing CF limit visibility on cash runway and capex needs

Investment Implications

Key Takeaways:

• Core profitability weakened materially; operating income down 77.5% with ~1.2% operating margin
• Net income up 169.8% likely due to non-recurring factors; earnings quality is mixed
• OCF is strong (¥524m; 4.67x NI) but likely driven by working capital release
• Leverage moderate (D/E 0.85x) with thin interest coverage (~2.0x)
• Asset turnover is low (0.274), depressing ROE despite leverage
• Liquidity reasonable (current ratio 139%), but cash position undisclosed

Metrics to Watch:

• Revenue trajectory and order/booking trends in 2H
• Ordinary income recovery and the mix of operating vs. non-operating items
• Working capital movements (receivables, inventories, payables) and sustainability of OCF
• Interest coverage and debt levels post financing outflows
• Capex and investing CF disclosures to assess true FCF
• Gross margin consistency and reconciliation of COGS vs. reported GP

Relative Positioning: Relative to typical TSE small/mid-cap peers, CAPITA currently shows below-average growth and operating profitability, moderate leverage, acceptable liquidity, and ROE slightly below market norms; near-term performance is heavily influenced by non-recurring items and working-capital-driven cash inflows.

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
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