OIE SANGYO CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥64.43B
• Operating Income: ¥1.98B
• Net Income: ¥1.41B
• EPS: ¥170.17

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

Verdict: Solid topline growth but margin compression led to only modest operating profit growth and a decline in bottom-line earnings in FY2026 Q2. Revenue rose 10.5% YoY to 644.26, supported by healthy volume/price pass-through in the food wholesale channel. Gross profit reached 120.31 with a gross margin of 18.7%, indicating improved value-add versus cost of sales but still constrained by a low-margin distribution model. Operating income increased 2.0% YoY to 19.83, implying weaker operating leverage relative to sales growth. Ordinary income was 20.09 (+2.4% YoY), with limited non-operating contribution (net +0.26). Net income declined 6.9% YoY to 14.11 as tax burden and slight non-operating drags outweighed operating gains. Operating margin compressed to 3.08% from an estimated 3.33% last year (~25 bps contraction). Net margin fell to 2.19% from an estimated 2.60% (~41 bps contraction). Interest expense remained de minimis (0.01) with an interest coverage of ~1,983x, so financial costs are not the driver. ROE stands at 9.1%, supported by relatively high asset turnover (1.607x) and moderate financial leverage (2.59x), partially offsetting thinner net margin. Liquidity is adequate (current ratio 132%) though below the 150% comfort benchmark; working capital remains the core funding requirement with AR of 160.86 and AP of 179.83. Balance sheet leverage (D/E 1.59x) is slightly above a conservative threshold but manageable given the minimal interest burden and stable cash balances (71.39). Earnings quality cannot be validated due to unreported operating cash flow; this is a key monitoring gap. Payout ratio is estimated at 66.9%, a touch above the 60% benchmark, which raises mild sustainability questions absent FCF disclosure. Forward-looking, maintaining gross spread and controlling SG&A will be essential to defend margins as revenue grows, with ROE sustainability hinging on asset turnover discipline and stable leverage.

Profitability Analysis

ROE decomposition (DuPont): ROE 9.1% = Net Profit Margin 2.2% × Asset Turnover 1.607 × Financial Leverage 2.59x. The most notable change YoY appears to be margin compression: operating income grew only +2.0% against +10.5% sales, and net income fell -6.9%, pointing to pressure at the margin level. Operating margin is 3.08% vs an estimated 3.33% last year (~-25 bps), and net margin 2.19% vs 2.60% (-41 bps), suggesting gross profit expansion did not fully translate into operating profit due to higher SG&A intensity and/or mix effects. Business drivers likely include higher personnel/logistics costs and continued cost pass-through friction typical in foodservice distribution, with some normalization in COVID-era tailwinds. Asset turnover at 1.607 is strong for a wholesaler and likely improved vs last year on double-digit revenue growth; however, without prior asset data this remains an inference. Leverage (2.59x) supports ROE but is not the primary driver; interest burden is negligible, indicating prudent funding structure. Sustainability: margin pressure could moderate if price pass-through fully catches up and SG&A efficiency improves, but structurally thin margins in the sector cap upside. Operating risk flag: SG&A growth likely outpaced gross profit growth given weak operating leverage; SG&A as a percent of sales is 15.6%, requiring tighter cost control to protect margins.

Growth Assessment

Revenue growth of +10.5% YoY to 644.26 is robust and appears broad-based for food wholesale, likely driven by price pass-through and steady foodservice demand. Operating income growth of +2.0% lagged sales, indicating limited operating leverage due to cost inflation in labor and logistics. Ordinary income kept pace slightly better (+2.4%), but net income fell -6.9% reflecting margin compression and normalized effective tax rate (~29.8%). Non-operating items are small (non-op income 0.27; expenses 0.01), suggesting core operations dominate earnings quality. With ROE at 9.1% and ROIC cited at 16.5%, underlying capital efficiency looks healthy, though ROIC details are not disclosed. Absent cash flow data, we cannot confirm whether growth is cash-generative; working capital intensity (AR 160.86; AP 179.83) remains a structural headwind. Outlook: revenue momentum should remain intact if foodservice demand holds and pricing discipline persists; profit trajectory hinges on defending gross spread and bending the SG&A curve. Watch for potential moderation in commodity cost volatility which could support margins, but competitive pricing and customer negotiations remain swing factors.

Financial Health

Liquidity is adequate with a current ratio of 132.1% (above 1.0 but below the >150% comfort benchmark) and a quick ratio equal to 132.1% given unreported inventories. No explicit warning triggers: Current Ratio is not <1.0 and D/E is 1.59x, below the 2.0 warning threshold though slightly above a conservative 1.5x benchmark. Working capital: current assets 286.18 comfortably exceed current liabilities 216.69, mitigating near-term refinancing risk; however, payables (179.83) exceed cash (71.39), underscoring reliance on cash conversion from receivables (160.86). Interest-bearing debt details are limited, but disclosed short-term loans (0.50) and long-term loans (0.39) are minimal; interest burden is negligible. Maturity mismatch risk appears controlled as short-term obligations are backed by sizeable receivables and cash. No off-balance sheet obligations are reported in the provided data. Equity of 154.93 supports leverage at manageable levels for a wholesaler.

Cash Flow Quality

Operating cash flow is unreported; thus OCF/Net Income cannot be assessed and earnings quality cannot be validated. Given the business model’s high working capital needs, strong topline growth can temporarily suppress OCF via increases in receivables; this is a key risk to monitor. Free cash flow and capex are unreported, preventing assessment of coverage for dividends and strategic investments. No direct signs of working capital manipulation are observable from the limited data, but the large AR (160.86) vs AP (179.83) highlights sensitivity to collection efficiency. Interest coverage of ~1,983x indicates low financing cash outflows, which helps cushion cash generation variability.

Dividend Sustainability

The calculated payout ratio is 66.9%, modestly above the <60% benchmark for comfort, implying limited buffer if earnings soften. With OCF and FCF unreported, coverage of dividends by internally generated cash cannot be confirmed. Balance sheet flexibility exists (cash 71.39; low interest-bearing debt), but sustained margin pressure could constrain distributable capacity. Dividend policy signals are not provided; in the absence of FCF disclosure, a cautious stance on payout growth is warranted. Key dependency: maintaining ROE near ~9% and stabilizing margins to keep payout within safe bounds.

Risk Assessment

Business Risks:

• Margin compression from inability to fully pass through input cost inflation (food, logistics, labor).
• Customer concentration and pricing pressure common in foodservice wholesale.
• Execution risk in SG&A control; operating leverage lagged sales growth.
• Supply chain disruptions affecting product availability and delivery costs.
• Demand volatility tied to restaurant and institutional foodservice trends.

Financial Risks:

• Working capital intensity and collection risk with AR at 160.86 vs cash 71.39.
• Liquidity below ideal comfort (current ratio 132% vs >150% benchmark), though no immediate stress.
• Moderate leverage (D/E 1.59x) amplifies sensitivity to profit variance despite low interest burden.
• Potential cash flow shortfalls not observable due to unreported OCF/FCF.

Key Concerns:

• Net margin fell ~41 bps YoY to 2.19%, driving a -6.9% decline in net income.
• Operating margin compressed ~25 bps despite double-digit sales growth.
• Payout ratio at ~67% reduces flexibility if earnings remain under pressure.

Investment Implications

Key Takeaways:

• Topline momentum is solid (+10.5% YoY) but profit growth is muted due to margin squeeze.
• ROE at 9.1% is sustained by high asset turnover and moderate leverage amid thin margins.
• Liquidity is adequate; interest burden is negligible, supporting resilience.
• Dividend payout appears on the high side relative to earnings trajectory.
• Non-operating items are small, so core operations will drive earnings variability.

Metrics to Watch:

• Gross profit margin and operating margin (bps movement QoQ/YoY).
• SG&A-to-sales ratio and absolute SG&A growth vs revenue growth.
• OCF/Net Income and FCF (once disclosed) for earnings quality confirmation.
• Working capital turns: AR days, AP days, and inventory days (when available).
• Leverage (D/E) and current ratio trend.
• Effective tax rate stability.
• ROIC vs internal targets and reinvestment returns.

Relative Positioning: Within domestic food and foodservice wholesalers, the company exhibits typical thin margins but competitive asset turnover and manageable leverage; profitability resilience depends on cost pass-through and SG&A efficiency more than financial engineering.

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