I.A GROUP CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥18.70B
• Operating Income: ¥376M
• Net Income: ¥220M
• EPS: ¥187.38

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, アイエーグループ 株式会社 delivered topline growth with revenue of ¥18.695bn, up 9.9% YoY, while converting modestly more of that growth into profit as operating income rose 8.6% YoY to ¥0.376bn and net income increased 15.8% YoY to ¥0.272bn. The gross profit margin remains robust at 43.3%, indicating solid merchandise economics or service margins, but significant SG&A intensity (about 41.3% of sales) continues to compress operating margins to 2.0%. Ordinary income exceeded operating income (¥0.418bn vs ¥0.376bn), suggesting positive non-operating contributions more than offset low interest expense (¥14.5m). Net margin stands at 1.45%, consistent with a low-margin, volume-driven model typical of retail/wholesale or service networks. Operating cash flow was strong at ¥0.725bn, 2.67x net income, reflecting solid earnings quality aided by non-cash charges (¥0.369bn D&A) and likely favorable working capital dynamics. Liquidity is adequate on a current basis (current ratio 152.7%), but the quick ratio is low at 49.4% due to inventory concentration, implying reliance on inventory turns to meet short-term obligations. Balance sheet leverage is moderate with debt-to-equity at 0.78x and healthy interest coverage of 25.9x, indicating low financial stress. Asset turnover of 0.652 suggests moderate capital efficiency for the business model, but ROE is subdued at 1.70% given the thin margin profile and only moderate leverage. The DuPont view (1.45% net margin × 0.652 asset turnover × 1.79 leverage) aligns with the reported 1.70% ROE, highlighting that margin improvement or faster asset turns are required for better equity returns. Working capital management is pivotal: inventories of ¥8.024bn represent about 68% of current assets and roughly 43% of half-year sales, making sell-through and shrink management critical. Financing cash flows were negative (−¥0.534bn), likely reflecting debt repayment or shareholder returns, but dividend data are not disclosed in the provided set; the DPS and payout ratio showing as zero indicate non-disclosure rather than actual zeros. Investing cash flows and cash balances are not disclosed here, limiting our view on capex intensity and liquidity buffers; this constrains free cash flow analysis and dividend capacity assessment. The effective tax rate metric is shown as 0.0% despite reported income tax of ¥0.178bn, implying incomplete pretax data in the extract; hence, tax normalization is an analytical caveat. Overall, the company exhibits stable growth, intact gross margins, solid cash conversion, and manageable leverage, but low operating margins and inventory-heavy working capital temper returns. Upside would hinge on SG&A productivity, inventory turns, and maintaining gross margin amid competitive and cost pressures.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 1.45%
• asset_turnover: 0.652
• financial_leverage: 1.79
• calculated_ROE: 1.70%
• interpretation: ROE is constrained primarily by thin net margins; leverage is moderate and asset turnover is reasonable. Incremental ROE gains would require improved margin structure and/or faster turns. margin_quality:
• gross_margin: 43.3%
• operating_margin: 2.0%
• ordinary_margin: 2.2%
• net_margin: 1.45%
• SG&A_ratio_estimate: 41.3% of sales (≈¥7.71bn)
• commentary: High gross margin underpins the model, but heavy SG&A drag translates into low operating margin. Positive non-operating items lifted ordinary income above operating income, offsetting interest costs. operating_leverage:
• revenue_growth_YoY: 9.9%
• operating_income_growth_YoY: 8.6%
• assessment: Slight negative operating leverage in the period, implying that cost growth roughly matched revenue growth. SG&A productivity remains the main lever for margin expansion.

Growth Assessment

revenue_sustainability: Topline grew 9.9% YoY to ¥18.695bn, suggesting healthy demand or footprint expansion. Sustainability will depend on same-store performance, pricing power, and competitive intensity. profit_quality: Net income rose faster than operating income (15.8% vs 8.6%), aided by non-operating gains and strong cash conversion. However, core operating profitability remains thin. outlook: Near-term growth appears supported by volume and stable gross margin. To translate sales growth into higher returns, management needs to improve SG&A efficiency and maintain mix/pricing to protect gross margin.

Financial Health

liquidity:

• current_ratio: 152.7%
• quick_ratio: 49.4%
• working_capital: ¥4.095bn
• interpretation: Overall liquidity is adequate, but low quick ratio highlights reliance on inventory monetization for short-term obligations. solvency:
• debt_to_equity: 0.78x
• interest_coverage: 25.9x
• equity_ratio_note: Equity ratio not disclosed in usable form in the extract; total equity is ¥16.014bn vs total assets ¥28.675bn, implying an equity-to-assets proxy around 55.9%.
• assessment: Moderate leverage with strong coverage indicates low refinancing risk under current conditions. capital_structure: Liabilities of ¥12.421bn against equity of ¥16.014bn (assets ¥28.675bn) imply a conservative balance sheet for a low-margin business.

Cash Flow Quality

earnings_quality:

• OCF: ¥0.725bn
• net_income: ¥0.272bn
• OCF_to_NI: 2.67
• interpretation: Cash generation exceeds accounting earnings, supported by non-cash D&A (¥0.369bn) and likely working capital tailwinds—indicative of good earnings quality this period. FCF_analysis:
• free_cash_flow: Not assessable (investing cash flow undisclosed in this extract)
• commentary: Investing CF and capex were not disclosed here (zeros indicate non-disclosure). True FCF cannot be determined without capex/asset growth data. working_capital:
• inventories: ¥8.024bn (≈68% of current assets; ≈43% of half-year sales)
• implication: Inventory discipline is critical for cash conversion; slow-moving stock or shrink could pressure OCF in subsequent periods.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio figures are not disclosed in the provided data (zeros denote non-disclosure). FCF_coverage: Undeterminable due to lack of investing cash flow/capex data; OCF of ¥0.725bn provides capacity, but without capex and actual dividends, coverage cannot be evaluated. policy_outlook: Absent disclosure, infer capacity from fundamentals: moderate leverage and strong OCF support potential distributions, but low margins and inventory intensity argue for prudence until sustained ROE improvement is demonstrated.

Risk Assessment

Business Risks:

• Thin operating margin (2.0%) leaves limited buffer against cost inflation or price competition.
• High SG&A ratio (≈41% of sales) exposes profits to wage, energy, and logistics cost pressures.
• Inventory-heavy model (¥8.024bn) risks obsolescence, shrink, and markdowns if demand softens.
• Dependence on non-operating gains to lift ordinary income above operating income may not be recurring.
• Potential exposure to regional macro trends and consumer spending volatility.

Financial Risks:

• Low quick ratio (49.4%) implies reliance on inventory liquidation and supplier credit for liquidity.
• ROE at 1.70% indicates low return on equity, limiting internal capital generation.
• Tax normalization uncertainty (effective tax rate not inferable from extract) may affect future net margins.
• Visibility on capex and cash balance is limited due to non-disclosure, complicating FCF and liquidity assessments.

Key Concerns:

• Sustaining gross margin while improving SG&A productivity.
• Managing inventory turns to preserve OCF and avoid markdown-driven margin erosion.
• Converting revenue growth into higher operating margin and ROE.
• Clarifying capex plans and cash balances to assess true FCF and dividend capacity.

Investment Implications

Key Takeaways:

• Solid revenue growth (+9.9% YoY) with stable gross margin (43.3%) but persistent SG&A drag.
• Operating margin remains low at 2.0%; ordinary income benefits from non-operating items.
• Cash generation is strong relative to earnings (OCF/NI 2.67x), supporting balance sheet resilience.
• Moderate leverage (D/E 0.78x) and strong interest coverage (25.9x) reduce financial risk.
• ROE is subdued at 1.70%, highlighting the need for margin and/or asset-turn improvements.

Metrics to Watch:

• Same-store sales growth and price/mix to gauge sustainable topline momentum.
• Gross margin trend and shrink/markdown rates.
• SG&A-to-sales ratio and labor/productivity metrics.
• Inventory days and turnover; OCF/NI ratio sustainability.
• Capex intensity and store/network investment; disclosure on investing CF and cash balance.
• Tax rate normalization and composition of non-operating income.

Relative Positioning: Compared with typical domestic retail/wholesale peers, the company shows comparable topline growth and gross margin resilience, a relatively conservative balance sheet, but lower operating margin and ROE, with greater dependence on inventory efficiency for liquidity.

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