ZENSHO HOLDINGS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥612.94B
• Operating Income: ¥40.44B
• Net Income: ¥24.88B
• EPS: ¥143.25

Income Statement

Balance Sheet

Cash Flow Statement

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

Zensho Holdings delivered solid top-line growth in FY2026 Q2 with revenue of ¥612.9bn, up 9.9% YoY, but profitability lagged as operating income declined 1.7% YoY to ¥40.4bn, indicating margin compression. The operating margin was 6.6%, down versus the prior year implied by the negative YoY change in operating income despite healthy sales growth. Net income was ¥23.3bn, down 6.5% YoY, yielding a net margin of 3.79%, reflecting higher below-EBIT burdens (interest, taxes, and potentially non-operating items). DuPont analysis shows an ROE of 8.96%, driven by a modest net margin (3.79%), moderate asset turnover (0.715x), and relatively high financial leverage (3.30x). Gross profit is reported at ¥308.1bn, implying a gross margin of 50.3%; however, the presented cost of sales figure does not arithmetically reconcile with gross profit, suggesting classification differences rather than a data error. EBITDA of ¥62.7bn and an EBITDA margin of 10.2% indicate reasonable operating cash generation capacity, albeit with some pressure year on year. Interest coverage remains comfortable at 14.8x (EBIT/interest), signaling manageable financing costs despite a liability-heavy balance sheet. The balance sheet shows total assets of ¥857.0bn and total equity of ¥259.6bn, implying an equity ratio of approximately 30.3% (despite the reported 0.0% placeholder) and a debt-to-equity of 2.21x. Liquidity is adequate with a current ratio of 131.9% and a quick ratio of 129.3%, supported by positive working capital of ¥60.9bn. Cash flow quality appears strong: operating cash flow was ¥41.0bn, 1.76x net income, suggesting earnings are backed by cash. However, investing cash flow was not disclosed (shown as zero), so free cash flow cannot be assessed from the provided data. Financing cash flow was an outflow of ¥16.6bn, consistent with debt service and/or shareholder returns, though specific dividend data are not disclosed here. The effective tax rate shown as 0.0% is a placeholder; using the provided income tax expense suggests a more typical tax burden (roughly low-30% on a pre-tax basis, subject to non-operating items and NCI). Overall, the quarter reflects strong demand but rising cost headwinds (likely raw materials, labor, and utilities) compressing margins. The company’s scale, adequate liquidity, and solid cash conversion help offset profitability pressure. Key uncertainties stem from unreported items (cash balance, investing cash flows, share data), limiting visibility on capex intensity and dividend coverage. Monitoring margin recovery, cost normalization, and store productivity will be critical to the outlook in the second half.

Profitability Analysis

ROE_decomposition: ROE 8.96% = Net margin 3.79% × Asset turnover 0.715 × Financial leverage 3.30. The ROE is supported more by leverage and asset turnover than by margin, indicating sensitivity to operating margin changes. margin_quality: Gross margin is reported at 50.3% (¥308.1bn/¥612.9bn). Operating margin is 6.6% (¥40.4bn/¥612.9bn). Net margin is 3.79% (¥23.3bn/¥612.9bn). YoY, operating income declined despite revenue growth, indicating higher SG&A (labor, energy, logistics) and/or unfavorable mix. Interest expense is modest relative to EBIT (14.8x coverage), and tax expense appears normal despite the placeholder effective tax rate. operating_leverage: Revenue +9.9% YoY with operating income -1.7% YoY implies negative operating leverage in the period. EBITDA margin of 10.2% versus operating margin of 6.6% highlights D&A intensity typical of a store-based model; incremental sales did not fully cover fixed cost inflation this quarter.

Growth Assessment

revenue_sustainability: Top-line grew 9.9% YoY to ¥612.9bn, likely driven by price revisions, store network expansion, and steady traffic in core formats. Sustainability depends on consumer demand resilience and competitive pricing in a higher-cost environment. profit_quality: Net income of ¥23.3bn with OCF of ¥41.0bn (OCF/NI 1.76x) signals quality of earnings, with cash generation exceeding accounting profit. However, ordinary income is close to operating income, suggesting limited non-operating support; net income softness reflects tax and other below-EBIT items. outlook: Margin recovery hinges on cost normalization (raw materials, FX-linked inputs, utilities) and labor productivity gains. If sales growth persists and cost pressures abate, operating leverage can turn positive. Continued store optimization and procurement scale are potential offsets to inflation.

Financial Health

liquidity: Current assets ¥252.0bn vs. current liabilities ¥191.1bn yields a current ratio of 131.9% and quick ratio of 129.3%. Working capital stands at ¥60.9bn. Liquidity appears sufficient for near-term obligations. solvency: Total liabilities ¥572.7bn vs. equity ¥259.6bn imply debt-to-equity of 2.21x and an equity ratio of about 30.3% (computed; reported 0.0% is a placeholder). Interest coverage is strong at 14.8x, suggesting manageable solvency risk. capital_structure: Leverage is material but supported by stable cash generation and scale. The asset base of ¥857.0bn vs. revenue implies asset turnover of 0.715x, consistent with a capital-intensive multi-format restaurant operator.

Cash Flow Quality

earnings_quality: OCF of ¥41.0bn vs. net income of ¥23.3bn (1.76x) indicates robust cash conversion, implying disciplined working capital or non-cash charges supporting cash generation. FCF_analysis: Investing cash flow is not disclosed (shown as zero), so free cash flow cannot be calculated from the provided data. Given D&A of ¥22.3bn and store footprint, maintenance and growth capex are likely significant; actual FCF may be meaningfully lower than OCF depending on expansion pace. working_capital: Positive working capital of ¥60.9bn and quick ratio of 129.3% suggest no immediate strain. The OCF/NI ratio implies working capital did not materially consume cash in the period.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio are shown as 0.0%, which indicates undisclosed, not zero. Based on net income of ¥23.3bn, capacity exists for distributions, but absence of disclosed DPS prevents calculation of payout. FCF_coverage: Investing cash flows are unreported; thus, FCF and dividend coverage cannot be assessed from the provided dataset. policy_outlook: Given stable cash generation and moderate leverage, sustained dividends would be supported under normal conditions; however, actual policy and quantum are not provided here and should be confirmed against company disclosures.

Risk Assessment

Business Risks:

• Input cost inflation (beef, grains, seafood) and FX-driven import price volatility
• Labor cost increases and staffing constraints impacting service levels
• Energy and utilities cost volatility affecting store-level margins
• Competitive pricing pressure in domestic F&B and convenience channels
• Execution risk in store expansion/remodels and format mix
• Food safety and supply chain continuity

Financial Risks:

• Leverage sensitivity (debt-to-equity 2.21x) if margins compress further
• Interest rate risk on floating-rate debt and refinancing exposures
• Capex intensity potentially diluting FCF in expansionary phases
• Lease obligations (not disclosed here) elevating fixed-cost base
• FX exposure from imported raw materials and overseas operations

Key Concerns:

• Negative operating leverage despite strong revenue growth
• Unreported investing cash flows limit visibility on FCF and dividend capacity
• Margin sensitivity to cost inflation and wage pressures

Investment Implications

Key Takeaways:

• Revenue growth robust at +9.9% YoY to ¥612.9bn.
• Operating income declined 1.7% YoY; operating margin ~6.6%, signaling cost pressure.
• ROE 8.96% supported by leverage (3.30x assets/equity) rather than margin strength.
• Cash conversion strong: OCF/NI 1.76x; interest coverage comfortable at 14.8x.
• Balance sheet liquidity adequate (current ratio 1.32x; quick ratio 1.29x).
• Equity ratio approximated at 30.3% (computed, reported 0.0% is a placeholder).
• Limited visibility on capex/FCF due to undisclosed investing cash flows.
• Dividend details undisclosed; payout and coverage cannot be derived.

Metrics to Watch:

• Same-store sales growth and traffic vs. price/mix contribution
• Operating margin trend and store-level EBITDA margins
• Raw material cost indices and FX (USD/JPY) affecting COGS
• Labor cost ratio and productivity metrics
• Capex and net new stores to assess FCF trajectory
• Net debt/EBITDA and lease-adjusted leverage
• OCF/NI and working capital turns
• Effective tax rate normalization

Relative Positioning: Within Japanese restaurant peers, Zensho’s scale underpins procurement and cost advantages, supporting decent cash conversion and coverage metrics; however, current-period negative operating leverage highlights heightened margin sensitivity versus best-in-class operators with more flexible cost structures.

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