KOURAKUEN CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥14.45B
• Operating Income: ¥755M
• Net Income: ¥584M
• EPS: ¥30.60

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

Kourakuen Co., Ltd. (7554) delivered a strong FY2026 Q2 (single-entity, JGAAP) performance, with revenue of ¥14.45bn, up 53.9% YoY, and operating income of ¥0.76bn, up 192.9% YoY, indicating pronounced operating leverage. Net income reached ¥0.58bn (+25.1% YoY), translating to EPS of ¥30.60. Profitability improved meaningfully: operating margin expanded to 5.2% from roughly 2.8% a year ago (back-calculated), driven by sales recovery and improved cost absorption. Gross margin printed at 69.7%, though this level appears high for a restaurant operator; it may reflect classification under JGAAP or the inclusion of higher-margin revenue streams, but we analyze it as reported. DuPont analysis yields a reported ROE of 8.86%, decomposed into a 4.04% net margin, 1.195x asset turnover, and 1.83x financial leverage. The effective tax rate is approximately 17% based on the disclosed tax charge, despite a reported 0.0% in the calculated metrics section (zeros denote unreported items, not actual zero). The balance sheet is sound: total assets are ¥12.09bn, equity ¥6.60bn, and liabilities ¥6.50bn, implying an equity ratio near 54.6% and debt-to-equity of 0.99x. Liquidity is adequate with a current ratio of 121.6% and quick ratio of 116.0%, and inventory remains lean at ¥0.28bn. Interest expense is minimal at ¥6.1m, and interest coverage is very comfortable at 124x. Cash flow statements are undisclosed in this dataset (all zeros), limiting visibility on operating cash conversion and free cash flow. The company paid no dividends in the period (DPS ¥0; payout 0%), consistent with a conservative stance amid ongoing earnings normalization. While the topline rebound appears robust and operating leverage is favorable, the lack of cash flow disclosure and the single-entity scope warrant caution when extrapolating cash generative capacity and capex needs. Overall, the trajectory suggests recovery and improving capital efficiency, but sustained performance will depend on same-store sales, input cost management (food, labor, utilities), and disciplined store investment.

Profitability Analysis

ROE_decomposition: ROE 8.86% = Net margin 4.04% × Asset turnover 1.195 × Financial leverage 1.83. The improved operating margin (≈5.2%) and higher turnover are the key drivers; leverage is moderate and not the principal contributor. margin_quality: Gross margin at 69.7% and operating margin at 5.2%. The gap between gross and operating margins indicates substantial labor, rent, and utility costs typical of restaurant operations. Effective tax rate is ~17% (¥121.8m/¥705.8m pre-tax). Interest burden is negligible (interest expense ¥6.1m), so ordinary income ≈ operating income. operating_leverage: Revenue rose 53.9% YoY while operating income rose 192.9% YoY, implying strong operating leverage and meaningful fixed-cost absorption. Back-calculated prior-year operating income ≈ ¥258m and margin ≈ 2.8%, vs. 5.2% currently.

Growth Assessment

revenue_sustainability: Revenue ¥14.45bn (+53.9% YoY) indicates strong recovery. Sustainability will depend on same-store traffic, pricing power, and store network dynamics. Inventory at ¥277.5m (~1.9% of sales) suggests healthy throughput. profit_quality: Ordinary income aligns closely with operating income (low non-operating impact), suggesting core earnings quality is improving. However, absence of D&A disclosure (shown as 0) obscures EBITDA assessment and underlying cash profitability. outlook: If current demand trends persist and cost pressures (food, labor, energy) are managed, margins can remain above prior-year levels. Continued efficiency in labor scheduling, menu pricing, and procurement will be pivotal to sustaining the current ROE near 9%.

Financial Health

liquidity: Current assets ¥6.02bn vs. current liabilities ¥4.95bn; current ratio 121.6%, quick ratio 116.0%. Working capital ¥1.07bn indicates adequate short-term coverage. solvency: Equity ¥6.60bn and total assets ¥12.09bn imply an underlying equity ratio of ~54.6% (the reported 0.0% is an undisclosed value). Interest coverage 124x underscores low financial risk from debt service. capital_structure: Debt-to-equity 0.99x (using total liabilities as proxy), indicating moderate leverage primarily from operating liabilities; financial debt specifics are not disclosed in this dataset.

Cash Flow Quality

earnings_quality: OCF, capex, and FCF are undisclosed (zeros indicate unreported). With net income at ¥584m and minimal interest, earnings appear operationally driven, but cash conversion cannot be validated. FCF_analysis: Free cash flow is unreported. Without D&A and capex, we cannot assess maintenance vs. growth investment or FCF coverage of potential distributions. working_capital: Inventory of ¥277.5m vs. revenue suggests lean operations. Receivables/payables detail is not provided, limiting analysis of cash conversion cycle.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0 with a reported payout ratio of 0%. Given positive earnings but no FCF data, sustained dividends cannot be assessed. The restraint is consistent with reinforcing balance sheet flexibility during recovery. FCF_coverage: Not assessable due to unreported OCF and capex (both shown as 0). policy_outlook: With ROE at ~8.9% and leverage moderate, resumption of dividends could be contemplated if cash flows normalize and capex remains disciplined; however, visibility is limited without cash flow disclosure.

Risk Assessment

Business Risks:

• Same-store sales volatility due to consumer demand and competitive pricing in QSR/ramen.
• Input cost inflation (wheat, pork, soy, cooking oil) and energy/utilities pressure on margins.
• Labor availability and wage inflation, including minimum wage hikes in Japan.
• Execution risk in store openings/closures and renovations affecting fixed-cost leverage.
• Food safety and brand reputation risks inherent to restaurant operations.
• Exposure to weather/natural disasters disrupting store operations.

Financial Risks:

• Limited visibility on operating cash flow and capex due to undisclosed cash flow statements.
• Potential off-balance-sheet lease exposure under JGAAP single-entity reporting.
• Refinancing and interest rate risks appear low but could rise if debt increases for expansion.
• Tax rate variability impacting net profit if special items or loss carryforwards change.

Key Concerns:

• Absence of OCF/FCF data restricts assessment of earnings-to-cash conversion.
• Sustainability of outsized YoY growth as base effects normalize.
• Gross margin level appears high for the sector; any reclassification or normalization could compress operating margin.

Investment Implications

Key Takeaways:

• Topline rebounded strongly (+53.9% YoY), with significant operating leverage (OP +192.9%).
• ROE at 8.86% improves but remains just below a typical 10% hurdle.
• Balance sheet is solid with an implied equity ratio ~55% and ample interest coverage.
• Liquidity is adequate (current ratio 122%, quick ratio 116%).
• Cash flow disclosure is lacking; dividend resumption hinges on demonstrable FCF.

Metrics to Watch:

• Same-store sales growth and traffic vs. pricing mix.
• Food and labor cost ratios, utility costs, and their impact on operating margin.
• OCF and capex (once disclosed) to validate FCF generation and coverage.
• Store count changes, renovation cadence, and payback periods.
• Inventory days and payable terms to gauge cash conversion.
• Effective tax rate normalization vs. historical range.

Relative Positioning: Within Japan’s casual dining/QSR peers (e.g., ramen and family restaurant operators), Kourakuen currently shows improving profitability and moderate leverage. ROE and margins are recovering but still middle-of-the-pack, with better interest coverage than more leveraged peers; sustained outperformance will hinge on maintaining operating leverage while managing input and labor costs.

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