HIDAY HIDAKA Corp. FY2026 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥46.17B
• Operating Income: ¥5.29B
• Net Income: ¥3.56B
• EPS: ¥98.21

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

AI Financial Analysis

Executive Summary

Verdict: Strong Q3 FY2026 performance with double-digit top-line growth and solid margin expansion, underpinned by disciplined cost control and a robust balance sheet. Revenue rose 12.7% YoY to 461.74, with operating income up 30.7% to 52.85 and net income up 29.3% to 35.60. Operating margin improved to 11.4% from roughly 9.9% a year ago, an expansion of about 158 bps, while net margin increased to 7.7% from 6.7% (+99 bps). Gross profit reached 320.58 with a gross margin of 69.4%, indicating favorable merchandise mix and/or pricing amid cost inflation. SG&A was 267.72, implying an SG&A ratio of 58.0%, and the operating leverage effect drove the outsized profit growth versus revenue. The DuPont analysis shows ROE at 15.1%, driven by a healthy net margin (7.7%), high asset turnover (1.41x), and modest financial leverage (1.39x). Tax burden was 0.671 (effective tax rate ~32.8%) and interest burden near 1.0, reflecting minimal net interest costs and a conservative capital structure. Liquidity is strong: current ratio 212% and cash & deposits of 107.35 comfortably exceed current liabilities of 71.67. Balance sheet movement indicates significant treasury stock accumulation (treasury stock more negative: -21.77 → -61.79), suggesting active buybacks that reduce equity and modestly lift ROE. Earnings quality cannot be fully assessed due to unreported cash flows; OCF/NI and FCF coverage are not available, a key limitation. Nevertheless, low leverage and ample cash mitigate near-term financial risk and support dividend capacity. The calculated payout ratio is 47.1% (interim ¥18 + year-end ¥26), which looks sustainable given current profitability and cash levels. Forward-looking, continued same-store sales traction and cost pass-through, alongside disciplined SG&A, will be key to maintaining the improved margin profile. Watch labor and utility costs, commodity inputs (notably wheat and pork), and any changes in tax rate. Overall, the print strengthens confidence in earnings momentum, though confirmation via cash flow in the full-year report will be important.

Profitability Analysis

ROE decomposition (3-factor): Net Profit Margin (7.7%) × Asset Turnover (1.408) × Financial Leverage (1.39x) = ROE 15.1%. The largest positive swing this quarter versus last year stems from higher margins: operating margin expanded ~158 bps (to 11.4%), and net margin expanded ~99 bps (to 7.7%), outpacing topline growth. Drivers likely include price optimization, improved mix, and scale benefits that kept SG&A growth below gross profit growth, despite industry-wide cost pressures. Financial leverage is modest and stable, though the increase in treasury stock (buybacks) reduced equity and mechanically supported ROE at the margin. Sustainability: the margin gains appear largely operational rather than one-off, but durability depends on continued traffic/ticket strength and effective cost pass-through against labor and utilities inflation. Concerning trends: none evident from the limited disclosures; however, we note the SG&A ratio remains high at 58.0%, and without a breakdown (labor, rent, utilities), monitoring cost creep is essential. DuPont 5-factor: Tax burden 0.671 (somewhat heavy), Interest burden 1.003 (negligible interest drag), EBIT margin 11.4%; the improvement is chiefly at the EBIT margin level.

Growth Assessment

Revenue growth of 12.7% YoY is robust for a restaurant operator and aligns with continued demand normalization and likely menu pricing/mix effects. Operating income growth of 30.7% indicates positive operating leverage as fixed costs were better absorbed. Ordinary income increased 28.4% to 53.02, broadly consistent with operating income gains, with minimal non-operating noise. Net income rose 29.3% to 35.60, with EPS at ¥98.21. Absent same-store sales and traffic/ticket data, we cannot decompose growth, but the magnitude suggests both price and volume likely contributed. No segment data or e-commerce/omnichannel metrics were provided; store network growth and closure impacts are unknown. Looking ahead, sustaining double-digit revenue growth will hinge on same-store productivity (traffic and ticket), menu innovation, and prudent network expansion without cannibalization. Margin sustainability will depend on commodity and labor cost trends; current gross margin (69.4%) provides cushion but could be tested if input costs re-accelerate. The tax rate (32.8%) dampens net profit scalability; no guidance on potential tax normalization was provided. Overall growth momentum is favorable, but confirmation via same-store KPIs and cash flow is needed.

Financial Health

Liquidity is strong: current ratio 2.12x and quick ratio 2.12x (no inventories reported) with cash & deposits of 107.35 exceeding current liabilities of 71.67. No warning for current ratio (<1.0) or D/E (>2.0); the reported D/E is 0.39x (total liabilities/equity), indicating a conservative structure. Solvency is solid with total liabilities at 27.8% of assets; interest-bearing debt is unreported, but the interest burden of 1.003 implies minimal net interest expense. Maturity mismatch risk is low: current assets 152.14 vs current liabilities 71.67 provide ample coverage. Off-balance sheet obligations (e.g., operating leases) are not disclosed in this dataset; as a restaurant operator, lease commitments likely exist and should be reviewed in footnotes. Equity declined YoY (owners' equity 258.61 → 236.61), largely due to increased treasury stock, which is a shareholder return but reduces balance sheet buffer; cash remains ample, mitigating risk.

Notable B/S Changes

Treasury Stock: -21.77 → -61.79 (-183.8%) - Significant buyback activity reduced shareholders' equity and modestly lifted ROE; monitor capital allocation balance versus growth capex and liquidity. Investment Securities: 1.56 → 2.13 (+36.4%) - Small increase in financial assets; limited P&L/valuation impact but watch for market volatility exposure.

Cash Flow Quality

OCF, investing CF, and FCF are unreported, so we cannot compute OCF/Net Income or assess FCF coverage. As such, we cannot confirm earnings-to-cash conversion quality this quarter. Working capital appears conservative for a restaurant operator: receivables (23.34) vs payables (16.58) suggest limited credit exposure and no evident stretch in payables. With cash at 107.35 and modest liabilities, near-term liquidity for dividends and maintenance capex looks sufficient, but sustainability of both dividends and any buybacks requires confirmation of positive, recurring FCF at the full-year. No signs of working capital manipulation are observable from the limited data, but absence of inventory and cash flow disclosures is a constraint.

Dividend Sustainability

Calculated payout ratio is 47.1% (¥44 DPS total: ¥18 interim + ¥26 year-end), based on average shares of 36.25m and NI of 35.60 (¥3.56bn). This sits within a generally sustainable range (<60%) for stable restaurant operators. Cash on hand (107.35) and low leverage support capacity to fund dividends. FCF coverage cannot be assessed due to missing OCF and capex data; therefore, our view is conditional on normalized FCF being positive after maintenance capex. Treasury stock increased materially, implying concurrent buybacks alongside dividends; continuation of both will depend on cash generation and investment needs for store development. With ROE at 15.1% and solid margins, a mid-40% payout appears maintainable near term, barring a sharp downturn.

Risk Assessment

Business risks include Input cost inflation (wheat, pork, vegetable oils) pressuring gross margin, Labor cost increases amid tight labor market and rising minimum wages, Consumer demand sensitivity to macro conditions impacting traffic, Execution risk in pricing/pass-through potentially affecting volumes, Food safety and brand reputation risks intrinsic to restaurant operations.

Financial risks include Reduced equity base due to increased treasury stock lowers buffer to shocks, Limited disclosure on lease obligations; potential off-balance sheet commitments, Cash flow visibility risk due to unreported OCF/FCF this quarter.

Key concerns include Sustainability of margin expansion without full SG&A breakdown (labor, utilities, rent), Tax rate at 32.8% dampens net income scalability, Dependence on continued same-store growth; cannibalization risk if accelerating store openings.

Investment Implications

Key takeaways include Strong quarter: revenue +12.7% YoY, operating income +30.7%, net income +29.3%, Margin expansion: operating margin +158 bps to 11.4%, net margin +99 bps to 7.7%, ROE at 15.1% supported by better profitability and modest leverage, Balance sheet conservative with current ratio 2.12x and cash exceeding current liabilities, Active shareholder returns via increased treasury stock; equity base decreased YoY, Lack of cash flow data is the main analytical gap; confirm FCF at year-end, Dividend payout ~47% appears sustainable given current earnings and cash.

Metrics to watch include Same-store sales growth (traffic vs ticket), Labor, utilities, and rent as % of sales (SG&A breakdown), Gross margin trend vs commodity cost indices (wheat/pork), OCF/Net Income and FCF after maintenance capex, Pace of share buybacks (treasury stock changes) and impact on equity, Tax rate stability and any one-off items, Lease commitments and EBITDA coverage (once disclosed).

Regarding relative positioning, Within Japan casual dining peers, the company exhibits above-average balance sheet strength, a good operating margin profile (11–12%), and ROE at the top end of the 10–15% range, albeit with less transparency on cash flow this quarter.