HIDAY HIDAKA (7611) FY2027 Q2 Earnings Report

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Executive Summary

Revenue and profit increased in the first half. Although the gross margin declined, improvement in the SG&A ratio offset the decline, keeping the operating margin broadly flat. Revenue was ¥34.06B (up 10.8% YoY, or +¥3.31B), and operating income was ¥4.07B (up 11.0%, or +¥0.4B). Ordinary income was ¥4.1B (up 11.4%), and net income attributable to owners of the parent was ¥2.77B (up 11.4%). Cost of sales rose 14.1% YoY, exceeding revenue growth, while SG&A expenses increased by just 9.0%. This gap determined the margin dynamics.

Factors Driving Changes in Performance

【Revenue】Revenue increased 10.8%, from ¥30.75B to ¥34.06B. Cost of sales rose 14.1%, from ¥9.33B to ¥10.64B, and the gross margin declined by approximately 0.9pt, from 69.7% to 68.8%. Costs grew faster than revenue, suggesting an impact from raw material costs.

【Profit and Loss】SG&A expenses increased just 9.0%, from ¥17.76B to ¥19.35B, and the SG&A ratio improved by approximately 0.9pt, from 57.8% to 56.8%. Salaries and allowances increased 6.8% (¥8.55B→¥9.13B), while rent increased 4.5% (¥2.48B→¥2.6B); both grew more slowly than revenue. This absorption of fixed costs kept the operating margin at 11.9%, roughly in line with the prior year. Non-operating income was ¥0.09B and non-operating expenses were ¥0.06B, leaving ordinary income at approximately the same level as operating income. No significant extraordinary items were evident. In summary, both revenue and profit increased.

Key Financial Metrics

【Profitability】The operating margin was 11.9%, the net margin was 8.1%, and annualized ROE was 20.8%. The improvement in ROE was driven more by an increase in total asset turnover than by the profit margin. Financial leverage was 1.37x, broadly unchanged. 【Cash Quality】Accounts receivable increased 22.5%, from ¥2.31B to ¥2.83B, exceeding revenue growth. Collection days, based on annualized revenue, lengthened from approximately 13.7 days to approximately 15.1 days, although the absolute level remains low. Cash and deposits were ¥13.28B, an increase of ¥1.06B year over year. 【Investment Efficiency】Total assets were ¥36.46B, and annualized ROA was approximately 15.2%. Construction in progress increased from ¥0.006B to ¥0.17B, indicating that capital investment is progressing. 【Financial Soundness】The Equity Ratio was 73.1% (72.8% in the prior year), and the current ratio was 238.2%. Cash and deposits were equivalent to approximately 1.73x current liabilities. Asset retirement obligations were ¥1.79B, accounting for 18.3% of total liabilities.

Cash Flow Analysis

As no cash flow statement was provided, funding trends can be assessed from changes in the balance sheet. Cash and deposits increased by ¥1.06B, from ¥12.22B to ¥13.28B, expanding financial flexibility. Retained earnings rose by ¥1.7B, from ¥27.58B to ¥29.28B, indicating an accumulation of internally retained funds. Meanwhile, accounts receivable increased by ¥0.52B, slightly increasing the amount of funds tied up in working capital. Investment securities declined by ¥0.94B, from ¥1.27B to ¥0.33B, possibly reflecting a shift in financial assets toward more liquid forms such as cash and deposits. The increase in construction in progress indicates that store and equipment investments are underway. The increase in cash and deposits appears to reflect improved cash conversion of earnings.

Earnings Quality

The majority of earnings was derived from operating income, indicating a high degree of recurring earnings. Non-operating income was ¥0.09B (including interest income of ¥0.02B), and non-operating expenses were ¥0.06B; their impact on ordinary income of ¥4.1B was small. Loss on disposal of fixed assets was limited to ¥0.05B (¥0.03B in the prior year). The difference between operating income and ordinary income was ¥0.03B, with the core business driving profits. Against pretax income of ¥4.1B, income taxes were ¥1.32B, representing an effective tax rate of approximately 32%. The fact that accounts receivable growth exceeded revenue growth warrants attention when assessing the relationship between earnings and cash.

Earnings Forecast and Guidance

The full-year forecast is revenue of ¥67B (up 7.6% from the prior year), operating income of ¥6.8B (up 3.3%), and net income of ¥4.5B (down 4.9%). First-half progress rates were 50.8% for revenue, 59.8% for operating income, 60.3% for ordinary income, and 61.6% for net income.

Required operating income for the second half is ¥2.73B, below the first-half result. The required second-half operating margin is approximately 8.3%, lower than the first-half margin of approximately 11.9%. The full-year net income forecast implies a decline from the prior year, contrary to the 11.4% increase recorded in the first half. This difference suggests that higher expenses or extraordinary factors may be incorporated into the second-half forecast, although the specific details cannot be confirmed from the materials.

Shareholder Returns

The Q2 dividend per share was ¥28 (the annual dividend for the prior full year was ¥23), and the full-year forecast is ¥56. The payout ratio against first-half EPS of ¥77.06 is approximately 36.3%. The forecast payout ratio against full-year forecast EPS of ¥124.99 is approximately 44.8%. Both figures are payout ratios based solely on dividends, not Total Return Ratios including share buybacks. Given cash and deposits of ¥13.28B and an Equity Ratio of 73.1%, the company has a substantial base of funds available for dividends. The full-year dividend forecast is significantly higher than the prior-year actual amount.

Risk Factors

1. Cost inflation risk: Cost of sales rose 14.1% YoY, exceeding the 10.8% increase in revenue, and the gross margin declined by approximately 0.9pt. If this trend continues, it will become difficult to maintain the profit margin through SG&A ratio improvements alone.

2. Asset retirement obligations: Asset retirement obligations were ¥1.79B, accounting for 18.3% of total liabilities. If store closures or relocations become concentrated, restoration costs could affect earnings and cash.

3. Increase in working capital: Accounts receivable increased 22.5%, exceeding revenue growth. Collection days lengthened by approximately 1.4 days, and it is necessary to monitor whether this increase continues.

Industry Benchmarks (Reference; Compiled by the Company)

Profitability and Returns

Both the operating margin and net margin are well above the upper end of the industry IQR.

Growth and Capital Efficiency

Revenue growth is above the median and close to the upper end of the IQR (10.9%).

Source: Company compilation

Key Points for This Earnings Report

1. The SG&A ratio improved enough to maintain an operating margin of 11.9%, despite a decline of approximately 0.9pt in the gross margin. Profit growth therefore depends on fixed-cost absorption, making cost trends in the second half a key focus.

2. The second-half operating margin implied by the full-year forecast is approximately 8.3%, below the first-half margin of approximately 11.9%. Net income progress has reached 61.6%, making the second-half earnings level a key factor in assessing the sustainability of performance.

3. The financial position is strong, with an Equity Ratio of 73.1% and cash and deposits of ¥13.28B. Meanwhile, asset retirement obligations (¥1.79B) and the increase in accounts receivable require ongoing monitoring.

Theoretical Share Price (Reference)

Sensitivity: ¥904–¥957 for a ±1% change in the cost of equity, and ¥925–¥937 for a ±0.1 change in ω.

Notes:

• Because net income progress against the full-year forecast (62%) exceeds the standard level (50%), forecast EPS has been adjusted upward, within a maximum of +10% (as companies ahead of their progress targets tend to outperform forecasts. The adjustment may be excessive for businesses with strong seasonality).
• Net assets as of the quarter-end are used (there is a timing difference relative to the full-year forecast).
• As net assets include non-controlling interests, the theoretical value may be somewhat overstated.

(Model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-08 / Mechanically calculated using only publicly disclosed data; this is not a forecast of market share prices or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI from XBRL earnings data. It does not recommend investing in any specific security. Industry benchmarks are reference information compiled by the company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, and you should consult a professional as necessary.

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