DREAMBED CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥5.62B
• Operating Income: ¥347M
• Net Income: ¥221M
• EPS: ¥54.09

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

Dream Bed Co., Ltd. (TSE:77910) delivered steady top-line growth in FY2026 Q2, with revenue up 4.5% YoY to ¥5.62bn, while converting this into disproportionately stronger operating profit growth of 19.6% to ¥347m. The company’s gross margin of 50.9% is robust for a bedding/furniture manufacturer, indicating favorable product mix and/or pricing discipline relative to input cost inflation. Operating margin improved to 6.2%, and ordinary income of ¥332m suggests limited non-operating drag, with interest expense of only ¥17m and strong interest coverage of 19.9x. Net income rose 19.3% YoY to ¥221m (EPS ¥54.09), yielding a net margin of 3.93% and contributing to a DuPont ROE of 4.71% for the period. Asset turnover of 0.503 and financial leverage of 2.38 indicate moderate efficiency and balance sheet gearing for a mid-sized manufacturer. Liquidity is tight: the current ratio is 94.8%, the quick ratio 78.2%, and working capital stands at -¥245m, implying reliance on short-term liabilities to fund operations. Operating cash flow was modest at ¥31m, translating to an OCF/Net Income conversion of 0.14, which is weak for the half-year and likely reflects a working capital build; detailed drivers cannot be confirmed due to disclosure gaps. Despite modest leverage (total liabilities/equity 1.44x) and strong interest coverage, the negative working capital and low OCF warrant attention. The effective tax rate, inferred from disclosed tax expense, is approximately 29%, consistent with standard domestic rates; the “0.0%” shown in calculated metrics appears to be a placeholder. Inventory of ¥778m represents about 17% of current assets; without receivables and payables detail, inventory risks and WC cycle dynamics cannot be fully assessed. Free cash flow cannot be reliably calculated because investing cash flows and capex are not disclosed; the “FCF: 0” line should be treated as unreported, not zero. No dividend was reported for the period (DPS 0.00), and payout ratio is shown as 0%, likely reflecting timing or non-disclosure rather than a definitive policy shift. Overall, the earnings profile shows improving profitability from better margins and cost control, offset by constrained liquidity and weak cash conversion in the half. The near-term outlook hinges on sustaining gross margin resilience, normalizing working capital, and clarifying capex/cash needs. Data limitations (notably equity ratio, cash balance, and investing CF) require caution in interpreting solvency and dividend capacity, but the available non-zero metrics point to manageable leverage, solid profitability momentum, and cash discipline as the key swing factors.

Profitability Analysis

ROE (DuPont) is 4.71%, decomposed as net margin 3.93% × asset turnover 0.503 × financial leverage 2.38. Operating margin of 6.2% (¥347m on ¥5.62bn) improved YoY given operating income growth (+19.6%) outpacing revenue growth (+4.5%), indicating positive operating leverage. Gross margin at 50.9% is strong for the category and suggests favorable mix/pricing; sustaining this level will be a key driver of returns. EBITDA was ¥516m with a 9.2% margin, implying adequate operating cash earnings to cover interest (19.9x coverage) and fixed costs. Ordinary margin of 5.9% shows limited non-operating headwinds beyond modest interest expense. The net margin of 3.93% incorporates an inferred effective tax rate of roughly 29% (¥91m tax on ~¥312m pre-tax). Asset turnover of 0.503 reflects moderate utilization; further improvement likely hinges on inventory turns and receivables management. Overall margin quality appears solid, but conversion to cash was weak this half, tempering the apparent operating leverage benefit.

Growth Assessment

Revenue grew 4.5% YoY to ¥5.62bn, a steady pace likely supported by resilient bedding demand and/or institutional orders; details by channel are not disclosed. Operating income growth of 19.6% indicates cost discipline and mix improvements, enabling margin expansion despite modest top-line growth. Net income rose 19.3%, roughly in line with operating profit growth, implying limited non-operating noise. Sustainability will depend on maintaining the 50.9% gross margin against raw material, freight, and labor cost pressures. The company’s asset turnover at 0.503 suggests room for efficiency gains through inventory/receivables optimization, which could support future growth without heavy asset additions. Weak OCF (¥31m) versus net income (¥221m) implies a temporary working capital headwind; normalization in H2 would be important for growth funding. With investing cash flows undisclosed, visibility on expansionary capex or capacity upgrades is limited. Near-term outlook appears cautiously constructive given margin momentum, but confirmation via improved cash conversion and stable order trends would increase confidence.

Financial Health

Total assets are ¥11.17bn, liabilities ¥6.76bn, and equity ¥4.70bn, implying leverage of 1.44x liabilities-to-equity and financial leverage of 2.38x assets-to-equity. Liquidity is tight: current assets ¥4.46bn vs current liabilities ¥4.70bn yields a current ratio of 0.95 and a quick ratio of 0.78. Working capital is negative at -¥245m, indicating dependence on short-term funding or supplier credit; this is manageable if inventory turns and receivable collections are strong, but it reduces cushion against shocks. Interest expense is modest at ¥17m, with interest coverage of 19.9x on operating income, indicating low near-term refinancing risk. The equity ratio line is undisclosed (shown as 0%); however, based on provided totals, equity/asset ratio is approximately 42% (¥4.70bn/¥11.17bn), suggesting a reasonably solid capital base. Cash and equivalents are undisclosed, limiting assessment of immediate liquidity buffers. Overall solvency appears sound, but short-term liquidity management is a key focus area.

Cash Flow Quality

Operating cash flow was ¥31m versus net income of ¥221m, yielding an OCF/NI ratio of 0.14, which is weak and points to a working capital drag during the half. Depreciation and amortization of ¥169m underpins EBITDA of ¥516m, indicating that accounting earnings are supported by non-cash charges; however, cash realization lagged. Investing cash flow and capex are undisclosed (reported as 0), preventing a reliable free cash flow calculation; the “FCF: 0” metric should be treated as unreported. Given negative working capital and the OCF shortfall, monitoring AR collections, inventory levels (¥778m), and payables timing is critical. If working capital normalizes in H2, cash conversion should improve and support internal funding of operations. Until investing cash needs are clarified, the quality of earnings from a cash perspective remains uncertain.

Dividend Sustainability

No dividend per share (DPS 0.00) and a 0% payout ratio are shown, but these likely reflect non-disclosure/timing rather than a definitive policy, given positive earnings (EPS ¥54.09). With OCF at ¥31m versus net income of ¥221m for the half, near-term cash coverage of any dividends appears tight unless working capital reverses. Free cash flow cannot be assessed due to undisclosed investing cash flows, limiting visibility on coverage. Balance sheet leverage is moderate, which could support distributions if cash generation improves, but the current ratio below 1 argues for prudence. Policy outlook is unclear; confirmation will require management guidance and year-end cash flow data. In the absence of capex and cash balance disclosure, dividend sustainability cannot be firmly concluded.

Risk Assessment

Business Risks:

• Exposure to housing, renovation, and hospitality capex cycles affecting bedding demand
• Raw material cost volatility (textiles, foam/chemical inputs, steel components) and freight costs pressuring margins
• Customer concentration risk in wholesale/retail or contract channels (not disclosed)
• Competitive pricing pressure from domestic and imported bedding/furniture brands
• Product mix risk if premium segments slow, impacting gross margin sustainability
• Execution risk in inventory and receivables management given negative working capital

Financial Risks:

• Tight liquidity with current ratio 0.95 and quick ratio 0.78
• Weak cash conversion (OCF/NI 0.14) implying working capital headwinds
• Limited transparency on cash balance and capex/investing cash needs
• Potential refinancing/timing risk if payables stretch is required to fund operations
• Sensitivity to interest rate increases, though current interest burden is low

Key Concerns:

• Sustainability of 50.9% gross margin amid cost volatility
• Normalization of working capital to restore cash conversion
• Visibility on capex and free cash flow given undisclosed investing CF
• Maintaining liquidity with negative working capital

Investment Implications

Key Takeaways:

• Revenue growth of 4.5% YoY translated into 19.6% operating profit growth, evidencing margin expansion and operating leverage
• Gross margin is strong at 50.9%, a key support for earnings quality
• Liquidity is tight (current ratio 0.95; working capital -¥245m) and cash conversion was weak (OCF/NI 0.14)
• Leverage is moderate (liabilities/equity 1.44x) with robust interest coverage (19.9x)
• FCF and cash balance are not disclosed, limiting visibility on capital allocation and dividend capacity

Metrics to Watch:

• OCF/Net Income and working capital movements (AR, inventory, AP)
• Gross margin trajectory and pricing vs. input costs
• Capex and investing cash flows to assess FCF
• Current and quick ratios as indicators of liquidity buffer
• Asset turnover and inventory days for efficiency improvements
• Order trends in contract/hospitality channels (if disclosed)

Relative Positioning: Within Japan’s bedding/furniture space, Dream Bed appears to be a mid-sized manufacturer with solid margins and moderate leverage, but currently exhibits tighter liquidity and weaker cash conversion than ideal; confirmation of sustainable margin performance and normalization of working capital would be important to strengthen its standing relative to peers.

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
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