HIRAGA CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.90B
• Operating Income: ¥77M
• Net Income: ¥71M
• EPS: ¥24.91

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

Hiraga Co., Ltd. (78630) reported FY2026 Q2 standalone results under JGAAP with modest top-line growth but significant profit compression, indicating margin pressure and negative operating leverage. Revenue was ¥4,898 million (+0.9% YoY), while operating income fell 68.3% YoY to ¥77 million, reducing the operating margin to approximately 1.6%. Ordinary income (¥114 million) exceeded operating income, implying non-operating gains helped cushion weak core profitability. Net income was ¥71 million (-62.5% YoY), translating to an EPS of ¥24.91 and a slim net margin of 1.45%. Gross profit was ¥1,025.8 million, equating to a gross margin of 20.9%, which appears thin and vulnerable to input cost inflation and pricing pressure. EBITDA was ¥222.5 million (EBITDA margin 4.5%), highlighting low operating efficiency in a likely project- and service-heavy model. DuPont analysis shows ROE of 1.67% driven by very low net margin (1.45%), moderate asset turnover (0.685x), and modest financial leverage (1.68x). Cash conversion was strong with operating cash flow (OCF) of ¥306.3 million, 4.31x net income, suggesting favorable working capital movements and/or non-cash charges supporting cash earnings. Liquidity appears solid with a current ratio of 170.6% and quick ratio of 168.5%, reflecting minimal inventory intensity (inventories ¥48.2 million) and likely strong receivables and cash balances, though cash was not separately disclosed. The balance sheet is conservative: total assets ¥7,154 million and total equity ¥4,246 million imply an equity ratio of roughly 59.4% (computed), despite the reported equity ratio metric being undisclosed. Leverage is manageable with a debt-to-equity ratio of 0.72x and strong interest coverage of 26.6x, indicating low financial risk despite weakening profits. Financing cash outflow of ¥133.9 million suggests debt repayments and/or lease payments; dividends were not paid (DPS ¥0), aligning with an earnings preservation stance amid profit pressure. Reported effective tax rate appears distorted in the metrics; given the disclosed income tax charge of ¥89.6 million and net income of ¥71 million, interim period effects and non-operating items likely affect the apparent rate. Data limitations are present: equity ratio, cash, investing cash flows, and share counts were not disclosed, and several metrics show as zero because of non-disclosure rather than true zero. Overall, the company exhibits resilient liquidity and cash generation in the period, but low margins, negative operating leverage, and a subdued ROE underscore the need for margin restoration and cost control to improve capital efficiency.

Profitability Analysis

ROE_decomposition: ROE 1.67% = Net margin 1.45% × Asset turnover 0.685 × Financial leverage 1.68. The dominant drag is the thin net margin; asset turnover is moderate for a service/production mix, and leverage is modest. margin_quality: Gross margin is 20.9% (¥1,025.8m/¥4,898.0m). Operating margin compressed to ~1.6% (¥77m/¥4,898m), indicating elevated SG&A and/or cost inflation not passed through to pricing. Ordinary income margin ~2.3% benefits from non-operating items. Net margin is 1.45%, reflecting a thin bottom line and limited pricing power. operating_leverage: Revenue rose 0.9% YoY, but operating income fell 68.3% YoY, signifying negative operating leverage and material fixed-cost absorption issues. EBITDA margin at 4.5% is low, leaving little buffer for cost volatility.

Growth Assessment

revenue_sustainability: Top-line growth of +0.9% YoY suggests stable but subdued demand; the business likely depends on project timing and client budgets, making sustained growth sensitive to macro conditions. profit_quality: Ordinary income (¥114m) > operating income (¥77m) indicates reliance on non-operating gains to support profits. Net margin of 1.45% and sharp YoY decline in operating income point to weaker underlying profitability. outlook: To restore earnings growth, management likely needs to tighten cost control, optimize mix/pricing, and improve utilization. Near-term growth will depend on converting gross profit into operating profit and stabilizing SG&A, given limited pricing power.

Financial Health

liquidity: Current ratio 170.6% and quick ratio 168.5% indicate strong short-term coverage. Working capital is ¥1,647.5 million, and inventories are low at ¥48.2 million, consistent with a low-hold model and receivables-driven current assets. solvency: Total assets ¥7,154m and equity ¥4,246m imply an equity ratio of ~59.4% (computed). Debt-to-equity of 0.72x and interest coverage of 26.6x point to manageable leverage and minimal refinancing risk. capital_structure: Liabilities total ¥3,057.5m versus equity of ¥4,246.0m; the structure is conservative. Financing cash outflow of ¥133.9m suggests net repayments; absence of disclosed cash balances limits visibility on net debt.

Cash Flow Quality

earnings_quality: OCF of ¥306.3m is 4.31x net income (¥71m), indicating robust cash conversion, supported by non-cash D&A (¥145.5m) and favorable working capital movements. FCF_analysis: Free cash flow is shown as 0 due to undisclosed investing cash flows; thus, FCF cannot be reliably assessed. Without capex detail, we cannot judge maintenance vs. growth spending. working_capital: High OCF suggests positive working capital inflows (likely receivables collection and low inventory requirements). Sustaining this will be key given thin margins.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0 and payout ratio 0.0%. Given low net margin and significant YoY profit decline, withholding dividends aligns with capital preservation and balance sheet resilience. FCF_coverage: FCF coverage cannot be assessed because investing cash flows were not disclosed; the reported FCF figure of 0 reflects non-disclosure rather than actual zero. policy_outlook: Resumption or initiation of dividends likely hinges on restoring operating margin and demonstrating stable cash generation through the second half and into the next fiscal year.

Risk Assessment

Business Risks:

• Margin pressure from input cost inflation (materials, subcontracting, labor) with limited pass-through.
• Demand variability tied to client marketing and project budgets, leading to revenue volatility.
• Customer concentration risk typical in B2B project businesses.
• Execution risk on project timing, utilization, and cost control amid low operating margins.
• Competitive pricing in printing/advertising/production services compressing margins.

Financial Risks:

• Thin profitability (net margin 1.45%) limiting shock absorption.
• Potential working capital swings materially affecting cash generation.
• Limited visibility on capex and cash balances due to undisclosed investing CF and cash lines.
• Dependence on non-operating gains to support ordinary income.

Key Concerns:

• Negative operating leverage (OP -68.3% YoY on +0.9% revenue).
• Low EBITDA margin (4.5%) and operating margin (~1.6%).
• ROE at 1.67% below cost of equity, indicating weak capital efficiency.

Investment Implications

Key Takeaways:

• Stable revenue but significant margin compression and negative operating leverage in H1.
• Strong liquidity and manageable leverage with an implied ~59% equity ratio.
• High cash conversion (OCF/NI 4.31x), but FCF unassessable due to undisclosed capex.
• Ordinary income supported by non-operating items, masking weak core operations.
• ROE of 1.67% highlights need for margin recovery to improve capital efficiency.

Metrics to Watch:

• Gross and operating margin trajectory in H2 (pricing, mix, SG&A ratio).
• Order backlog and utilization to gauge revenue visibility.
• Working capital (DSO/DPO) and sustainability of OCF conversion.
• Capex disclosures and investing cash flows to assess true FCF.
• Net debt/cash once cash balances are disclosed.
• ROE progression and asset turnover trends.

Relative Positioning: Versus TSE small-cap peers in printing/marketing services, Hiraga shows conservative balance sheet strength and cash conversion but lags on profitability and ROE, with heightened sensitivity to cost inflation and pricing pressure.

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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