KOSAIDO Holdings Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥16.46B
• Operating Income: ¥2.79B
• Net Income: ¥2.18B
• EPS: ¥15.25

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

Verdict: A mixed FY2026 Q2—topline softness and margin compression drove double-digit profit declines, but liquidity and operating cash flow were exceptionally strong. Revenue fell 6.0% YoY to 164.59, with operating income down 22.9% to 27.93 and net income down 16.5% to 21.54. Gross profit was 61.79, implying a 37.5% gross margin; operating margin stood at 17.0% and net margin at 13.1%. Based on YoY trajectories, operating margin compressed by approximately 373 bps (from ~20.7% to 17.0%) and net margin compressed by ~166 bps (from ~14.8% to 13.1%). Ordinary income declined 22.0% to 26.93, with ordinary margin compressing by ~336 bps to 16.4%. Non-operating results were a net drag (income 1.20 vs expenses 2.20), primarily due to 1.59 in interest expense, modestly diluting ordinary profit. Despite earnings pressure, operating cash flow surged to 187.05, or 8.68x net income, indicating powerful cash conversion this quarter. The balance sheet remains very conservative with 249.64 in cash against total debt of 109.07, leaving net cash of roughly 140.57 and a current ratio of 301%. Leverage is low (D/E 0.43x, Debt/EBITDA 3.01x) and interest coverage is strong at 17.57x. ROE is modest at 4.4%, constrained by low asset turnover (0.234) despite a healthy net margin. ROIC at 6.4% sits below the 7–8% benchmark, suggesting room for capital efficiency improvements. Dividend details are largely undisclosed; the provided calculated payout ratio of 85.4% appears elevated relative to cash earnings benchmarks, though strong OCF provides near-term coverage comfort. The key issue this quarter is negative operating leverage as revenue fell faster than SG&A flexibility would allow, compressing operating margins. Forward-looking, normalization of cash flow versus earnings and stabilizing operating margins will be crucial, alongside maintaining disciplined capital allocation to lift ROIC. Overall, fundamentals are resilient on liquidity and cash flow, but profitability momentum and capital efficiency need attention.

Profitability Analysis

ROE decomposition (DuPont): ROE 4.4% = Net Profit Margin 13.1% × Asset Turnover 0.234 × Financial Leverage 1.43x. The component exerting the largest negative change this quarter is the margin leg: operating income fell 22.9% vs revenue -6.0%, compressing operating margin by ~373 bps to 17.0% and net margin by ~166 bps to 13.1%. Business drivers likely include weaker revenue and limited SG&A elasticity, plus a modest non-operating drag from interest expense (1.59) that reduced ordinary margin. Asset turnover remains structurally low at 0.234, reflecting a cash-rich balance sheet (cash 249.64 against assets 702.75) and a capital-light revenue base; the 6% revenue decline likely nudged A/T lower. Financial leverage is conservative at 1.43x and did not materially support ROE. Sustainability: the margin compression is cyclical/operational rather than one-time; recovery depends on revenue stabilization and SG&A discipline. The very high OCF may not be fully recurring if driven by working capital releases; therefore, it doesn’t directly cure margin pressure. Watch for potential negative operating leverage when revenue declines outpace cost adjustments; SG&A as a percent of sales is 20.6% this quarter, and if SG&A growth outstrips revenue in future periods, margins could remain under pressure.

Growth Assessment

Revenue contracted 6.0% YoY to 164.59, signaling near-term softness. Operating income dropped 22.9% to 27.93 and ordinary income fell 22.0% to 26.93, indicating deteriorating operating leverage. Net income decreased 16.5% to 21.54, cushioned by a relatively benign effective tax rate of 19.3%. EBITDA was 36.27, implying a 22.0% margin; however, EBITDA also faces pressure from the topline decline. Given the limited disclosure by segment, the sustainability of revenue is unclear; absent new growth vectors, near-term growth likely hinges on stabilizing core operations and price/mix improvement. The reported ROIC of 6.4% is below the 7–8% benchmark, suggesting further optimization of invested capital or portfolio actions may be needed. Non-operating items were a net headwind this quarter; unless interest cost moderates, ordinary profit growth will depend mainly on operating profit improvement. Outlook: focus on recovering operating margin toward the prior-year level (~20–21%) by improving SG&A efficiency and maintaining gross profit discipline; monitor whether revenue decline moderates in H2.

Financial Health

Liquidity is robust: current ratio 301.0% and quick ratio 299.9%, well above healthy thresholds; no warning (CR < 1.0) applies. Cash and deposits of 249.64 far exceed current liabilities of 101.37, indicating no near-term liquidity stress. Solvency is conservative: D/E 0.43x and interest coverage 17.57x; Debt/EBITDA is a manageable 3.01x. Total debt is 109.07 (14.00 short-term, 95.07 long-term) versus net cash of ~140.57, implying ample financial flexibility. Maturity mismatch risk appears low given sizable cash relative to short-term borrowings and payables (AP 15.23). No off-balance sheet obligations were reported in the provided data. Equity totals 491.88, supporting a financial leverage factor of 1.43x in DuPont, consistent with a conservative capital structure.

Cash Flow Quality

OCF/Net income is 8.68x, signaling very strong cash conversion and no earnings quality red flag (threshold <0.8). The magnitude suggests significant working capital inflows and/or upfront cash receipts in addition to earnings and non-cash add-backs (D&A 8.34). Free cash flow and capex were not disclosed, so structural FCF sustainability cannot be confirmed; however, the cash balance increased capacity for dividends and debt reduction in the near term. Financing cash flow was -82.50, likely reflecting debt repayments and/or shareholder returns, which were readily funded by OCF. With receivables (34.62) and inventories (1.09) modest versus sales, working capital risk seems contained; nonetheless, the outsized OCF spike may normalize in subsequent quarters. No clear signs of working capital manipulation are observable from the high-level data provided.

Dividend Sustainability

Dividend details are largely unreported; the provided calculated payout ratio of 85.4% is above the <60% benchmark and would be considered elevated if representative of the full-year policy. FCF coverage cannot be assessed due to missing investing CF and capex data; however, OCF of 187.05 and a net cash position of ~140.57 indicate ample near-term capacity to fund dividends. Financing CF of -82.50 suggests outflows (repayments/returns) were comfortably covered by OCF. Policy outlook is uncertain without DPS guidance; if management targets stability, maintaining current levels appears feasible near term, but medium-term sustainability should align with normalized FCF rather than a single strong quarter of OCF.

Risk Assessment

Business Risks:

• Revenue decline of 6.0% YoY indicating demand softness and negative operating leverage
• Operating margin compression (~373 bps YoY) reflecting limited SG&A flexibility
• ROIC at 6.4% below the 7–8% benchmark, implying capital efficiency headwinds
• Potential normalization of unusually strong OCF if driven by temporary working capital releases
• Dependence on maintaining gross profit discipline amid top-line pressure

Financial Risks:

• Interest expense (1.59) creating a non-operating drag; exposure to rate increases on floating debt if applicable
• Refinancing and maturity schedule concentration risk on 95.07 of long-term loans (timing undisclosed)
• Elevated calculated payout ratio (85.4%) could constrain reinvestment if sustained
• Low asset turnover (0.234) dampening ROE even with healthy margins

Key Concerns:

• Sustained margin compression if revenue pressure persists
• Uncertainty around capex and investing cash flows limits FCF visibility
• Lack of segment disclosure obscures drivers of revenue and profit change
• Potential gap between accounting earnings and cash flows normalizing next periods

Investment Implications

Key Takeaways:

• Topline declined 6.0% with operating income down 22.9%, indicating negative operating leverage
• Operating margin compressed ~373 bps to ~17.0%; net margin at 13.1% down ~166 bps
• OCF exceptionally strong at 187.05 (8.68x net income), boosting liquidity
• Balance sheet is cash-rich (net cash ~140.57) with conservative leverage (D/E 0.43x)
• ROE modest at 4.4% due to low asset turnover; ROIC at 6.4% below target range
• Non-operating items net negative, led by interest expense (1.59)

Metrics to Watch:

• Operating margin trajectory and SG&A ratio versus revenue
• Asset turnover and ROIC improvements
• OCF normalization and detailed working capital movements
• Debt/EBITDA and interest coverage amid rate environments
• Dividend disclosures (DPS) and payout ratio versus normalized FCF
• Ordinary income trend and non-operating expense control

Relative Positioning: Within domestic small/mid-cap peers, the company exhibits superior liquidity and cash generation this quarter with conservative leverage, but lags on growth momentum and capital efficiency (ROIC/ROE), with profitability pressured by negative operating leverage.

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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