Kyokuto Boeki Kaisha,Limited FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥31.82B
• Operating Income: ¥1.27B
• Net Income: ¥765M
• EPS: ¥77.57

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

Kyokuto Boeki (8093) delivered a strong FY2026 Q2, with revenue up 49.5% YoY to ¥31.8bn and operating income up 60.1% YoY to ¥1.28bn, indicating meaningful operating leverage. Profitability improved across the P&L: gross margin was 15.3%, operating margin 4.0%, ordinary margin 4.5%, and net margin 2.94%. EBITDA reached ¥1.46bn, with an EBITDA margin of 4.6%, reflecting disciplined cost execution amid scale benefits. DuPont analysis shows ROE at 3.18%, decomposed into a 2.94% net margin, 0.57x asset turnover, and 1.90x financial leverage. Despite profit growth, cash conversion was weak: operating cash flow was ¥0.26bn, only 28% of net income and 18% of EBITDA, implying a working capital drag in a period of rapid top-line expansion. Liquidity remains solid with a current ratio of 176% and a quick ratio of 149%, supported by substantial working capital of ¥18.9bn and manageable leverage (total liabilities/ equity of 0.97x). Interest expense is modest (¥20m) and coverage is very strong at 63.8x, suggesting low financial risk from debt service. Ordinary income of ¥1.42bn exceeded operating income, indicating positive non-operating contributions; net income was ¥0.94bn (+22.1% YoY). Income tax expense was ¥0.28bn, confirming a positive tax burden even though the “effective tax rate” metric shows 0.0%, which appears to be an undisclosed placeholder. Balance sheet strength is underpinned by ¥55.8bn in total assets and ¥29.4bn in equity; the reported equity ratio of 0.0% is an undisclosed value rather than a true figure. Financing cash flow was an outflow of ¥1.06bn, likely reflecting dividends, debt repayment, or other financing activities, though details are not disclosed this quarter. Dividend per share, payout ratio, and cash and equivalents are shown as zero in the dataset, which indicates non-disclosure rather than actual zero values; EPS is reported at ¥77.57. Overall, the quarter demonstrates healthy revenue momentum and operating leverage, but cash flow conversion lags earnings, warranting focus on receivables, inventories, and payables. The capital structure appears balanced and liquidity ample, providing cushion for growth execution. Outlook hinges on the sustainability of demand within key end markets and the company’s ability to normalize working capital to translate earnings into free cash flow. Data gaps (equity ratio, cash balance, dividends, and share counts) limit precision in certain ratio analyses, but available non-zero items support a constructive read on profitability and financial health.

Profitability Analysis

ROE is 3.18%, driven by net margin of 2.94%, asset turnover of 0.57x, and financial leverage of 1.90x. Operating margin is 4.0% (¥1.275bn/¥31.817bn) and expanded faster than sales, with operating income up 60.1% vs revenue up 49.5%, evidencing operating leverage. Gross margin at 15.3% (¥4.863bn/¥31.817bn) suggests value-added trading with some pricing power or mix improvement. Ordinary income margin of 4.5% indicates a positive contribution from non-operating items, while net margin at 2.94% reflects typical trading-company tax and below-the-line impacts. EBITDA of ¥1.455bn implies depreciation of ¥0.18bn and modest capital intensity. Interest burden is negligible (interest expense ¥0.02bn; interest coverage 63.8x), supporting margin stability. Margin quality appears solid; however, low OCF/NI (0.28x) tempers the quality of earnings until working capital effects normalize.

Growth Assessment

Top-line growth was robust at +49.5% YoY to ¥31.8bn, likely driven by volume and pricing tailwinds in core segments. Profit growth outpaced sales at the operating level (+60.1% YoY), signaling operating leverage and improved cost absorption. Net income grew +22.1% YoY to ¥0.94bn, a slower pace than operating income due to taxes and below-the-line items. The sustainability of revenue growth will depend on end-market demand and the repeatability of large orders or projects; contribution from non-operating income also lifted ordinary profit this quarter. Profit quality is mixed: margins improved, but weak cash conversion (OCF/NI 0.28x; OCF/EBITDA ~18%) indicates temporary working capital investment or timing issues. If growth persists, inventory and receivables discipline will be key to maintaining free cash flow. Outlook is cautiously positive on profitability given demonstrated operating leverage, provided the company can translate earnings into cash and maintain pricing/mix benefits.

Financial Health

Liquidity is strong: current ratio 176.2%, quick ratio 148.9%, and working capital of ¥18.887bn indicate ample short-term coverage. Solvency is comfortable with total liabilities/ equity at 0.97x and implied leverage (assets/equity) at 1.90x. Interest expense is minimal (¥20m), and coverage is robust at 63.8x, implying low refinancing or servicing risk. Total assets are ¥55.792bn and equity ¥29.437bn; the reported equity ratio of 0.0% is undisclosed and should not be interpreted as zero. Inventory stands at ¥6.749bn; current assets are ¥43.688bn, suggesting significant receivables and cash components, though cash balance is not disclosed in this dataset.

Cash Flow Quality

Operating cash flow was ¥0.261bn versus net income of ¥0.937bn (OCF/NI 0.28x), indicating weak cash conversion driven likely by working capital outflows amid rapid growth. EBITDA of ¥1.455bn versus OCF of ¥0.261bn (OCF/EBITDA ~18%) further highlights timing and working capital effects. Investing cash flow is shown as zero (undisclosed), so capital expenditure and true free cash flow cannot be reliably determined; the provided FCF figure of zero is an undisclosed placeholder. Financing cash flow was an outflow of ¥1.055bn, likely reflecting dividends, debt repayment, or other financing uses, but specifics are not available. Overall earnings quality is decent at the P&L level, but cash realization lags and should improve if receivables collection and inventory turns normalize.

Dividend Sustainability

Dividend data (DPS, payout ratio, and FCF coverage) are shown as zero, indicating non-disclosure for this period. EPS is ¥77.57, but without disclosed DPS we cannot compute an actual payout ratio. With OCF at ¥0.261bn and unknown capex, free cash flow coverage of dividends cannot be assessed from this dataset. The financing cash outflow of ¥1.055bn may include dividend payments, but the breakdown is not available. Policy outlook cannot be inferred this quarter; sustainability will hinge on normalization of working capital and the company’s historical payout practice (not disclosed here).

Risk Assessment

Business Risks:

• Revenue concentration risk if growth is driven by large, non-recurring orders or specific end-markets.
• Working capital intensity typical of trading businesses, exposing cash flow to receivables and inventory swings.
• Margin sensitivity to input costs, FX, and pricing spreads in traded goods.
• Dependence on non-operating contributions to ordinary income in certain periods.
• Supply chain and logistics disruptions that can impact delivery timing and costs.

Financial Risks:

• Weak cash conversion this quarter (OCF/NI 0.28x; OCF/EBITDA ~18%).
• Potential need for incremental financing if working capital expands further with growth.
• Information gaps: undisclosed cash balance, equity ratio, dividend amounts, and capex complicate assessment.
• Exposure to interest rate/FX movements typical of trading firms, albeit current interest burden is low.

Key Concerns:

• Sustainability of +49.5% revenue growth and visibility into forward order pipeline.
• Normalization of receivables and inventories to convert earnings into cash.
• Clarity on dividend policy and capital allocation given ¥1.055bn financing outflow.
• Reliability of certain ratios where inputs are undisclosed (equity ratio, effective tax rate, cash).

Investment Implications

Key Takeaways:

• Strong revenue growth with operating leverage: sales +49.5% YoY; operating income +60.1% YoY.
• Improved profitability: operating margin 4.0%, net margin 2.94%, EBITDA margin 4.6%.
• ROE of 3.18% driven by a balanced mix of margin, 0.57x asset turnover, and moderate leverage (1.90x).
• Cash conversion weak (OCF/NI 0.28x) indicating working capital drag during growth.
• Solid liquidity and low interest burden (coverage 63.8x) mitigate short-term financial risk.
• Data gaps (dividends, cash, equity ratio, capex) limit full valuation and payout analysis.

Metrics to Watch:

• OCF/NI and OCF/EBITDA improvement as working capital normalizes.
• Receivables days, inventory days, and payables days to gauge cash cycle efficiency.
• Sustainability of gross and operating margins amid cost and FX fluctuations.
• Order backlog and segment mix to assess durability of top-line growth.
• Financing cash flow breakdown for signals on dividends, debt changes, or buybacks.

Relative Positioning: Within Japanese trading-oriented peers of similar scale, the company exhibits above-trend recent growth and healthy operating leverage, with moderate leverage and strong liquidity, but trails on cash flow conversion this quarter due to working capital expansion.

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
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis