KIMURATAN CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.36B
• Operating Income: ¥30M
• Net Income: ¥-52M
• EPS: ¥-0.21

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

Kimuratan (81070) reported FY2026 Q2 consolidated results under JGAAP showing a sharp top-line rebound with revenue of ¥1,362 million, up 122.4% YoY, but profitability and bottom-line sustainability remain challenged. Gross profit was ¥293 million, implying a gross margin of 21.5%, which is modest for apparel and suggests pricing power and/or mix are still constrained despite the sales recovery. Operating income reached ¥30 million (+71.3% YoY), an operating margin of roughly 2.2%, indicating limited operating leverage after accounting for high fixed costs and depreciation. EBITDA was ¥124 million (9.1% margin), but depreciation and amortization of ¥94 million absorbed 76% of EBITDA, leaving thin EBIT coverage for financing costs. Ordinary income fell to a loss of ¥28 million, reflecting heavy non-operating burdens, notably interest expense of ¥36 million. Net loss was ¥54 million (EPS -¥0.21), unchanged YoY on the reported basis, implying that revenue momentum has not yet translated into net profitability. On a DuPont basis, ROE was -4.95%, driven by a -3.96% net margin, low asset turnover of 0.137 (likely dampened by interim timing), and very high financial leverage of 9.08x. Liquidity appears reasonable with a current ratio of 159.8% and quick ratio of 139.6%, supported by inventories of ¥267 million and working capital of ¥792 million. Solvency is the key constraint: total liabilities of ¥8,958 million versus equity of ¥1,091 million imply a debt-to-equity ratio of 8.21x and an equity ratio around 11% (based on non-zero figures), making the capital structure fragile. Interest coverage on an EBIT basis was only 0.8x, underscoring sensitivity to financing costs. Operating cash flow was positive at ¥45 million despite the net loss, aided by non-cash charges; however, free cash flow cannot be reliably assessed because investing cash flow and cash balances were not disclosed (zeros indicate unreported). The tax line shows ¥8 million despite losses, pointing to non-deductible items or minimum taxes. Dividend remains suspended (DPS ¥0), which is appropriate given losses and leverage. Overall, the quarter shows evidence of a volume recovery and some cost control at the operating level, but non-operating burdens and high leverage continue to prevent translation into sustainable profitability. The near-term outlook hinges on sustaining revenue momentum into H2, improving gross-to-operating margins, and alleviating financing pressure through better ordinary income and cash generation. Data limitations (notably cash, investing CF, and share-related metrics) constrain precision in some assessments, but available non-zero data indicate improving operations constrained by capital structure.

Profitability Analysis

ROE_decomposition: Reported DuPont: Net margin -3.96% × Asset turnover 0.137 × Leverage 9.08 = ROE -4.95%. The negative net margin and low turnover dominate; leverage amplifies equity volatility. margin_quality: Gross margin 21.5% and EBITDA margin 9.1% indicate basic contribution is positive, but high D&A (¥94m) compresses EBIT to a 2.2% operating margin (¥30m). Non-operating costs (interest ¥36m and other items) flipped operating profit into an ordinary loss. operating_leverage: Revenue +122.4% YoY translated into operating income of ¥30m, suggesting only modest incremental margins after fixed costs. D&A equal to 76% of EBITDA limits EBIT sensitivity to sales growth. Further SG&A discipline and mix/pricing gains are needed for stronger drop-through.

Growth Assessment

revenue_sustainability: Top-line growth of 122.4% YoY suggests recovery from a low base and possible normalization of demand. Sustainability will depend on repeat sell-through, seasonality into H2, and channel mix integrity (wholesale vs. direct). profit_quality: Operating profit is positive, but ordinary and net losses indicate profit quality is not yet robust. Interest burden and other non-operating costs offset operating gains. Tax expense of ¥8m despite losses points to limited tax shields. outlook: If revenue strength continues and gross margin holds or improves, EBITDA should remain positive. Achieving positive ordinary income requires either higher operating margin or lower financing costs. Execution on inventory turns and expense control in the winter/spring season will be critical.

Financial Health

liquidity: Current assets ¥2,117m vs. current liabilities ¥1,325m yield a current ratio of 159.8% and quick ratio of 139.6%, indicating near-term coverage is adequate. Working capital stands at ¥792m. Cash and equivalents were not disclosed, limiting assessment of immediate cash buffers. solvency: Total liabilities ¥8,958m vs. equity ¥1,091m imply D/E of 8.21x and an equity ratio of roughly 11% (based on total equity/total assets), indicating thin capitalization. Interest coverage is weak at 0.8x on EBIT, leaving limited cushion against rate or earnings shocks. capital_structure: High financial leverage (DuPont leverage 9.08x) magnifies equity risk. Ordinary loss despite positive operating income underscores the weight of financial obligations within the capital stack.

Cash Flow Quality

earnings_quality: OCF of ¥45m versus a net loss of ¥54m (OCF/NI -0.83 due to negative NI) indicates non-cash add-backs (notably ¥94m D&A) and/or working capital movements supported cash. However, ordinary loss and interest burden temper quality. FCF_analysis: Investing CF was not disclosed (reported as zero), so FCF cannot be reliably determined. Absent capex data, we cannot assess maintenance vs. growth spending or OCF coverage of investments. working_capital: Inventories of ¥267m appear manageable relative to sales; sustaining higher inventory turns is important to preserve cash. The positive OCF suggests no acute working capital drain in the half, but seasonality may alter the profile in H2.

Dividend Sustainability

payout_ratio_assessment: With a net loss of ¥54m and DPS of ¥0, payout ratio is effectively 0%, aligning with capital preservation priorities under current leverage and profitability constraints. FCF_coverage: FCF coverage cannot be judged because investing CF is undisclosed; a resumption of dividends would require consistent positive OCF after capex and an improvement in ordinary income. policy_outlook: Given high leverage (D/E 8.21x), weak interest coverage (0.8x), and net losses, maintaining a no-dividend stance appears prudent until ordinary income turns sustainably positive and cash generation strengthens.

Risk Assessment

Business Risks:

• Volatile demand in childrenswear/apparel with high seasonality
• Margin pressure from discounting and channel mix
• Inventory obsolescence risk impacting gross margin and cash
• Execution risk in scaling revenue while holding SG&A flat
• Supplier and logistics cost fluctuations affecting COGS

Financial Risks:

• High leverage (D/E 8.21x; leverage 9.08x) limiting flexibility
• Weak interest coverage (0.8x) and ordinary loss
• Potential refinancing and covenant risks if earnings do not improve
• Sensitivity to interest rate levels given interest expense of ¥36m
• Thin equity base (approx. 11% equity ratio) increasing insolvency risk

Key Concerns:

• Translation of revenue rebound into positive ordinary and net income
• Sustaining gross margin at or above 21.5% amid competitive pricing
• Maintaining positive OCF through H2 seasonality without inventory build
• Managing financing costs to avoid continued ordinary losses

Investment Implications

Key Takeaways:

• Revenue rebounded strongly (+122.4% YoY) but profitability remains fragile
• Operating income positive (¥30m) yet ordinary and net income negative
• High financial leverage (D/E 8.21x) is the binding constraint
• Interest coverage at 0.8x highlights sensitivity to earnings and rates
• OCF positive (¥45m) aided by non-cash charges; FCF unknown due to undisclosed investing CF

Metrics to Watch:

• Ordinary income trajectory and interest expense run-rate
• Gross margin and SG&A ratio to sales
• Inventory turnover and working capital days
• OCF consistency and any disclosed capex/investing CF
• Asset turnover improvement and leverage (equity ratio) evolution

Relative Positioning: Within Japanese small-cap apparel, Kimuratan shows improving operating traction but remains more highly leveraged with weaker interest coverage than typical peers, leaving it more exposed to execution and financing risks despite the strong top-line recovery.

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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