Mitsuuroko Group Holdings Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥162.02B
• Operating Income: ¥5.55B
• Net Income: ¥4.69B
• Earnings per Unit (EPU): ¥83.84

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Unit Information

Distribution 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

FY2026 Q2 was a strong rebound quarter for Mitsuuroko Group Holdings, with sharp profit recovery on modest topline growth. Revenue rose 4.6% YoY to 1,620.16, while operating income surged 259.4% YoY to 55.47, and ordinary income climbed 173.3% YoY to 63.47. Net income advanced 164.0% YoY to 47.33, lifting the net margin to 2.9%. Gross profit reached 225.15, driving a gross margin of 13.9%. Operating margin expanded to 3.42%, implying a step-change in profitability versus last year’s estimated ~1.0% level. Based on the operating income increase versus modest revenue growth, operating margin expanded by roughly 245 bps YoY. Net margin improved by an estimated ~175 bps YoY to 2.9%, reflecting better operating leverage and supportive non-operating income. Non-operating income of 12.00 (notably dividends of 7.03) contributed meaningfully, representing about 25% of operating profit. Cash generation was decent with operating cash flow of 38.58, translating to an OCF/NI ratio of 0.82x, slightly below the >1.0x quality benchmark but not alarming. Liquidity remains strong with a current ratio of 190.9% and quick ratio of 179.6%, and solvency is conservative at a D/E of 0.81x and interest coverage of 35.6x. ROE stands at 4.7% via DuPont, underpinned mainly by higher net margin; asset turnover is 0.879 and financial leverage is 1.81x. ROIC is estimated at 5.2%, below the 7–8% management target typical for trading-oriented businesses, suggesting further capital efficiency improvement is needed. Estimated FCF (OCF − CapEx) is about 15.9, which may not fully cover an implied payout if the 67.5% payout ratio were applied to the period’s net income. The mix shows non-operating income is a supportive tailwind, but the core driver this quarter was operating leverage and improved spreads/mix. Forward-looking, sustaining margin gains while improving ROIC and cash conversion will be key, as non-operating contributions may be less predictable. Overall, the quarter indicates a solid earnings recovery with robust balance sheet support, but cash flow quality and ROIC trajectory warrant monitoring.

Profitability Analysis

ROE (4.7%) = Net Profit Margin (2.9%) × Asset Turnover (0.879) × Financial Leverage (1.81x). The biggest positive change YoY is the margin component: operating income jumped +259% on +4.6% revenue, indicating operating margin expansion from roughly 1.0% a year ago to 3.42% now (+245 bps). Business-wise, this likely stems from improved gross spreads and operating leverage (SG&A at 10.5% of sales), and support from non-operating dividends/interest (12.00). Asset turnover at 0.879 appears steady for a distribution/energy trading model; leverage remains moderate at 1.81x, so ROE gains are not debt-driven. The margin improvement looks partly sustainable if procurement, energy spreads, and cost discipline hold, but the non-operating contribution (25% of operating profit) can be volatile. Watch for any reversal in commodity price tailwinds or seasonal normalization in energy demand that could compress margins. No clear evidence that SG&A grew faster than revenue; as a share of sales, SG&A is 10.48%, but lack of YoY SG&A disclosure limits deeper diagnostics.

Growth Assessment

Topline growth was steady at +4.6% YoY to 1,620.16, while profit growth was outsized: operating income +259.4% YoY and net income +164.0% YoY. Growth quality is mixed-positive: core operating leverage drove most of the step-up, augmented by non-operating income (dividends 7.03). EBITDA reached 81.81 (5.0% margin), providing a healthier buffer versus prior-year levels. Ordinary margin improved to 3.92%, highlighting balanced operating and financial contributions. Sustainability hinges on maintaining improved gross spreads and disciplined SG&A, as well as the stability of dividend income from investment securities. ROIC at 5.2% trails the typical 7–8% target range for diversified trading-oriented groups, implying room for portfolio pruning or higher-return investments. Near-term outlook is constructive given strong balance sheet and interest coverage (35.6x), but management will need to convert earnings to cash more consistently (OCF/NI 0.82x) to support reinvestment and shareholder returns. With non-operating income at ~25% of operating profit, earnings may exhibit some volatility tied to market conditions and affiliate performance.

Financial Health

Liquidity is strong: current ratio 190.9% and quick ratio 179.6%, well above benchmarks. No warning flags for Current Ratio < 1.0 or D/E > 2.0 (D/E is 0.81x). Working capital is ample at 426.26, with cash and deposits of 381.60 and receivables of 320.06 comfortably exceeding short-term loans of 33.18 and accounts payable of 270.69. Maturity mismatch risk appears low: current assets (895.28) are nearly 2x current liabilities (469.02), and cash alone covers total short-term borrowings several times. Long-term loans are 137.43, and Debt/EBITDA is a conservative ~2.09x, underscoring manageable leverage. No off-balance sheet obligations are disclosed in the provided data.

Cash Flow Quality

OCF was 38.58 versus net income of 47.33, giving OCF/NI of 0.82x. This is slightly below the >1.0x preferred threshold but above the 0.8x warning trigger; it suggests moderate working capital use or timing effects. With CapEx of 22.68, estimated FCF is ~15.90 (OCF − CapEx), positive but modest relative to period earnings. Financing CF was -53.02, indicating net outflows likely from debt repayment and/or shareholder returns, though dividends and buybacks are unreported. No explicit signs of working capital manipulation can be inferred from the limited disclosure; however, the gap between OCF and NI merits monitoring in subsequent quarters. Absent full investing CF disclosure, cash reinvestment intensity beyond CapEx cannot be fully assessed.

Dividend Sustainability

The calculated payout ratio is 67.5%, slightly above the <60% benchmark for comfort. Total dividend paid is unreported, but if applied to period net income of 47.33, implied dividends would be ~31.95, which exceeds estimated FCF of ~15.90 for the half—suggesting potential undercoverage on a period basis. Given strong liquidity (cash 381.60) and low leverage, near-term dividend capacity is supported by the balance sheet, but long-term sustainability requires stronger FCF conversion. DPS and actual cash dividends are not disclosed for the period; thus, the assessment remains provisional. If management targets stable or rising dividends, improving ROIC (currently 5.2%) and OCF/NI >1.0 will be important to avoid relying on the balance sheet.

Risk Assessment

Business Risks:

• Commodity price volatility affecting energy margins and inventory valuation
• Demand seasonality and weather sensitivity in energy distribution
• Dependence on non-operating income (dividends) for a material portion of profits (~25% of operating profit)
• Procurement and logistics cost fluctuations impacting gross spreads

Financial Risks:

• OCF trailing net income (0.82x) indicating moderate cash conversion risk
• Potential dividend undercoverage by period FCF if payout ratio applied to H1 earnings
• Interest rate exposure on floating-rate borrowings (though leverage is moderate)

Key Concerns:

• ROIC at 5.2% below the 7–8% target range, implying capital efficiency headwinds
• Limited disclosure on investing CF and dividend cash outflows reduces visibility
• Earnings sensitivity to market-driven dividend income from investment securities

Investment Implications

Key Takeaways:

• Earnings recovery driven primarily by operating margin expansion (~+245 bps YoY) on modest revenue growth
• Non-operating dividends/interest provided a meaningful tailwind (12.00), enhancing ordinary income
• Balance sheet strength (current ratio 191%, D/E 0.81x, interest coverage 35.6x) underpins resilience
• Cash conversion is acceptable but not ideal (OCF/NI 0.82x); sustaining OCF improvement is key
• ROIC at 5.2% highlights need for portfolio optimization or higher-return growth

Metrics to Watch:

• Operating margin trend and gross spread stability
• OCF/NI and working capital movements (receivables, payables, inventories)
• Non-operating income mix and sustainability (dividend income, interest)
• ROIC progression toward 7–8% target range
• CapEx discipline and FCF coverage of dividends

Relative Positioning: Within diversified trading-oriented energy distributors, Mitsuuroko shows strong balance sheet metrics and a pronounced profit rebound, but trails best-in-class peers on ROIC and cash conversion consistency; reliance on non-operating income adds some earnings variability compared to more purely operations-driven 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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