Sanrio Company,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥87.68B
• Operating Income: ¥39.18B
• Net Income: ¥19.17B
• EPS: ¥115.21

Income Statement

Balance Sheet

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

Sanrio (81360) delivered a very strong FY2026 Q2 (cumulative) performance, with revenue of ¥87.7bn, up 39.6% YoY, and operating income of ¥39.2bn, up 66.1% YoY, indicating substantial operating leverage. Gross profit was ¥48.4bn, implying a gross margin of 55.2%, while the operating margin rose to approximately 44.7%, underscoring disciplined cost control and a favorable mix (likely higher-margin licensing). Ordinary income reached ¥39.7bn and net income ¥27.5bn (+44.3% YoY), translating to a reported net margin of 31.39%. DuPont analysis shows ROE of 19.04%, driven by a high net margin (31.39%), moderate asset turnover (0.409x on a half-year basis), and modest leverage (financial leverage 1.48x). Interest expense was minimal at ¥86m, producing an interest coverage ratio of 455.6x, reflecting very low financial risk from borrowing costs. Liquidity is robust: current ratio 307.8%, quick ratio 293.1%, and working capital of ¥102.4bn, supported by current assets of ¥151.7bn versus current liabilities of ¥49.3bn. Balance sheet strength appears solid with total assets of ¥214.1bn and total liabilities of ¥94.8bn; this implies an equity ratio around the high-60% range despite a reported equity ratio of 0.0% in the provided metrics (likely a placeholder). Inventory of ¥7.25bn is small relative to revenue and cost of sales, suggesting healthy turnover and low obsolescence risk for the period. The effective tax rate shown as 0.0% in metrics is not reflective of the data; using ordinary income as a proxy for pre-tax profit, taxes of ¥5.0bn imply roughly a 12–13% effective tax rate, though extraordinary items and non-controlling interests are not disclosed. Cash flow data (operating, investing, financing) and cash balances are not disclosed in this extract (zeros indicate unreported), limiting assessment of earnings-to-cash conversion and capex intensity. Dividend data is also not disclosed here (DPS and payout show as zero placeholders), so dividend conclusions require caution. EPS was ¥115.21, but outstanding shares are not provided, preventing corroboration of net income to per-share figures. Overall profitability quality appears high given margin expansion and low interest burden, but confirmation via operating cash flow is needed. Growth appears broad-based and sustainable in the near term, contingent on continued licensing momentum and international demand, but sensitivity to FX and IP lifecycle should be considered. Despite certain data gaps (notably cash flows, depreciation and amortization, and share count), the available financials support a view of improved scale, strong margins, and conservative leverage.

Profitability Analysis

ROE_decomposition: ROE 19.04% = Net margin 31.39% × Asset turnover 0.409 × Financial leverage 1.48. The ROE is primarily driven by an unusually high net margin; asset turnover is modest for a brand/licensing-led model, and leverage contribution is restrained. margin_quality: Gross margin 55.2% and operating margin ~44.7% reflect a rich mix (licensing/royalties and high-margin merchandise) and tight SG&A control. Ordinary margin ~45.3% and net margin 31.39% confirm strong operating efficiency. Interest expense is negligible (¥86m), supporting clean operating-to-net translation. The indicated effective tax rate in the metrics is 0.0%, but based on taxes of ¥5.0bn against ordinary income of ¥39.7bn, the implied tax rate is roughly 12–13% (subject to undisclosed extraordinary items/NCI). operating_leverage: Revenue +39.6% YoY versus operating income +66.1% YoY indicates positive operating leverage, with incremental margins exceeding the base margin. This suggests fixed-cost absorption benefits and/or favorable mix shift to licensing and overseas royalties.

Growth Assessment

revenue_sustainability: Top-line growth of +39.6% YoY is strong, likely reflecting continued global brand traction and licensing expansion. Inventory remains modest (¥7.25bn), consistent with a licensing-heavy model, supporting the sustainability of revenue without heavy working-capital build. profit_quality: Operating income growth (+66.1% YoY) outpaced sales, indicating quality improvements from mix and cost discipline. The low interest burden and healthy implied tax rate support underlying profit quality; however, absence of depreciation disclosure limits assessment of EBIT vs. cash costs. outlook: Near-term outlook appears favorable given high margins, operating leverage, and balance sheet strength. Sustainability will hinge on: maintaining licensing momentum across key regions, controlling content/marketing costs, and FX tailwinds. Confirmation via operating cash flow and recurring licensing backlog would enhance confidence.

Financial Health

liquidity: Current assets ¥151.7bn vs. current liabilities ¥49.3bn; current ratio 307.8%, quick ratio 293.1%, working capital ¥102.4bn. Liquidity is ample. solvency: Total assets ¥214.1bn, total liabilities ¥94.8bn; implied equity ratio around ~67–68% despite a reported 0.0% placeholder. Interest coverage 455.6x indicates very low solvency risk from debt service. capital_structure: Debt-to-equity 0.66x (likely total liabilities/equity proxy) suggests conservative leverage. Financial leverage of 1.48x in DuPont is modest, indicating ROE is not reliant on gearing.

Cash Flow Quality

earnings_quality: Net income ¥27.5bn with minimal interest expense supports clean earnings. However, operating cash flow is undisclosed (shown as zero placeholder), preventing validation of accrual quality and cash conversion. FCF_analysis: Operating CF and investing CF are not disclosed, so FCF cannot be computed. Capex intensity and reinvestment needs are unknown in this extract. working_capital: Inventories ¥7.25bn vs. cost of sales ¥14.44bn suggest efficient inventory levels; receivables and payables data not disclosed. The large working capital position (¥102.4bn) indicates capacity to fund growth without external financing.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio are shown as 0.0% but are undisclosed placeholders here. With EPS of ¥115.21 for the period, there appears ample earnings capacity for dividends, but actual policy and interim distributions cannot be inferred from the provided data. FCF_coverage: FCF not disclosed; therefore, coverage analysis cannot be performed. Historically, dividend sustainability hinges on OCF relative to net income and capex, both unavailable here. policy_outlook: Given strong profitability and conservative balance sheet, distributions are likely a strategic choice rather than a capacity constraint, but confirmation requires management guidance and cash flow disclosures.

Risk Assessment

Business Risks:

• Concentration in character IP portfolios (brand lifecycle and hit-dependency).
• Licensing contract renewals and bargaining power with global partners.
• International expansion execution, particularly in the U.S., China, and Europe.
• FX volatility affecting overseas royalties and translations.
• Consumer demand sensitivity in discretionary merchandise and lifestyle goods.
• Theme-park/experiential operations variability (attendance and operational costs).
• Counterfeit and IP enforcement risks in certain markets.
• Content and marketing spend effectiveness for brand refreshes.

Financial Risks:

• Limited visibility on cash conversion due to undisclosed operating cash flow.
• Potential working-capital swings in receivables/payables not provided here.
• Exposure to FX translation and transaction impacts on earnings and equity.
• Intangible asset impairment risk tied to IP valuation (amortization not disclosed).
• Tax rate volatility given differences between ordinary income and net income.

Key Concerns:

• Cash flow statement unreported, limiting assessment of earnings quality and dividend capacity.
• Equity ratio reported as 0.0% in the metrics despite balance sheet implying a high equity ratio; indicates data presentation gaps.
• Depreciation and amortization undisclosed, obscuring capital intensity and maintenance needs.

Investment Implications

Key Takeaways:

• Strong top-line growth (+39.6% YoY) with outsized operating income growth (+66.1% YoY) evidences positive operating leverage.
• High profitability: gross margin 55.2%, operating margin ~44.7%, net margin 31.39%.
• ROE 19.04% supported by margin strength and modest leverage (1.48x).
• Liquidity is ample (current ratio 307.8%, quick ratio 293.1%) with ¥102.4bn working capital.
• Interest burden is minimal (¥86m; coverage 455.6x), lowering financial risk.
• Inventory levels appear lean relative to sales/COGS, suggesting efficient operations.
• Cash flow and depreciation data are not disclosed, limiting validation of earnings quality and reinvestment needs.
• Dividend details are not disclosed here; payout assessment requires additional information.

Metrics to Watch:

• Operating cash flow and free cash flow conversion versus net income.
• Licensing revenue mix and renewal pipeline across regions.
• FX rates (USD/JPY, CNY/JPY, EUR/JPY) and hedging impacts.
• SG&A ratio and incremental margins to gauge sustainability of operating leverage.
• Inventory and receivables turnover to monitor working-capital discipline.
• Capex and depreciation trends (park facilities, digital/content investments).
• Tax rate normalization and any non-controlling interest effects.

Relative Positioning: Within Japan’s character IP and leisure/consumer-entertainment space, Sanrio currently exhibits above-peer margin and ROE performance with conservative leverage; confirmation of superior cash conversion and sustained licensing growth would solidify its relative strength.

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