Joshin Denki Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥210.45B
• Operating Income: ¥2.14B
• Net Income: ¥2.20B
• EPS: ¥73.28

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

Joshin Denki Co., Ltd. (8173) reported FY2026 Q2 consolidated results under JGAAP with solid top-line momentum and modest operating leverage, but a weaker bottom line due to non-operating and tax effects. Revenue rose 9.6% YoY to ¥210.5bn, demonstrating healthy demand through the first half. Gross profit reached ¥50.9bn with a gross margin of 24.2%, indicating reasonable pricing discipline and mix for a consumer electronics/appliance retailer. Operating income increased 16.3% YoY to ¥2.14bn, lifting the operating margin to about 1.0%, evidencing positive operating leverage albeit from a thin base. Ordinary income was ¥2.00bn, and net income declined 13.7% YoY to ¥1.89bn, compressing the net margin to 0.90%; this suggests headwinds below the operating line and/or a heavier tax burden. The DuPont profile shows a calculated ROE of 1.82% for the period, driven by a very slim net margin (0.90%), moderate asset turnover (0.916x), and financial leverage of 2.20x. EBITDA was ¥4.95bn (2.4% margin), and depreciation/amortization totaled ¥2.82bn, implying a capital-intensive store and logistics footprint relative to earnings. Interest expense was ¥123m with interest coverage of 17.4x, which is comfortable for a retailer with seasonal cash flow variability. Operating cash flow was strong at ¥11.11bn, equating to 5.87x net income, signaling high earnings-to-cash conversion in H1. The balance sheet remains sound with total assets of ¥229.7bn, total liabilities of ¥126.8bn, and total equity of ¥104.2bn; the reported debt-to-equity ratio stands at 1.22x. Liquidity appears adequate with a current ratio of 155% and working capital of ¥44.6bn, though the absence of disclosed inventories and cash constrains deeper analysis. Dividends were not disclosed in this dataset (DPS shown as ¥0.00 should be treated as unreported), so payout and FCF coverage cannot be conclusively assessed. Several important items are undisclosed or reported as zero (e.g., inventories, investing cash flows, cash and equivalents, equity ratio, shares), which limits precision in inventory efficiency, capital expenditure needs, and per-share metrics. Overall, the company delivered healthy revenue growth and improved operating income, but net profit softness and partial data disclosure warrant caution in interpreting the sustainability of H1 trends.

Profitability Analysis

ROE decomposition indicates: Net profit margin 0.90% × Asset turnover 0.916 × Financial leverage 2.20 = ROE 1.82% (in line with the reported figure). The margin structure is thin: gross margin 24.2%, operating margin ~1.0%, and EBITDA margin 2.4%, implying tight cost control is essential to sustain profitability. Operating income grew faster than revenue (+16.3% vs +9.6%), evidencing positive operating leverage; however, absolute margins remain low, making profits sensitive to promotions and wage/utilities inflation. The spread between EBITDA (¥4.95bn) and operating income (¥2.14bn) is primarily depreciation/amortization (¥2.82bn), reflecting a meaningful fixed-asset base across stores, distribution, and IT. Interest burden is modest (¥123m) with coverage at 17.4x, so financing costs are not the binding constraint on profitability. The decline in net income despite higher operating profit points to adverse non-operating items and/or a higher effective tax burden versus last year; with income tax expense at ¥1.20bn and net of ¥1.89bn, implied pretax profit is near ¥3.09bn, suggesting a tax rate closer to the high-30%s rather than 0% (the 0% “effective tax rate” metric should be treated as not meaningful due to data limitations). Margin quality appears serviceable at the gross level, but the low operating margin underscores vulnerability to competitive pricing and cost inflation. Overall profitability hinges on maintaining sales density and optimizing SG&A productivity.

Growth Assessment

Revenue increased 9.6% YoY to ¥210.5bn, a solid print for H1 that likely reflects steady appliance demand, seasonal promotions, and possible mix lift from higher-ticket items. Operating income rose 16.3% YoY to ¥2.14bn, indicating some cost discipline and operating leverage, albeit from a low base. Net income declined 13.7% YoY to ¥1.89bn, implying pressure below the operating line (non-operating losses, valuation effects, or higher taxes). The sustainability of revenue growth will depend on consumer sentiment, competitive pricing, and product cycles in categories like white goods, TVs, PCs, and gaming. With an EBITDA margin of 2.4% and operating margin ~1.0%, incremental growth must be accompanied by SG&A efficiency to translate into earnings. OCF strength (¥11.11bn) suggests good cash realization of H1 earnings, potentially aided by working capital dynamics; however, undisclosed inventories make it difficult to assess sell-through and stock health. Looking ahead to H2, seasonality (year-end sales, new model introductions) typically supports the top line, but heightened promotions could cap margin expansion. Absent disclosure on CAPEX and store openings/closures, visibility on medium-term growth drivers (format expansion, e-commerce penetration, logistics automation) is limited. Overall growth quality is mixed: strong revenue and operating growth offset by weaker net profit due to non-operating/tax items.

Financial Health

Total assets are ¥229.7bn, liabilities ¥126.8bn, equity ¥104.2bn, indicating a balanced capital structure. The current ratio is 155% with working capital of ¥44.6bn, suggesting adequate short-term liquidity. The quick ratio is shown equal to the current ratio because inventories are undisclosed (reported as zero), so true liquidity may be slightly lower; this is an important caveat. Debt-to-equity is reported at 1.22x; in the absence of a detailed debt breakdown, this should be interpreted cautiously as it may reflect total liabilities-to-equity rather than interest-bearing debt. Interest coverage at 17.4x denotes comfortable ability to service interest. The disclosed equity ratio of 0.0% should be treated as unreported, not reflective of the actual balance sheet (since equity is ¥104.2bn). Overall solvency appears reasonable for a retailer, but more granularity on interest-bearing debt, lease liabilities, and cash on hand would improve assessment.

Cash Flow Quality

Operating cash flow of ¥11.11bn versus net income of ¥1.89bn yields an OCF/NI ratio of 5.87, indicating robust cash conversion in H1. EBITDA of ¥4.95bn and D&A of ¥2.82bn provide a non-cash cushion supporting OCF. The strong OCF likely includes favorable working capital timing (payables, receivables, and inventories), but inventories are undisclosed, limiting attribution. Investing cash flow is shown as zero (undisclosed), so free cash flow cannot be reliably computed; the displayed FCF of zero should not be interpreted as actual zero. Financing cash flow was an outflow of ¥9.89bn, which may reflect debt repayment, lease payments, or shareholder returns; details are not provided. Cash and equivalents are undisclosed (reported as zero), so period-end liquidity cannot be confirmed from this dataset. Overall earnings quality appears good based on cash conversion, but visibility on capital intensity (CAPEX) and maintenance needs is insufficient to judge sustainable FCF.

Dividend Sustainability

Dividends per share are shown as ¥0.00 and payout ratio 0.0%, which should be treated as not disclosed rather than actual zero. With EPS of ¥73.28 for H1, earnings capacity appears adequate to support some level of distribution in principle, but without CAPEX and cash balance data, FCF coverage cannot be assessed. Financing cash outflow (−¥9.89bn) could include dividends or buybacks, yet the lack of share count and DPS disclosure prevents verification. Historically, Japanese retailers often prioritize stable dividends, but policy specifics for this period are not available in the provided data. Near-term sustainability would hinge on H2 earnings, working capital seasonality, and capital expenditure requirements. Until CAPEX and cash data are disclosed, we cannot quantify payout affordability or coverage.

Risk Assessment

Business Risks:

• Intense price competition in consumer electronics retail, pressuring already thin operating margins (~1.0%).
• Demand cyclicality tied to consumer sentiment, product cycles, and promotional calendars.
• Supplier terms and product availability affecting gross margin and inventory turns.
• Shift to e-commerce and omnichannel requiring ongoing investments in logistics and IT.
• Seasonality risk in H2 (year-end) potentially increasing promotional intensity.

Financial Risks:

• Limited visibility on cash and inventories (undisclosed), complicating liquidity assessment.
• Unclear debt composition versus total liabilities; true leverage (interest-bearing + leases) may differ from headline ratios.
• Tax and non-operating volatility impacting net income despite stable operating trends.
• Potential CAPEX requirements not disclosed, obscuring free cash flow and dividend capacity.
• Working capital swings inherent to retail could reverse OCF strength in subsequent quarters.

Key Concerns:

• Net income declined 13.7% YoY despite higher operating profit, highlighting below-the-line headwinds.
• Very low operating margin increases sensitivity to cost inflation and promotional activity.
• Key disclosures (inventories, CAPEX, cash, shares) are missing, limiting precision of profitability and FCF analysis.

Investment Implications

Key Takeaways:

• Top-line growth of +9.6% YoY with operating income up +16.3% indicates positive operating leverage in H1.
• Margins remain thin (EBITDA 2.4%, operating ~1.0%, net 0.90%), keeping profitability sensitive to competitive dynamics.
• OCF strength (¥11.11bn, 5.87x net income) signals solid cash conversion, though working capital drivers are undisclosed.
• Balance sheet appears sound (current ratio 155%, interest coverage 17.4x), but lack of inventory and cash disclosure is a constraint.
• ROE is modest at 1.82%, capped by very low net margin despite reasonable asset turnover and leverage.

Metrics to Watch:

• Gross margin trajectory and SG&A ratio to confirm durable operating leverage.
• Inventory levels and turnover once disclosed to gauge stock health and markdown risk.
• CAPEX and store investment plans to assess sustainable FCF and return profile.
• Non-operating income/expense and effective tax rate normalization driving net income.
• Like-for-like sales and e-commerce growth to validate revenue sustainability in H2.

Relative Positioning: Within Japan’s consumer electronics retail space, the company shows respectable sales growth and adequate balance sheet resilience, but lags on profitability quality with sub-1.5% operating margins and modest ROE; enhanced cost efficiency, mix optimization, and clearer capital allocation disclosure would improve its relative standing.

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