PALTAC CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥625.13B
• Operating Income: ¥13.89B
• Net Income: ¥11.14B
• EPS: ¥180.69

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

PALTAC (82830) reported FY2026 Q2 standalone (JGAAP) results showing steady top-line growth but modest compression in profitability and weaker cash conversion. Revenue rose 4.1% year over year to ¥625.1bn, while operating income slipped 0.6% to ¥13.9bn, indicating negative operating leverage in the period. Gross profit was ¥44.2bn, implying a gross margin of roughly 7.1%, broadly consistent with a low-margin wholesale/distribution model. Operating margin stood at about 2.2%, with ordinary income of ¥15.6bn (ordinary margin ~2.5%) supported by positive non-operating items relative to operating income. Net income was ¥11.1bn, down 6.4% YoY, translating to a net margin of 1.78%. DuPont analysis yields ROE of 3.75%, driven by a 1.78% net margin, 1.178x asset turnover, and 1.79x financial leverage, underscoring the importance of efficiency and leverage in returns given thin margins. Cash generation was soft versus earnings: operating cash flow of ¥5.17bn equates to an OCF/Net Income ratio of 0.46, signaling working capital absorption or timing effects in the half. Liquidity appears strong with a current ratio of 175% and quick ratio of 148.8%, supported by ¥156.7bn in working capital; solvency looks solid with debt-to-equity of 0.74x and interest coverage of over 4,600x due to minimal interest expense. The effective tax rate, inferred from tax expense over ordinary income, was approximately 33–34%, consistent with a normalized corporate tax burden. Dividend information is not disclosed in the dataset (zeros denote undisclosed, not actual values), so payout policy and FCF coverage cannot be assessed here. Several key items such as cash and equivalents, investing cash flows, free cash flow, and share data are not reported, limiting depth on capital allocation and per-share metrics. Inventory of ¥54.7bn highlights the working-capital-intensive nature of the business, which can introduce cash flow volatility despite stable earnings. Overall, the company demonstrates stable sales momentum and resilient margins for a wholesaler, but faces near-term pressure on operating leverage and weaker cash conversion in the half. Balance sheet strength provides flexibility, though sustained improvement in operating cash flow and working capital efficiency will be important to underpin returns. Given the standalone basis of reporting, consolidated group dynamics and dividends may differ from these figures. The analysis below focuses strictly on the non-zero data provided and acknowledges missing disclosures.

Profitability Analysis

ROE of 3.75% decomposes into: Net profit margin 1.78% × Asset turnover 1.178 × Financial leverage 1.79. This indicates returns are primarily constrained by thin margins, partially offset by decent asset efficiency and moderate leverage. Gross margin was ~7.1% (¥44.2bn GP on ¥625.1bn revenue), consistent with a low-margin wholesale profile. Operating margin was ~2.2% (¥13.9bn OI), slightly compressing YoY as OI declined despite revenue growth, implying negative operating leverage in the half. Ordinary income exceeded operating income by ~¥1.7bn, suggesting positive non-operating contributions (e.g., financial or other income) buffering core margin pressure. EBITDA was ¥17.1bn, implying an EBITDA margin of ~2.7%; D&A of ¥3.23bn points to relatively light asset intensity per yen of sales but still meaningful for a distributor. Interest burden is negligible (interest expense ¥3m; interest coverage >4,600x), so financing costs are not a drag on profitability. The implied tax rate (¥5.30bn/¥15.61bn ≈ 33.9%) is broadly normal and reduces net margin to sub-2%. Overall margin quality appears stable but thin, with modest pressure evidenced by the YoY OI decline; sustainable improvement likely hinges on procurement terms, pricing discipline, logistics efficiency, and mix.

Growth Assessment

Revenue grew 4.1% YoY to ¥625.1bn, indicating steady demand and/or successful price pass-through in a deflation-normalizing environment. However, operating income declined 0.6% YoY, signaling that revenue growth did not fully translate to profit growth—consistent with some margin squeeze (e.g., costs, pricing, or mix) or elevated operating expenses. Ordinary income growth outpaced operating income (OI < OI-1 while ordinary income remains higher than OI), implying non-operating tailwinds that may not be structurally repeatable. Net income declined 6.4% YoY, highlighting sensitivity of bottom-line to margin compression and/or normalization of below-the-line items. EBITDA margin of ~2.7% provides limited buffer for cost inflation; execution on cost control and logistics productivity remains essential. Sustainability of revenue growth likely depends on consumer goods demand, client store traffic, and supplier collaboration, while profit quality will depend on procurement efficacy and operating discipline. Outlook: absent disclosed guidance, a stable but low-growth trajectory seems plausible, with scope for profit recovery if gross-to-operating margin conversion improves. Monitoring whether negative operating leverage reverses in subsequent quarters will be critical.

Financial Health

Liquidity is strong: current ratio 175%, quick ratio 148.8%, and working capital of ¥156.7bn suggest ample short-term coverage. Inventories of ¥54.7bn are significant for a distributor but manageable relative to current assets, though they can introduce cash flow volatility. Solvency metrics appear healthy with debt-to-equity at 0.74x and robust interest coverage (>4,600x), indicating low financing risk from interest-bearing debt. Total assets of ¥530.6bn against total equity of ¥297.2bn imply financial leverage of ~1.79x, moderate for the sector. The reported equity ratio as 0.0% is undisclosed rather than actual; based on assets and equity, the equity ratio would be approximately 56% on a simple basis. Cash and equivalents are not disclosed (reported as zero), limiting assessment of immediate liquidity buffer; however, strong working capital and low interest burden mitigate near-term risk. Overall capital structure appears conservative to moderate, supporting operational needs.

Cash Flow Quality

Operating cash flow was ¥5.17bn versus net income of ¥11.14bn, yielding an OCF/NI ratio of 0.46 and indicating weaker cash conversion this half, likely due to working capital investment (timing of receivables/payables/inventories). EBITDA of ¥17.1bn vs. OCF ¥5.17bn also suggests meaningful working capital absorption and/or tax/other cash items impacting OCF. Investing cash flow is undisclosed (reported as zero), preventing calculation of free cash flow; accordingly, the provided FCF figure of zero should be treated as not available. Without capex disclosure, we cannot assess maintenance vs. growth investment levels or depreciation coverage. Working capital management remains a key lever: with inventories at ¥54.7bn, changes in inventory days and receivable/payable cycles will heavily influence cash conversion. Earnings quality is acceptable from a margin perspective but would be stronger with higher cash realization; subsequent quarters should be monitored for normalization.

Dividend Sustainability

Dividend per share and payout ratio are not disclosed in the provided data (zeros indicate missing). EPS was ¥180.69, but without an announced DPS or free cash flow, payout analysis and FCF coverage cannot be determined here. Balance sheet strength (moderate leverage, strong liquidity) would typically support a stable dividend policy in this type of business, but we cannot infer company policy or its sustainability from the dataset. Outlook: pending disclosure of DPS and capex/FCF, we will reassess payout ratio, coverage, and alignment with any stated shareholder return policy.

Risk Assessment

Business Risks:

• Structural low-margin wholesale model leaves limited room for error in pricing and cost control
• Input cost inflation (logistics, labor, fuel) and challenges passing through to customers
• Working-capital intensity leading to cash flow volatility despite stable earnings
• Inventory obsolescence and shrink risk, especially in seasonal or promotional goods
• Customer concentration and bargaining power of major retailers/drugstores
• Supply chain disruptions affecting fulfillment and service levels
• Regulatory or tax changes influencing consumer goods distribution

Financial Risks:

• Weaker cash conversion in the half (OCF/NI 0.46) increasing reliance on short-term funding
• Potential increases in interest rates affecting financing costs, albeit low current interest expense
• Limited visibility on capex and investing cash flows due to undisclosed data
• Sensitivity of net income to small changes in margin given thin profitability

Key Concerns:

• Negative operating leverage with OI down 0.6% YoY despite 4.1% revenue growth
• Cash flow lagging earnings; need for improved working-capital efficiency
• Dividend and capital allocation visibility limited due to undisclosed items

Investment Implications

Key Takeaways:

• Top-line growth solid at +4.1% YoY, but operating income slightly declined, indicating margin pressure
• ROE modest at 3.75%, constrained by thin net margin; asset efficiency and moderate leverage help
• Cash conversion weak in the period (OCF/NI 0.46), suggesting working capital absorption
• Liquidity and solvency are strong (current ratio 175%, D/E 0.74x, interest coverage >4,600x)
• Non-operating gains supported ordinary income; sustainability should be monitored

Metrics to Watch:

• Gross and operating margin trends and SG&A efficiency
• OCF/NI and free cash flow (post disclosure of investing/capex)
• Inventory days, receivables and payables turnover
• Ordinary income vs. operating income to gauge reliance on non-operating items
• Tax rate normalization and its impact on net margin
• Any updates on DPS, payout ratio, and capital allocation policy

Relative Positioning: Within Japan’s consumer goods distribution/wholesale space, PALTAC’s margins and leverage are characteristic of the sector’s low-margin, high-volume model; current liquidity and solvency are robust, but cash conversion underperformed this half relative to stable peers, making working capital execution a key differentiator near term.

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