Mizuho Leasing Company,Limited FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥430.61B
• Operating Income: ¥23.46B
• Net Income: ¥29.60B
• EPS: ¥103.76

Income Statement

Balance Sheet

Cash Flow Statement

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

Verdict: Solid top-line expansion but margin compression and negative operating cash flow point to a volume-driven quarter with heightened reliance on non-operating items and funding. Revenue surged 44.3% YoY to 4,306.05, lifting scale materially in the leasing and financial assets portfolio. Gross profit was 426.65 with a gross margin of 9.9%, indicating limited spread capture amid rapid asset growth. Operating income declined 3.0% YoY to 234.58 as SG&A rose with scale, driving operating margin down to 5.45%. Ordinary income edged up 1.0% to 351.11, supported by strong non-operating income of 152.02 against non-operating expenses of 35.48. Net income increased 13.5% to 290.53, helped by a 23.8% effective tax rate and robust non-operating contribution. Operating margin compressed by approximately 267 bps YoY (from ~8.1% to 5.45%) as revenue growth far outpaced operating income. Net profit margin compressed by about 183 bps (from ~8.58% to 6.75%), highlighting weaker profitability per unit of revenue despite higher absolute earnings. Earnings quality is weak this quarter: operating cash flow was -117.83 (OCF/NI = -0.41x), implying working capital and lease investment outflows funded by debt. Financing cash flow was +646.18, indicating significant external funding to support portfolio expansion. Leverage remains structurally high for the business model (D/E 8.46x), but interest coverage is a comfortable 7.55x, suggesting manageable debt service at current spread levels. Liquidity is adequate (current ratio 131%) though short-term loan reliance (7,004.39) requires tight ALM discipline. ROE is 6.9% via high financial leverage offsetting low asset turnover (0.109) and moderate net margin (6.8%). ROIC at 0.9% underscores thin economic returns versus invested capital, typical for leasing but still below management benchmarks in capital-intensive finance. Forward-looking, sustaining net income growth will require stabilizing margins (pricing vs. funding costs) and moderating reliance on non-operating income, while managing funding mix and duration risk. Overall, growth is strong, but quality and capital efficiency warrant caution until cash generation and margins improve.

Profitability Analysis

ROE decomposition (DuPont): ROE 6.9% = Net Profit Margin 6.8% × Asset Turnover 0.109 × Financial Leverage 9.46x. The dominant driver is financial leverage; asset turnover is structurally low for leasing, and net margin compressed YoY. The most material change this quarter (inferred from revenue +44.3% vs operating income -3.0%) is margin compression at the operating level, indicating negative operating leverage (costs and funding burden rising faster than core income). Business reasons likely include: higher funding costs pressuring spreads, mix shifts to lower-yield assets, and scale-up costs in SG&A and credit/operational support for growth. Non-operating income cushioned ordinary income and net income, masking weaker core margin trends. Sustainability: leverage-driven ROE is sustainable only if spreads and credit losses remain controlled; current margin compression suggests this support is vulnerable if rate or credit conditions worsen. Watch for SG&A growth outpacing revenue (not fully disclosed here) and for ordinary income dependency on non-operating gains (non-operating income ratio 52.3%), which can be volatile.

Growth Assessment

Revenue growth of 44.3% YoY indicates aggressive balance sheet expansion, likely from higher lease originations and related financing volumes. Operating profit declined 3.0% YoY, implying growth is coming at thinner spreads or higher operating costs. Ordinary income rose 1.0% and net income rose 13.5%, supported by non-operating items and tax rate, not by core operating leverage. The sustainability of this growth depends on: ability to reprice assets to offset higher funding costs, maintain credit quality, and reduce reliance on non-operating contributions. Near-term outlook: headline growth can continue if funding access remains strong (financing CF +646.18) and asset demand persists, but profitability per unit may remain under pressure until pricing catches up and cost discipline improves.

Financial Health

Liquidity: Current ratio 131.2% (above 1.0 but below the >1.5 comfort benchmark); quick ratio mirrors at 131.2%. No explicit red flag on current ratio, but elevated short-term loans (7,004.39) vs cash (796.32) imply ongoing reliance on rolling short-term funding. Solvency: D/E 8.46x is very high (warning >2.0) but characteristic of leasing models; equity ratio (calculated) ~10.6% (4,187.03 / 39,601.86). Interest coverage is solid at 7.55x, indicating capacity to service debt at current rates. Maturity mismatch: Potential risk given large short-term borrowings versus long-duration lease receivables (receivable details not disclosed); ALM discipline is crucial. Off-balance sheet obligations: Not disclosed in provided data; leases with residual value or guarantees may exist but are unreported here.

Cash Flow Quality

OCF/Net Income is -0.41x, a quality concern this period as earnings did not convert to cash; typical for portfolio build but still a flag. Free cash flow is not calculable due to missing capex/investing data; however, negative OCF alongside large positive financing CF indicates external funding of growth and possibly dividends. Working capital signals: negative OCF likely reflects growth in lease assets/receivables; no explicit signs of manipulation from the disclosed items, but monitoring receivable days and asset growth vs funding cost is important. Sustainability: Dividend and growth currently rely on capital market access; improved cash conversion would be desirable if growth moderates.

Dividend Sustainability

Calculated payout ratio is 45.7%, within a generally sustainable range (<60%) from a P/L perspective. Cash coverage is unclear: OCF is negative and FCF is unreported, implying dividends are effectively supported by financing while the portfolio expands. With leverage high, maintaining dividends requires stable funding access and credit performance. Policy outlook: Expect management to balance shareholder returns with capital adequacy; payout looks manageable if earnings hold, but could tighten if spreads compress further or if credit costs rise.

Risk Assessment

Business Risks:

• Spread compression from rising funding costs outpacing asset yield repricing
• Credit risk deterioration among lessees during economic slowdown
• Residual value risk on leased assets if secondary market prices weaken
• Operational scaling risk as rapid growth strains underwriting and collections
• High dependency on non-operating income (non-operating income ratio 52.3%)

Financial Risks:

• High leverage (D/E 8.46x) increases sensitivity to funding cost and market access
• Maturity mismatch risk given large short-term loans (7,004.39) vs long-duration assets
• Negative operating cash flow (-117.83) requiring continued external financing
• Potential interest rate volatility impacting interest coverage and margins

Key Concerns:

• Operating margin compression (~267 bps YoY) despite strong revenue growth
• Net margin compression (~183 bps YoY) with net income supported by non-operating items
• ROIC at 0.9% indicates low economic returns versus invested capital

Investment Implications

Key Takeaways:

• Growth strong but quality mixed: revenue +44.3% YoY, operating income -3.0% YoY
• Margin compression evident; operating margin ~5.45% vs ~8.1% a year ago
• Net income +13.5% aided by non-operating items and tax rate, not core operations
• Leverage structurally high (D/E 8.46x) but interest coverage healthy at 7.55x
• OCF negative (-117.83); expansion funded by +646.18 financing CF
• ROE 6.9% relies on leverage; asset turnover low (0.109); ROIC 0.9%

Metrics to Watch:

• Net interest/spread metrics and operating margin trajectory
• OCF/Net Income and funding mix (short-term vs long-term loans)
• Credit costs and delinquency indicators (not disclosed here)
• Non-operating income share of profits
• Equity ratio and D/E trend
• Effective tax rate stability

Relative Positioning: Within Japanese leasing peers, the profile shows typical high leverage and low asset turnover, with decent interest coverage. However, this quarter exhibits sharper margin compression and heavier reliance on non-operating items than ideal, and ROIC is notably low, suggesting below-peer capital efficiency if sustained.

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
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