Mizuho Leasing Company,Limited FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥430.61B
• Operating Income: ¥23.46B
• Net Income: ¥27.32B
• 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

Mizuho Leasing (8425) reported FY2026 Q2 consolidated results under JGAAP showing strong top-line expansion but mixed operating trends. Revenue surged 44.3% YoY to ¥430.6bn, reflecting robust origination/growth in leasing and finance assets. Gross profit reached ¥42.0bn, implying a gross margin of 9.7%, which is consistent with a financial services/leasing model where interest and fee spreads drive profitability. Operating income declined 3.0% YoY to ¥23.5bn, indicating some margin pressure and/or cost growth ahead of revenue recognition. Ordinary income was ¥35.1bn, materially above operating income, suggesting sizable non-operating contributions (e.g., equity-method gains, interest and dividend income, or FX/valuation effects common in financial institutions). Net income rose 13.5% YoY to ¥29.1bn, highlighting stronger below-operating-line items and a modest effective tax burden within the period. DuPont analysis indicates ROE of 6.94% (net margin 6.75%, asset turnover 0.109x, leverage 9.46x), a profile typical for asset-heavy lessors relying on leverage and scale. Interest coverage of 11.1x (operating income/interest expense) signals comfortable interest service capacity. The current ratio is 128%, reflecting adequate near-term liquidity on reported figures. Debt-to-equity of 8.35x is high in absolute terms but within the normal range for leasing companies that fund assets with matched liabilities. Operating cash flow was negative ¥216.9bn, consistent with portfolio growth and working capital deployment that usually accompanies rapid revenue expansion in leasing. Financing cash inflow of ¥234.7bn likely funded receivable and asset growth; investing cash flow was not disclosed in this dataset. Dividend data show 0 (undisclosed), so payout assessment must rely on earnings power and typical sector practices rather than reported distributions. Book value per share and share counts were not disclosed here, constraining per-share and capital adequacy analysis. Overall, the company demonstrates healthy earnings momentum at the bottom line, resilient interest coverage, and growth-driven cash outflows typical of the model; however, operating margin compression and reliance on non-operating income warrant monitoring. Data limitations (several zero placeholders) mean conclusions are based on available line items and sector context rather than a fully detailed statement set.

Profitability Analysis

ROE is 6.94%, decomposed into a net profit margin of 6.75%, asset turnover of 0.109x, and financial leverage of 9.46x. The ROE profile indicates that leverage and spread income, rather than rapid asset turns, are the main contributors—consistent with leasing. Operating margin softness is evident as operating income fell 3.0% YoY despite a 44.3% jump in revenue, implying pressure on spreads, higher credit costs, or elevated SG&A to support growth. Gross margin at 9.7% suggests stable core spreads but not expanding, while the gap between operating income (¥23.5bn) and ordinary income (¥35.1bn) indicates non-operating tailwinds (e.g., financial income, valuation or equity-method gains). Interest coverage at 11.1x is solid, supporting margin resilience even in a higher-rate or funding-spread environment. Operating leverage appears negative in the half (costs grew faster than operating profit), which can reverse if the newly originated assets season and revenue recognition catches up in subsequent periods. The effective tax rate appears low on reported numbers for the half, aiding net margin; normalization could temper net profitability later. Overall profitability quality is good at the bottom line but with a heavier reliance on non-operating contributions and funding leverage than on pure operating margin expansion.

Growth Assessment

Revenue expanded 44.3% YoY to ¥430.6bn, pointing to strong asset origination and transaction volumes. Operating income declined 3.0% YoY, suggesting growth was achieved at tighter spreads or with front-loaded costs. Net income rose 13.5% YoY to ¥29.1bn, supported by non-operating gains or lower taxes. The sustainability of growth hinges on maintaining funding access and pricing discipline as the balance sheet scales (total assets ¥3.96tn). Ordinary income exceeding operating income by ¥11.7bn highlights recurring financial income streams that may be more stable but can also be sensitive to markets and associate performance. Asset turnover at 0.109x is typical for the sector and unlikely to be a growth lever; scale and asset mix optimization will matter more. With negative OCF due to portfolio build, growth is being financed externally, which is common but exposes earnings to funding cost dynamics. Future growth quality will depend on credit performance, residual value outcomes, and discipline in high-growth segments (e.g., specialty assets, renewable assets, structured finance). Outlook: if revenue growth moderates while cost growth normalizes, operating leverage could improve; if funding spreads widen or credit costs rise, earnings growth could slow. Given the half-year context, seasonal effects and revenue recognition timing may also influence the apparent operating margin trend.

Financial Health

Liquidity is adequate on reported figures, with a current ratio of 127.6% and working capital of ¥550.6bn, appropriate for a financial lessor with significant receivables. Solvency metrics show total assets of ¥3.96tn and total equity of ¥418.7bn; the debt-to-equity ratio is 8.35x, high but in line with industry norms where leverage funds earning assets. Interest expense of ¥2.11bn is well covered by operating income (11.1x), indicating buffer against moderate funding cost increases. The reported equity ratio was shown as 0.0% (undisclosed), but based on balances, equity is approximately 10.6% of assets, which is reasonable for the model; however, regulatory and rating agency capital measures would be more informative. Capital structure is predominantly liability-funded, as expected; maintaining diversified funding (bank loans, CP, bonds, ABS) will be important to sustain growth. No cash and cash equivalents were disclosed in this dataset; liquidity should be assessed with internal liquidity buffers and committed lines, not available here. Overall, the balance sheet appears robust for a lessor, with sufficient earnings coverage and scale, though sensitive to funding market conditions.

Cash Flow Quality

Operating cash flow was -¥216.9bn, which is typical for a period of rapid portfolio growth in leasing as cash is deployed into receivables and assets early. The OCF/Net Income ratio of -7.46 reflects timing differences between cash deployment and accrual earnings; it does not necessarily indicate weak earnings quality in this sector. Investing cash flow was not disclosed here; many lease asset acquisitions are reflected within operating cash flows under JGAAP classifications, so a zero in investing CF is likely a reporting placeholder. Financing cash flow of +¥234.7bn indicates the company raised funding broadly sufficient to support asset growth and OCF needs. Free cash flow is shown as 0 in this dataset (undisclosed), so FCF coverage metrics cannot be reliably computed. Working capital expansion is implied by the negative OCF alongside strong revenue growth, consistent with increased lease receivables. Earnings quality appears acceptable given strong interest coverage and net profit growth, but verification would require details on credit costs, impairment charges, and gains/losses on disposals not provided here. Monitoring cash conversion over the next periods as newly originated assets season will be key to assessing structural versus timing effects.

Dividend Sustainability

Dividend-related items (annual DPS, payout ratio, FCF coverage) are shown as 0 in the dataset and should be treated as undisclosed. Based on earnings capacity (net income ¥29.1bn for the half) and the sector’s typical policy of stable/increasing dividends over time, internal coverage from earnings appears feasible, subject to capital adequacy targets and growth funding needs. Negative OCF in growth phases is normal for lessors and should not by itself preclude dividends if regulatory and rating constraints are respected and funding access remains strong. Without disclosed free cash flow and capital policy details, we cannot precisely assess payout sustainability or alignment with medium-term plans. Key determinants will be profit stability, credit cost trends, funding spreads, and equity capital requirements to support balance sheet growth.

Risk Assessment

Business Risks:

• Spread compression due to competition and client repricing in leasing and specialty finance
• Credit risk from SME and corporate counterparties during economic slowdown
• Residual value risk on operating lease assets, especially in cyclical equipment segments
• Concentration risk by asset class or counterparty if growth is focused in specific niches
• Regulatory and accounting changes affecting lease classification and capital requirements
• Execution risk from rapid balance sheet expansion and integration of new business lines

Financial Risks:

• Funding cost increases and refinancing risk given leverage of 8.35x
• Liquidity risk if market conditions tighten despite a reported current ratio of 128%
• Interest rate mismatch between asset yields and liability costs
• Dependence on non-operating income to bridge operating profit softness
• Potential rise in credit costs impacting earnings and capital
• Market valuation risks affecting ordinary income (e.g., equity-method or investment gains)

Key Concerns:

• Operating income declined 3.0% YoY despite 44.3% revenue growth, indicating margin pressure
• OCF/Net Income at -7.46 due to portfolio build; sustained negative cash conversion could strain funding needs
• High leverage is standard but amplifies sensitivity to funding spreads and credit losses

Investment Implications

Key Takeaways:

• Top-line growth is strong, driven by asset origination and scaling balance sheet
• Operating margin pressure contrasts with healthy net income growth supported by non-operating items
• Interest coverage is solid at 11.1x, supporting resilience to moderate rate increases
• Leverage (8.35x D/E) is high but consistent with leasing; funding access is a critical enabler
• Negative OCF reflects growth rather than deterioration in earnings quality, but bear watching
• Data limitations (several undisclosed line items) restrict deeper margin and cash flow decomposition

Metrics to Watch:

• Net interest and fee spreads (gross and operating margin trends) as growth matures
• Credit costs, NPL ratios, and provisioning
• Funding mix, average cost of funds, and refinancing schedule
• Ordinary income composition (equity-method gains vs. recurring financial income)
• OCF trajectory and cash conversion as originations season
• Capital adequacy metrics and equity buffer relative to asset growth

Relative Positioning: Within Japan’s leasing peer set (e.g., ORIX, Tokyo Century, Sumitomo Mitsui Finance & Leasing), Mizuho Leasing exhibits a sector-typical high leverage/low asset turnover model, with solid interest coverage and strong current-period growth but some operating margin compression; sustained access to low-cost funding and disciplined credit/risk management will determine relative performance.

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