Tokyo Century Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥693.28B
• Operating Income: ¥72.52B
• Net Income: ¥50.05B
• EPS: ¥190.04

Income Statement

Balance Sheet

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

Tokyo Century (8439) reported solid FY2026 Q2 consolidated results under JGAAP, with operating performance outpacing top-line growth and ROE tracking the DuPont bridge. Revenue rose 4.1% year on year to ¥693.3bn, while operating income increased 28.8% to ¥72.5bn, indicating material operating leverage and disciplined cost control. Gross profit reached ¥134.5bn, implying a gross margin of 19.4%, and the operating margin expanded to approximately 10.5%. Ordinary income of ¥77.2bn exceeded operating income by about ¥4.7bn, suggesting non-operating contributions (e.g., financial income/equity-method gains) more than offset interest expense of ¥4.7bn. Net income surged 115.2% YoY to ¥92.8bn, significantly above ordinary income, indicating substantial below-ordinary-line positives (e.g., valuation gains, minority interest effects, or tax effects). The reported DuPont metrics point to ROE of 7.91%, driven by a net margin of 13.39%, asset turnover of 0.101x, and financial leverage of 5.84x. Asset turnover remains low as is typical for leasing/financial assets, while leverage and margin are the key ROE drivers. Liquidity appears sound with a current ratio of 163.5% and quick ratio of 161.7%, and working capital of about ¥1.195tn, though current classifications in financials can differ from industrial companies. Capital structure shows liabilities of ¥5.69tn and equity of ¥1.17tn (implied equity-to-asset ratio ~17.1%), consistent with a leveraged finance model but within a manageable range given coverage. Interest coverage stands at a healthy 15.5x, reflecting resilient earnings relative to funding costs. The implied effective tax rate is about 18% (¥20.3bn tax on ~¥113.1bn pre-tax), though the provided “0.0%” flag likely reflects non-disclosure in the data feed. Cash flow statements were not disclosed in this dataset (zeros indicate unreported), so free cash flow metrics cannot be evaluated from this release. Dividend data (DPS, payout) were also not disclosed, so distribution capacity cannot be inferred from the provided figures. Overall, earnings quality appears supported by operating improvement and strong coverage, while the large YoY jump in net income likely includes non-recurring or below-ordinary-line factors that should be normalized in forward views. Balance-sheet scale expanded to ¥6.85tn of assets, and inventories remain minimal at ¥34.0bn, consistent with a finance/lease profile. Key monitoring points include credit costs, asset quality, funding cost trends, and sustainability of non-operating income, which are not disclosed here but are pivotal for forward earnings resilience.

Profitability Analysis

ROE_decomposition: ROE 7.91% = Net margin 13.39% × Asset turnover 0.101 × Financial leverage 5.84. Net margin benefited from strong ordinary and below-ordinary contributions; asset turnover remains low by business model; leverage is the principal amplifier of equity returns. margin_quality: Gross margin is 19.4% (¥134.5bn gross profit on ¥693.3bn revenue). Operating margin is ~10.5% (¥72.5bn/¥693.3bn). Ordinary income exceeded operating income by ~¥4.7bn, indicating supportive non-operating line items. Net income (¥92.8bn) above ordinary income (¥77.2bn) implies additional below-ordinary-line positives; normalized profitability may be lower than the headline net margin. operating_leverage: Revenue +4.1% YoY versus operating income +28.8% YoY indicates significant operating leverage and cost efficiency gains. Interest coverage at 15.5x (¥72.5bn/¥4.7bn) suggests the P&L has ample buffer against funding-cost variability.

Growth Assessment

revenue_sustainability: Top-line growth of 4.1% YoY to ¥693.3bn appears steady. Asset-turnover of 0.101x reflects the capital-intensive finance model; sustaining growth will hinge on asset formation, pricing discipline, and funding availability. profit_quality: Operating income growth (+28.8% YoY) outpaced revenue, indicating mix/scale benefits and expense control. The divergence between net income (¥92.8bn) and ordinary income (¥77.2bn) suggests non-recurring or non-core items boosted bottom line; quality of earnings is better assessed at the operating/ordinary level. outlook: With leverage at 5.84x (A/E) and interest coverage at 15.5x, the company has capacity to support asset growth if funding costs remain contained. Key forward drivers include credit cost trends, residual values in leasing assets, and the spread between asset yields and funding costs. Non-operating contributions may normalize.

Financial Health

liquidity: Current assets ¥3,076.1bn vs current liabilities ¥1,881.1bn yields a current ratio of 163.5% and quick ratio of 161.7% (inventories ¥34.0bn are small). Working capital is ¥1,195.0bn, providing a buffer, though liquidity interpretation for finance companies differs from industrials. solvency: Total liabilities ¥5,686.0bn and equity ¥1,172.5bn imply liabilities-to-equity of 4.85x and an implied equity-to-asset ratio of ~17.1% (equity ¥1,172.5bn / assets ¥6,848.8bn). Interest coverage is 15.5x, indicating comfortable debt service capacity under current earnings. capital_structure: Financial leverage (Assets/Equity) is 5.84x, typical for the sector. Funding is largely liability-based; stability depends on access to capital markets and banking lines, which are not detailed in the provided data.

Cash Flow Quality

earnings_quality: Operating and ordinary income underpin core profitability; the step-up from ordinary to net income suggests below-ordinary-line positives that may not recur. Implied effective tax rate is ~18%, consistent with normalized levels for a diversified finance company. FCF_analysis: Operating CF and investing CF were not disclosed in this dataset (reported as zero placeholders). Therefore, free cash flow cannot be calculated or assessed for coverage. working_capital: Working capital stands at ~¥1.195tn with minimal inventories (¥34.0bn). For a finance company, receivables/lease assets dominate current assets; without detailed receivables or funding maturity profiles, we cannot assess timing mismatches.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio were not disclosed (zeros indicate non-disclosure). With net income of ¥92.8bn and ROE of 7.91%, the company appears to have earnings capacity; however, absent DPS and share count, payout cannot be evaluated. FCF_coverage: Free cash flow data were not disclosed; FCF coverage of dividends cannot be assessed from this release. policy_outlook: No dividend policy details were provided. For finance businesses, dividend capacity typically depends on earnings stability, credit costs, and capital adequacy; given data limitations, we refrain from inferring policy direction.

Risk Assessment

Business Risks:

• Credit risk on leasing/financing assets amid macro slowdown or borrower stress
• Residual value risk on leased assets and secondary market price volatility
• Spread compression from rising funding costs relative to asset yields
• Concentration risk by sector or large obligors (not disclosed here)
• Regulatory and accounting changes affecting capital treatment and earnings recognition

Financial Risks:

• Refinancing and liquidity risk given leverage (liabilities/equity 4.85x)
• Interest rate risk impacting net interest margin and valuations
• Market risk on equity-method and investment holdings affecting non-operating income
• Potential volatility in tax expense and minority interests driving swings below ordinary income

Key Concerns:

• Sustainability of the large YoY increase in net income given likely non-recurring items
• Dependence on capital markets access and funding cost stability
• Limited disclosure in this dataset on cash flows, credit costs, and asset quality metrics

Investment Implications

Key Takeaways:

• Operating leverage is evident: operating income +28.8% on revenue +4.1%
• ROE of 7.91% is driven mainly by margin and leverage; asset turnover remains structurally low
• Interest coverage of 15.5x indicates robust capacity to absorb funding-cost increases
• Net income materially exceeded ordinary income, pointing to potential one-offs
• Balance sheet leverage (A/E 5.84x; liabilities/equity 4.85x) is significant but appears manageable with current earnings

Metrics to Watch:

• Credit costs and non-performing asset indicators (not disclosed here)
• Funding mix and average funding cost versus asset yield (spread)
• Ordinary income sustainability excluding one-off effects
• Capital adequacy and equity-to-asset ratio trajectory
• Cash flow from operations once disclosed

Relative Positioning: Within Japan’s leasing/financial services peers, profitability is supported by strong operating leverage and healthy coverage; leverage is in a typical sector range, with ROE in the mid-to-high single digits driven by margin and gearing rather than asset velocity.

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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