JACCS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥97.07B
• Operating Income: ¥13.28B
• Net Income: ¥9.31B
• EPS: ¥271.26

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

Verdict: Soft quarter with double-digit profit declines and subdued returns despite adequate liquidity. Revenue for FY2026 Q2 (cumulative) was 970.69, while operating income fell 17.4% YoY to 132.81 and ordinary income decreased 18.6% YoY to 131.02, with net income down 13.2% YoY to 97.12. Operating margin stands at 13.7% (132.81/970.69), ordinary income margin at 13.5%, and net margin at 10.0%. The net non-operating impact was a small drag of -1.80 (0.27 non-op income vs 2.07 non-op expenses), indicating core operations drove the downturn. SG&A of 689.72 equates to 71.1% of revenue, suggesting limited operating leverage in the quarter. Effective tax rate was 34.0% (47.88/140.98). Comprehensive income (75.55) was notably below net income (97.12), implying negative OCI of about -21.6 and modest equity erosion from valuation/FX effects. ROE calculated at 3.2% is low for a consumer finance/credit business given financial leverage of ~12.8x, highlighting weak profitability rather than capital constraints. ROIC at 0.7% is well below the typical 7–8% value creation threshold, signaling limited economic returns on invested capital this period. Balance sheet liquidity appears sound with a current ratio of 190% and working capital of 17,648.74, while solvency optics show very high leverage (D/E 11.83x) that is structurally common for the sector but still heightens sensitivity to funding costs and credit cycles. We cannot assess cash flow quality due to unreported OCF/FCF; therefore, earnings-to-cash conversion is a key data gap this quarter. The calculated payout ratio of 88.2% appears elevated relative to earnings pressure and low ROE, potentially constraining retained capital for growth or buffer-building. Forward-looking, key watchpoints are credit cost trends embedded in SG&A, funding costs amid rate volatility, and any normalization in non-operating/OCI items. Without revenue YoY and cash flow data, the magnitude of margin compression in basis points and sustainability of dividends/FCF coverage remain uncertain. Overall, results reflect pressure on profitability in a leveraged balance sheet context, with adequate near-term liquidity but muted capital efficiency.

Profitability Analysis

ROE decomposition (DuPont): ROE 3.2% = Net Profit Margin (10.0%) × Asset Turnover (0.025) × Financial Leverage (12.83x). The weakest driver is asset turnover at 0.025, typical for financials with large balance sheets, while net margin deterioration (NI -13.2% YoY) was the most visible change driver given flat-to-unknown revenue. Business context suggests operating income fell 17.4% YoY due to cost pressure (SG&A at 71.1% of revenue) and potentially higher credit costs/funding costs, while non-operating impacts were minor. Leverage remained high (12.8x), indicating the ROE softness stems from margin compression rather than changes in capital structure. This margin pressure is partially cyclical (credit costs and funding spreads) and may normalize if credit quality stabilizes and funding costs ease, but there is no evidence this quarter of improvement. Concerning trend flags: operating profit decline outpaced any visible revenue growth (revenue YoY not disclosed), and SG&A intensity appears heavy; if SG&A growth exceeded revenue growth, it would confirm negative operating leverage (data insufficient, but OI contraction implies this risk). Sustainability: net margin could recover on better risk costs and operating efficiency; however, ROIC at 0.7% suggests returns are currently below cost of capital, so improvement is necessary for long-term value creation.

Growth Assessment

Revenue printed at 970.69, but lack of YoY revenue disclosure limits growth assessment; profitability contracted (OP -17.4% YoY, NI -13.2% YoY). Profit composition shows core operations as the main driver (non-op net -1.80), implying the decline is not due to one-offs. The effective tax rate was stable at 34%, so earnings compression came mainly from pre-tax profitability. The negative swing in OCI (comprehensive income 75.55 vs NI 97.12) adds a headwind to equity accumulation. Without segment detail, we infer pressure likely from higher credit costs or operating expenses and potentially rising funding costs. Outlook hinge factors: stabilization of credit losses, expense discipline, and funding cost management. With ROE at 3.2% and ROIC at 0.7%, growth investments may be constrained unless profitability improves or capital is optimized. Overall growth sustainability is uncertain pending visibility on revenue trajectory and credit cost trends.

Financial Health

Liquidity: Current ratio 190% and quick ratio 190% indicate ample near-term liquidity; cash and deposits are 1,151.33 against current liabilities of 19,604.47, supported by sizeable other current assets typical for a finance company. Solvency: Total liabilities/Equity (D/E) is 11.83x, explicitly above the 2.0 threshold, warranting caution though consistent with sector leverage profiles. Equity-to-asset ratio (calculated) is approximately 7.8% (2,989.54/38,368.54), indicating a thin capital buffer; capital adequacy should be monitored. Maturity mismatch: Short-term loans (3,470.13) are well covered by current assets (37,253.21), and total current liabilities (19,604.47) are below current assets, suggesting manageable refinancing risk. Interest-bearing debt detail is partial (short/long-term loans total 11,383.70), but comprehensive interest coverage cannot be assessed due to missing interest expense. No off-balance sheet obligations were disclosed in the dataset. Warning: D/E > 2.0; Current ratio is comfortably >1.0.

Cash Flow Quality

OCF and FCF are unreported, so OCF/Net Income and FCF coverage cannot be evaluated; earnings quality assessment is therefore limited. The gap between net income (97.12) and comprehensive income (75.55) indicates negative OCI, which reduces equity and can reflect market valuation or FX movements rather than cash fundamentals. Working capital is large and typical for a finance business; without OCF detail, we cannot identify timing effects or working capital maneuvers. Dividend and capex coverage by FCF cannot be assessed due to missing data; prudence is warranted given high payout ratio amid earnings pressure.

Dividend Sustainability

Reported payout ratio is not available, but the calculated payout ratio is 88.2%, which is elevated versus typical sustainability benchmarks (<60%). With ROE at 3.2% and ROIC at 0.7%, high payout reduces internal capital generation needed to support growth and buffers. FCF coverage is not calculable due to missing cash flow data, so dividend sustainability cannot be confirmed from cash metrics. Policy outlook: If earnings remain pressured, maintaining an ~88% payout could constrain retained earnings; management may need to balance shareholder returns with capital adequacy and investment needs.

Risk Assessment

Business Risks:

• Credit cost volatility impacting SG&A and operating profit
• Funding cost increases compressing spreads and margins
• Macroeconomic slowdown reducing consumer spending and loan/credit card volumes
• Regulatory changes in consumer finance/credit card operations
• Competition from banks and fintechs pressuring fees and yields
• Negative OCI from market valuation/FX affecting capital

Financial Risks:

• High leverage (D/E 11.83x) amplifying earnings and capital sensitivity
• Low ROE (3.2%) and ROIC (0.7%) indicating weak capital efficiency
• Thin equity buffer (~7.8% equity-to-asset ratio) increasing vulnerability to shocks
• Refinancing and interest rate risk on 3,470.13 short-term loans and broader funding stack
• Insufficient disclosure on interest coverage and OCF impeding risk monitoring

Key Concerns:

• Double-digit YoY declines in operating and ordinary income
• High SG&A intensity (71.1% of revenue) limiting operating leverage
• Comprehensive income below net income, signaling valuation/FX headwinds
• Elevated payout ratio (~88%) despite low returns
• Data gaps on cash flows, credit costs, and segment performance

Investment Implications

Key Takeaways:

• Profitability under pressure: OP -17.4% YoY, NI -13.2% YoY; net margin 10.0%
• Returns are muted relative to leverage: ROE 3.2%, ROIC 0.7%
• Liquidity adequate (current ratio 1.9x), but leverage is structurally high (D/E 11.83x)
• Negative OCI reduced comprehensive income to 75.55, weighing on equity build
• Dividend payout appears high at ~88%, limiting internal capital generation

Metrics to Watch:

• Credit cost trends (provisions/write-offs within operating expenses)
• Funding costs and duration mix (short-term vs long-term loans)
• Net interest/spread metrics and fee income trajectory
• OCF and FCF to validate earnings quality and dividend coverage
• Capital adequacy indicators and equity-to-asset ratio movement
• Trends in OCI drivers (securities valuation, FX)

Relative Positioning: Within Japanese consumer finance/credit card peers, the company exhibits adequate liquidity but weaker return metrics and elevated payout intensity. High leverage is sector-typical, yet current profitability does not fully compensate for balance sheet risk, placing the profile on the conservative-to-pressured side of the sector spectrum pending improvement in credit costs and funding spreads.

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