KYUSHU LEASING SERVICE CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥15.52B
• Operating Income: ¥2.85B
• Net Income: ¥2.31B
• EPS: ¥92.76

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

Kyushu Leasing Service Co., Ltd. (8596) delivered resilient profitability in FY2026 Q2 despite a sharp top-line contraction characteristic of leasing cycle dynamics. Revenue declined 27.4% year over year to ¥15.52bn, but operating income fell a milder 15.7% to ¥2.85bn, indicating cost flexibility and disciplined margin management. Ordinary income was ¥2.87bn, slightly above operating income, suggesting limited reliance on non-operating items this period. Net income rose 2.2% to ¥2.10bn, supported by controlled funding costs (interest expense ¥42m) and stable credit costs inferred from strong interest coverage. DuPont analysis shows ROE of 4.76%, driven by a solid net margin of 13.5%, very low asset turnover of 0.071 (typical for lessors), and financial leverage of 4.96x. Gross margin stood at 31.2%, and EBITDA margin at 22.0%, consistent with a financing-driven earnings model that prioritizes spread and fee income over volume. Liquidity appears strong with a current ratio of 303.9% and working capital of ¥100.8bn, though cash and equivalents were not disclosed in XBRL. Capital structure remains geared (debt-to-equity 3.62x), but this is within the norms for leasing models; based on disclosed totals, the implied equity ratio is approximately 20.1% (¥44.0bn equity / ¥218.4bn assets), notwithstanding the unreported equity ratio metric. Operating cash flow was negative ¥1.49bn versus positive net income, reflecting working capital investment and lease asset origination typical of growth or portfolio mix shifts in leasing. Interest coverage was a robust 67.7x, highlighting a low funding cost base and manageable financial risk in the period. The implied effective tax rate is about 32% (¥0.998bn tax vs pre-tax), despite a reported 0.0% metric in the summary table, which likely reflects reporting classifications rather than an actual zero rate. Dividend per share is currently reported as zero; with positive earnings, dividend visibility depends on policy timing and full-year cash generation, as FCF was not disclosed and OCF was negative in H1. Overall, profitability quality is acceptable, balance sheet resilience is evident, and leverage is prudent for the business model, but cash flow conversion in the half is weak by design and needs monitoring over the full year. Key watchpoints include revenue normalization in H2, origination discipline, credit costs, and funding mix amid interest rate trends. Data limitations (notably cash position, investing cash flow, and per-share book metrics) temper precision but do not change the broad conclusions. The company remains a smaller, regionally anchored lessor with stable spreads and cautious risk-taking relative to volume growth in this half.

Profitability Analysis

ROE_decomposition: ROE 4.76% = Net Profit Margin 13.50% × Asset Turnover 0.071 × Financial Leverage 4.96. The low turnover is structural for leasing; leverage and margin are the principal ROE drivers. Incremental improvements will likely come from better spread/fee mix and modest leverage optimization rather than asset velocity. margin_quality: Gross margin 31.2% and EBITDA margin 22.0% suggest healthy spread and fee-based earnings. Operating income of ¥2.85bn on ¥4.85bn gross profit indicates controllable SG&A and credit costs. Ordinary income modestly exceeds operating income (¥2.87bn vs ¥2.85bn), implying limited non-operating dependence. Net margin at 13.5% is strong for the sector and underpinned by low interest expense (¥42m). operating_leverage: Revenue fell 27.4% YoY while operating income declined only 15.7% YoY, indicating positive operating leverage from cost discipline and a resilient margin profile. This suggests variable cost structures and portfolio mix (e.g., higher-margin transactions) cushioned the top-line drop.

Growth Assessment

revenue_sustainability: The 27.4% YoY decline to ¥15.52bn reflects lower origination volumes and/or portfolio run-off; leasing revenues can be lumpy due to large-ticket timing. Sustainability hinges on H2 origination recovery and stable renewal rates. profit_quality: Net income increased 2.2% to ¥2.10bn despite the revenue decline, supported by margin resilience and minimal non-operating reliance. Interest coverage of 67.7x and controlled interest expense indicate stable funding costs. Implied effective tax rate near 32% is normalizing and incorporated into earnings quality. outlook: With low asset turnover typical of lessors and leverage already moderate, future growth will rely on origination volume normalization, pricing discipline, and credit risk management. Watch for H2 bookings, utilization, and fee income to determine whether operating income can hold or improve despite volume headwinds.

Financial Health

liquidity: Current assets ¥150.25bn vs current liabilities ¥49.45bn yield a current and quick ratio of 3.04x (303.9%), reflecting strong near-term liquidity. Working capital stands at ¥100.80bn. Cash and equivalents were not disclosed; liquidity conclusions rely on aggregate current assets rather than cash buffers. solvency: Total liabilities ¥159.30bn vs equity ¥44.02bn imply debt-to-equity of 3.62x. Using disclosed totals, the implied equity ratio is ~20.1% (notwithstanding the reported 0.0% placeholder). For a leasing company, this leverage appears prudent and supports an investment-grade-style risk posture if asset quality remains sound. capital_structure: Interest expense is low (¥42m) relative to EBITDA (¥3.41bn), resulting in 67.7x interest coverage. Funding mix details are not provided, but the low interest burden suggests competitive funding and/or conservative debt usage in H1.

Cash Flow Quality

earnings_quality: OCF/Net income is -0.71, indicating negative cash conversion in H1 largely due to working capital and lease asset origination typical of the business model. Net income of ¥2.10bn is supported by recurring leasing spreads; however, the timing of cash inflows lags accounting recognition. FCF_analysis: Investing cash flow and capex/lease asset acquisitions were not disclosed, and reported FCF is 0 (unreported). Therefore, FCF coverage of dividends cannot be assessed from the period data. The negative OCF suggests internally generated cash did not fund growth in H1, with reliance on financing (¥1.18bn inflow). working_capital: Given negative OCF amid positive earnings, increases in receivables/lease assets or changes in payables likely drove cash usage. Monitoring receivables growth, lease asset additions, and collections will be critical for H2 cash normalization.

Dividend Sustainability

payout_ratio_assessment: Annual DPS is currently reported as ¥0.00 and payout ratio 0.0%. With EPS of ¥92.76 and positive earnings, the capacity to pay dividends exists, but policy timing and full-year results will determine actual distributions. FCF_coverage: FCF is not disclosed and OCF is negative in H1, so coverage cannot be confirmed. Sustained dividends would require either H2 cash recovery or available balance sheet liquidity. policy_outlook: Given moderate leverage (~3.62x liabilities/equity) and resilient profitability, a conservative payout policy is plausible. Clarity depends on management guidance and full-year cash generation; interim non-payment does not preclude a year-end distribution.

Risk Assessment

Business Risks:

• Origination volatility leading to revenue swings (large-ticket timing).
• Credit risk of lessees, especially SME exposure in regional markets.
• Residual value risk on equipment at lease maturity.
• Competitive pressure from major leasing companies and banks impacting spreads.
• Interest rate and funding environment changes affecting margins.
• Regional concentration in Kyushu, including exposure to natural disasters (typhoons, earthquakes).

Financial Risks:

• Negative OCF in H1 implies reliance on external funding during growth periods.
• Leverage inherent to leasing (3.62x liabilities/equity) amplifies asset quality sensitivity.
• Potential normalization of tax rate (~32% implied) affecting net income if prior periods benefited from lower rates.
• Undisclosed cash and investing flows reduce visibility on liquidity buffers and asset growth commitments.

Key Concerns:

• Sustaining margins amid lower revenue and competitive pricing.
• Cash flow conversion and receivables/lease asset collection in H2.
• Credit cost trends in a potentially slowing macro environment.

Investment Implications

Key Takeaways:

• Resilient profitability with net income up 2.2% despite a 27.4% revenue decline.
• ROE of 4.76% driven by strong margins and moderate leverage; asset turnover remains structurally low.
• Strong liquidity (current ratio ~3.04x) and manageable funding costs (interest coverage 67.7x).
• Negative OCF (-¥1.49bn) reflects lease origination and working capital needs; watch for H2 normalization.
• Implied equity ratio ~20.1% suggests a prudent capital base for a lessor.
• Dividend visibility limited in H1; payout requires full-year cash confirmation.

Metrics to Watch:

• H2 origination volume, lease asset additions, and renewal rates.
• Net interest/spread metrics and fee income contribution to margins.
• Credit costs, delinquency ratios, and recoveries.
• Funding cost trends and maturity profile; interest coverage sustainability.
• OCF trajectory and FCF generation; changes in receivables/lease assets.
• Equity ratio and leverage (liabilities/equity), targeting stability or modest improvement.

Relative Positioning: Relative to large domestic peers (e.g., ORIX, Tokyo Century, Fuyo Lease), Kyushu Leasing appears a smaller, regionally focused lessor with moderate leverage, strong margin discipline, and higher earnings stability than revenue would imply; scale and diversification remain more limited, making origination and credit discipline key differentiators.

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
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