Monex Group,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥40.40B
• Net Income: ¥4.43B
• EPS: ¥18.09

Income Statement

Balance Sheet

Cash Flow Statement

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

FY2026 Q2 was a solid profitability quarter for Monex Group on a pre-tax basis, with net income of 45.49 (100M JPY) and a net margin of 11.3%, though leverage remains high and cash flow disclosure is limited. Revenue reached 403.97 with a very light reported cost of sales at 7.79, implying a gross margin near 98% typical for brokerage/fee-based models, albeit gross profit itself was unreported. SG&A expenses were 300.99, representing a sizable 74.5% of revenue, underscoring a cost-heavy operating model. Profit before tax was 76.58, translating to an implied pre-tax margin of roughly 18.9%. Net income grew 12.3% YoY to 45.49; however, lack of comparable revenue and operating profit data limits deeper trend analysis on operating leverage. Equity-method income was 12.44, contributing meaningfully to the bottom line but not dominating (equity method income ratio 16.2%), suggesting a diversified profit mix beyond affiliates. Non-operating income ratio of 27.3% indicates a notable, though not overwhelming, reliance on non-core items to support earnings. Effective tax rate stood at 42.2%, which is on the high side and a partial drag from pre-tax to net profit conversion. On balance sheet, total assets were 7,589.18 and equity 1,193.84, implying high financial leverage of 6.36x and a low equity ratio of 15.5%. Debt-to-equity is elevated at 5.36x, warranting attention given earnings cyclicality in market-sensitive businesses. Cash and equivalents were 415.37, but operating, investing, and financing cash flows were not disclosed this quarter, limiting earnings quality assessment. The calculated ROE was 3.8%, driven more by leverage than by asset turnover (0.053) or exceptionally high margins, which constrains return resilience if revenue slows. Dividend signals are mixed: a calculated payout ratio of 224.7% implies distributions outpaced earnings, which is not sustainable without strong free cash flow or one-off capital sources; however, actual DPS and cash flow support were not disclosed. With many line items unreported (gross profit, OCF, operating income), the headline result is favorable at the net level but lacks corroboration from cash flow and operating margin detail. Forward-looking, maintaining pre-tax profitability and tightening cost discipline will be key, as will clarity on cash generation to underpin any continued shareholder returns. Given high leverage, market volatility and funding conditions could amplify earnings swings. Overall, the quarter shows decent earnings momentum and diversified profit composition, but sustainability hinges on cash flow normalization and capital discipline.

Profitability Analysis

ROE (3.8%) = Net Profit Margin (11.3%) × Asset Turnover (0.053) × Financial Leverage (6.36x). The current ROE is predominantly a function of high financial leverage, as asset turnover is structurally low for financial platforms and the net margin, while reasonable, is not extraordinary. Without prior-period component data, we cannot quantify which element changed most, but the cross-section suggests leverage is the principal driver and risk lever. Business drivers: revenue of 403.97 with minimal cost of sales (7.79) supports a high implied gross margin, while SG&A intensity (74.5% of revenue) suppresses operating profitability; non-operating contributions (27.3% of total) and equity-method income (12.44) supplement pre-tax earnings. Sustainability: the fee/commission-heavy margin profile is structurally sustainable, but depends on market activity, trading volumes, and asset price levels; non-operating income can be volatile. Red flags to monitor include the high SG&A ratio and any sign that SG&A growth exceeds revenue growth; we lack YoY SG&A growth data this quarter to confirm. With an effective tax rate of 42.2%, tax drag also limits net conversion and ROE upside unless structural tax optimization is pursued.

Growth Assessment

Top-line sustainability is uncertain this quarter due to missing YoY revenue and operating profit comparisons; net income rose 12.3% YoY, but we cannot attribute the increase between core operating earnings vs non-operating items with precision. The profit mix appears diversified: non-operating income ratio at 27.3% and equity-method income of 12.44 (16.2% contribution) support earnings but introduce volatility. SG&A at 300.99 implies heavy investment in people/technology/compliance; absent operating margin disclosure, operating leverage is unclear. The effective tax rate at 42.2% is a headwind to net growth unless normalized. Outlook hinges on trading activity, client asset levels, and volatility; a supportive market backdrop would aid revenue and margins, while a risk-off environment could compress both. With leverage high, earnings can be more sensitive to revenue swings. Near-term, maintaining pre-tax margin near ~19% and stabilizing SG&A ratio are the key controllables.

Financial Health

Equity ratio is 15.5% and D/E is 5.36x, indicating high leverage; this warrants caution, especially for a market-sensitive business. Current ratio and quick ratio are unreported; we cannot assess short-term liquidity directly. Cash and equivalents were 415.37, but we lack visibility into deposit/loan structures or other funding that could affect liquidity. Maturity mismatch risk cannot be evaluated due to missing current asset/liability breakdown and debt maturity detail. No off-balance sheet commitments were disclosed in the provided data. Explicit warning: D/E > 2.0 is a risk flag; high leverage elevates sensitivity to earnings shocks and funding conditions.

Cash Flow Quality

Operating cash flow was not disclosed; OCF/Net Income is not calculable this quarter, preventing a quality cross-check between earnings and cash generation. Free cash flow is also unreported, so coverage of dividends, capex, and strategic investments cannot be assessed. Working capital movements are opaque; we cannot identify any working capital-driven earnings management signals. Given the calculated payout ratio of 224.7%, cash flow support would be critical; absent OCF/FCF data, sustainability cannot be confirmed.

Dividend Sustainability

The calculated payout ratio of 224.7% indicates dividends exceeded earnings for the period, which is not sustainable over time without strong recurring free cash flow or one-off returns of capital. DPS and total dividends were unreported, so we cannot reconcile the numerator directly. FCF coverage is not calculable due to missing OCF and capex data. Policy outlook is therefore uncertain; if management targets a stable or progressive dividend, improved cash generation or a moderation in payout would be necessary unless supported by excess capital.

Risk Assessment

Business Risks:

• Market activity/trading volume cyclicality affecting fee/commission revenue
• Volatility in non-operating income and equity-method contributions (12.44; 16.2% of profit)
• High SG&A intensity (74.5% of revenue) limiting operating leverage
• High effective tax rate (42.2%) dampening net income conversion

Financial Risks:

• High leverage: D/E 5.36x and equity ratio 15.5%
• Liquidity visibility is low due to missing current assets/liabilities and OCF
• Potential funding/maturity mismatch risk (not assessable with current disclosures)
• Dividend sustainability risk given 224.7% calculated payout without FCF disclosure

Key Concerns:

• Earnings quality cannot be validated without OCF; OCF/NI ratio not available
• Non-operating income ratio 27.3% introduces earnings volatility
• Asset turnover is low (0.053), making ROE reliant on leverage rather than efficiency
• Data gaps (operating income, gross profit, cash flows) limit trend and margin analysis

Investment Implications

Key Takeaways:

• Solid net profitability: NI 45.49, net margin 11.3%, pre-tax margin ~18.9%
• Profit mix is diversified but includes a meaningful non-operating component (27.3%)
• ROE 3.8% driven by high leverage (6.36x); efficiency (AT 0.053) remains low
• SG&A ratio high at 74.5%, constraining operating margin expansion
• High leverage (D/E 5.36x) elevates sensitivity to market and funding conditions
• Dividend sustainability questionable with a 224.7% calculated payout and no FCF data

Metrics to Watch:

• Operating cash flow and OCF/NI ratio (target >1.0)
• Operating income and operating margin trends
• SG&A-to-revenue ratio trajectory
• Composition of earnings: core vs non-operating vs equity-method income
• Leverage and equity ratio movement
• Effective tax rate normalization

Relative Positioning: Within Japanese online brokerages/fintech platforms, the quarter shows respectable net profitability but comparatively high leverage and less visibility on cash flow. Sustained improvement likely requires tighter cost control and clearer cash generation, especially if market tailwinds fade.

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