KOBAYASHI YOKO CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥2.58B
• Operating Income: ¥56M
• Net Income: ¥87M
• EPS: ¥6.98

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Verdict: FY2026 Q2 was a weak earnings quarter operationally with heavy reliance on non-operating income, but cash generation and liquidity remained adequate. Revenue came in at 25.81, while operating income was 0.56 (-60.0% YoY), ordinary income 0.96 (-46.6% YoY), and net income 0.86 (-36.5% YoY). Non-operating income of 0.64 (dividend income 0.40; interest income 0.07) materially supported profit, offset by non-operating expenses of 0.24. Operating margin implied at roughly 2.2% (0.56/25.81), and net margin at 3.3% (0.86/25.81). With revenue YoY unreported, exact basis-point margin changes cannot be calculated; however, the 60% decline in operating income indicates pronounced margin compression versus the prior year. The effective tax rate was high at 39.4%, dampening bottom-line leverage. Total comprehensive income was 3.15, far exceeding net income of 0.86, implying sizable unrealized valuation gains (likely on investment securities of 24.83). Cash flow quality was strong: operating cash flow (OCF) was 3.00, well above net income (OCF/NI 3.49x). Liquidity was adequate with current ratio at 138.5% and quick ratio at 132.8%, and working capital of 42.24. Leverage was moderate (D/E 1.18x) with minimal interest burden (interest expense ~0.00; coverage 835.8x). Capital efficiency is a key concern: ROE was 0.9% and ROIC 0.5%, both well below typical cost of capital thresholds. Non-operating dependence is elevated (non-operating income ratio 73.9%), highlighting earnings volatility risk tied to market and dividend income streams. The combination of weak operating profit, high tax rate, and reliance on financial gains points to fragile core profitability. Nonetheless, cash generation and a modest balance sheet provide some buffer to navigate near-term headwinds. Forward-looking, stabilization of core operations, improved cost discipline, and a clearer path to lift ROIC above 5% are essential. Monitoring the performance and valuation of investment securities will be crucial given their sizable contribution to comprehensive income.

Profitability Analysis

ROE decomposition (DuPont): ROE 0.9% = Net Profit Margin (3.3%) × Asset Turnover (0.118) × Financial Leverage (2.18x). The most significant drag is the very low asset turnover (0.118), followed by thin net margin at 3.3%; leverage is moderate at 2.18x and not a primary driver. Operating income fell 60% YoY, signaling core margin compression from either weaker gross spread, volume softness, or elevated operating costs; SG&A details are unreported, limiting attribution. Non-operating income (dividends/interest) cushioned ordinary income, masking the underlying weakness in the operating line. The current net margin benefits from financial income and unrealized effects (seen in comprehensive income), which are less controllable and potentially volatile. Sustainability: low asset turnover appears structural given the balance sheet size versus revenue; absent business mix changes, it is unlikely to rise quickly. The degradation in operating profitability appears cyclical/tactical (we lack revenue YoY), but the magnitude (-60% in OI) suggests more than minor noise; recovery requires revenue growth and/or cost actions. Red flags: dependence on non-operating income (0.64 vs OI 0.56), and implied SG&A/COGS pressure causing operating deleverage; also, the effective tax rate at ~39% reduces net margin resiliency.

Growth Assessment

Revenue trajectory is unclear as YoY revenue is unreported; however, the sharp decline in operating income (-60% YoY) indicates unfavorable operating leverage, implying either weaker volumes/pricing or higher costs. Profit quality is skewed toward financial income: dividend income (0.40) and interest income (0.07) are significant relative to OI, supporting ordinary income despite weak operations. EBITDA is 1.17 (margin 4.5%), modest for a service/intermediary business, and suggests limited fixed-cost absorption this quarter. Total comprehensive income of 3.15 indicates valuation tailwinds on securities, which are non-cash and reversible; this should not be extrapolated as sustainable growth. Outlook hinges on stabilizing operating profit and reducing reliance on financial income; absent evidence of revenue acceleration or cost takeout, near-term growth in core earnings appears constrained. Key swing factors include investment income trends (dividends/valuation), cost control, and any improvement in client activity/volume. Overall, the earnings mix points to low visibility and higher volatility in headline growth.

Financial Health

Liquidity is adequate: current ratio 1.385 and quick ratio 1.328 exceed 1.0 (no explicit warning triggered), though below the 1.5 comfort benchmark. Working capital stands at 42.24, with cash and deposits of 31.22 comfortably exceeding short-term borrowings of 0.70. Solvency is moderate: D/E 1.18x and equity/asset ratio ~45.9% (100.21/218.21), indicating a conservative capital cushion. Interest burden is negligible (interest coverage ~836x), limiting refinancing risk. Maturity mismatch risk appears low: current assets (151.90) comfortably cover current liabilities (109.67). Off-balance sheet obligations are not disclosed; none can be assessed from available data. No explicit red flags from thresholds (Current Ratio <1.0 or D/E >2.0) are present.

Cash Flow Quality

Earnings quality is strong this quarter with OCF/Net Income at 3.49x, indicating cash earnings exceed accounting profits. While full investing CF is unreported, capex is modest at 0.56; a proxy FCF (OCF − Capex) would be ~2.44, implying ample internal funding capacity. Working capital dynamics are not disclosed in detail, but the strong OCF alongside declining operating income suggests cash conversion benefited from favorable working capital movements or collection discipline. No clear signs of working capital manipulation are evident from the limited disclosures. Financing CF of -1.32 likely reflects dividend payments and routine debt items; share repurchases were negligible. Given low debt and healthy cash, liquidity coverage for operations and maintenance capex appears sound.

Dividend Sustainability

The reported payout ratio is 73.0%, above the <60% comfort threshold and thus on the higher side. Using EPS of 6.98 JPY and the payout ratio, implied DPS is roughly 5.1 JPY; with ~12.55 million shares, estimated total cash dividends would be ~0.64 (in 100M JPY). Against OCF of 3.00, dividend coverage appears comfortable (~4.7x by this proxy). Capex is modest (0.56), suggesting room to fund both maintenance investments and dividends from internal cash generation in the near term. However, given weak operating profitability and reliance on non-operating income, sustaining a >70% payout could constrain reinvestment or balance sheet flexibility if OCF normalizes downward. Policy outlook likely stable in the near term given cash coverage, but improvement in core earnings would be prudent to maintain dividend sustainability through cycles.

Risk Assessment

Business Risks:

• Core operating profitability deterioration (operating income -60% YoY) indicating margin and/or volume pressure
• High dependence on non-operating income (dividends/interest) to support ordinary income
• Low asset turnover (0.118) and low ROIC (0.5%), implying weak capital efficiency
• Potential volatility in comprehensive income driven by valuation of investment securities (24.83 balance)
• Elevated effective tax rate (~39%) reducing net earnings leverage

Financial Risks:

• Earnings sensitivity to equity market and interest rate movements via dividend/valuation income
• Potential downside to OCF if working capital tailwinds reverse
• Payout ratio at ~73% could pressure cash if profits soften further
• Concentration risk in financial assets relative to operating profit generation

Key Concerns:

• Sustained ROE at ~0.9% and ROIC at 0.5% below likely cost of capital
• Operating deleverage given modest EBITDA margin (4.5%)
• Visibility: revenue YoY, gross profit, and SG&A breakdowns are unreported, limiting diagnostic clarity

Investment Implications

Key Takeaways:

• Quarter characterized by weak core operations but robust cash conversion
• Non-operating income is a major earnings pillar; results are sensitive to financial markets
• Balance sheet remains conservative with ample cash and minimal interest burden
• Capital efficiency is notably low (ROE 0.9%, ROIC 0.5%), requiring structural improvement
• Dividend appears covered by cash flow near term, but payout is relatively high at ~73%

Metrics to Watch:

• Operating margin and EBITDA margin trends (evidence of cost control and pricing power)
• Breakdown of non-operating income (sustainability of dividend income and valuation effects)
• Working capital movements and OCF sustainability
• ROIC trajectory versus a 5–8% target range
• Effective tax rate normalization and its impact on net margin

Relative Positioning: Within small-cap financial/agency businesses, the company shows adequate liquidity and low financing risk but trails peers on core profitability and capital efficiency, with a higher-than-comfort payout and greater dependency on market-driven income.

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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