YUTAKA TRUSTY SECURITIES CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.64B
• Operating Income: ¥1.93B
• Net Income: ¥1.47B
• EPS: ¥259.11

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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: Strong profitability with double-digit earnings growth, but cash flow quality and leverage warrant caution in FY2026 Q2. Operating income was 19.28 (億円), up 20.2% YoY, and ordinary income reached 19.81 (億円), up 21.0% YoY, underscoring robust core performance. Net income rose 26.2% YoY to 14.69 (億円), translating to a net margin of 31.6% on revenue of 46.43 (億円). Operating margin stands at a high 41.5%, and EBITDA margin is 42.9%, indicating tight cost control and a favorable revenue mix. Basis point comparisons versus last year’s margins cannot be precisely quantified due to unreported prior-period revenue and gross profit, but current margin levels are elevated for a securities broker. Non-operating items were modestly positive (income 0.59 vs expense 0.06), contributing roughly 4.0% of ordinary income and indicating results are primarily driven by operations. The effective tax rate was 32.4%, broadly in line with domestic norms. ROE calculated at 9.8% reflects strong profitability tempered by very high financial leverage (DuPont financial leverage 11.27x). ROIC is reported at 12.5%, comfortably above the 8% excellence benchmark, signaling efficient use of invested capital in core activities. Liquidity is adequate but thin (current ratio 106.9%), with positive working capital of 105.01 (億円), while liabilities are concentrated short term (current liabilities 1,514.67 (億円)). The key concern is earnings quality: operating cash flow was -28.70 (億円), yielding an OCF/net income ratio of -1.95x, which is well below the >1.0 benchmark. The cash outflow likely reflects working capital swings typical for securities businesses, but it nonetheless weakens near-term financial flexibility. Debt-to-equity is 10.27x, well above conservative thresholds, consistent with the sector’s balance sheet model but a clear risk if market conditions deteriorate. Dividend payout ratio is estimated at 52.1%, within a sustainable range on an earnings basis, yet uncovered by period OCF. Forward-looking, sustainability hinges on normalizing cash flow, maintaining current margin discipline, and managing leverage amid market volatility. Absent detailed breakdowns (revenue composition, SG&A details, investing cash flows), the outlook remains cautiously positive on earnings momentum but guarded on cash and leverage.

Profitability Analysis

ROE Decomposition (DuPont): ROE 9.8% = Net Profit Margin (31.6%) × Asset Turnover (0.028) × Financial Leverage (11.27x). The largest driver is the high net margin and extreme financial leverage, while asset turnover is structurally low due to a large balance sheet base relative to revenue in a securities firm. The most notable change vs prior year is implied margin-driven earnings growth (operating income +20.2% YoY) given revenue YoY is unreported; we cannot quantify which component shifted most numerically, but the growth in operating income suggests margin expansion or improved operating leverage. Business reason: stronger trading/commission income mix or spread income, plus disciplined SG&A (27.06 (億円) versus high operating income) likely drove operating leverage. Sustainability: elevated margins can persist in supportive markets, but are vulnerable to declines in client activity, spreads, and market volumes; non-operating contributions are small and less of a swing factor. Concerning trends: SG&A growth vs revenue growth cannot be compared due to missing revenue YoY; however, OCF divergence from NI (-1.95x) is a clear quality flag that could presage margin pressure if funding costs/working capital needs rise.

Growth Assessment

Revenue sustainability: With revenue at 46.43 (億円) and operating income up 20.2% YoY, topline and mix quality appear favorable, but the absence of revenue YoY and segment detail limits visibility. Profit quality: Net margin at 31.6% and EBITDA margin at 42.9% indicate robust profitability; non-operating income is modest (0.59 (億円)), suggesting limited reliance on one-offs. Outlook: Earnings trajectory is positive near term if market volumes and client risk appetite remain firm; sensitivity to market volatility and interest rate shifts remains high. Key swing factors: client trading activity, underwriting/advisory pipeline (if applicable), proprietary trading gains/losses, and funding/borrowing costs. ROIC at 12.5% supports value creation assuming margin resilience; however, negative OCF introduces execution risk around sustaining growth investment and shareholder returns without balance-sheet strain.

Financial Health

Liquidity: Current ratio 106.9% and quick ratio 106.9% indicate a narrow liquidity cushion; not an explicit red flag (<1.0), but leaves limited room for shocks. Working capital is positive at 105.01 (億円), and current assets (1,619.68 (億円)) exceed current liabilities (1,514.67 (億円)). Solvency: Debt-to-equity is 10.27x (warning >2.0), reflecting a leverage-intensive model; financial leverage in DuPont is 11.27x. Maturity profile: Liabilities are predominantly short-term; short-term loans are 7.00 (億円). While the current asset base covers near-term obligations, rollover and funding cost risks exist if markets tighten. Off-balance sheet: No disclosures provided; potential contingent exposures (e.g., guarantees, derivatives) typical for brokers are unknown.

Cash Flow Quality

OCF/Net Income is -1.95x, signaling poor earnings-to-cash conversion this period. Free cash flow cannot be computed due to missing investing cash flows; capex is small at 0.10 (億円), implying limited structural cash needs outside working capital. The OCF shortfall likely stems from working capital movements common in securities operations (e.g., settlement receivables/payables, margin balances), but sustained negative OCF would pressure liquidity and could necessitate funding via short-term borrowings or asset sales. No clear signs of deliberate working capital manipulation can be inferred without detail; the magnitude suggests transactional timing rather than accrual-based earnings inflation. Dividend coverage by OCF appears inadequate this period; coverage by earnings is acceptable.

Dividend Sustainability

Payout ratio (calculated) is 52.1%, within the <60% benchmark for sustainability on an earnings basis. However, period OCF is negative, so dividends are not covered by operating cash this quarter/half and would rely on cash reserves or financing. With leverage high (D/E 10.27x) and liquidity only modestly above 1.0x, sustained distributions require normalization of cash flow. Policy outlook: If management prioritizes stable dividends, maintaining the current payout likely depends on market conditions and working capital release; absent that, flexibility could be constrained. Data limitations: total dividends paid and schedule are unreported, so we cannot reconcile payout to cash distributions.

Risk Assessment

Business Risks:

• Market volatility risk impacting trading/commission revenues and proprietary positions
• Client activity sensitivity (volumes, risk appetite) affecting fee income
• Spread/interest rate risk affecting securities-related income
• Operational and compliance risk typical for securities firms

Financial Risks:

• High leverage (D/E 10.27x) amplifying earnings volatility and downside risk
• Short-term funding reliance with thin liquidity buffer (current ratio 1.07x)
• Negative operating cash flow (-28.70 億円) creating funding pressure if persistent
• Potential margin call/liquidity stresses in adverse market moves

Key Concerns:

• OCF/NI at -1.95x indicates weak cash conversion
• Inability to quantify margin changes due to missing prior revenue limits trend assessment
• Interest coverage not available; debt service capacity unclear
• Limited disclosure on revenue/SG&A breakdown and investing cash flows

Investment Implications

Key Takeaways:

• Earnings momentum solid: OI +20.2% YoY, NI +26.2% YoY
• High profitability: OPM 41.5%, NPM 31.6%, EBITDA margin 42.9%
• ROE 9.8% with high financial leverage (11.27x); ROIC 12.5%
• Liquidity adequate but thin; leverage structurally high for the sector
• Cash flow quality weak this period (OCF -28.70 億円), a key watch item for sustainability

Metrics to Watch:

• Operating cash flow and OCF/NI ratio (>1.0 target)
• Capital adequacy and regulatory capital ratios (not disclosed)
• Revenue mix and fee/trading income volatility
• Short-term funding costs and rollover profile
• Working capital movements (settlement receivables/payables, margin balances)
• Effective tax rate stability and any one-offs in non-operating items

Relative Positioning: Within domestic mid-sized securities brokers, the company exhibits stronger-than-typical margins and ROIC, but with very high leverage and thin liquidity; near-term performance appears favorable, yet resilience depends on stabilizing operating cash flows and maintaining market activity levels.

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