eGuarantee,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥5.49B
• Operating Income: ¥2.51B
• Net Income: ¥1.69B
• EPS: ¥36.83

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

E-Guarantee Co., Ltd. reported FY2026 Q2 consolidated results under JGAAP with solid topline growth and resilient profitability amid some margin compression. Revenue rose 12.5% year over year to ¥5,488 million, while operating income increased 5.6% to ¥2,512 million and net income grew 6.4% to ¥1,740 million, indicating positive but moderating operating leverage. Gross profit reached ¥3,762 million, equating to a high gross margin of 68.5%, consistent with an asset-light, fee-based guarantee business model. Operating margin is a robust 45.8% (operating income/revenue), though the slower growth in operating income versus revenue implies some cost inflation or higher loss-related costs. Ordinary income of ¥2,568 million slightly exceeded operating income, suggesting modest non-operating income support. Based on ordinary income and net income, the implied effective tax rate is approximately 32.2%, consistent with standard domestic rates. DuPont analysis shows a net margin of 31.71%, asset turnover of 0.183x, and financial leverage of 1.27x, producing an ROE of 7.35%, which matches the reported ROE metric. ROA is approximately 5.8% (net margin × asset turnover), reflecting strong profitability per unit of assets despite a conservative balance sheet. The balance sheet indicates total assets of ¥30.0 billion and total equity of ¥23.682 billion, implying an equity ratio around 78.9% (based on disclosed assets and equity), underscoring low balance-sheet risk. Liquidity remains ample with a current ratio of 290.5% and working capital of ¥12.40 billion, offering significant flexibility to absorb cyclical swings in claim payments or investments in growth. Debt-to-equity of 0.28x (liabilities proxy) looks conservative, and reported interest expense is nil, consistent with limited financial leverage. Operating cash flow and other cash flow figures were not disclosed in this dataset (zeros reflect non-disclosure), limiting direct assessment of cash conversion and free cash flow. Dividend-related data (DPS, payout, and FCF coverage) were also not disclosed; therefore, we cannot evaluate payout sustainability from this release alone. Overall, the company demonstrates durable profitability, prudent capitalization, and healthy liquidity, with the main watchpoint being the apparent moderation in operating leverage as costs grow faster than revenue. Key data limitations include the absence of cash flow statements, detailed debt composition, and dividend policy figures, which constrain our ability to fully assess cash flow quality and capital returns.

Profitability Analysis

ROE of 7.35% is driven by a 31.71% net margin, 0.183x asset turnover, and modest financial leverage of 1.27x. ROA is approximately 5.8%, which is strong for a financial services-like model with low tangible asset intensity. Gross margin stands at 68.5%, supporting a high operating margin of 45.8%; however, operating income growth (+5.6% YoY) lagged revenue growth (+12.5% YoY), indicating negative operating leverage in the period. SG&A (implied) is about ¥1,250 million (gross profit minus operating income), or roughly 22.8% of revenue and 33.2% of gross profit, suggesting elevated cost intensity versus revenue growth this half. Ordinary income (¥2,568 million) exceeds operating income by about ¥56 million, reflecting modest non-operating gains. The implied effective tax rate is ~32.2% ((ordinary income − net income) / ordinary income), aligning with typical statutory levels. Interest expense is not disclosed (reported as zero), and interest coverage cannot be assessed from the provided data. Overall margin quality remains high, but the deceleration in operating income versus revenue warrants monitoring of claim/loss-related costs and SG&A efficiency.

Growth Assessment

Revenue expanded 12.5% YoY to ¥5,488 million, signaling healthy demand for guarantee services. Operating income increased 5.6% YoY to ¥2,512 million and net income grew 6.4% to ¥1,740 million, indicating slower profit growth than sales due to margin compression. The fee-based model continues to scale, but operating leverage softened, likely from higher SG&A for growth and/or elevated claim costs within cost of sales. Gross margin of 68.5% remains robust, suggesting core pricing and mix are intact. Ordinary income benefited slightly from non-operating items (~¥56 million), but the growth profile is primarily driven by the core business. With asset turnover at 0.183x and financial leverage low, growth is largely organic rather than balance-sheet driven. Sustainability hinges on maintaining low claim ratios, disciplined pricing, and continued client acquisition in a stable macro environment. Outlook considerations include credit cycle sensitivity: a weaker macro backdrop could elevate guarantee claims, pressuring margins, while transaction volume growth would support fees. Given limited disclosure on pipeline metrics (e.g., guarantee balance outstanding, claim ratio), near-term growth quality should be judged cautiously but appears supported by high underlying margins.

Financial Health

Total assets are ¥30.0 billion, total equity ¥23.682 billion, and total liabilities ¥6.623 billion, indicating a conservative capital structure (implied equity ratio ~78.9% based on available figures). Current assets are ¥18.907 billion vs. current liabilities of ¥6.508 billion, yielding a current ratio of 290.5% and ample liquidity. Working capital stands at ¥12.40 billion, and the quick ratio equals the current ratio due to no inventories reported. Debt-to-equity is indicated at 0.28x using total liabilities as a proxy; interest expense is not disclosed, suggesting limited financial leverage. The strong equity base relative to assets implies substantial loss-absorbing capacity should claim costs rise. No maturity profile or committed facilities are disclosed in the dataset, so refinancing risk cannot be assessed here.

Cash Flow Quality

Operating, investing, and financing cash flows are not disclosed in this dataset (zeros represent non-disclosure), preventing direct evaluation of cash conversion, free cash flow, or working capital dynamics. The reported OCF/Net Income ratio of 0.00 and FCF of 0 should be treated as unavailable, not actual values. Given net income of ¥1,740 million and an asset-light model, cash generation is typically strong, but we cannot infer actual cash flows without disclosure. We also lack details on changes in receivables/payables, provision movements, and claim payments, which are critical to assessing earnings quality in a guarantee business. As such, earnings quality cannot be fully validated from a cash perspective in this period.

Dividend Sustainability

Dividend per share, payout ratio, and FCF coverage are not disclosed in this dataset. EPS for the half is ¥36.83, and profitability is strong, suggesting capacity for shareholder returns; however, without actual DPS and operating/free cash flow figures, we cannot assess payout sustainability or coverage. The conservative balance sheet (implied high equity ratio) provides flexibility for distributions, but policy intent and targeted payout are unknown from these materials. Until dividend policy and cash flow data are available, sustainability assessment remains indeterminate.

Risk Assessment

Business Risks:

• Credit cycle sensitivity impacting claim frequency/severity and cost of sales (loss ratio).
• Pricing pressure or mix shifts that could reduce fee margins.
• Client concentration risk if a few large counterparties dominate guarantee volume.
• Macroeconomic slowdown reducing transaction volumes and increasing defaults.
• Regulatory or accounting changes affecting guarantee reserve recognition and capital requirements.
• Operational risk in underwriting/monitoring counterparties and managing recoveries.

Financial Risks:

• Potential spike in claim payments leading to margin compression and earnings volatility.
• Limited disclosure of cash flows constrains visibility on cash conversion and liquidity buffers.
• Reinvestment and growth spending (SG&A) could outpace revenue if acquisition costs rise.
• Interest rate and funding environment changes (if future borrowing is used) may affect profitability.

Key Concerns:

• Negative operating leverage in the half (OI growth +5.6% vs. revenue +12.5%).
• Absence of cash flow data prevents verification of earnings quality and FCF.
• Lack of dividend data precludes payout sustainability analysis.
• Unspecified composition of liabilities and debt makes solvency metrics less precise.

Investment Implications

Key Takeaways:

• Top-line growth remained solid at +12.5% YoY with high gross and operating margins.
• ROE of 7.35% reflects strong net margin but conservative leverage and moderate asset turnover.
• Operating leverage softened; cost discipline and claim costs are key to margin durability.
• Balance sheet appears conservative with an implied equity ratio near 79% and strong liquidity.
• Data gaps on cash flows and dividends limit assessment of cash conversion and capital returns.

Metrics to Watch:

• Claim/loss ratio and provision movements within cost of sales.
• Operating margin and SG&A-to-revenue ratio for signs of cost normalization.
• Guarantee balance outstanding and fee yield (pricing) to gauge growth sustainability.
• ROE and ROA trends relative to capital deployment and leverage.
• Operating cash flow, free cash flow, and working capital movements when disclosed.
• Dividend policy (DPS, payout target) and capital allocation intentions.

Relative Positioning: Within Japanese financial services and specialty guarantee peers, the company exhibits above-average margins and conservative capitalization, translating into stable ROA and mid-single-digit ROE; near-term relative performance hinges on managing claim costs and restoring operating leverage while maintaining growth.

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