TOC Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥7.13B
• Operating Income: ¥1.05B
• Net Income: ¥1.27B
• EPS: ¥11.02

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

For FY2026 Q2 (cumulative), TOC Co., Ltd. reported solid top-line and operating profit growth but weaker cash conversion and a year-on-year decline in net income. Revenue rose 13.6% YoY to ¥7.131bn, while operating income increased 53.7% YoY to ¥1.047bn, indicating meaningful operating leverage. Gross profit came in at ¥1.614bn, implying a gross margin of 22.6%, and EBITDA was ¥1.638bn with a 23.0% margin. Ordinary income of ¥1.413bn exceeded operating income, pointing to positive non-operating contributions despite minimal interest expense of ¥6m. Net income was ¥971m, down 23.4% YoY, suggesting non-recurring items and/or a higher tax burden affected bottom-line comparability. The provided “effective tax rate” metric shows 0.0%, but using reported income tax of ¥577m and net income suggests an implied tax rate around the high-30% range, indicating the 0.0% figure is not decision-useful this period. The DuPont-based ROE is low at 0.95%, driven by modest net margin (13.62%), very low asset turnover (0.061x), and limited financial leverage (1.14x). The balance sheet is conservative, with total assets of ¥117.1bn, liabilities of ¥14.1bn, and equity of ¥102.7bn (debt-to-equity 0.14x), supporting strong solvency. Liquidity appears ample with a current ratio of 740.8% and working capital of ¥26.5bn. Cash flow from operations was negative at -¥2.021bn, resulting in an OCF/Net Income ratio of -2.08, which flags weak cash conversion and likely sizable working capital outflows in the half. Interest coverage is robust at 174.5x (EBIT/interest), reflecting minimal financial risk from interest costs. Dividend-related figures for this period are not assessable from the provided data, as zeros typically indicate non-disclosure rather than actual nulls. Several line items (e.g., equity ratio, cash balance, investing cash flows, shares outstanding) appear unreported, limiting precision on per-share metrics, FCF, and capital intensity. Overall, the period shows improving core profitability and resilient financial health, offset by negative operating cash flow and bottom-line volatility versus last year. Continued monitoring of cash conversion, non-operating income quality, and tax normalization is warranted.

Profitability Analysis

ROE_decomposition: DuPont metrics indicate Net Profit Margin 13.62% × Asset Turnover 0.061 × Financial Leverage 1.14 = ROE 0.95%. The low ROE is driven primarily by very low asset turnover, consistent with an asset-heavy real estate/ leasing profile, and modest leverage. margin_quality: Gross margin is 22.6% (¥1.614bn/¥7.131bn). EBITDA margin is 23.0% (¥1.638bn/¥7.131bn). Operating margin is 14.7% (¥1.047bn/¥7.131bn). Ordinary income exceeds operating income (¥1.413bn vs ¥1.047bn), indicating positive non-operating contributions; interest expense is only ¥6m, so the uplift likely comes from other non-operating items. Net margin is 13.62%. The YoY decline in net income despite stronger operating income suggests lower non-recurring gains and/or a higher effective tax burden versus the prior year. operating_leverage: Operating income growth of +53.7% on +13.6% revenue growth implies strong operating leverage, likely from fixed-cost absorption and better asset utilization. Depreciation of ¥591m (≈8.3% of revenue) indicates a meaningful fixed-cost base typical of property-heavy businesses, magnifying leverage when occupancy or rents improve.

Growth Assessment

revenue_sustainability: Revenue grew 13.6% YoY to ¥7.131bn. Given the business profile, growth likely reflects improved leasing performance, occupancy, or asset additions rather than volume cycling. Sustainability will depend on tenant retention, leasing spreads, and pipeline execution. profit_quality: Operating income improved to ¥1.047bn, with margin expansion to ~14.7%. Ordinary income surpassing operating income suggests reliance on non-operating gains or income, which may be less repeatable. The YoY drop in net income (-23.4%) points to normalization of one-offs and/or higher taxes. outlook: With low financial leverage and strong interest coverage, the company has capacity to pursue asset enhancements or selective growth. Near-term earnings trajectory will hinge on maintaining recent revenue momentum and converting it to cash, while limiting earnings volatility from non-operating items and taxes.

Financial Health

liquidity: Current assets of ¥30.633bn vs current liabilities of ¥4.135bn yield a current ratio of 740.8% and working capital of ¥26.498bn, indicating very strong near-term liquidity. Quick ratio is reported at 740.5%, broadly consistent with minimal inventories (¥12m). solvency: Total liabilities of ¥14.071bn vs equity of ¥102.672bn translate to a debt-to-equity ratio of 0.14x. Interest expense is low (¥6m) and interest coverage is very strong at 174.5x, underscoring low financial risk. capital_structure: The business remains equity-heavy with limited leverage (financial leverage factor of 1.14). This supports resilience but dampens ROE in the absence of higher asset turnover or margin expansion.

Cash Flow Quality

earnings_quality: OCF/Net Income is -2.08 (OCF -¥2.021bn vs NI ¥971m), indicating weak cash conversion in the half. This likely reflects working capital outflows (e.g., receivables timing, deposits, or other operating items) rather than core profitability pressures. FCF_analysis: Investing cash flow is reported as zero (likely unreported), so reliable free cash flow cannot be derived. Given negative OCF, underlying FCF for the period is likely pressured, but the magnitude is indeterminable without capex data. working_capital: The negative OCF points to material working capital absorption. With inventories negligible (¥12m), the driver is likely trade receivables, other current assets, or timing differences related to property operations.

Dividend Sustainability

payout_ratio_assessment: EPS is ¥11.02 for the half. The reported payout ratio and DPS are shown as zero, which typically indicates non-disclosure in this dataset rather than an actual zero payout. Therefore, a payout assessment cannot be made from the provided figures. FCF_coverage: Not assessable due to unreported investing CF; OCF is negative in the period, which would challenge cash coverage of dividends if sustained. policy_outlook: With a conservative balance sheet and low leverage, the company has capacity for returns; however, sustainability depends on normalized OCF and visibility on capex. No explicit dividend policy cues are available in this dataset.

Risk Assessment

Business Risks:

• Occupancy and tenant concentration risk affecting rental income stability
• Lease renewal and rent reversion risk amid macro uncertainty
• Property market cyclicality impacting valuations and transaction gains
• Execution risk on redevelopment or asset enhancement projects
• Regulatory and tax changes related to real estate and property holdings
• Natural disaster risk (earthquake/typhoon) affecting assets and operations

Financial Risks:

• Weak cash conversion this period (OCF/NI -2.08) raising near-term liquidity management needs if persistent
• Potential earnings volatility from non-operating items, given ordinary income > operating income
• Refinancing and interest rate exposure on any floating-rate debt, though current interest burden is low
• Tax rate variability affecting net income

Key Concerns:

• Negative operating cash flow of -¥2.021bn despite ¥971m net income
• Dependence on non-operating income to lift ordinary income above operating income
• Low ROE (0.95%) driven by low asset turnover (0.061x)

Investment Implications

Key Takeaways:

• Strong operating leverage: operating income +53.7% on revenue +13.6%
• Ordinary income exceeds operating income, implying meaningful non-operating contributions
• Net income down 23.4% YoY, suggesting normalization of one-offs and/or higher taxes
• Low leverage (D/E 0.14x) and high interest coverage (174.5x) support financial resilience
• OCF/NI of -2.08 highlights weak cash conversion in the half
• ROE at 0.95% constrained by very low asset turnover (0.061x)

Metrics to Watch:

• Same-property NOI growth, occupancy rates, and leasing spreads
• Operating cash flow trends and working capital movements
• Capex and redevelopment spending (to assess FCF and capital intensity)
• Composition of non-operating income and extraordinary items
• Effective tax rate normalization
• LTV (liabilities/assets), debt tenor, and interest rate exposure

Relative Positioning: Relative to typical Japanese listed real estate operators, TOC exhibits a conservative balance sheet and strong interest coverage but lower ROE due to low asset turnover; near-term results show improving operating profitability offset by weak cash conversion and bottom-line volatility.

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