MIRARTH HOLDINGS,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥56.56B
• Operating Income: ¥12M
• Net Income: ¥-782M
• EPS: ¥-6.46

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

Verdict: Weak quarter with sharp revenue decline, near-breakeven operations, and a net loss driven by heavy interest burden. Revenue fell 34.5% YoY to 565.61, with gross profit of 130.41 and a gross margin of 23.1%. SG&A of 130.28 absorbed virtually all gross profit, yielding operating income of just 0.12 (down 99.7% YoY). The operating margin dropped to roughly 2 bps, indicating a severe contraction from last year’s level. Non-operating income of 5.38 was overwhelmed by non-operating expenses of 21.49, mainly interest expense of 19.53, pushing ordinary income to -15.98. Profit before tax was -12.83 and net income -8.78, implying a net margin of -1.6%. Interest coverage is extremely weak at 0.01x, highlighting elevated debt-service risk. The balance sheet shows total assets of 4,004.72 and equity of 859.87, implying high financial leverage (D/E 3.66x, assets/equity 4.66x). Liquidity is adequate on headline metrics (current ratio 163.8%), but short-term loans of 679.44 exceed cash and receivables (420.16), suggesting reliance on inventory monetization and refinancing. DuPont ROE is -1.0% (NPM -1.6%, asset turnover 0.141x, leverage 4.66x), with negative profitability the dominant drag. Ordinary income improved YoY on a percentage basis (+155.9%), but remains in loss, indicating that the improvement reflects a smaller deficit rather than fundamental recovery. EPS (basic) is -6.46 JPY while diluted EPS is 16.33 JPY; this asymmetry likely stems from method differences under JGAAP or instrument effects and warrants caution in interpretation. Cash flow statements were not disclosed, preventing assessment of earnings quality (OCF/NI) and FCF coverage for dividends or capex. Forward-looking, the company must restore operating margins and reduce financing costs or leverage; absent these, losses and refinancing risk could persist. With project-based businesses, timing of handovers can swing quarterly results; however, the magnitude of the operating margin collapse and high interest burden are core issues.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = (-1.6%) × 0.141 × 4.66 ≈ -1.0%. The largest driver of deterioration is Net Profit Margin, as operating profit collapsed to near zero and interest expense pushed ordinary income and net income into loss. Asset turnover is low at 0.141x, consistent with a balance sheet-heavy, project-cycle model typical of real estate and energy development; it likely fell with the 34.5% revenue decline. Financial leverage is high (4.66x assets/equity), which magnifies the impact of negative margins on ROE. Business reason: revenue timing and mix weakened, SG&A did not flex down with gross profit, and higher interest expense (19.53) overwhelmed limited operating earnings. Sustainability: the margin compression appears cyclical/timing-related in part (project delivery shifts), but the interest burden is structural unless leverage is reduced or borrowing costs fall; thus, ROE pressure can persist. Concerning trends: SG&A nearly equaled gross profit (130.28 vs 130.41), implying minimal operating leverage benefits and cost rigidity; revenue fell 34.5% YoY, indicating negative operating leverage.

Growth Assessment

Top-line declined 34.5% YoY to 565.61, suggesting weaker project deliveries or slower sales in core segments. Gross margin printed at 23.1%, but operating margin was essentially zero due to SG&A absorption, indicating that growth has not translated into earnings this period. Ordinary income remained negative despite a YoY percentage improvement, reflecting a smaller loss rather than true growth. Profit quality is weak as net losses stem not only from timing but from heavy interest costs; absent volume recovery and cost control, profitability recovery is challenged. Near-term outlook hinges on the delivery pipeline in 2H, pricing in property and energy assets, and refinancing terms. If 2H handovers normalize, revenue could recover, but the interest burden will cap earnings unless deleveraging occurs. No disclosure on order backlog or segment splits limits visibility; growth sustainability cannot be confirmed without these. Overall, earnings growth trajectory is impaired until margin and financing cost issues are addressed.

Financial Health

Liquidity: Current ratio is 163.8% (healthy), and working capital is 911.07. Quick ratio equals the current ratio in the disclosed data set (163.8%), but inventories are unreported; given the business model, inventories are likely material and would reduce the true quick ratio. Maturity and funding: Short-term loans are 679.44 versus cash and deposits of 368.32 and receivables of 51.84; thus, short-term debt exceeds immediately liquid assets, implying reliance on inventory monetization/refinancing. Solvency: Total liabilities 3,144.85 vs equity 859.87 implies D/E 3.66x (warning). Long-term loans are 1,583.63, with significant interest expense (19.53) and an interest coverage of 0.01x (severe strain). No off-balance sheet obligations were disclosed in the provided data; however, sponsors of property/renewable projects may have guarantees or commitments not captured here (data limitation). No explicit covenant data or debt maturity ladder provided, increasing uncertainty on refinancing risk.

Cash Flow Quality

OCF, investing CF, and FCF are unreported, so OCF/Net Income and FCF coverage cannot be assessed. This is a key limitation, particularly given negative net income and high leverage. Earnings quality flags: interest coverage at 0.01x suggests earnings are insufficient to service debt from operations in this quarter. Working capital signals are mixed: receivables are modest (51.84) and cash 368.32, but inventories are unreported and likely significant; potential reliance on inventory conversion raises timing risk. Absent OCF disclosure, we cannot confirm whether earnings shortfall is offset by positive OCF from deliveries; hence, dividend and capex sustainability cannot be verified.

Dividend Sustainability

The calculated payout ratio is -479.4%, implying dividends despite a net loss; however, DPS and total dividends paid are unreported in this period, so this figure may reflect prior policy rather than actual cash outflow. With operating income near zero, a net loss (-8.78), and interest coverage at 0.01x, internal coverage is weak. FCF coverage is not calculable due to missing OCF/capex. Balance sheet leverage is high (D/E 3.66x), which typically pressures dividend flexibility under JGAAP lender covenants. Sustainability therefore depends on a 2H recovery in deliveries and cash generation; without that, capacity to maintain prior dividends would be at risk. Policy details are not disclosed in the dataset; management stance cannot be inferred.

Risk Assessment

Business Risks:

• Project timing risk: revenue and profit depend on delivery schedules; a 34.5% YoY revenue decline shows high volatility.
• Margin pressure: SG&A nearly equals gross profit, leaving negligible operating margin.
• Market cycle risk: exposure to real estate demand, pricing, and sales velocity; potential slowdown would weigh on earnings.
• Regulatory/renewable exposure: if involved in solar/renewables, changes to FIT/market prices can impact returns.

Financial Risks:

• High leverage: D/E 3.66x and assets/equity 4.66x increase earnings volatility and covenant/refinancing risk.
• Debt service capacity: interest coverage at 0.01x indicates insufficient operating earnings to cover interest.
• Refinancing risk: short-term loans (679.44) exceed immediately liquid assets (cash+AR 420.16), relying on rollovers or asset sales.
• Interest rate risk: higher rates would further pressure interest expense and profitability.

Key Concerns:

• Sustained ordinary loss (-15.98) despite YoY percentage improvement.
• EPS inconsistency: basic EPS negative while diluted EPS positive suggests complexities in instruments/calculation; monitor clarity.
• Lack of cash flow disclosure obscures earnings quality and dividend capacity.
• Potential hidden inventory risk (unreported inventories) affecting liquidity and valuation.

Investment Implications

Key Takeaways:

• Revenue down 34.5% YoY; operating income nearly zero at 0.12.
• Operating margin compressed to ~0.02%, down by roughly 460 bps versus estimated prior year.
• Ordinary and net losses driven by high interest expense (19.53).
• Leverage is high (D/E 3.66x); interest coverage 0.01x signals acute debt-service strain.
• Liquidity headline metrics look adequate (current ratio 163.8%), but ST debt coverage by cash/AR is thin.
• ROE -1.0% driven by negative margins despite high leverage.
• Cash flow data are missing; dividend capacity cannot be verified.

Metrics to Watch:

• 2H delivery pipeline and contracted sales backlog.
• Operating margin recovery and SG&A control versus gross profit.
• Interest expense trajectory and refinancing terms/maturity ladder.
• Operating cash flow, free cash flow, and working capital movements (especially inventories).
• Debt reduction plans, asset sales, or equity measures to de-lever.
• Segment mix (real estate vs energy) and gross margins by segment.

Relative Positioning: Within Japan-listed real estate/asset development peers, MIRARTH’s leverage is elevated and interest coverage considerably weaker than sector medians, while revenue volatility and near-zero operating margin place it in the lower quartile on earnings resilience for this quarter.

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