Keio Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Operating Income: ¥31.48B
• Net Income: ¥25.21B
• EPS: ¥183.67

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

Keio Corporation (TSE:9008) reported FY2026 Q2 consolidated results under JGAAP with operating income of ¥31.485 billion, down 0.8% year on year, indicating largely stable core operations with slight pressure on operating margins. Ordinary income was ¥30.689 billion, below operating income by ¥0.796 billion, suggesting net non-operating expenses mainly from interest costs. Net income declined 13.5% YoY to ¥21.722 billion, a larger drop than operating income, implying pressure from non-operating items and/or tax normalization versus the prior year. EPS was ¥183.67, though outstanding shares data were not disclosed in the XBRL extract. While revenues and gross profit were not disclosed, the operating income and ordinary income suggest transportation and non-transport segments remained profitable through the half. Interest expense was ¥1.828 billion, and with an interest coverage ratio of 17.2x, the company maintains robust capacity to service debt from operating earnings. Using net income and taxes reported, the implied effective tax rate is approximately 24.0%, not 0.0% as shown in the auto-calculated metrics that were affected by missing data. The balance sheet shows total assets of ¥1,136.663 billion, total liabilities of ¥707.831 billion, and total equity of ¥438.471 billion; this implies an equity ratio around 38.6%, despite the reported 0.0% (an artifact of unreported fields). Financial leverage (assets/equity) is 2.59x, typical for capital-intensive railway operators. Liquidity appears tight on a current basis with a current ratio of 88.0% and quick ratio of 75.2%, and working capital of –¥36.149 billion; however, this can be structurally common in Japanese private railways with stable fare cash inflows. Cash flow statements were not disclosed, limiting assessment of earnings-to-cash conversion and free cash flow coverage. Dividend details were also not disclosed in this extract; historically, sector peers target steady dividends, but current payout capacity cannot be verified without cash flow and board policy updates. Inventory stands at ¥38.908 billion, reflecting exposure to retail/merchandising operations alongside core rail and real estate. Overall, profitability is resilient at the operating level with modest YoY decline, but net income softness and tight current liquidity warrant monitoring. The capital structure is moderate with D/E of 1.61x and ample interest coverage. Outlook hinges on passenger demand, non-transport earnings normalization, cost control (energy and wages), and capex cadence. Data limitations (notably revenue, cash flows, and dividends) constrain precision; conclusions below focus on disclosed, non-zero datapoints and reasonable inferences for a half-year period.

Profitability Analysis

ROE decomposition is constrained by missing revenue and average equity. Using period-end equity as a proxy and treating the reported net income as a half-year figure, annualized net income would be ~¥43.4 billion, implying an annualized ROE around ~9.9% (¥43.4b / ¥438.5b), versus a half-year simple ROE proxy of ~5.0%. Financial leverage is 2.59x (assets/equity = ¥1,136.7b / ¥438.5b). Net margin and asset turnover cannot be computed due to undisclosed revenue; thus, DuPont margin and efficiency legs are not assessable. Operating leverage appears moderate: operating income slipped 0.8% YoY while net income fell 13.5% YoY, indicating negative mix/non-operating swings rather than severe operating deleverage in the half. Ordinary income trails operating income by ~¥0.8 billion, broadly consistent with net interest expense after considering ¥1.828 billion interest expense and potential non-operating gains. Implied effective tax rate is ~24.0% (¥6.866b / (¥21.722b + ¥6.866b)), which likely contributed to the larger decline in net income relative to operating income. Interest coverage is strong at 17.2x, demonstrating robust EBIT relative to financing costs. Margin quality cannot be fully evaluated without revenue/COGS; however, stable operating income suggests underlying demand and cost control remained intact despite sector cost headwinds (energy, labor).

Growth Assessment

Operating income of ¥31.485 billion declined only 0.8% YoY, indicating a largely flat trajectory in core earnings. Net income fell 13.5% YoY to ¥21.722 billion, suggesting either normalization of prior-year one-time items, higher non-operating expenses, or a higher effective tax burden in the current period. Ordinary income at ¥30.689 billion also points to stable recurring profitability with some non-operating drag versus operating income. With revenue unreported, we cannot quantify top-line growth or segment trends (transportation vs. real estate/retail/hotels). That said, the modest change in operating income indicates that demand recovery or stable commuter flows likely supported earnings, while cost pressures or mix may have capped upside. Interest costs of ¥1.828 billion highlight ongoing financing burden amidst capital intensity. Looking forward, sustainability of operating income will depend on passenger volume trends, fare mix, tourism recovery, and non-transport segment performance, alongside energy and wage cost trajectories. Absent revenue data, we refrain from margin growth estimates; however, the earnings profile appears resilient. Near-term outlook is cautiously stable pending more detailed disclosures on revenue and cash flows. The company’s asset base (¥1.14 trillion) provides earnings capacity via real estate and associated businesses, but also necessitates steady capex and financing, which may temper net profit growth.

Financial Health

Liquidity: current assets ¥266.341 billion vs. current liabilities ¥302.490 billion yields a current ratio of 88.0% and quick ratio of 75.2%, indicating tight short-term liquidity and negative working capital of –¥36.149 billion. For private railways with predictable cash inflows, sub-1.0x current ratios can be manageable, but refinancing and seasonality should be monitored. Solvency: total liabilities ¥707.831 billion and equity ¥438.471 billion imply D/E of 1.61x and an equity ratio around 38.6%. This is a moderate leverage profile for the sector. Interest coverage of 17.2x suggests low near-term default risk. Capital structure: financial leverage (A/E) is 2.59x; sustained capex needs could increase leverage cyclically. Asset base: total assets ¥1,136.663 billion with inventories of ¥38.908 billion reflect diversified operations (transport, retail/real estate). Overall, balance sheet strength is adequate with comfortable solvency but tighter liquidity.

Cash Flow Quality

Operating, investing, and financing cash flows were not disclosed in this extract, so standard earnings quality tests (OCF/NI, accruals, working-capital drag, and FCF conversion) cannot be performed. The auto-calculated OCF/NI ratio of 0.00 and FCF of 0 are artifacts of missing data, not economic reality. Qualitatively, interest coverage of 17.2x indicates EBIT comfortably covers cash interest, but without OCF we cannot verify cash realization of earnings. Working capital is negative (–¥36.149 billion), which can aid cash generation if structurally funded by payables and advances; conversely, it can elevate refinancing needs if conditions tighten. Until cash flow statements are available, we treat earnings quality as unverified and FCF coverage of dividends as unknown.

Dividend Sustainability

Dividend per share and payout ratios are not disclosed here; the 0.00 values are placeholders due to missing data. With EPS at ¥183.67 for the half, theoretical capacity for distributions exists, but sustainability must be assessed against cash flow generation, capex requirements, and policy. Without OCF/FCF and board guidance, we cannot assess payout ratio or FCF coverage. Sector practice among private railways favors stable dividends aligned with medium-term earnings and capex cycles. For now, dividend outlook is indeterminate; confirmation awaits full cash flow and dividend policy disclosure for FY2026.

Risk Assessment

Business Risks:

• Passenger demand volatility (commuter and tourism), including macro and pandemic-related sensitivities
• Energy and electricity cost inflation impacting rail operations
• Wage and subcontracting cost pressures affecting operating margins
• Retail/merchandising and hotel segment cyclicality, inventory risks, and mall/tenant health
• Real estate development and leasing cycles, vacancy risk
• Regulatory and fare revision constraints in the rail business
• Natural disasters and service disruptions affecting ridership and assets
• Competition from remote work trends reducing commuter volumes

Financial Risks:

• Tight current liquidity (current ratio 88.0%, quick ratio 75.2%) and negative working capital (–¥36.149 billion)
• Interest rate and refinancing risk given capital intensity and D/E of 1.61x
• Capex requirements for rolling stock, safety, and infrastructure, potentially elevating leverage
• Potential asset impairment risk in non-core segments during downturns
• Limited visibility on cash flow generation due to undisclosed OCF/FCF
• Tax rate variability affecting net income

Key Concerns:

• Net income decline (–13.5% YoY) outpacing operating income (–0.8% YoY), implying non-operating or tax headwinds
• Liquidity below 1.0x current ratio requiring careful cash and liability management
• Absence of revenue and cash flow disclosures in this period’s extract hampering margin and FCF assessment

Investment Implications

Key Takeaways:

• Core operations stable: operating income ¥31.485 billion, down only 0.8% YoY
• Net income softness (–13.5% YoY) primarily from non-operating/tax factors
• Strong interest coverage (17.2x) mitigates financing risk despite D/E of 1.61x
• Equity ratio implied at ~38.6% (not 0.0%), indicating solid solvency
• Liquidity tight with current ratio at 88.0% and negative working capital
• Cash flow and dividend visibility limited due to undisclosed OCF/FCF and DPS

Metrics to Watch:

• Disclosure of revenue by segment and fare/passenger trends
• Operating CF and FCF to validate earnings conversion and dividend capacity
• Capex plans and funding mix; net debt trajectory
• Energy costs and wage inflation impact on operating income
• Non-operating items (interest and other) driving the ordinary-to-operating income gap
• Effective tax rate normalization versus prior year
• Liquidity buffers: cash balances and committed lines

Relative Positioning: Within Japan’s private railway peer group, Keio exhibits moderate leverage and robust interest coverage, with operating earnings resilience but tighter short-term liquidity; full assessment versus peers awaits disclosure of revenue, cash flow, and segment detail.

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