Chichibu Railway Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Operating Income: ¥296M
• Net Income: ¥25M
• EPS: ¥158.86

Income Statement

Balance Sheet

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

Chichibu Railway Co., Ltd. (Consolidated, JGAAP) reported FY2026 Q2 results showing a strong rebound in profitability at the operating and bottom-line levels, despite limited disclosure of top-line and cash flow items. Operating income was ¥296 million, up 257.6% YoY, indicating significant operating turnaround and/or normalization effects. Ordinary income was ¥274 million, slightly below operating income, implying modest net non-operating expenses despite ¥25.5 million in interest costs. Net income reached ¥235 million, up 827.7% YoY, with EPS of ¥158.86. Based on the balance sheet at period-end, total assets were ¥16.84 billion and total equity ¥5.244 billion, implying a computed equity ratio of approximately 31.1% (versus the reported 0.0% placeholder) and financial leverage (A/E) of 3.21x. Liquidity remains tight: current assets of ¥2.031 billion against current liabilities of ¥3.989 billion yields a current ratio of 0.51x and working capital of -¥1.958 billion. Interest coverage is solid at 11.6x (operating income/interest expense), suggesting near-term debt service capacity despite weak liquidity. Tax expense was ¥5.37 million, implying an unusually low effective tax rate (~2–3%) for the period, likely reflecting tax loss carryforwards or specific tax adjustments. Cash flow statements are undisclosed (all zeros), limiting assessment of operating cash generation and free cash flow. Revenue and gross profit were also undisclosed in XBRL, constraining margin analysis and asset turnover assessment. Nevertheless, half-year ROA based on net income over total assets is approximately 1.4%, and half-year ROE is roughly 4.5%, indicating improving returns that could annualize to mid-to-high single digits if performance holds. The capital structure shows total liabilities of ¥11.90 billion (D/E ~2.27x), consistent with asset-heavy regional rail profiles but warranting attention given negative working capital. Dividend information is not effectively disclosed (DPS and payout appear as zeros), so we cannot assess distribution policy from this filing. Overall, results signal a recovery in core profitability and manageable solvency, offset by liquidity constraints and disclosure gaps on revenue and cash flows. Continued monitoring of demand recovery, cost inflation (energy and labor), and refinancing is key.

Profitability Analysis

ROE decomposition is constrained by missing revenue and gross profit data. Using available items: (1) Leverage: financial leverage (Assets/Equity) is 3.21x. (2) Profitability: half-year ROA (NI/Assets) ≈ 235,000,000 / 16,841,000,000 = 1.4%. This translates into a half-year ROE of ~4.5% (NI/Equity = 235,000,000 / 5,244,000,000). If sustained, full-year ROE could normalize to the high-single digit range, but this is not a forecast. Margin quality: Operating income grew 257.6% YoY with net income up 827.7% YoY, implying substantial operating leverage and/or improved mix and cost control. Ordinary income trails operating income by ¥22 million despite ¥25.5 million of interest expenses, suggesting small non-operating gains offsetting part of interest costs. Effective tax rate appears abnormally low (~2–3%), inflating net margin for the period; sustainability of this rate is uncertain. Operating leverage: The magnitude of YoY profit rebound, absent revenue disclosure, implies fixed-cost absorption benefits typical in rail and transport businesses when volumes recover. However, without sales data, we cannot isolate price/mix vs volume effects or quantify incremental margins. Overall, profitability is improving, driven by operating efficiency and leverage on fixed costs, with interest burden currently well covered.

Growth Assessment

Revenue sustainability cannot be quantified due to undisclosed sales figures. Nevertheless, the strong YoY growth in operating and net income suggests a cyclical or post-normalization upswing in demand or improved cost structure. Profit quality appears supported by a large improvement in operating income relative to interest expense, indicating expansion in core economics rather than purely non-operating items. The very low tax rate amplifies net income growth and may not persist, implying headline EPS growth could moderate if taxes normalize. Outlook considerations include regional mobility trends, fare adjustments, ancillary businesses (real estate, logistics, tourism), and cost inflation for electricity and labor. Absent segment disclosure, we assume railway and related businesses remain the primary driver. Sustainability will hinge on maintaining utilization, cost discipline, and avoiding sharp increases in energy costs. Near-term, the strong interest coverage and improving operating profit provide a base for continued recovery; however, lack of revenue and cash flow disclosure limits conviction on the durability of growth.

Financial Health

Liquidity: Current assets ¥2.031 billion vs current liabilities ¥3.989 billion results in a current ratio of 0.51x and quick ratio of ~0.50x, with negative working capital of -¥1.958 billion. This indicates tight liquidity and reliance on short-term funding lines or steady cash inflows. Solvency: Total liabilities ¥11.90 billion and equity ¥5.244 billion imply D/E of 2.27x and a computed equity ratio of ~31.1% (equity/total assets). Leverage (A/E 3.21x) is typical for capital-intensive rail but leaves limited buffer against shocks. Interest coverage is robust at 11.6x (¥296m OI / ¥25.5m interest), suggesting manageable near-term debt service. Capital structure: No cash balance disclosed; therefore, net debt cannot be assessed. With inventories small (¥34.3m), most current assets are likely receivables and cash equivalents; however, cash data are undisclosed here. Refinancing risk should be monitored given low liquidity and unknown debt maturity profile.

Cash Flow Quality

Earnings quality assessment is limited by undisclosed operating, investing, and financing cash flows (all zeros indicate not reported). Consequently, OCF/NI and free cash flow cannot be validated. Given the negative working capital position, earnings may be supported by favorable working capital dynamics in normal periods (e.g., deferred revenue or payables), but this cannot be confirmed. Depreciation is undisclosed; thus, we cannot compute EBITDA or assess cash conversion of operating profit relative to non-cash charges. Capex intensity for rail assets is typically high; without investing CF, maintenance vs growth capex split is unknown. Overall, earnings quality appears improved at the operating level, but cash flow validation is not possible from available data.

Dividend Sustainability

Dividend per share and payout ratios are not effectively disclosed in this filing (zeros reflect non-disclosure). Therefore, we cannot directly assess distribution capacity. From a fundamentals perspective, half-year net income of ¥235 million suggests potential capacity to distribute, but tight liquidity (current ratio 0.51x, negative working capital) and unknown cash balances argue for caution until cash flows are disclosed. Free cash flow coverage of dividends cannot be evaluated without OCF and capex. Policy outlook is unclear; many regional rail companies prioritize balance sheet stability and capex over high payouts. Monitoring management guidance, historical payout norms, and upcoming capex plans is essential.

Risk Assessment

Business Risks:

• Demand volatility in regional passenger and freight volumes tied to local economic activity and demographics
• Energy and electricity price inflation impacting traction power costs
• Labor cost pressures and driver shortages
• Regulatory constraints on fare adjustments and service obligations
• High fixed-cost base and asset intensity leading to operating leverage in downturns
• Natural disaster risk (typhoons, floods, earthquakes) disrupting operations and increasing repair capex
• Competition from private vehicles, buses, and remote work habits reducing commuter demand

Financial Risks:

• Tight liquidity: current ratio 0.51x and negative working capital of -¥1.958 billion
• Refinancing and interest rate risk given D/E of 2.27x and leverage (A/E 3.21x)
• Potential future normalization of the tax rate reducing net income
• Uncertain cash flow generation due to undisclosed OCF and capex
• Asset maintenance capex requirements typical for rail potentially pressuring FCF

Key Concerns:

• Lack of revenue and cash flow disclosure hampers validation of earnings quality
• Sustainability of profit rebound without visibility on volumes and pricing
• Liquidity reliance on short-term funding or steady inflows amid negative working capital

Investment Implications

Key Takeaways:

• Strong rebound in operating profit (¥296m, +257.6% YoY) and net income (¥235m, +827.7% YoY) indicates improved operating performance
• Interest coverage of 11.6x supports near-term debt service despite weak liquidity
• Computed equity ratio ~31.1% and D/E 2.27x are in line with capital-intensive rail profiles but reduce shock absorption capacity
• Liquidity is tight (current ratio 0.51x; working capital -¥1.96bn), elevating short-term risk
• Effective tax rate appears unusually low this period; normalization could temper bottom-line momentum
• Cash flow and revenue non-disclosure limit assessment of sustainability and FCF

Metrics to Watch:

• Disclosure of revenue and segment breakdown (rail, logistics, real estate, others)
• Operating cash flow, capex, and resulting free cash flow
• Debt maturity schedule, interest rate mix (fixed vs variable), and refinancing plans
• Energy cost trajectory and hedging, if any
• Passenger volumes, load factors, and fare adjustments
• Tax rate normalization and any deferred tax asset utilization
• Working capital trends and liquidity buffers (cash, committed lines)

Relative Positioning: Within Japan’s regional railway peers, leverage and computed equity ratio appear typical, profitability is recovering well, but liquidity is weaker than desired due to negative working capital and undisclosed cash balances.

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