West Japan Railway Company FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥871.83B
• Operating Income: ¥122.93B
• Net Income: ¥70.82B
• EPS: ¥187.27

Income Statement

Balance Sheet

Cash Flow Statement

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

West Japan Railway (JR West, 9021) reported solid FY2026 Q2 consolidated results under JGAAP, with revenue of ¥871.8bn (+7.4% YoY), operating income of ¥122.9bn (+17.3% YoY), and net income of ¥86.7bn (+24.4% YoY). The stronger growth in operating and net income relative to revenue indicates meaningful operating leverage and margin expansion in the period. DuPont-calculated ROE stands at 6.68%, supported by a 9.95% net margin, 0.231x asset turnover, and 2.91x financial leverage. EBITDA reached ¥204.8bn, translating to a 23.5% EBITDA margin, which is healthy for an asset-intensive railway operator. Interest coverage of 12.7x evidences ample headroom against interest costs despite a leveraged balance sheet structure (debt-to-equity 1.90x). Liquidity is tighter, with a current ratio of 88.4% and a quick ratio of 62.4%, and working capital is negative at ¥-81.2bn, consistent with transport operators’ liability-heavy current structures but still a monitoring point. Operating cash flow of ¥98.1bn exceeded net income (OCF/NI = 1.13), indicating reasonable earnings-to-cash conversion in the half; however, this is an interim snapshot and may be influenced by seasonal working capital. Investing cash flow is not disclosed in this dataset, which limits visibility into capex intensity and free cash flow; the “0” values are placeholders for undisclosed items, not actual zero. Equity ratio is also undisclosed in this extract, so solvency must be inferred from liabilities-to-equity and coverage metrics. Effective tax rate appears as 0.0% in the calculated metrics, but tax expense of ¥30.4bn is provided; thus, the reported effective tax rate is not usable from the “0.0%” figure. Dividend per share and payout are undisclosed here; financing cash outflow of ¥129.4bn suggests outlays for debt service and/or shareholder returns, but the split cannot be determined from the provided data. Overall, profitability momentum is favorable, cash generation aligns with earnings quality, and interest coverage is strong, while liquidity is tight and capex visibility is limited due to the absence of investing cash flow disclosure. Given the capital-intensive nature of rail operations and the large depreciation base (¥81.9bn in the half), sustained capex needs should be assumed even though not reported here. Outlook hinges on passenger demand normalization, retail/real estate ancillary profitability, and disciplined cost control to preserve margin gains. The leverage profile is manageable under current earnings power, but refinancing and rate risks remain relevant. Data omissions (gross profit, C&E, equity ratio, investing CF, DPS, shares) temper the completeness of the analysis; conclusions are drawn only from disclosed non-zero items.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 9.95% (NI ¥86.7bn / Revenue ¥871.8bn)
• asset_turnover: 0.231x (Revenue ¥871.8bn / Total Assets ¥3,775.0bn)
• financial_leverage: 2.91x (Assets ¥3,775.0bn / Equity ¥1,298.9bn)
• calculated_ROE: 6.68% (matches provided DuPont ROE) margin_quality:
• operating_margin: 14.1% (Operating income ¥122.9bn / Revenue ¥871.8bn)
• EBITDA_margin: 23.5% (EBITDA ¥204.8bn / Revenue ¥871.8bn)
• tax_burden_and_interest_burden: Tax burden ~0.753 (NI ¥86.7bn / pre-tax proxy ¥115.1bn); Interest burden ~0.937 (Ordinary income ¥115.1bn / Operating income ¥122.9bn), indicating limited drag from financing costs.
• notes: Gross profit not disclosed under JGAAP presentation for this period; analysis relies on operating and EBITDA margins. operating_leverage: Evidence of operating leverage with revenue +7.4% YoY vs operating income +17.3% YoY and net income +24.4% YoY; fixed-cost dilution likely supported margin expansion.

Growth Assessment

revenue_sustainability: Top-line growth of +7.4% YoY suggests steady recovery/expansion in core rail and ancillary businesses; sustainability will depend on passenger demand trends and non-transport segments. profit_quality: Profit growth outpaced revenue, reflecting cost control and price/mix. Interest coverage of 12.7x and OCF/NI of 1.13 support underlying quality. outlook: If demand normalization persists and cost discipline holds, mid-teens operating margins could be defensible; however, seasonality and interim timing warrant caution. Monitoring fare mix, ridership, and retail/real estate contributions is key.

Financial Health

liquidity:

• current_ratio: 88.4% (CA ¥617.3bn / CL ¥698.6bn)
• quick_ratio: 62.4% ((CA − Inventories) ¥436.2bn / CL ¥698.6bn)
• working_capital: ¥-81.2bn
• commentary: Sub-1.0 current ratio and negative working capital are common in transport but reduce near-term flexibility; reliance on stable operating cash inflows is implied. solvency_and_capital_structure:
• total_assets: ¥3,775.0bn
• total_liabilities: ¥2,472.2bn
• total_equity: ¥1,298.9bn
• debt_to_equity: 1.90x (proxy for leverage given liabilities include debt and other obligations)
• interest_coverage: 12.7x (Operating income / Interest expense)
• equity_ratio: Not disclosed in this dataset (0.0% placeholder).

Cash Flow Quality

earnings_to_cash_conversion: OCF/NI = 1.13 (¥98.1bn / ¥86.7bn), indicating reasonable conversion in the half. free_cash_flow: Not assessable from provided data; investing cash flow is undisclosed (reported as 0 placeholder). working_capital_dynamics: Negative working capital structure likely supports cash generation in steady-state, but interim OCF can be volatile due to seasonality and timing of payables/receivables. additional_notes: Depreciation of ¥81.9bn in the half highlights capital intensity; maintenance and growth capex are expected but not disclosed here.

Dividend Sustainability

payout_ratio_assessment: Payout ratio is shown as 0.0% due to undisclosed DPS; cannot infer actual payouts from this dataset. FCF_coverage: FCF not computable without investing cash flows; coverage assessment unavailable. policy_outlook: With NI of ¥86.7bn and OCF of ¥98.1bn in the half, internal capacity for shareholder returns appears supported by earnings, but visibility is limited by missing capex and DPS data. Any assessment should be revisited when full cash flow and dividend disclosures are available.

Risk Assessment

Business Risks:

• Passenger demand variability due to macro conditions, tourism flows, and external shocks.
• Regulatory and fare-setting constraints inherent to rail operations.
• Operational disruptions from accidents, natural disasters, and weather events in the service region.
• Input cost pressures (energy, maintenance materials) impacting margins.
• Execution risks in non-transport segments (retail, real estate) that affect consolidated profitability.

Financial Risks:

• Tight liquidity metrics (current ratio 88.4%, quick ratio 62.4%).
• Leverage exposure (debt-to-equity 1.90x) and refinancing/rate risk.
• Capex intensity and asset renewal needs amid undisclosed investing cash flows.
• Potential working capital swings affecting interim OCF.
• Dependence on sustained interest coverage to buffer against rate increases.

Key Concerns:

• Limited visibility on capex and free cash flow due to undisclosed investing cash flows.
• Sub-1.0 current ratio and negative working capital requiring ongoing OCF support.
• Equity ratio and cash balance not disclosed, constraining solvency and liquidity assessment granularity.

Investment Implications

Key Takeaways:

• Revenue growth of +7.4% YoY translated into disproportionate operating (+17.3%) and net (+24.4%) income growth, evidencing operating leverage.
• ROE at 6.68% is driven by solid margins, modest asset turnover, and higher financial leverage.
• Interest coverage of 12.7x indicates manageable financing burden despite leverage.
• Liquidity is tight (current ratio 88.4%, quick ratio 62.4%) and should be monitored.
• Earnings-to-cash conversion is reasonable (OCF/NI 1.13), but FCF is unassessable due to missing investing CF.
• Large depreciation (¥81.9bn) underscores structural capex needs; visibility pending investing CF disclosure.

Metrics to Watch:

• Ridership volumes and passenger revenue mix (commuter vs. leisure).
• Operating margin trajectory and cost inflation (energy and maintenance).
• Capex/investing cash flows and resultant free cash flow.
• Net debt and interest coverage amid interest rate environment.
• Working capital movements and seasonality impacts on OCF.
• Dividend announcements and payout policy updates.

Relative Positioning: Within domestic rail peers, JR West demonstrates improving operating leverage and solid coverage metrics, alongside a typical asset-intensive balance sheet with tighter liquidity; full comparative positioning requires disclosure of investing cash flows, cash balance, and dividend data.

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