Daiichi Koutsu Sangyo Co., Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥46.41B
• Operating Income: ¥669M
• Net Income: ¥544M
• EPS: ¥13.46

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

Daiichi Koutsu Sangyo (9035) reported modest top-line growth in FY2026 Q2 with revenue of ¥46.41bn (+1.5% YoY), but profitability remained thin and earnings declined at the bottom line. Gross profit of ¥6.486bn implies a gross margin of 14.0%, while operating income was ¥669m (+0.2% YoY), reflecting limited operating leverage in the period. Ordinary income of ¥932m exceeded operating profit, indicating positive non-operating contributions that more than offset sizable interest costs, yet net income fell 13.9% YoY to ¥460m due to higher below-the-line charges and taxes. Operating margin stood at about 1.4% and EBITDA margin at 5.0%, both indicative of a high-cost operating model characteristic of the taxi and mobility services sector. Leverage remains elevated: total liabilities of ¥146.1bn against equity of ¥44.54bn imply a debt-to-equity ratio of 3.28x and assets/equity (financial leverage) of 4.49x. Despite high leverage, liquidity looks adequate on reported figures, with current assets of ¥93.19bn and current liabilities of ¥59.91bn yielding a current ratio of 155.6% and working capital of ¥33.28bn. Interest expense of ¥506m kept interest coverage tight at 1.3x (operating income basis), underscoring sensitivity to financing costs. Cash generation was solid: operating cash flow (OCF) of ¥2.794bn implies strong cash conversion (OCF/Net Income 6.07x), aided by non-cash charges (¥1.656bn depreciation) and likely working capital tailwinds. Free cash flow cannot be assessed because investing cash flows were not disclosed; the reported FCF of 0 should be treated as “not available” rather than zero. DuPont analysis shows ROE of 1.03% composed of a 0.99% net margin, 0.232x asset turnover, and 4.49x financial leverage—returns are currently constrained mainly by low margins and modest asset efficiency. The gap between ordinary and operating income suggests recurring non-operating supports (e.g., subsidies, asset-related or equity-method income) that partially mitigate interest burden, but reliance on such items adds earnings variability. Dividend information was not disclosed (DPS reported as 0.00), thus payout and FCF coverage cannot be evaluated for this half-year. With the taxi market facing driver shortages, wage pressures, and fuel and maintenance cost inflation, incremental pricing and utilization gains will be required to translate revenue growth into operating profit expansion. Overall, the business shows stable but low-margin operations, adequate liquidity, elevated leverage, and good cash conversion in the half, with bottom-line pressure and limited interest coverage remaining key constraints. Seasonality and potential demand recovery in the second half could help, but sustained margin improvement and deleveraging are needed to lift ROE. Data limitations—especially around investing cash flows, cash balance, and dividend details—temper the depth of conclusions.

Profitability Analysis

ROE_decomposition: ROE 1.03% = Net Profit Margin 0.99% × Asset Turnover 0.232 × Financial Leverage 4.49. The weak ROE primarily reflects a very thin net margin and modest asset turnover, partly offset by high leverage. margin_quality: Gross margin 14.0% and EBITDA margin 5.0% indicate a cost-heavy model. Operating margin ~1.4% remained essentially flat YoY (+0.2% OI growth vs +1.5% revenue), suggesting limited operating leverage in the period. The ordinary profit above operating profit indicates supportive non-operating items offsetting interest expense, but net income declined 13.9% due to taxes/minorities/other below-the-line items. operating_leverage: Revenue +1.5% YoY vs operating income +0.2% indicates low operating leverage. Wage inflation, fuel, maintenance, and insurance likely absorbed top-line gains. Depreciation (¥1.656bn) relative to EBITDA (¥2.325bn) also caps incremental operating flow-through.

Growth Assessment

revenue_sustainability: Top-line grew 1.5% YoY to ¥46.41bn, consistent with steady demand but not indicative of strong volume or pricing acceleration. Taxi demand normalization appears gradual. profit_quality: Ordinary income (¥932m) reliance suggests non-operating supports (e.g., subsidies or investment income) remain relevant. Interest expense (¥506m) consumes a large portion of operating profit, constraining net income growth. outlook: Absent cost relief or stronger utilization/fare growth, margin expansion may be limited. H2 seasonality and potential continued demand recovery could aid revenue, but earnings trajectory hinges on cost control, fleet efficiency, and financing costs.

Financial Health

liquidity: Current assets ¥93.19bn vs current liabilities ¥59.91bn yield a current ratio of 155.6% and working capital of ¥33.28bn, indicating comfortable near-term liquidity on reported figures. Quick ratio equals current ratio due to undisclosed inventories. solvency: Total liabilities ¥146.15bn vs equity ¥44.54bn produce a debt-to-equity ratio of 3.28x and implied equity-to-asset ratio near 22% (equity ¥44.54bn / assets ¥200.00bn). Interest coverage is tight at 1.3x, signaling sensitivity to rate or earnings shocks. capital_structure: High leverage (assets/equity 4.49x) supports asset intensity but depresses ROE given low margins. Financing CF was -¥1.91bn (likely debt service), suggesting ongoing balance sheet discipline but continued dependency on external funding.

Cash Flow Quality

earnings_quality: OCF of ¥2.794bn vs net income of ¥460m (OCF/NI 6.07x) indicates strong cash conversion, supported by significant depreciation (¥1.656bn) and likely working capital inflows. FCF_analysis: Investing CF was not disclosed; thus free cash flow cannot be determined. The reported FCF of 0 should be interpreted as ‘not available,’ not zero, especially for an asset-heavy fleet business where capex is normally material. working_capital: Positive OCF suggests working capital contributed in the half, but the durability is unclear without detail on receivables/payables. Monitoring cash collection cycles and fuel/parts payables is important given thin margins.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are not disclosed (shown as 0.00). With net income of ¥460m in H1, any payout assessment would be speculative without full-year guidance and policy disclosure. FCF_coverage: Not assessable due to undisclosed investing cash flows; reported FCF of 0 should not be treated as actual zero. policy_outlook: Given tight interest coverage and elevated leverage, a conservative dividend stance would be consistent with balance sheet priorities, but no formal policy information was provided for this period.

Risk Assessment

Business Risks:

• Driver shortages and wage inflation impacting service capacity and cost structure
• Fuel and maintenance cost volatility compressing margins
• Regulatory changes in ride-hailing/dispatch systems affecting competitive dynamics
• Demand sensitivity to macroeconomic conditions and tourism flows
• Aging fleet requiring recurring capex to maintain service quality and compliance
• Operational risks including accidents, litigation, and insurance costs

Financial Risks:

• High leverage (D/E 3.28x) with tight interest coverage (1.3x)
• Refinancing risk and interest rate sensitivity given large liability base
• Reliance on non-operating income to support ordinary profit
• Potential working capital reversals reducing cash conversion
• Limited margin buffer to absorb shocks

Key Concerns:

• Sustained thin operating margin (~1.4%) despite modest revenue growth
• Net income decline (-13.9% YoY) amid rising financing and tax burden
• Inability to assess capex and FCF due to undisclosed investing cash flows

Investment Implications

Key Takeaways:

• Top-line grew modestly (+1.5% YoY) but operating profit was essentially flat, highlighting limited operating leverage.
• ROE is low at 1.03%, constrained by thin margins and modest asset turnover despite high financial leverage.
• Interest burden remains heavy (interest coverage 1.3x), keeping earnings sensitive to rate and profit swings.
• OCF was strong (¥2.794bn; OCF/NI 6.07x), but FCF cannot be judged without capex disclosure.
• Liquidity appears adequate (current ratio 155.6%), but leverage is elevated (D/E 3.28x).

Metrics to Watch:

• Fare revenue per vehicle and utilization/dispatch efficiency
• Labor cost ratio and progress on driver recruitment/retention
• Fuel and maintenance cost trends and pass-through pricing
• Interest coverage and effective borrowing costs
• Capex and fleet renewal pace (to infer true FCF and future maintenance burden)
• Ordinary income composition (recurring vs. one-off non-operating items)
• Working capital movements and OCF sustainability
• ROE trajectory via margin and asset turnover improvements

Relative Positioning: Within domestic mobility and taxi operators, the company exhibits typical thin operating margins but comparatively high leverage, resulting in low ROE and tight interest coverage; liquidity is stronger than some smaller peers, while cash conversion this half was solid, though true FCF competitiveness cannot be gauged absent capex 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
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