Keihan Holdings Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥144.37B
• Operating Income: ¥22.12B
• Net Income: ¥16.48B
• EPS: ¥156.60

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

Verdict: A mixed FY2026 Q2 with resilient bottom line (+1.2% YoY net income) despite softer operating and ordinary profits, underpinned by strong interest coverage but weighed by low ROIC. Revenue reached 1,443.65 (100M JPY), operating income was 221.19 (-2.8% YoY), and ordinary income was 211.23 (-6.1% YoY), indicating some pressure at the operating-to-ordinary line. Net income improved to 158.02 (+1.2% YoY), aided by a moderate effective tax rate of 25.5%. Operating margin is approximately 15.3% (operating income/revenue), while net margin stands at 10.9%. Basis point comparisons versus last year are not determinable due to missing prior-period revenue, but the decline in operating and ordinary income suggests margin compression at those levels. Earnings quality is acceptable with OCF/NI at 0.87x; this is below 1.0 but above the 0.8 risk threshold, implying moderate cash conversion. EBITDA was 337.34, implying an EBITDA margin of 23.4% and robust interest coverage of 13.28x, indicating good debt service capacity. Liquidity is healthy with a current ratio of 151.5% and quick ratio of 151.5%. Leverage is moderate-to-high with D/E at 1.70x and Debt/EBITDA at 8.23x, the latter warranting caution. ROE is 4.8% via DuPont (10.9% × 0.164 × 2.70x), reflecting strong leverage influence but constrained asset turnover typical of rail/real-estate-heavy models. ROIC of 2.8% is below a typical cost of capital, flagging capital efficiency concerns and a need for profitable project discipline. Non-operating income (12.29) was more than offset by non-operating expenses (22.25), slightly dragging ordinary income. Cash from financing (+92.08) and share repurchases (-24.00) indicate continued capital market activity; dividends were unreported but payout ratio is estimated at 27.0%, implying room for distributions. Forward-looking, sustaining net profit growth will likely depend on passenger demand, real estate cycle strength in Kansai, and disciplined capex given low ROIC. Overall, a stable yet efficiency-challenged quarter with solid liquidity and coverage, but leverage and capital returns remain the key watchpoints.

Profitability Analysis

ROE decomposition (DuPont): ROE 4.8% = Net Profit Margin 10.9% × Asset Turnover 0.164 × Financial Leverage 2.70x. The structural constraint is low asset turnover (0.164), typical for asset-heavy railway/real estate operations, while leverage (2.70x) props up ROE. The net margin of 10.9% is sound relative to rail/conglomerate peers, but operating income fell 2.8% YoY and ordinary income fell 6.1% YoY, implying pressure either from cost inflation (energy, maintenance) or higher non-operating expenses (interest and others). The biggest driver of current ROE level is financial leverage; conversely, the biggest headwind to improving ROE is weak asset turnover and low ROIC (2.8%). Business reason: rail and property require large fixed assets and long payback periods, depressing turnover and ROIC; non-operating expense (22.25) also offset non-operating income (12.29). Sustainability: low asset turnover is structural; incremental improvement would require mix shift to higher-yielding segments (e.g., real estate sales, hotels) or fare optimization. Margin outlook: with operating income down despite unknown revenue trend, operating margin likely compressed; however, net income growth (+1.2% YoY) suggests below-the-line relief (tax rate) or mix shifts. Watch for SG&A discipline (reported 247.20) relative to revenue growth; if SG&A growth outpaces revenue, operating leverage turns negative.

Growth Assessment

Top-line was 1,443.65, but YoY revenue growth is unreported, limiting growth attribution. Operating income declined 2.8% YoY and ordinary income declined 6.1% YoY, indicating some margin pressure or adverse non-operating impacts (e.g., higher interest or other expenses). Net income rose 1.2% YoY, suggesting either improved tax efficiency (effective tax rate 25.5%) or mix benefits. EBITDA margin at 23.4% is healthy and supports ongoing operations despite OI softness. The profit mix shows core operations as the main driver; non-operating income (12.29) was insufficient to offset non-operating expenses (22.25), so recurring operations still need to carry growth. Outlook hinges on passenger volumes in the Keihan corridor, inbound tourism recovery impacting hotels/leisure, and timing/recognition of real estate development sales. Given ROIC at 2.8% (<5% warning), incremental growth should be selective and returns-focused to avoid diluting capital efficiency.

Financial Health

Liquidity: Current ratio 151.5% and quick ratio 151.5% are healthy (>1.5 benchmark). No explicit warning: current ratio is not below 1.0. Working capital of 827.40 supports near-term obligations. Maturity profile: short-term loans are 574.43 versus current assets of 2,432.80, suggesting manageable near-term refinancing/liquidity risk; cash and deposits are 134.17, so liquidity relies on the broader current asset base and bank lines. Solvency: D/E is 1.70x (above the conservative 1.5 benchmark but below the 2.0 explicit warning threshold). Interest coverage is strong at 13.28x, mitigating near-term solvency concerns despite leverage. Debt/EBITDA is 8.23x, a caution level for capital-intensive sectors; sustained deleveraging or EBITDA growth would be desirable. Total assets 8,794.05, equity 3,257.39; equity ratio not provided, but implied around 37% (owners’ equity/total assets), indicating a reasonable capital buffer. No off-balance sheet obligations disclosed in the data.

Cash Flow Quality

OCF of 138.18 versus net income of 158.02 yields OCF/NI of 0.87x. This is below 1.0 but above the 0.8 risk flag; cash conversion is acceptable but not robust. Free cash flow is unreported due to missing investing CF/capex, so we cannot assess full coverage of dividends and buybacks. Financing cash flow of +92.08 and share repurchases of -24.00 indicate reliance on external funding during the half, though net leverage metrics remain serviceable given strong interest coverage. Working capital detail is not disclosed; thus, we cannot confirm whether OCF was supported by temporary payables increases or receivables timing. No clear signs of working capital manipulation can be inferred from the limited data.

Dividend Sustainability

The calculated payout ratio is 27.0%, which is comfortably below the 60% benchmark and suggests flexibility to maintain dividends if earnings are stable. FCF coverage cannot be determined due to unreported investing CF and capex. OCF (138.18) versus estimated dividends (not disclosed) and buybacks (24.00) suggests room for shareholder returns, but capex for rail and real estate could be substantial and is the key swing factor. Policy outlook likely prioritizes stable dividends typical of railway groups, contingent on steady cash generation and disciplined capex amidst low ROIC.

Risk Assessment

Business Risks:

• Passenger demand volatility in the Keihan corridor (commuter volumes and inbound tourism sensitivity).
• Real estate market cyclicality in the Kansai region affecting sales margins and inventory turns.
• Cost inflation (energy, materials, maintenance) pressuring operating margins.
• Execution risk on large capex projects with long paybacks, given ROIC at 2.8%.
• Potential disruption from natural disasters affecting rail operations and assets.

Financial Risks:

• Elevated leverage: D/E 1.70x and Debt/EBITDA 8.23x increase sensitivity to earnings downturns.
• Refinancing and interest rate exposure with short-term loans of 574.43 and ongoing funding needs.
• OCF/NI at 0.87x indicates only moderate cash conversion, leaving less buffer for capex and dividends if earnings soften.
• Non-operating expense (22.25) exceeding non-operating income (12.29) reduces ordinary income resilience.

Key Concerns:

• Capital efficiency: ROIC 2.8% is below typical WACC, risking value dilution if growth is not returns-accretive.
• Operating and ordinary profit declines (-2.8% and -6.1% YoY) point to margin pressure.
• Debt capacity: while interest coverage is strong, high Debt/EBITDA limits headroom if macro weakens.
• Data gaps (capex, investing CF, revenue YoY) constrain full assessment of FCF and margin trends.

Investment Implications

Key Takeaways:

• Stable bottom line with net income up 1.2% YoY despite softer operating/ordinary profits.
• Healthy liquidity and strong interest coverage provide near-term resilience.
• Leverage is on the higher side; Debt/EBITDA at 8.23x warrants monitoring.
• Capital efficiency is weak (ROIC 2.8%), making capex discipline critical.
• Non-operating items are a small net drag on ordinary income.

Metrics to Watch:

• Passenger volumes, hotel occupancy, and inbound tourism indicators in Kansai.
• Operating margin trajectory and SG&A growth versus revenue.
• Capex levels and project IRRs to gauge ROIC improvement potential.
• Debt/EBITDA and maturity profile (short-term loans vs liquidity sources).
• OCF/NI ratio trend and working capital movements.
• Ordinary income versus net income to detect below-the-line impacts.

Relative Positioning: Within domestic private railway and real-estate–linked peers, Keihan shows solid liquidity and coverage but below-peer capital efficiency and relatively high leverage; improving ROIC and managing leverage are key to narrowing the gap with best-in-class operators.

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