NIKKON Holdings Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥131.91B
• Operating Income: ¥10.77B
• Net Income: ¥6.89B
• EPS: ¥59.62

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

Nippon Konpo Group Holdings (9072) delivered FY2026 Q2 consolidated results showing resilient top-line growth but margin compression and negative operating leverage. Revenue rose 9.6% YoY to ¥131.9bn, highlighting steady volume and/or pricing gains in core logistics operations. Despite the solid revenue growth, operating income declined 6.6% YoY to ¥10.8bn, with the operating margin at approximately 8.2%, indicating cost pressures outpaced revenue growth. Net income increased 6.8% YoY to ¥7.20bn, supported by high interest coverage and limited financial expenses, suggesting non-operating items and a manageable tax burden helped cushion bottom-line performance. Gross profit of ¥19.10bn (14.5% margin) and EBITDA of ¥17.65bn (13.4% margin) reflect an asset-intensive model with meaningful depreciation (¥6.88bn) and a notable gap between EBITDA and operating income. Ordinary income reached ¥11.05bn, and interest expense was modest at ¥0.21bn, generating a robust interest coverage ratio of 50.6x, indicative of conservative leverage and strong debt-servicing capacity. On the balance sheet, total assets were ¥433.2bn and total equity ¥246.6bn, implying an equity ratio of roughly 56.9% (derived from the balance sheet), consistent with a solid capital structure even though the reported equity ratio field shows 0.0% due to non-disclosure conventions. Liquidity is adequate with a current ratio of 113.5% and a quick ratio of 113.3%, reflecting low inventory intensity (inventories ¥0.15bn) typical of logistics and transportation businesses. Operating cash flow was strong at ¥14.26bn, nearly 2.0x net income, pointing to good cash conversion and healthy earnings quality in the period. However, investing cash flow and cash and equivalents were not disclosed, so free cash flow and net cash positions cannot be reliably assessed. DuPont metrics indicate a calculated ROE of 2.92% for the period, built from a net margin of 5.46%, asset turnover of 0.305, and financial leverage of 1.76—consistent with a modest-return, low-leverage profile; note that period-to-date metrics may not annualize linearly due to seasonality. The implied effective tax rate, inferred from income tax expense of ¥4.14bn and net income of ¥7.20bn, is approximately mid-30s percent, aligning with domestic norms (the reported 0.0% effective tax rate is a placeholder due to unreported pre-tax figures). Working capital stood at ¥10.37bn, supporting short-term solvency. Dividend data (DPS and payout) are unreported in the provided feed; thus, dividend sustainability and coverage cannot be quantified from this dataset, though underlying cash generation and balance sheet strength appear supportive. Overall, the company demonstrates robust financial health and cash generation but faces cost inflation and negative operating leverage, leading to operating margin pressure despite topline expansion. Key uncertainties include capex intensity (and thus true free cash flow), cash balances, and dividend policy disclosures. Given sector dynamics (labor cost inflation, fuel and energy volatility, and regulatory constraints), sustaining margin improvements will likely hinge on pricing pass-through, mix, and productivity gains.

Profitability Analysis

ROE decomposition: Net profit margin 5.46% × asset turnover 0.305 × financial leverage 1.76 yields a calculated ROE of 2.92% for the period, consistent with the reported figure. Operating margin is approximately 8.2% (¥10.77bn operating income / ¥131.91bn revenue), down YoY given operating income -6.6% versus revenue +9.6%, evidencing negative operating leverage. Gross margin of 14.5% versus EBITDA margin of 13.4% and operating margin of 8.2% indicates meaningful fixed-cost absorption and D&A intensity (¥6.88bn), typical for logistics assets (fleet, facilities). The gap between gross profit (¥19.10bn) and operating income (¥10.77bn) implies selling, general, and administrative costs around ¥8.33bn, suggesting inflationary pressures in labor and other overheads. Interest burden is light (¥0.21bn), and interest coverage is strong at 50.6x, so financial costs are not the driver of profit compression. Ordinary income (¥11.05bn) slightly above operating income underscores limited but positive non-operating contributions. Overall margin quality is moderate: good cash conversion supports earnings quality, but cost pass-through appears incomplete in the period, compressing operating margins despite higher sales.

Growth Assessment

Top-line growth of 9.6% YoY to ¥131.9bn signals healthy demand and/or pricing in core transportation and logistics services. However, operating income fell 6.6% YoY to ¥10.8bn, indicating cost growth outpaced revenue growth—consistent with labor cost pressures, fuel/utility volatility, and regulatory constraints impacting productivity. Net income increased 6.8% YoY to ¥7.20bn, supported by benign financial expenses and likely stable tax dynamics, masking weaker operating leverage at the operating level. The EBITDA of ¥17.65bn provides a buffer, but the D&A load highlights ongoing asset intensity that may require sustained capex to support growth. Revenue sustainability will depend on contract pricing, fuel surcharge mechanisms, and network utilization; early signs are positive on volume/pricing, but cost management will be critical to translate sales to profit. Profit quality looks reasonable given OCF of ¥14.26bn exceeds net income by ~1.98x, although without investing CF we cannot confirm free cash flow growth. Outlook hinges on improved pass-through of costs, disciplined capex, and productivity gains to arrest operating margin compression while maintaining growth.

Financial Health

Balance sheet strength appears solid with total equity of ¥246.6bn against total assets of ¥433.2bn, implying an equity ratio of approximately 56.9% (derived). Total liabilities of ¥179.1bn translate to a debt-to-equity ratio of ~0.73x (using total liabilities as a proxy for debt under data limitations), indicating conservative leverage. Liquidity is adequate: current assets ¥87.02bn vs current liabilities ¥76.64bn yields a current ratio of 1.14x and quick ratio of 1.13x, aided by minimal inventories (¥0.15bn). Working capital of ¥10.37bn supports near-term obligations. Interest expense is low at ¥0.21bn, and interest coverage of 50.6x indicates ample headroom against rate and earnings volatility. Cash and equivalents are not disclosed in the dataset, so we cannot comment on net cash/debt, but the structural balance sheet metrics suggest resilience.

Cash Flow Quality

Operating cash flow of ¥14.26bn is 1.98x net income (¥7.20bn), indicating strong cash conversion and supportive earnings quality. The divergence suggests favorable working capital movements and/or non-cash charges (notably ¥6.88bn depreciation) underpin reported profits. Investing cash flow is not disclosed (reported as 0 by convention), preventing calculation of free cash flow; given the asset-intensive nature of logistics, actual capex could be significant and is a key unknown. Financing cash flow was a net inflow of ¥6.46bn, but without detail (debt drawdowns/repayments, dividends, leases) the mix cannot be assessed. Overall, cash generation from operations is strong, but free cash flow visibility is limited due to non-disclosure of investing cash flows and cash balance.

Dividend Sustainability

Dividend per share and payout ratio are not disclosed in the provided data (0.00 placeholders). EPS for the period is ¥59.62, and OCF is strong, suggesting capacity to fund shareholder returns; however, the absence of investing cash flow and cash balance data precludes a rigorous free cash flow coverage analysis. Historically for asset-heavy logistics, maintenance capex can absorb a sizable portion of OCF, so sustainability hinges on actual capex and lease commitments. Policy outlook cannot be inferred from the dataset; confirmation of interim/annual dividend guidance, payout targets, and capital allocation priorities (capex vs. shareholder returns) is needed.

Risk Assessment

Business Risks:

• Cost inflation in labor and subcontracting amid industry-wide driver shortages and workstyle reform constraints
• Fuel and energy price volatility and timing mismatch in surcharge pass-through
• Negative operating leverage if volume growth slows or mix shifts to lower-margin services
• Regulatory impacts (2024 overtime caps for drivers) potentially reducing capacity and raising costs
• Competitive pricing pressure in domestic logistics and 3PL services
• Customer concentration or renegotiation risk on large contracts
• Operational risks including accidents, service disruptions, and network utilization variability

Financial Risks:

• Capex intensity and potential for elevated replacement/expansion capex reducing free cash flow
• Lease liabilities and off–balance sheet commitments (not visible in provided data) increasing fixed charges
• Working capital swings impacting cash conversion in periods of rapid growth or client payment delays
• Interest rate risk is modest but present, though mitigated by low interest expense and strong coverage
• Pension or retirement benefit obligations (if any) that may introduce earnings/cash volatility

Key Concerns:

• Operating income fell 6.6% YoY despite 9.6% revenue growth, evidencing margin pressure
• Free cash flow cannot be assessed due to undisclosed investing cash flows, limiting capital return visibility
• Dividend policy and DPS not disclosed, creating uncertainty on shareholder return trajectory
• Cash and equivalents not disclosed, constraining assessment of net liquidity
• ROE remains modest at 2.92% for the period, reflecting limited asset turnover and conservative leverage

Investment Implications

Key Takeaways:

• Strong top-line growth (+9.6% YoY) but negative operating leverage with operating income -6.6% YoY
• Healthy balance sheet with implied equity ratio ~56.9% and debt-to-equity ~0.73x
• Robust interest coverage (50.6x) and strong OCF/NI (1.98x) support earnings quality
• Margin compression at the operating level suggests cost pass-through/productivity improvements are priority
• Capex and cash disclosures are key missing pieces; true FCF and dividend capacity cannot be confirmed

Metrics to Watch:

• Operating margin trend and EBITDA margin trajectory
• Contract repricing cadence and fuel surcharge pass-through effectiveness
• Labor cost ratio and productivity/utilization metrics
• Capex (growth vs. maintenance), investing cash flow, and free cash flow
• Receivables days and working capital movements affecting OCF
• ROE progression via asset turnover improvements and capital efficiency
• Net leverage including lease-adjusted obligations (once disclosed)

Relative Positioning: Within domestic logistics peers, the company exhibits a conservative balance sheet, strong interest coverage, and solid cash conversion, but faces similar sector headwinds in labor and fuel costs; current results show weaker operating leverage versus revenue growth, placing near-term margin execution at the forefront compared with peers focused on aggressive cost pass-through and network optimization.

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