Kyogoku unyu shoji Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.46B
• Operating Income: ¥158M
• Net Income: ¥134M
• EPS: ¥45.99

Income Statement

Balance Sheet

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

Verdict: A solid rebound quarter with sharp profit recovery driven by both improved core operations and sizable non-operating gains, but capital efficiency remains weak and reliance on financial income is high. Revenue rose 8.0% YoY to 44.65, while operating income surged 503.6% YoY to 1.58, lifting ordinary income to 1.97 (+184.7% YoY) and net income to 1.32 (+174.5% YoY). Gross profit reached 4.48, with a gross margin of 10.0%, indicating modest pricing power in a still-cost-heavy model. Operating margin is 3.5% (1.58/44.65), ordinary margin 4.4%, and net margin 3.0%, marking a clear improvement versus last year’s depressed base (exact bps shift YoY not calculable due to lack of prior-period margin data). Non-operating income was material at 0.57, of which dividend income accounted for 0.39, supporting ordinary profit; this lifts the non-operating income ratio to a high 43.5%. Interest expense was 0.16, with interest coverage at a healthy 9.8x, reflecting improved earnings capacity. Balance sheet is conservative on leverage (D/E 0.89x) but liquidity is only moderate with a current ratio of 1.15x and notable short-term loans of 8.28. ROE stands at 2.9% on DuPont metrics (NPM 3.0%, AT 0.527x, leverage 1.89x), still modest for shareholders. ROIC is weak at 2.5%, below the 5% warning threshold, signaling underwhelming capital efficiency despite the earnings rebound. Operating cash flow was unreported, preventing an assessment of earnings quality via OCF/NI or FCF coverage. Dividend sustainability appears reasonable with a low calculated payout ratio of 24.2%, but the lack of cash flow disclosure tempers confidence. Forward-looking, the company needs to consolidate operational improvements, reduce dependence on dividend and other non-operating income, and raise ROIC through better asset turnover and disciplined capex. Overall, momentum is improving, but quality and sustainability indicators are mixed due to low ROIC and limited cash flow visibility.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 2.96% × 0.527 × 1.89 ≈ 2.9%. Component diagnostics: (1) Net profit margin at ~3.0% is the primary driver of this quarter’s ROE improvement given the outsized YoY profit growth vs revenue (+174.5% NI vs +8.0% sales); exact YoY component deltas are not calculable, but directionally margin expanded. (2) Asset turnover at 0.527x is modest for a logistics business and likely a structural drag on ROE. (3) Financial leverage at 1.89x is moderate, providing some boost without excessive balance sheet risk. Business reasons: Operating earnings benefited from scale and cost control, while ordinary profit was additionally supported by 0.57 in non-operating income (notably 0.39 dividend income), amplifying net margin. Sustainability: The operating recovery looks more durable than the non-operating contribution; dividend income can be volatile and is not core. Watch that SG&A growth is undisclosed; however, with operating income jumping far ahead of revenue, operating leverage was favorable this quarter. Flags: Non-operating income ratio is high at 43.5%, and ROIC remains low (2.5%), indicating underlying capital efficiency issues despite the earnings rebound.

Growth Assessment

Topline grew 8.0% YoY to 44.65, a steady pace for a logistics operator. Operating income rose to 1.58 (+503.6% YoY), indicating strong operating leverage from a low base and/or improved mix/pricing; operating margin is now 3.5%. Ordinary income growth (+184.7% YoY) was aided by 0.57 non-operating income, notably 0.39 in dividends, which is unlikely to be a stable driver of growth. Net income increased 174.5% YoY to 1.32, with a 3.0% net margin. Given the limited disclosure, the breadth of growth across segments and the persistence of cost savings cannot be verified. Near-term outlook depends on sustaining utilization, passing through fuel and labor cost inflation, and moderating the reliance on dividend income. Without OCF and capex data, we cannot validate whether growth is cash-generative; prudence is warranted until cash conversion is evidenced.

Financial Health

Liquidity: Current ratio is 1.15x (above 1.0 but below the 1.5x comfort threshold), and quick ratio is also 1.15x, indicating adequate but thin liquidity. Working capital is positive at 3.45, with current assets of 26.43 vs current liabilities of 22.98. Maturity profile: Short-term loans are 8.28, while cash is 9.81 and accounts receivable 14.34, suggesting manageable near-term refinancing risk but some maturity mismatch reliance on rolling ST borrowings. Solvency: Debt-to-equity is 0.89x (comfortable), and interest coverage is strong at 9.8x. Long-term loans are minimal (0.03), indicating a largely short-term funding structure. No off-balance-sheet obligations are disclosed in the provided data. Explicit warnings: Current ratio is above 1.0 (no immediate warning) and D/E is well below 2.0 (no leverage warning).

Cash Flow Quality

OCF and FCF are unreported, so OCF/Net Income and FCF coverage cannot be assessed. This prevents validation of earnings quality via cash conversion, a key limitation. Working capital indicators: Receivables (14.34) exceed payables (7.25), typical for logistics, but without period-on-period movements we cannot assess working capital release/absorption or potential window dressing. Non-operating income contributed meaningfully to ordinary profit (0.57, including 0.39 dividends), which is cash-like but non-core and potentially volatile; reliance on such income elevates earnings quality risk if operating momentum softens. Interest burden (0.16) is well covered this quarter by operating income (coverage 9.8x). Overall, earnings quality cannot be confirmed as high without OCF data; classify as indeterminate with a tilt toward mixed due to non-operating contributions.

Dividend Sustainability

The calculated payout ratio is a modest 24.2%, implying headroom relative to earnings. However, the absence of OCF and capex data prevents assessment of FCF coverage; we cannot confirm whether dividends are funded from free cash flow. Balance sheet leverage (D/E 0.89x) is moderate, which provides some flexibility, and interest coverage is strong, reducing immediate distribution risk. Sustainability will hinge on maintaining operating profitability and reducing dependence on non-operating income to underpin recurring cash flows. Policy outlook unspecified; given low ROIC (2.5%), reinvestment discipline and selective returns to shareholders would be prudent until cash conversion is demonstrated.

Risk Assessment

Business Risks:

• Demand volatility in domestic freight and warehouse utilization impacting asset turnover and margins
• Fuel cost inflation and pass-through risk pressuring gross and operating margins
• Driver shortage and wage inflation elevating SG&A/COGS in a labor-intensive model
• Customer concentration risk typical in regional logistics (not disclosed, but material if present)
• Operational disruptions (accidents, weather, supply chain bottlenecks) affecting service levels and costs

Financial Risks:

• Liquidity buffer is modest with current ratio at 1.15x and reliance on short-term loans (8.28)
• Earnings dependence on non-operating income (dividends 0.39) raises volatility of ordinary profit
• Low ROIC (2.5%) indicates weak capital efficiency and potential value dilution if not improved
• Interest rate risk on short-term borrowings given ST-heavy funding structure
• Cash flow visibility risk due to unreported OCF/FCF data

Key Concerns:

• Capital efficiency: ROIC at 2.5% (<5% threshold) despite profit rebound
• Non-operating income ratio high at 43.5%, suggesting quality-of-earnings risk
• Liquidity only adequate (current ratio 1.15x) with notable short-term debt
• Inability to validate cash conversion due to missing cash flow disclosures

Investment Implications

Key Takeaways:

• Earnings inflected positively: operating income +503.6% YoY on 8.0% revenue growth; net margin 3.0%
• Ordinary profit supported by dividends and other non-operating income (0.57), boosting results but adding volatility
• Leverage moderate (D/E 0.89x) and coverage strong (9.8x), providing financial flexibility
• Liquidity is only modest (current ratio 1.15x); short-term loans significant at 8.28
• Capital efficiency is weak (ROIC 2.5%), a core medium-term improvement area

Metrics to Watch:

• Operating cash flow and FCF to validate earnings quality and dividend cover
• Share of non-operating income in ordinary profit (target: declining reliance)
• Asset turnover improvement and ROIC progression toward >5% near-term
• Receivables and payable days to monitor working capital discipline
• Fuel cost pass-through and labor cost trends affecting margins
• Debt mix and duration (reduce short-term concentration) and interest rate exposure

Relative Positioning: Versus domestic logistics peers, the company’s current profitability has improved but remains margin-thin, with ROIC below peer norms and a higher-than-desirable reliance on non-operating income; balance sheet leverage is moderate and coverage sound, positioning it defensively but with a need to enhance cash conversion and capital efficiency to close the performance gap.

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