Shinki Bus Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥26.36B
• Operating Income: ¥1.26B
• Net Income: ¥894M
• EPS: ¥74.15

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 strong Q2 with sharp profit recovery on solid top-line growth and disciplined cost control, albeit with structurally low capital efficiency. Revenue rose 8.2% YoY to 263.6, supported by demand recovery in passenger and ancillary businesses. Gross profit reached 58.9 with a 22.4% gross margin, indicating improved cost pass-through versus input pressures. Operating income doubled to 12.6 (+108.7% YoY), lifting operating margin to 4.8%. Using implied prior-year figures, operating margin expanded by roughly 231 bps (from about 2.5% to 4.8%), evidencing positive operating leverage. Net income jumped 112.7% YoY to 8.9, pushing net margin to 3.4% and implying ~167 bps margin expansion versus last year. Ordinary income increased 93.2% to 13.2, with non-operating contributions modest at 1.29 and interest expense minimal at 0.11. Earnings quality is high: operating cash flow was 32.8, 3.67x net income, signaling strong cash conversion. After 28.2 of capex, implied FCF is about 4.6, positive but tight against a calculated payout profile. Liquidity is adequate but not abundant (current ratio 110.8%, quick ratio 103.7%) and solvency is conservative (D/E 0.35x, interest coverage 114x). ROE is low at 1.8%, driven by thin margins and slow asset turnover (0.386), consistent with the sector’s asset-intensive, regulated/fare-capped profile. ROIC at 1.8% flags capital efficiency concerns versus a typical 7–8% target in transportation services. Dividend payout ratio (calculated) stands at 82.8%, which looks high relative to implied FCF but comfortably covered by OCF this half. Forward-looking, continued ridership recovery, fare revisions, and cost normalization (fuel and labor) are key to sustaining margin gains. The balance sheet allows ongoing fleet renewal, but capex-heavy needs will continue to pressure FCF if growth moderates. Overall, the quarter shows cyclical recovery and improved profitability, with the main medium-term task being to lift ROIC while managing wage and energy cost risks.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin 3.4% × Asset Turnover 0.386 × Financial Leverage 1.35x = ROE 1.8% (matches reported). The biggest delta YoY is the margin component: operating income +108.7% on revenue +8.2% implies material operating margin expansion (+231 bps to 4.8%); net margin also expanded (+167 bps to 3.4%). Business drivers: demand recovery (ridership/charter), improved pricing/fare mix and better cost pass-through versus fuel and other operating costs, plus tight SG&A discipline (SG&A ratio currently ~17.6%). Asset turnover remains low (0.386), reflecting an asset-heavy bus fleet and infrastructure base typical of the industry; this likely changed little YoY. Leverage is conservative at 1.35x (equity-rich balance sheet), contributing little to ROE uplift; this is strategic but caps ROE. Sustainability: Margin gains appear partly cyclical (post-pandemic normalization, tourism) and partly structural (ongoing cost control). However, wage inflation and scheduled fleet renewal could compress margins absent fare adjustments. Watchpoints: if SG&A and personnel costs re-accelerate faster than revenue, operating leverage will reverse; no evidence of SG&A growing faster than revenue is available from disclosed data.

Growth Assessment

Revenue growth of 8.2% YoY is healthy and likely driven by mobility demand recovery and tourism-related services. Operating profit growth outpaced revenue (+108.7%), indicating strong operating leverage in the period. Non-operating items were supportive but not dominant (non-op income 1.29 vs operating 12.59), so the profit improvement is primarily operating in nature. EBITDA rose to 19.78, with a 7.5% margin, underscoring improved cash earnings. The sustainability of growth will hinge on sustaining ridership, fare/mix improvements, and managing labor/fuel costs. Given the sector’s regulated fare dynamics and cost pressures, mid-single-digit revenue growth with incremental margin improvements is a reasonable near-term expectation. Near-term catalysts could include incremental fare revisions, inbound/charter demand, and cost efficiency programs. Conversely, an economic slowdown or higher fuel costs could dampen momentum.

Financial Health

Liquidity: Current ratio 110.8% and quick ratio 103.7% indicate an adequate but thin liquidity buffer; no explicit warning (both ≥1.0) but limited headroom against shocks. Working capital is positive at 11.77, aided by cash and deposits of 54.71 versus current liabilities of 109.48. Solvency: D/E 0.35x is conservative; long-term loans are 18.99, and interest coverage is very strong at 114x. Total liabilities are modest at 175.26 against equity of 507.83, reflecting an equity-heavy structure. Maturity mismatch: Current assets (121.25) exceed current liabilities (109.48), suggesting low near-term rollover risk; short-term borrowings are unreported, but cash provides a cushion. Off-balance sheet: No disclosures provided; operating lease or long-term service commitments typical for bus operations may exist but are not reported here.

Cash Flow Quality

OCF/Net income of 3.67x signals high earnings quality and favorable working-capital dynamics. Implied FCF is approximately 4.57 (OCF 32.78 minus capex 28.21), positive but slim relative to potential shareholder returns and debt service. With Financing CF at -6.93 and dividends unreported, there may be outflows for dividends and/or debt repayment; data limitations prevent precise attribution. Sustainability: If capex remains elevated for fleet renewal and safety/IT investments, sustaining both dividends and net debt reduction will require OCF to remain at current robust levels or higher. No evident signs of working capital stress or manipulation from the limited disclosures.

Dividend Sustainability

The calculated payout ratio is 82.8%, high versus a generic <60% benchmark, implying limited flexibility if earnings soften. Against implied FCF of ~4.6, a payout approximating ~7.4 (82.8% of NI 8.94) would not be fully covered by FCF this half, though it is covered by OCF (32.8). Financing CF of -6.93 suggests some distributions or repayments occurred, but the split is unreported. Given conservative leverage and strong OCF, near-term dividend capacity looks serviceable; however, sustainability depends on maintaining elevated OCF while funding capex. Policy outlook: Expect a conservative approach, prioritizing balance sheet strength and essential capex; dividend growth likely to track earnings normalization rather than outpace it.

Risk Assessment

Business Risks:

• Fuel price volatility affecting operating costs and margins
• Labor shortages and wage inflation for drivers and mechanics
• Demand sensitivity to tourism/inbound and local economic activity
• Regulatory and fare-setting constraints limiting pricing power
• Safety and compliance requirements increasing operating and capex burdens

Financial Risks:

• Tight liquidity headroom (current ratio ~1.11) despite adequate quick ratio
• FCF pressure from sustained capex needs for fleet renewal and decarbonization
• Potential dividend coverage gap if OCF moderates or capex increases
• Interest rate risk is low given modest debt, but refinancing terms could tighten

Key Concerns:

• Low ROIC (1.8%) and ROE (1.8%) indicate structural capital inefficiency
• Asset turnover is low (0.386), constraining returns
• Dependence on non-operating items is limited but should be monitored for volatility
• Data gaps (dividends paid, short-term debt, investing CF) constrain full assessment

Investment Implications

Key Takeaways:

• Clear profit recovery with operating margin expansion to 4.8%
• High cash conversion (OCF/NI 3.67x) supports near-term financial flexibility
• Capital efficiency remains the principal medium-term challenge (ROIC 1.8%)
• Liquidity is adequate but not ample; prudent cash management is essential
• Capex-heavy profile creates potential FCF tightness versus an elevated payout ratio

Metrics to Watch:

• Ridership and charter volumes; load factors
• Operating margin and SG&A ratio trajectory
• Fuel costs and any hedging arrangements
• Wage revisions and staffing levels
• OCF, FCF, and capex cadence; dividend cash coverage
• ROIC and asset turnover improvements
• Current ratio and short-term borrowing levels

Relative Positioning: Within regional transportation peers, the company shows stronger near-term profit rebound and cash conversion but continues to trail on capital efficiency and structural ROE due to asset intensity and conservative leverage.

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