THE KEIHIN CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥25.40B
• Operating Income: ¥1.85B
• Net Income: ¥1.36B
• EPS: ¥209.14

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: Solid quarter with margin-driven profit growth and strong cash conversion despite modest topline expansion. Revenue grew 2.0% YoY to 253.98, while operating income rose 22.4% YoY to 18.49, lifting the operating margin to approximately 7.3%. Net income increased 24.1% YoY to 13.65, resulting in a net margin of 5.4%. Using the provided YoY growth rates, we estimate operating margin expanded by roughly 120 basis points (from about 6.1% to 7.3%). Net margin likely expanded about 95 basis points (from roughly 4.4% to 5.4%). Gross profit was 29.27, implying an 11.5% gross margin, which supports the narrative of improved operating leverage and/or cost control. Non-operating income of 2.19 (driven by 1.72 dividends and 0.19 interest) netted against 0.60 non-operating expenses, adding approximately 1.6 to ordinary income and providing a secondary earnings tailwind. Cash generation was a highlight: operating cash flow of 32.29 exceeded net income by 2.37x, indicating high earnings quality in the period. Liquidity remains robust with a current ratio of 162.4% and cash (108.4) exceeding total current liabilities (103.66), keeping near-term refinancing risk low. Leverage is measured and serviceable, with interest coverage at 54.38x and a reported D/E ratio of 0.67x. However, capital efficiency remains a concern: ROE is 4.3% and ROIC is 4.6%, both below common mid-to-high single-digit targets, highlighting scope for better asset utilization. The non-operating income ratio of 16.0% signals some reliance on financial income (notably dividends), which can be less predictable. Equity investments of 95.18 underpin that dividend stream but introduce market and valuation sensitivity under JGAAP classification effects. With OCF strong and financing cash outflow of -12.95 (likely debt service and/or dividends), balance sheet capacity remains adequate for steady capex and dividends, though investing CF and capex were not disclosed. Forward-looking, sustaining margin gains while lifting ROIC above 7% will likely require further mix/efficiency improvements and disciplined capital allocation. Overall, the quarter demonstrates resilient operations, strong cash conversion, and healthy liquidity, offset by low capital efficiency and partial dependence on non-operating income.

Profitability Analysis

ROE decomposition (DuPont): ROE 4.3% = Net Margin 5.4% × Asset Turnover 0.479 × Financial Leverage 1.67x. The largest driver of YoY improvement is the net margin, as net income grew 24.1% vs revenue +2.0%. Operating income outpaced sales (+22.4% vs +2.0%), implying operating margin expansion of roughly 120 bps to about 7.3%, driven by better cost control and/or pricing/mix. Non-operating contributions (net +1.59) further lifted ordinary income, aided primarily by dividend income (1.72). Asset turnover at 0.479 remains modest, reflecting a capital-intensive balance sheet (noncurrent assets 361.97 vs total assets 530.36) and likely contributes to low ROE/ROIC. Financial leverage at 1.67x is moderate and not the principal ROE driver. Sustainability: operating margin gains appear supported by fundamentals (revenue growth with greater operating leverage), but the non-operating contribution—16% of operating income—may be less stable given dividend variability. Watchpoints: lack of SG&A detail limits assessment of fixed vs variable cost dynamics; however, the combination of rising operating income and strong OCF suggests no obvious deterioration. No red flags like SG&A growth outpacing revenue can be asserted due to unreported SG&A.

Growth Assessment

Revenue growth of 2.0% YoY indicates steady demand amid a stable operating environment. Profit growth was stronger: operating income +22.4% and net income +24.1%, signaling improved margins and operating leverage. Gross profit of 29.27 (11.5% margin) supports the narrative that costs were controlled relative to sales. Non-operating income provided an additional lift (dividend income 1.72 and interest 0.19), but such contributions are less recurring than core operations. Estimated operating margin increased from roughly 6.1% to 7.3%, and net margin from about 4.4% to 5.4%. EBITDA was 27.79 with a margin of 10.9%, indicating healthy earnings capacity relative to sales. The improvement appears more margin- than volume-driven; sustaining it will depend on maintaining pricing, mix, and efficiency gains. The absence of segment data and SG&A details limits visibility into which business lines led growth. Outlook: if revenue continues low-single-digit growth, continued margin discipline could support mid-teens earnings growth; however, any normalization of dividend income would temper ordinary income growth.

Financial Health

Liquidity is strong: current ratio 162.4% and quick ratio 162.4% (cash heavy), with cash and deposits at 108.40 exceeding current liabilities of 103.66. Working capital stands at 64.66, providing a cushion for operations and seasonality. Solvency: reported D/E is 0.67x and interest coverage is 54.38x, indicating conservative leverage and high debt service capacity. Short-term loans are 27.04 against ample cash, limiting near-term maturity risk; long-term loans are 40.45, spreading obligations over time. Total liabilities are 213.03 versus total equity of 317.32, reinforcing balance sheet resilience. There is no explicit warning trigger (Current Ratio well above 1.0; D/E well below 2.0). Maturity mismatch risk appears low as current assets (168.32) comfortably cover current liabilities (103.66). Off-balance sheet obligations were not reported; none can be assessed from the provided data.

Cash Flow Quality

OCF/Net income is 2.37x, indicating high-quality earnings with strong cash conversion. Operating CF of 32.29 comfortably covers interest (0.34) many times over and leaves room for maintenance capex and dividends, though investing CF and capex were not disclosed. Free cash flow cannot be calculated due to missing investing CF/capex details; nonetheless, the positive OCF trajectory is supportive. No overt signs of working capital manipulation are visible from the limited data; strong OCF vs NI suggests either favorable working capital movements or robust underlying cash margins. Financing CF of -12.95 likely reflects dividend payments and/or net debt reduction; absent details, we assume prudent capital returns and liability management. Overall, cash flow quality is strong this quarter.

Dividend Sustainability

The calculated payout ratio is 38.3%, indicating room for distributions within a prudent threshold (<60%), though DPS and total dividends paid were not disclosed. With OCF of 32.29 exceeding net income (13.65), cash generation supports ordinary dividends; FCF coverage cannot be assessed due to missing investing CF/capex. Balance sheet liquidity (cash 108.40) and low interest burden further enhance sustainability. Key dependencies include capex requirements (unreported) and the durability of non-operating income (dividends), which partially supports earnings. Policy outlook cannot be inferred without management guidance, but current fundamentals suggest capacity to sustain a moderate payout.

Risk Assessment

Business Risks:

• Margin sustainability risk if cost savings or pricing tailwinds fade (operating margin currently ~7.3%).
• Exposure to cyclical demand in logistics/transport-related end-markets affecting volumes and utilization.
• Operational cost inflation (labor, energy, fuel) potentially pressuring gross and operating margins.
• Dependence on non-operating income (dividend income 1.72) which is less controllable than core earnings.

Financial Risks:

• Low capital efficiency with ROIC at 4.6% (<5% warning), potentially diluting long-term value creation.
• Market and valuation risk tied to investment securities (95.18), which can affect comprehensive income and future dividend receipts.
• Interest rate risk on floating-rate borrowings, albeit mitigated by strong coverage (54.38x) and modest debt levels.
• Refinancing risk appears low but persists given short-term loans of 27.04.

Key Concerns:

• Sustained improvement in ROE (4.3%) and ROIC (4.6%) is needed to meet mid-cycle return targets.
• Earnings partly supported by non-operating items (non-operating income ratio 16.0%).
• Limited disclosure on SG&A and investing cash flows reduces visibility on cost drivers and capital intensity.

Investment Implications

Key Takeaways:

• Profit growth outpaced revenue on margin gains; operating income +22.4% vs revenue +2.0%.
• Operating margin expanded to ~7.3% (≈+120 bps YoY by estimate), net margin to 5.4% (≈+95 bps).
• Earnings quality is high with OCF/NI at 2.37x.
• Liquidity is robust; cash (108.4) covers current liabilities (103.66), current ratio 162.4%.
• Leverage is conservative with strong interest coverage (54.38x).
• Capital efficiency remains weak: ROE 4.3% and ROIC 4.6%.
• Non-operating income (notably dividends) is a meaningful profit contributor and a swing factor.

Metrics to Watch:

• Operating margin and gross margin trajectory.
• ROIC progress toward >7–8%.
• OCF/NI ratio and working capital turns.
• Capex and investing CF disclosures for FCF assessment.
• Dividend income trend from investment securities and overall non-operating income dependence.
• Debt mix (short vs long) and interest rate sensitivity.

Relative Positioning: Versus domestic logistics/port service peers, Keihin exhibits solid near-term margin improvement and superior cash conversion with conservative leverage, but lags on capital efficiency (ROE/ROIC) and shows a higher-than-ideal reliance on non-operating income.

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