Chuo Warehouse Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥14.14B
• Operating Income: ¥1.13B
• Net Income: ¥979M
• EPS: ¥52.77

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 bottom-line beat driven by non-operating income and securities-related gains, while core operations softened modestly. Revenue was 141.36, operating income was 11.26 (-6.7% YoY), and ordinary income was 13.36 (-0.3% YoY), indicating non-operating support offsetting operating pressure. Net income jumped to 9.71 (+35.5% YoY), aided by higher non-operating income (2.75), notably dividend income of 1.94. Total comprehensive income surged to 26.09, far exceeding net income, implying sizable unrealized gains on securities recognized in OCI. EBITDA was 20.33, implying an EBITDA margin of 14.4%; operating margin is approximately 8.0% (11.26/141.36). Margin comparison in basis points is not measurable due to missing prior-period revenue and gross profit, but operating income contraction suggests mild margin compression YoY. Earnings quality is mixed: OCF was 8.79 versus net income of 9.71 (OCF/NI 0.90x), slightly below the >1.0x quality threshold. Capital intensity remains high: capex of 16.81 exceeded OCF, implying negative implied FCF in the period. Financial position is conservative with a current ratio of 197%, D/E of 0.27x, and interest coverage of 22.0x. Dividend reliance on investment income is notable: non-operating income accounted for 28.3% (vs. operating), and the payout ratio is elevated at 70.7%. ROIC is low at 1.8% (warning vs. 5% threshold) and ROE is 2.0%, reflecting a heavy asset base and modest profitability. The strong comprehensive income highlights market-value tailwinds on investment securities, which may be volatile. Short-term loans (29.00) are well covered by cash (78.24) and current assets (131.70), indicating limited liquidity stress. With operating softness, sustaining earnings will likely depend on stabilizing core warehousing/logistics margins and maintaining investment income. Forward-looking, focus on monetization of new capacity, price discipline to pass through costs, and the durability of dividend income streams from securities holdings. Overall, fundamentals are stable but capital efficiency needs improvement, and FCF was negative due to heavy capex this period.

Profitability Analysis

ROE decomposition (DuPont): ROE 2.0% = Net Profit Margin (6.9%) × Asset Turnover (0.231) × Financial Leverage (1.27x). The primary constraint on ROE is very low asset turnover (0.231), typical of asset-heavy warehousing combined with substantial investment securities (144.18) inflating the asset base. Net margin (6.9%) is supported by non-operating income (dividends 1.94; total non-op 2.75), which partially offset weaker operating income (-6.7% YoY). Financial leverage is modest (1.27x), consistent with D/E of 0.27x and interest coverage of 22x; leverage is not a major ROE lever. The component that appears to have changed most versus the prior year is the non-operating contribution to net margin (driving NI +35.5% despite lower operating income), suggesting margin resilience came from investment income rather than core logistics. Business driver: higher dividend receipts and favorable securities-related items (also seen in strong OCI) buffered earnings amid operating softness (likely cost inflation or pricing pressure). Sustainability: dividend income can be recurring but is subject to market conditions and payor performance; large OCI gains are non-cash and volatile. Operating trend concerns: operating income fell 6.7% YoY, while revenue YoY is unreported; if SG&A (5.85) or other operating costs rose faster than revenue, operating deleverage is a risk. Watch for cost pass-through (energy, labor) and utilization rates to stabilize core margins.

Growth Assessment

Revenue momentum is unclear due to missing YoY revenue data; operating income decline (-6.7% YoY) signals near-term growth headwinds in the core business. Ordinary income was resilient (-0.3% YoY) thanks to non-operating income (2.75), primarily dividends (1.94). Net income grew strongly (+35.5% YoY), driven by the non-operating lift and a normal tax rate (26.6%). EBITDA of 20.33 indicates healthy operating cash earnings, but below prior-year signaling is not possible with missing comps. Profit quality is mixed, tilted by investment income and OCI gains (comprehensive income 26.09 >> NI 9.71). For outlook, near-term growth depends on warehouse utilization, tariff revisions, and cost pass-through; investment income is a swing factor. Capex of 16.81 suggests capacity expansion or maintenance projects aimed at medium-term growth; near-term FCF will be pressured until cash returns ramp. Given ROIC at 1.8%, growth must be value-accretive through pricing, mix, and asset turnover improvements to avoid diluting returns. Risks to growth include cost inflation (utilities, labor), demand normalization post-pandemic logistics cycles, and variability in dividend income.

Financial Health

Liquidity is strong: current ratio 197% and quick ratio 197%, with cash of 78.24 versus current liabilities of 66.84. No warning on current ratio (<1.0) or leverage (>2.0 D/E); D/E is a conservative 0.27x. Interest coverage of 22.04x indicates ample debt service capacity. Maturity profile looks balanced: short-term loans of 29.00 are covered by cash and current assets; long-term loans are 27.66, keeping refinancing risk modest. Working capital is positive at 64.86. Total liabilities are 131.33 against total equity of 480.88, underscoring a solid solvency buffer. No explicit off-balance sheet obligations were reported in the data; however, typical industry exposures (leases, guarantees) may exist but are unreported here.

Cash Flow Quality

OCF/Net Income is 0.90x, slightly below the >1.0x benchmark and a mild caution flag on earnings-to-cash conversion. Implied free cash flow is negative in the period (OCF 8.79 minus capex 16.81 ≈ -8.02), reflecting heavy investment spending. Financing CF was +2.07, indicating reliance on external funding or reduced cash reserves to bridge investment and shareholder returns (share repurchases of -2.24). Working capital details are limited (AR/AP/Inventories unreported), making it difficult to identify timing effects; the OCF shortfall relative to NI could reflect seasonal receivable build or tax timing. No overt signs of working capital manipulation can be inferred from the limited disclosures provided.

Dividend Sustainability

The calculated payout ratio is 70.7%, above the <60% comfort zone and elevated for a capex-intensive period with negative implied FCF. DPS and total dividends paid are unreported, limiting precision, but the high payout versus earnings plus negative FCF suggests coverage from cash on hand or financing rather than internally generated free cash. Sustainability hinges on a rebound in operating cash flow and/or lower capex in coming periods. Given non-operating income’s contribution and OCI volatility, maintaining a high payout could increase sensitivity to market conditions. Policy outlook likely emphasizes stable or gradually increasing dividends, but near-term room for hikes appears limited until FCF normalizes.

Risk Assessment

Business Risks:

• Core operating softness (operating income -6.7% YoY) amid potential cost inflation in utilities and labor.
• Dependence on non-operating income (dividends 1.94; total non-op 2.75) to support earnings.
• Low ROIC (1.8%) indicating capital inefficiency and potential value dilution from growth capex.
• Execution risk on capex (16.81) with near-term FCF pressure until assets ramp.
• Customer/tenant concentration risk typical in warehousing (not disclosed, potential).
• Energy cost and facility maintenance cost volatility impacting warehouse margins.

Financial Risks:

• Negative implied FCF (≈ -8.02) this period requiring cash or debt to fund investments and shareholder returns.
• Earnings-to-cash conversion below benchmark (OCF/NI 0.90x).
• Valuation risk on investment securities (144.18) affecting OCI and potentially equity.
• Dividend policy risk with a 70.7% payout ratio during an investment-heavy phase.
• Interest rate risk on 56.66 of loans (short-term 29.00, long-term 27.66), though coverage is currently strong.

Key Concerns:

• Capital efficiency flagged (ROIC 1.8% < 5% threshold).
• Earnings reliance on non-operating items while core operations decline YoY.
• FCF negative due to capex; dividend coverage dependent on balance sheet strength.

Investment Implications

Key Takeaways:

• Bottom-line strength driven by non-operating income and securities gains, not core margin expansion.
• Operating margin around 8.0% with YoY pressure; watch cost pass-through and utilization.
• Liquidity and solvency are strong (current ratio 197%, D/E 0.27x, interest cover 22x).
• Implied FCF negative due to significant capex; near-term cash discipline is key.
• High payout ratio (70.7%) raises sensitivity to cash flow volatility.
• ROIC at 1.8% underscores need for better asset turnover and pricing to lift returns.

Metrics to Watch:

• Operating margin and EBITDA margin progression by quarter.
• OCF/NI and FCF trajectory as capex moderates or projects commence operations.
• Dividend income trends and composition of non-operating income.
• Securities valuation impact on OCI and book value.
• Debt mix and cost of debt amid rate environment; interest coverage durability.
• Utilization rates of new/expanded warehouse capacity and pricing adjustments.

Relative Positioning: Within domestic warehousing/logistics peers, the company exhibits conservative leverage and strong liquidity but lags on capital efficiency (low ROIC) and shows higher reliance on non-operating income to sustain earnings in this period.

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
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