Isewan Kaiun Co., Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥28.78B
• Operating Income: ¥1.84B
• Net Income: ¥1.25B
• EPS: ¥48.31

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: Solid operational improvement at the operating income level, but bottom-line softness due to higher tax and non-controlling interests kept net income below last year. Revenue grew 6.5% YoY to 287.8, reflecting resilient logistics demand and/or pricing, while operating income jumped 36.9% YoY to 18.41. Gross profit came in at 68.76 with a gross margin of 23.9%, indicating healthy spread capture. Operating margin improved to 6.4% (18.41/287.8), translating to material operating leverage on modest top-line growth. Ordinary income was 19.67 (+5.9% YoY), while non-operating income of 3.06 (including dividends 0.99 and interest income 0.43) contributed meaningfully to pre-tax profit. Profit before tax was 19.03, and net income declined 7.6% YoY to 11.77 as tax expense rose to 6.58 (effective tax rate 34.6%) and non-controlling interests increased (implied 0.68). Operating margin expanded by an estimated ~142 bps YoY (from ~5.0% to ~6.4%), but net margin compressed by ~62 bps (from ~4.7% to ~4.1%) given higher below-OP headwinds. Financially, the balance sheet is very strong: current ratio 366.8%, net cash of roughly ~198 (cash 200.8 minus loans ~2.3), and D/E 0.27x, with interest coverage at 213x. ROE remains modest at 2.5% on low financial leverage (1.27x) and moderate asset turnover (0.472), despite a reasonable net margin. ROIC is flagged at 4.3%, below the 5% warning threshold, indicating capital efficiency remains a priority area. Earnings quality cannot be validated due to unreported cash flow data (OCF and FCF not disclosed). The payout ratio is calculated at 67.7%, slightly above the typical 60% sustainability benchmark, which bears watching absent confirmed FCF support. Forward-looking, sustained operating margin improvements are encouraging, but net income trajectory will depend on tax rate normalization, the scale of non-controlling interests, and the durability of non-operating income. With ample liquidity and minimal debt, the company has flexibility to navigate macro and port-volume volatility and to selectively invest to lift ROIC. Key to re-rating will be improving capital efficiency (ROIC/ROE) via mix, pricing, and asset utilization while maintaining disciplined costs.

Profitability Analysis

DuPont breakdown: ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 4.1% × 0.472 × 1.27 ≈ 2.5%. The biggest YoY swing is at the operating level: operating margin expanded meaningfully (estimated +142 bps YoY), while net margin compressed (~-62 bps) due to a higher effective tax rate and increased non-controlling interests. Business drivers: revenue growth of 6.5% with operating income up 36.9% points to operating leverage from cost control/productivity and potentially favorable mix or pricing in logistics/port services. Below operating profit, ordinary income grew only 5.9% and net income fell 7.6%, indicating taxes and minority interests diluted the operating gains; non-operating income (3.06) helped but was offset by non-operating expenses (1.80) and higher tax. Sustainability: cost discipline and utilization gains are repeatable if volumes hold; however, non-operating gains (dividends/interest) are less controllable and tax/minority impacts can persist. Watch for any SG&A growth outpacing revenue—data is limited, but OP growth outpaced revenue, implying positive operating leverage this period.

Growth Assessment

Top-line growth of 6.5% YoY is moderate and likely tied to steady port/logistics demand and pricing normalization. Operating profit growth of 36.9% YoY outpaced revenue, reflecting improved efficiency and/or mix. Ordinary income growth slowed to 5.9% as non-operating items netted out, and net income fell 7.6% on tax and non-controlling interests. With non-operating income at 3.06 (dividends 0.99, interest 0.43), profit composition includes a notable financial component; reliance on such income could introduce volatility if market rates or dividend receipts change. ROIC at 4.3% signals room to enhance capital efficiency via higher asset turns or margin uplift. Outlook hinges on cargo volumes (exports/imports), container flows, automotive-related shipments, and pricing resilience, alongside cost control. Absent cash flow disclosures, we assume organic growth funded by strong cash reserves; selective capex in handling equipment/IT could support productivity and ROIC over time.

Financial Health

Liquidity is very strong: current ratio 366.8% and quick ratio 366.8%, with cash and deposits of 200.81 far exceeding current liabilities of 84.29. No warning triggers: Current Ratio >> 1.0; D/E 0.27x (< 1.5 threshold). Interest-bearing debt is minimal (short-term 0.66, long-term 1.64), implying a sizable net cash position. Maturity mismatch risk is low given cash on hand comfortably covers short-term obligations and the very small debt stack. Solvency is robust: total liabilities 128.35 vs equity 481.12. No off-balance sheet obligations were disclosed in the provided data; absence of disclosure does not preclude their existence (e.g., leases/contracts).

Cash Flow Quality

Operating cash flow, investing cash flow, and free cash flow were not reported, so OCF/Net Income and FCF coverage cannot be assessed. As such, earnings quality cannot be validated via cash conversion tests (OCF/NI > 1.0 benchmark). Working capital signals (AR 81.48 vs AP 42.66) and large cash holdings suggest liquidity strength, but without period cash flow movements we cannot identify potential working capital pulls or timing effects. Dividend sustainability vis-à-vis FCF is not assessable due to missing OCF and capex data.

Dividend Sustainability

The calculated payout ratio is 67.7%, modestly above the 60% benchmark for comfortable sustainability. Without OCF and capex disclosure, FCF coverage cannot be evaluated. The net cash balance and strong liquidity provide a buffer to maintain dividends in the near term even if FCF were temporarily tight. For medium-term sustainability, improving ROIC and maintaining operating margin gains will be important, as will visibility on capex plans for port/logistics equipment and systems.

Risk Assessment

Business Risks:

• Cargo volume volatility tied to global trade cycles and domestic industrial activity (auto, machinery, chemicals).
• Pricing pressure and competition in port/harbor logistics services.
• Labor cost inflation and staffing constraints in logistics/stevedoring operations.
• Operational disruptions from natural disasters (typhoons, earthquakes) impacting port infrastructure and schedules.

Financial Risks:

• ROIC at 4.3% (<5% warning) indicates low capital efficiency, risking value dilution if capex outpaces returns.
• Earnings sensitivity to non-operating income (dividends/interest) which may fluctuate with markets and rates.
• Effective tax rate at 34.6% and higher non-controlling interests reduced net income; persistence would cap ROE.
• Data gaps on cash flows and capex obscure FCF visibility and long-term dividend coverage.

Key Concerns:

• Net income decline (-7.6% YoY) despite strong operating performance suggests below-OP headwinds.
• Payout ratio of 67.7% is slightly above the comfort range without confirmed FCF support.
• ROE is low at 2.5% due to modest margins, low leverage, and moderate asset turnover.

Investment Implications

Key Takeaways:

• Operational momentum: operating income up 36.9% YoY with an estimated ~142 bps margin expansion.
• Bottom line pressured: net income -7.6% YoY on higher tax and non-controlling interests.
• Balance sheet strength: net cash position and current ratio ~3.7x underpin resilience.
• Capital efficiency is the main improvement lever: ROIC 4.3% and ROE 2.5% call for higher asset turns/margins.
• Non-operating income is meaningful; stability of dividends/interest income matters for ordinary profit.

Metrics to Watch:

• Operating margin trajectory and SG&A efficiency versus revenue growth.
• Effective tax rate and non-controlling interest proportion of profit.
• ROIC progression and asset turnover improvement.
• Port volume indicators (container throughput, auto exports) and pricing/mix.
• Capex plans and OCF/FCF once disclosed to assess dividend coverage.

Relative Positioning: Within domestic port and logistics peers, 伊勢湾海運 shows superior balance sheet conservatism (net cash, low D/E) but lags on capital efficiency (ROIC <5%) and ROE. The current period exhibits better operating leverage than many low-beta logistics operators, yet sustained re-rating likely requires improved ROIC/ROE while keeping the strong liquidity profile.

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