M・H・GROUP LTD. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥456M
• Operating Income: ¥-14M
• Net Income: ¥-9M
• EPS: ¥-1.29

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

For FY2026 Q1, 株式会社エム・エイチ・グループ reported revenue of ¥456.0 million, declining 4.2% year over year, with a gross profit of ¥129.8 million and a gross margin of 28.5%. The company posted an operating loss of ¥14.0 million (operating margin -3.1%), essentially flat YoY, indicating that cost actions offset some of the top-line pressure but not enough to reach break-even. Ordinary loss was ¥13.0 million, slightly narrower than operating loss, implying modest net non-operating income. The bottom line was a net loss of ¥15.0 million (net margin -3.29%), with EPS of -¥1.29 (note: shares outstanding were not disclosed, so per-share context is limited). The DuPont analysis shows a calculated ROE of -2.99%, driven by a negative margin (-3.29%), relatively low asset turnover (0.266x, likely quarterly and not annualized), and high financial leverage (3.41x). Balance sheet strength is mixed: total assets were ¥1.714 billion and total equity ¥502 million, implying an equity ratio of about 29.3% by calculation, even though the reported equity ratio field shows 0.0% (likely undisclosed rather than truly zero). Current assets were ¥1.537 billion versus current liabilities of ¥1.153 billion, yielding a current ratio of 133% and working capital of ¥383.9 million, suggesting adequate near-term liquidity. Debt-to-equity measured as total liabilities over equity stands at roughly 2.53x, indicating elevated leverage for a business that is currently loss-making. Interest expense was modest at ¥0.425 million, but interest coverage is negative (-32.9x) due to the operating loss. Reported depreciation, cash flows (operating, investing, financing), cash and equivalents, inventories, and share data were all shown as zero, which should be interpreted as undisclosed rather than actual zero values. As a result, EBITDA and cash flow–based metrics in the snapshot are not reliable and should not be used for decision-making. The revenue decline alongside flat operating losses suggests tightening margin discipline but soft demand or continued pricing pressure. Taxes of ¥2.221 million despite a loss are likely due to non-deductible levies or minimum taxes; the reported effective tax rate metric is not meaningful under a loss scenario. Overall, the company remains in a fragile profitability position with some liquidity cushion, but leverage amplifies downside risk if losses persist. The key near-term priority appears to be restoring revenue momentum and improving operating efficiency to reach break-even. Data limitations, especially the lack of cash flow and depreciation disclosure, constrain a full quality-of-earnings assessment at this stage.

Profitability Analysis

ROE of -2.99% decomposes into net margin (-3.29%), asset turnover (0.266x), and financial leverage (3.41x). The negative margin is the primary driver of weak ROE, with low turnover reflecting the quarterly context and possibly underutilized assets. Gross margin is 28.5% (¥129.8m/¥456.0m), which provides some buffer but is offset by SG&A and other operating costs leading to an operating margin of -3.1%. Ordinary income (-¥13.0m) is slightly better than operating income (-¥14.0m), indicating small positive non-operating items. Operating leverage remains unfavorable: a 4.2% revenue decline did not materially worsen losses, suggesting some cost flexibility but insufficient structural efficiency to reach break-even. Interest expense is low in absolute terms (¥0.425m), but interest coverage is negative (-32.9x) given the operating loss, highlighting sensitivity to even modest financing costs. With depreciation undisclosed (shown as zero), EBITDA and related margin metrics are not reliable and likely understated; true operating cash profitability may differ. Margin quality is difficult to fully evaluate without details on mix, pricing, and cost breakdown, but flat YoY operating loss against lower sales implies at least some cost control. The path to improving ROE hinges on restoring positive net margins through revenue stabilization and tighter SG&A, given leverage is already high.

Growth Assessment

Revenue declined 4.2% YoY to ¥456.0m, indicating demand softness or pricing/mix headwinds in the quarter. Profit growth is negative, with net loss of ¥15.0m; however, operating loss held flat YoY, suggesting some underlying cost containment. Sustainability of revenue remains uncertain without segment or regional disclosures; near-term momentum appears weak. Profit quality cannot be fully assessed due to missing depreciation and cash flow data; reported EPS (-¥1.29) reflects continuing losses with unknown share base. Ordinary loss being narrower than operating loss hints at recurring non-operating support (e.g., subsidies, other income) but not enough to offset core weakness. Outlook will depend on the company’s ability to stabilize same-store sales/order volumes, optimize pricing, and reduce fixed costs. If management can hold gross margin near ~28–29% while lowering SG&A, break-even operating income appears within reach on modest revenue recovery. Conversely, further top-line declines could quickly widen losses due to operating leverage. Near-term growth drivers and guidance were not disclosed; external demand conditions and cost inflation remain key variables. Overall, revenue sustainability is fragile and profit recovery is contingent on both volume and cost execution.

Financial Health

Total assets ¥1,714.0m, total liabilities ¥1,268.0m, and total equity ¥502.0m imply an equity ratio of ~29.3% (calculated), despite the reported field showing 0.0% (likely undisclosed). Leverage is elevated: debt-to-equity (using total liabilities) is ~2.53x. Liquidity appears adequate: current assets ¥1,536.5m vs. current liabilities ¥1,152.7m yield a current ratio of 133% and working capital of ¥383.9m. The quick ratio is also 133% because inventories were undisclosed (shown as zero). Cash and equivalents were undisclosed, so the liquidity buffer quality (cash vs. receivables) is unknown. Interest burden is small (¥0.425m) but the company lacks earnings coverage due to operating losses. Without clarity on debt composition, maturities, and covenant terms, refinancing risk cannot be fully evaluated; however, the combination of losses and leverage is a watchpoint. Equity at ¥502.0m provides some cushion, but continued losses would erode it. Overall solvency is acceptable at present but sensitive to persistent negative earnings.

Cash Flow Quality

Operating, investing, and financing cash flows were reported as zero, which should be treated as undisclosed; hence, we cannot assess cash conversion or free cash flow. OCF/Net Income and FCF metrics in the snapshot are not meaningful under these disclosure constraints. Depreciation is also undisclosed, limiting our ability to separate cash vs. non-cash earnings drivers. Working capital position appears positive (¥383.9m), but the composition and changes (receivables, payables, inventory) are unknown; therefore, any inference about cash generation from working capital is speculative. Given the operating loss and lack of cash data, earnings quality cannot be assessed with confidence this quarter. Key missing pieces include cash balance, receivables aging, payables terms, and capex. Until cash flow statements are available, prioritize liquidity monitoring and signs of cash burn.

Dividend Sustainability

DPS is reported as ¥0.00 and payout ratio 0.0%, consistent with a loss-making quarter in which dividends would ordinarily be suspended. FCF coverage is shown as 0.00x but is not meaningful because cash flows were undisclosed. With negative earnings and elevated leverage, discretionary distributions would typically be constrained to preserve liquidity. Absent guidance on dividend policy and in the context of current losses, near-term distributions appear unlikely. Any future dividend capacity will depend on restoring positive OCF and demonstrating sustainable profitability, plus clarity on capex and debt service requirements.

Risk Assessment

Business Risks:

• Revenue decline (-4.2% YoY) indicating potential demand, pricing, or mix headwinds
• Negative operating margin (-3.1%) and continued net losses
• Operating leverage risk: small revenue shocks can widen losses
• Limited disclosure on segment mix, making growth drivers opaque
• Potential cost inflation in labor and occupancy that may pressure margins

Financial Risks:

• Elevated leverage (liabilities/equity ~2.53x) with negative interest coverage
• Equity erosion risk if losses persist
• Liquidity quality uncertainty due to undisclosed cash balance and cash flows
• Refinancing/covenant risk unknown due to lack of debt detail
• Tax cash outflows despite losses (¥2.221m) may pressure liquidity

Key Concerns:

• Sustained losses alongside declining revenue
• High financial leverage amplifying earnings volatility
• Insufficient disclosure on cash flows, depreciation, inventories, and share count
• Break-even not yet achieved; limited visibility on path to profitability

Investment Implications

Key Takeaways:

• Top line declined 4.2% YoY to ¥456.0m; gross margin held at 28.5%
• Operating loss of ¥14.0m was flat YoY; operating margin -3.1%
• Calculated ROE -2.99% driven by negative margin and high leverage (3.41x)
• Liquidity is adequate (current ratio 133%, working capital ¥383.9m) but cash quality unknown
• Leverage is elevated (liabilities/equity ~2.53x) with negative interest coverage
• Cash flow data are missing; FCF and cash burn cannot be assessed
• Equity ratio by calculation ~29.3% despite reported 0.0% field

Metrics to Watch:

• Quarterly revenue trajectory and same-store/volume indicators (if disclosed)
• Operating margin progression toward break-even
• Cash and equivalents, OCF, and FCF once disclosed
• SG&A as a percentage of sales and fixed-cost reductions
• Debt composition, maturities, and any covenant disclosures
• Gross margin stability (pricing, mix, input costs)

Relative Positioning: Within small-cap, service-oriented peers, the company exhibits weaker profitability (negative operating margin) and higher leverage than ideal, but maintains moderate balance sheet equity (~29% by calculation) and adequate near-term liquidity; disclosure gaps on cash flows and depreciation limit comparability against better-disclosed peers.

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