TOSHIN HOLDINGS CO.,LTD FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥3.88B
• Operating Income: ¥77M
• Net Income: ¥-163M
• EPS: ¥3.25

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Verdict: Soft quarter with thin profitability and elevated financial risk, but stayed net profitable due to tax effects despite a pre-tax loss. Revenue was 38.84 (100M JPY), down 1.1% YoY, with gross profit of 7.94 and gross margin at 20.4%. Operating income was 0.77 (operating margin ~2.0%), but non-operating headwinds (net -0.27) and additional special factors pulled profit before tax to -0.76. Ordinary income was 0.11, implying sizable non-operating drag relative to operating income; the gap from ordinary income (0.11) to PBT (-0.76) indicates an implied extraordinary loss of about 0.87. Net income ended positive at 0.21 (EPS 3.25 JPY), driven by a tax expense of 0.87 despite a pre-tax loss, yielding a highly unusual effective tax rate of -114.8%. Interest expense was 0.40, placing interest coverage at 1.90x, below the 2.0x warning threshold. Balance sheet leverage is high with total liabilities of 221.10 against equity of 24.17, a D/E of 9.15x, and an implied equity ratio of roughly 10%. Liquidity is tight: current assets 61.81 versus current liabilities 106.39 produce a current ratio of 0.58 and a quick ratio of 0.57. Working capital stands at -44.59, reflecting reliance on short-term funding (short-term loans 53.50). DuPont ROE is 0.9%, composed of a very slim net margin (~0.5%), low asset turnover (0.167), and very high financial leverage (9.63x); leverage is the primary support for ROE. Margin trend in basis points cannot be assessed YoY due to missing prior-period margin detail; current operating margin is approximately 198 bps and net margin about 54 bps. Earnings quality cannot be validated because operating cash flow is unreported; OCF/NI is not calculable this quarter. Dividend sustainability looks strained: the calculated payout ratio is 311.3%, far above the <60% benchmark and inconsistent with the weak earnings base. Forward-looking, the company must improve operating profitability and reduce financing costs or deleverage to stabilize coverage and protect equity, while addressing maturity mismatch risk given heavy short-term borrowings. Absent visibility on cash flows and capex, the balance sheet constraints dominate the outlook. The unusual tax and extraordinary item dynamics this quarter introduce additional volatility into bottom-line outcomes.

Profitability Analysis

ROE decomposition (DuPont): ROE ~0.9% = Net Profit Margin (~0.5%) × Asset Turnover (0.167) × Financial Leverage (9.63x). The structure indicates that ROE is being propped up by very high leverage, with profitability and efficiency both weak. Without prior-period component data, we cannot quantify which component changed the most; however, the binding constraint today is the very low net margin. Business drivers: operating margin is only ~2.0% and is further diluted by net non-operating expenses (0.41 vs non-operating income of 0.14), and by implied extraordinary losses, pushing PBT negative. Interest burden (0.40) relative to operating income (0.77) limits ordinary income and depresses coverage. Sustainability: reliance on leverage to achieve a sub-1% ROE is not sustainable if margins remain at ~0.5% net; any revenue softness or cost uptick could turn net losses. Concerning trends include SG&A (8.43) exceeding gross profit (7.94), implying negative operating leverage pressure; while operating income is positive, the SG&A load relative to gross profit is heavy and leaves little buffer for shocks.

Growth Assessment

Top-line declined 1.1% YoY to 38.84, indicating a mild contraction. Gross margin stands at 20.4%, but we lack YoY margin detail to assess expansion/compression. Operating margin is approximately 2.0%, with ordinary income margin around 0.3% and net margin about 0.5%. Non-operating expenses of 0.41 outweighed non-operating income of 0.14, and additional extraordinary losses (~0.87) drove PBT negative; these items introduce volatility into earnings and cloud underlying run-rate growth. With interest coverage at 1.90x and D/E at 9.15x, financing constraints may limit aggressive growth investment unless profitability improves. Revenue sustainability will depend on stabilizing gross profit and containing SG&A; current SG&A exceeds gross profit, leaving limited room for organic reinvestment. Outlook hinges on cost control, potential pricing/mix improvement, and reducing non-operating drag; otherwise, further top-line softness could quickly translate to bottom-line losses.

Financial Health

Liquidity is weak: current ratio 0.58 (<1.0 warning) and quick ratio 0.57 indicate tight short-term coverage. Maturity mismatch: current liabilities 106.39 exceed current assets 61.81 by 44.59; short-term loans of 53.50 dominate near-term obligations. Cash and deposits are 30.85 versus accounts payable 18.54 and short-term loans 53.50, implying ongoing rollover/refinancing needs. Solvency risk is elevated: D/E is 9.15x (>2.0 warning), with total liabilities 221.10 and equity 24.17; implied equity ratio is roughly 10%, signifying thin capital buffers. Long-term loans are 85.85, indicating a sizable fixed debt load on top of short-term borrowings. Interest coverage is 1.90x (<2.0 warning), leaving little cushion against rate increases or earnings dips. No off-balance-sheet obligations are disclosed in the provided data; absence of disclosure does not rule them out.

Cash Flow Quality

Operating cash flow is unreported, so OCF/Net Income cannot be computed and earnings quality cannot be validated. Free cash flow is also unreported; we cannot assess coverage of dividends or capex. Given negative working capital (−44.59) and heavy short-term debt, the business may rely on supplier credit and debt rollovers; while not proof of manipulation, this structure can mask underlying cash conversion pressure if receivables stretch or payables are extended. Interest expense (0.40) relative to operating income (0.77) suggests that small operational setbacks could push OCF coverage of interest below 1x. Without cash flow data, we treat the quality of earnings as uncertain and sensitive to working capital movements.

Dividend Sustainability

The calculated payout ratio is 311.3%, far above the <60% benchmark and inconsistent with a quarter featuring a pre-tax loss and minimal net income. With FCF unreported, we cannot confirm coverage, but given weak margins, low interest coverage, and negative working capital, dividend sustainability appears strained. If dividends are guided on an annual basis, maintaining them would likely require improved operating cash flow or balance sheet support; with high leverage (D/E 9.15x), there is limited headroom to fund payouts through additional debt without compounding risk. Policy outlook is uncertain absent guidance; prudence would suggest prioritizing balance sheet stabilization over distributions if performance does not improve.

Risk Assessment

Business Risks:

• Thin operating margin (~2.0%) and net margin (~0.5%) leave limited shock absorption.
• Non-operating and extraordinary losses materially impacted PBT, introducing earnings volatility.
• Revenue decline of 1.1% YoY suggests demand or mix pressures that could persist.
• SG&A (8.43) exceeding gross profit (7.94) indicates negative operating leverage risk.

Financial Risks:

• High leverage (D/E 9.15x) and low equity ratio (~10%) elevate solvency risk.
• Low liquidity (current ratio 0.58, quick ratio 0.57) and negative working capital (−44.59) create refinancing and rollover dependence.
• Interest coverage at 1.90x is below the 2.0x warning threshold, vulnerable to rate or earnings shifts.
• Large short-term loans (53.50) vs cash (30.85) heighten near-term funding risk.

Key Concerns:

• Unusual tax expense (0.87) despite a pre-tax loss (−0.76) results in a negative effective tax rate, complicating bottom-line predictability.
• Implied extraordinary loss (~0.87) from ordinary income to PBT indicates one-off or non-core impacts not detailed in disclosures.
• Cash flow data (OCF/FCF) is unreported, limiting assessment of earnings quality and dividend coverage.
• Payout ratio at 311.3% appears misaligned with earnings capacity.

Investment Implications

Key Takeaways:

• Earnings are fragile: minimal operating margin and net margin with negative PBT before tax effects.
• Balance sheet risk is pronounced with D/E 9.15x and current ratio 0.58.
• Interest coverage at 1.90x signals heightened sensitivity to financing costs.
• Extraordinary and tax effects drove net profit despite a pre-tax loss, increasing volatility.
• Dividend sustainability is questionable given a 311.3% payout ratio and absent FCF data.

Metrics to Watch:

• Operating margin progression (targeting >3–5% to rebuild buffer).
• Interest coverage and absolute interest expense versus operating income.
• Working capital trends: receivables, payables, and short-term debt rollover.
• OCF and FCF once disclosed; OCF/NI ratio >1.0 as a quality marker.
• Extraordinary items and tax adjustments impacting PBT-to-NI bridge.
• Debt mix and maturity profile (shift from short-term to long-term).

Relative Positioning: Relative to typical TSE small/mid-cap peers, profitability is weaker and leverage higher, placing the company in a more vulnerable quadrant on both liquidity and solvency metrics until operating performance and cash generation improve.

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