ICHINEN HOLDINGS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥80.67B
• Operating Income: ¥6.05B
• Net Income: ¥3.84B
• EPS: ¥183.58

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

Ichinen Holdings (TSE: 9619) reported FY2026 Q2 cumulative revenue of ¥80.67bn (+3.9% YoY), with operating income of ¥6.05bn (-0.6% YoY) and net income of ¥4.34bn (+13.0% YoY). Top-line growth remained resilient, but operating profit softened slightly, implying modest margin pressure despite a healthy gross margin of 21.8%. The operating margin was approximately 7.5% (¥6.05bn/¥80.67bn), down marginally YoY, while EBITDA reached ¥15.25bn (18.9% margin), reflecting the group’s asset-intensive model. Net income outpaced operating income due to a normalizing tax burden and small non-operating gains, with ordinary income of ¥6.21bn just above operating income. Using reported tax expense (¥2.19bn) and net income (¥4.34bn), the implied effective tax rate is roughly 33–34%, indicating the “0.0%” tax rate in the metrics is not applicable. DuPont analysis shows ROE at 6.30%, driven by a 5.38% net margin, asset turnover of 0.392, and financial leverage of 2.99x. Liquidity remains solid with a current ratio of 168.5% and quick ratio of 142.6%, supported by ¥39.41bn of working capital and inventories of ¥14.92bn. Balance sheet strength is underpinned by total equity of ¥68.90bn versus total assets of ¥205.96bn; the computed equity ratio is approximately 33.5% (despite the displayed 0.0% being an unreported placeholder). Interest burden is low (¥119m), yielding a robust interest coverage of 50.8x. Operating cash flow was ¥4.73bn, resulting in an OCF/NI ratio of 1.09, a healthy indicator of earnings quality. OCF/EBITDA conversion appears modest (~31%), suggesting working capital absorption or timing effects despite large non-cash D&A (¥9.21bn). Investing cash flow, cash and equivalents, free cash flow, and dividend data were not disclosed in the feed (zeros indicate unreported), limiting full cash and capital allocation analysis. The debt-to-equity ratio of 2.03x and leverage of 2.99x are typical for asset-heavy service models, but solvency looks adequate given profitability and coverage. Overall, Ichinen delivered stable growth with preserved financial resilience, albeit with slight operating margin compression and incomplete cash flow and dividend disclosures. Key watchpoints include margin trajectory, working capital discipline, and capital intensity (capex vs. depreciation).

Profitability Analysis

ROE is 6.30% per DuPont: net margin 5.38% × asset turnover 0.392 × financial leverage 2.99. Operating margin is ~7.5% (¥6,046m/¥80,671m), down slightly YoY, signaling modest operating pressure despite a firm gross margin of 21.8%. EBITDA margin of 18.9% reflects significant non-cash charges (D&A ¥9,208m), consistent with an asset-heavy business (e.g., leasing/fleet-oriented). The gap between EBITDA and operating income (D&A intensity of ~11.4% of revenue) suggests high capital intensity and potential sensitivity of EBIT to utilization and pricing. Ordinary income (¥6,205m) only slightly exceeds operating income, indicating minimal dependence on non-operating items. Net income rose +13% YoY despite flat operating profit, helped by normal tax dynamics; implied effective tax rate ~33–34%. Operating leverage appears moderate: revenue growth (+3.9%) did not translate to operating income growth, suggesting cost inflation or mix effects. Margin quality remains acceptable given gross margin stability and strong interest coverage (50.8x), but sustaining operating margin will require disciplined cost control and pricing.

Growth Assessment

Revenue grew +3.9% YoY to ¥80.67bn, indicating steady underlying demand. Operating income declined slightly (-0.6% YoY), pointing to some pressure on operating leverage or mix. Net income growth of +13.0% YoY outpaced revenue due to tax/financial factors rather than core margin expansion, so profit growth quality is mixed. Ordinary income at ¥6.21bn close to operating income suggests limited non-operating dependence, a positive for sustainability. The asset turnover of 0.392 indicates a large asset base supporting revenue; growth likely relies on utilization, pricing, and disciplined capital deployment. Given D&A of ¥9.21bn in the half, capital intensity remains high; sustaining growth will require adequate reinvestment, but capex data is not disclosed. With modest top-line growth and slight OPM compression, near-term outlook points to stable but not accelerating profit growth unless cost efficiencies improve. The company’s breadth (implied by scale and D&A) can support incremental growth, but working capital effectiveness will be critical. Lack of investing CF disclosure limits visibility on expansion or renewal capex, an important driver of medium-term growth capacity. Overall, top-line trends appear resilient; profit growth sustainability hinges on margin management and capital efficiency.

Financial Health

Total assets ¥205.96bn and total equity ¥68.90bn imply a computed equity ratio of ~33.5% (the shown 0.0% is unreported). Total liabilities are ¥139.98bn; the debt-to-equity ratio is 2.03x, consistent with a leveraged but manageable profile for an asset-intensive operator. Liquidity is sound: current assets ¥96.91bn vs. current liabilities ¥57.51bn yield a current ratio of 168.5% and quick ratio of 142.6%. Working capital stands at ¥39.41bn, providing an operating buffer. Interest expense is modest at ¥119m, and interest coverage of 50.8x indicates low near-term refinancing stress. Asset turnover of 0.392 reflects a sizeable asset base, which, combined with high D&A, underscores the need for ongoing reinvestment to maintain capacity. Solvency appears adequate with ROE 6.3% and stable ordinary income; however, absent cash balance disclosure, immediate liquidity headroom beyond working capital cannot be fully assessed.

Cash Flow Quality

Operating cash flow of ¥4.73bn versus net income of ¥4.34bn yields an OCF/NI ratio of 1.09, indicating acceptable earnings cash conversion. Against EBITDA of ¥15.25bn, OCF conversion is ~31%, implying working capital absorption or timing effects despite sizeable non-cash D&A (¥9.21bn). Investing cash flow is unreported (displayed as 0), preventing calculation of free cash flow with certainty. Financing cash flow was ¥4.32bn, suggesting net inflows (details not disclosed), which may relate to debt or other financing; without investing CF and cash balance, leverage and liquidity dynamics through the period are partially opaque. If one were to assume maintenance capex approximates depreciation (¥9.21bn for the period), illustrative FCF would be negative despite positive OCF; however, this is purely indicative given lack of capex disclosure. Working capital management warrants monitoring given the OCF/EBITDA gap; inventories are ¥14.92bn within current assets of ¥96.91bn. Overall, cash earnings quality is decent at the net income level, but full FCF assessment is constrained by unreported investing CF and cash.

Dividend Sustainability

Dividend per share, payout ratio, and FCF coverage are not disclosed in the feed (zeros denote unreported). EPS for the period is ¥183.58, and OCF is ¥4.73bn, but without capex and dividend data, we cannot assess payout affordability or coverage. Balance sheet strength (computed equity ratio ~33.5%) and strong interest coverage (50.8x) indicate capacity to return capital in principle, subject to capex needs in an asset-heavy model. Policy outlook cannot be inferred from the provided data; sustainability will depend on actual capex versus OCF and management’s capital allocation priorities.

Risk Assessment

Business Risks:

• Margin pressure from cost inflation and pricing competition, evidenced by flat operating income despite revenue growth
• High capital intensity requiring continuous reinvestment to sustain earnings
• Utilization and asset-turnover sensitivity impacting profitability in an asset-heavy model
• Supply chain and procurement risks affecting cost of goods and maintenance cycles
• Customer demand cyclicality in key end-markets
• Residual value and remarketing risk if leasing/fleet exposures are material
• Regulatory and tax regime changes affecting effective tax rate and compliance costs

Financial Risks:

• Working capital swings reducing OCF/EBITDA conversion
• Leverage sensitivity (D/E 2.03x; financial leverage 2.99x) to earnings volatility
• Refinancing and interest rate risk, albeit mitigated by strong coverage currently
• Limited visibility on cash balance and capex due to unreported investing CF
• Potential negative FCF in periods of elevated reinvestment

Key Concerns:

• Slight operating margin compression despite revenue growth
• High D&A relative to operating income, underscoring capital intensity
• Inadequate disclosure on investing cash flows and dividends in the provided data
• OCF conversion vs. EBITDA is modest, indicating working capital absorption

Investment Implications

Key Takeaways:

• Revenue grew +3.9% YoY to ¥80.67bn; operating income slightly declined (-0.6% YoY)
• Gross margin solid at 21.8%; operating margin ~7.5%; EBITDA margin 18.9%
• ROE 6.30% with financial leverage 2.99x and asset turnover 0.392
• Liquidity robust (current ratio 168.5%, quick ratio 142.6%); computed equity ratio ~33.5%
• Interest coverage strong at 50.8x; interest burden minimal (¥119m)
• OCF/NI of 1.09 indicates acceptable earnings quality; OCF/EBITDA conversion ~31%
• Capex/FCF and dividend metrics are not disclosed, constraining capital return analysis

Metrics to Watch:

• Operating margin trajectory and cost efficiency
• Working capital turns and OCF/EBITDA conversion
• Capex (maintenance vs. growth) and resultant FCF
• Equity ratio and debt-to-equity trend
• Effective tax rate normalization
• Asset turnover improvement

Relative Positioning: Within asset-intensive service peers, Ichinen exhibits solid liquidity and interest coverage with moderate ROE and margins; capital intensity and working capital needs are the main drags on cash conversion relative to more asset-light competitors.

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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