Kin-Ei Corp. FY2026 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥2.93B
• Operating Income: ¥285M
• Net Income: ¥202M
• EPS: ¥72.71

Income Statement

Balance Sheet

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

Kin-Ei Co., Ltd. (9636) reported solid FY2026 Q3 (standalone, JGAAP) results, with revenue of 29.30 (100M JPY), up 8.3% year over year. Operating income rose faster than sales, up 18.4% to 2.85, signaling margin expansion and operating leverage. Ordinary income reached 2.93 (+17.5% YoY), while net income increased 22.4% to 2.02, pushing the net margin to 6.9%. Based on the provided DuPont metrics, ROE stands at 7.3%, driven by a 6.9% net margin, 0.495x asset turnover, and 2.15x financial leverage. Operating margin, calculable from disclosed figures, is approximately 9.7% (2.85/29.30), up from about 8.9% a year ago by back-calculation, indicating improved cost discipline or pricing/mix benefits. The effective tax rate is 31.9%, close to the statutory range. Balance sheet composition is asset-heavy, with noncurrent assets at 50.15 out of total assets of 59.19 (≈85%), consistent with cinema/real estate-centric operations, and intangibles are minimal at 0.02. Total liabilities are 33.42, equity 27.57, yielding a liabilities-to-equity (debt-to-equity proxy) of 1.21x; however, interest-bearing loans appear modest at 2.55 in total (short-term 2.50, long-term 0.05), consistent with low interest expense of 0.04. Liquidity is a watchpoint: current assets of 9.08 versus current liabilities of 12.85 imply a current ratio of 70.7% and working capital of -3.76. Cash and deposits are 0.87, indicating limited on-hand liquidity; however, strong interest coverage of 69.19x mitigates near-term solvency stress. EPS (basic) is 72.71 JPY on an average share count of 2,788,009, and book value per share is about 988.88 JPY. The payout ratio is indicated at 14.0%, suggesting a conservative distribution policy with scope for flexibility, though cash flow disclosure is absent. Overall earnings momentum is positive, with improved margins and ROE, but liquidity constraints and data gaps (notably OCF/FCF and gross/SG&A details) limit visibility. Non-operating effects were small but positive (income 0.13 vs expenses 0.04), so quality of profit appears primarily operating-driven. Given the heavy fixed-asset base and regional exposure typical of Kin-Ei’s business profile, sustaining utilization/occupancy and prudent capex will be key to maintaining margin gains and ROE. Data limitations include unreported cost of sales, gross profit, SG&A by line, cash flow statements, and dividend cash amounts; the analysis focuses on available non-zero items.

Profitability Analysis

ROE_decomposition: ROE 7.3% = Net margin 6.9% x Asset turnover 0.495 x Financial leverage 2.15x (consistent with assets/equity ≈ 59.19/27.57). Net income 2.02 on revenue 29.30 and assets 59.19 supports the DuPont bridge. margin_quality: Operating margin ≈ 9.7% (2.85/29.30). Ordinary margin ≈ 10.0% (2.93/29.30). Pretax margin ≈ 8.3% (2.43/29.30). Non-operating items net +0.09 were modest; profit quality is predominantly operating. Effective tax rate 31.9% is in a normal range, implying limited one-offs or special tax effects in the period. operating_leverage: Revenue grew 8.3% YoY while operating income grew 18.4%, implying positive operating leverage and cost efficiency gains. Back-calculated prior-year operating income ≈ 2.41 and revenue ≈ 27.05 yield a prior OPM of ~8.9%, indicating ~0.8pp margin expansion YoY. Fixed-cost absorption from an asset-heavy base likely contributed.

Growth Assessment

revenue_sustainability: Top-line growth of 8.3% is healthy for a mature, asset-intensive operator and likely reflects improved attendance/tenant performance and pricing/mix normalization. Sustainability will depend on utilization (cinema attendance/occupancy) and rental performance, given the limited diversification implied by the balance sheet. profit_quality: Growth in operating income outpaced sales, and non-operating contributions were small, pointing to underlying operating strength rather than transitory financial gains. Interest expense is minimal (0.04), so earnings are not flattered by leverage. outlook: If demand normalization persists and cost control holds, operating margin near 10% looks defensible. However, lack of visibility on depreciation, capex, and OCF tempers confidence in medium-term margin durability. External risks include local consumption trends and event-driven variability (e.g., film slates, tenant rotations).

Financial Health

liquidity: Current assets 9.08 vs current liabilities 12.85 imply a current ratio of 0.71 and working capital of -3.76, indicating tight short-term liquidity. Cash and deposits are 0.87, which is lean vs current liabilities. Quick ratio mirrors current ratio (0.71), as inventories and other liquid assets are unreported. solvency: Total liabilities 33.42 vs equity 27.57 yield a liabilities-to-equity of 1.21x. Interest-bearing loans appear low at 2.55, consistent with interest expense of 0.04 and strong interest coverage of 69.19x. Noncurrent liabilities of 20.58 likely include non-interest-bearing items (e.g., deposits), limiting financial risk despite headline leverage. capital_structure: Asset-heavy (noncurrent assets 50.15 ≈ 85% of total), with minimal intangibles (0.02). Financial leverage of 2.15x (assets/equity) supports the ROE profile but increases sensitivity to asset turnover. Balance sheet conservatism on interest-bearing debt offsets the weak liquidity profile.

Cash Flow Quality

earnings_quality: Earnings appear operationally driven given small net non-operating income (+0.09). However, absence of OCF and D&A disclosures limits assessment of accrual intensity and non-cash components. FCF_analysis: OCF and capex are unreported; thus FCF cannot be assessed. With an asset-heavy model, sustaining capex could be material, which would affect free cash generation despite healthy operating margins. working_capital: Negative working capital (-3.76) and a current ratio below 1 indicate reliance on ongoing cash conversion and possibly customer advances/deposits. Without OCF detail, the durability of cash conversion cannot be verified.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 14.0% based on EPS of 72.71 JPY, implying a conservative distribution and capacity for retention. Actual cash dividend amounts/DPS are unreported. FCF_coverage: Not assessable as OCF and capex are unreported. The low payout ratio provides a margin of safety, but liquidity constraints (current ratio 0.71; cash 0.87) may cap near-term increases. policy_outlook: Given conservative payout and improving profitability, the policy appears sustainable if operating conditions remain stable. Any step-up likely hinges on demonstrating consistent OCF and maintaining adequate cash buffers.

Risk Assessment

Business Risks:

• Demand volatility in cinema attendance and event-driven content cycles
• Tenant turnover and occupancy risks in real estate-related income
• Regional concentration risk (potentially Kansai-centric operations)
• Competitive pressures from alternative entertainment formats and streaming
• Regulatory and compliance changes affecting venue operations
• Natural disaster risk impacting facilities and footfall

Financial Risks:

• Tight liquidity with current ratio 0.71 and working capital of -3.76
• Potential capex requirements for maintenance/renovation in an asset-heavy model
• Refinancing and interest rate risk are limited but present, given short-term loans of 2.50
• Limited cash balance (0.87) relative to current liabilities
• Cash flow visibility is low due to unreported OCF/FCF

Key Concerns:

• Sustainability of margin expansion without clear OCF support
• Negative working capital and low cash buffer
• Lack of disclosure on cost structure (COGS, SG&A breakdown) and capex

Investment Implications

Key Takeaways:

• Earnings momentum is positive: revenue +8.3% and OP +18.4% with OPM ≈ 9.7%
• ROE of 7.3% is supported by improved margins and moderate leverage
• Liquidity is weak (current ratio 0.71), despite very strong interest coverage (69.19x)
• Interest-bearing debt appears low (~2.55), suggesting limited solvency risk
• Dividend policy is conservative (≈14% payout), but cash flow disclosure is lacking

Metrics to Watch:

• Operating cash flow and free cash flow once disclosed
• Capex intensity and maintenance vs growth split
• Operating margin trajectory and cost efficiency
• Utilization/occupancy metrics and revenue mix (ticket, concessions, rental)
• Liquidity buffers: cash balance, short-term debt rollovers, and current ratio

Relative Positioning: Within Japanese mid/small-cap entertainment/real-estate operators, Kin-Ei exhibits improving profitability and ROE with limited interest-bearing debt, but stands weaker on short-term liquidity and disclosure depth compared to more diversified 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
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