TOKAI Corp. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥79.03B
• Operating Income: ¥4.44B
• Net Income: ¥3.07B
• EPS: ¥90.13

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

Tokai Co., Ltd. (TSE: 9729) reported solid topline and operating performance for FY2026 Q2 (consolidated, JGAAP), with revenue of ¥79.0bn, up 8.7% YoY, and operating income of ¥4.44bn, up 21.1% YoY. Gross margin stands at 21.5%, and operating margin improved to roughly 5.6%, indicating positive operating leverage as cost control and scale efficiencies outpaced revenue growth. Ordinary income reached ¥4.70bn, and net income was ¥3.05bn, essentially flat YoY (+0.2%), implying non-operating or extraordinary factors and a normalized tax burden offsetting stronger operations. The DuPont decomposition yields a net margin of 3.86%, asset turnover of 0.675x, and financial leverage of 1.32x, resulting in a reported ROE of 3.43%. Balance sheet strength is notable: total assets are ¥117.0bn against total liabilities of ¥28.1bn and equity of ¥88.9bn, implying an equity ratio near 76% (the 0.0% shown is undisclosed, not zero). Liquidity is strong with a current ratio of 243% and quick ratio of 215%, underpinned by ample working capital of ¥33.2bn. Interest expense is minimal at ¥12m, driving an interest coverage ratio near 370x, highlighting very low financial risk. Inventory appears well managed, with an implied inventory days of about 21 days for the half-year, supporting working capital efficiency. Cash flow statements are undisclosed (all zeros), so operating cash flow, free cash flow, and dividend cash coverage cannot be assessed from this dataset. Depreciation and amortization are also undisclosed (reported as zero), preventing a reliable EBITDA view and complicating assessments of capital intensity and earnings quality. EPS is ¥90.13, but share count, DPS, and book value per share are not disclosed, limiting per-share and payout analytics. Overall, the company exhibits improved operating profitability, robust balance sheet health, and negligible financing risk, though the near-flat bottom line underscores the impact of taxes and non-operating items. The absence of cash flow disclosures and D&A data is the main limitation to assessing earnings durability and capital allocation. Near-term, sustaining margin gains while converting earnings to cash will be key to improving ROE from the current mid-single-digit level.

Profitability Analysis

ROE (DuPont) = Net margin (3.86%) × Asset turnover (0.675x) × Leverage (1.32x) ≈ 3.43%, consistent with the reported figure. Operating margin is 5.61% (¥4.436bn/¥79.026bn), ahead of topline growth, indicating positive operating leverage and effective SG&A control. Gross margin is 21.5%, adequate for a service/solutions-oriented model with material cost pass-through; sustaining this level suggests manageable input cost pressures. Ordinary margin is 5.95% and sits above operating margin, implying net positive non-operating contributions in the period. Net margin remained 3.86%, dampened by tax and/or extraordinary items, which explains the divergence between operating income growth (+21.1% YoY) and net income (+0.2% YoY). Interest burden is de minimis (¥12m), providing negligible drag on margins and ROE. EBITDA is not computable due to undisclosed D&A; thus, assessments of underlying cash earnings and capital intensity must rely on operating profit and inventory efficiency signals. Overall profitability quality appears to be improving at the operating level, but bottom-line scalability is constrained by below-the-line items and a normalized tax rate.

Growth Assessment

Revenue growth of 8.7% YoY to ¥79.0bn indicates healthy demand across core businesses. Operating income growth of 21.1% YoY confirms improved mix, pricing, and/or efficiency gains, suggesting that the growth is not purely volume-driven. Net income growth of 0.2% YoY implies offsets from taxes or non-operating/extraordinary items; the effective tax burden is consistent with roughly 30% based on the disclosed income tax amount versus implied pre-tax income. Asset turnover at 0.675x is modest, typical of asset-bearing service models; further improvement in turnover would support ROE uplift. Sustainability of revenue growth will hinge on retaining recent share gains, contract renewals, and stability in healthcare-related demand (given Tokai’s service mix). Given the strong balance sheet and low interest costs, the company has room to invest for growth without stressing solvency. Outlook-wise, maintaining gross margin while scaling operating profit suggests continued potential for margin expansion, but bottom-line growth will depend on stabilizing non-operating items and tax effects.

Financial Health

Liquidity is strong: current assets of ¥56.3bn vs current liabilities of ¥23.2bn produce a current ratio of 243% and quick ratio of 215%. Working capital totals ¥33.2bn, providing a cushion for operations and growth. Solvency is robust with total liabilities of ¥28.1bn against equity of ¥88.9bn; the implied equity ratio is approximately 76% (calculated as equity/assets), despite the reported 0.0% placeholder. The debt-to-equity proxy (total liabilities/equity) is 0.32x, indicating conservative leverage. Interest expense is only ¥12m, and interest coverage is roughly 370x, signaling minimal refinancing or rate risk. Overall capital structure is conservative, offering resilience to macro volatility and capacity for investment and shareholder returns if supported by cash flows.

Cash Flow Quality

Operating, investing, and financing cash flows are undisclosed in the dataset (reported as zeros), so OCF/NI and FCF cannot be evaluated from the provided figures. Earnings quality cannot be triangulated via cash conversion or working-capital cash usage due to the lack of cash flow data and D&A disclosure. Nonetheless, inventory appears efficient with an implied ~21 days of inventory on hand for the half-year ((¥6.49bn/¥55.74bn)×~182 days), which is supportive of working capital discipline. Without OCF and capex, we cannot assess free cash flow generation, capital intensity, or maintenance vs growth investment split. Conclusion: qualitative signals from margins and balance sheet are positive, but cash flow quality remains unverified given disclosure gaps.

Dividend Sustainability

Dividend data (DPS, payout ratio, FCF coverage) are undisclosed in this dataset and shown as zeros by placeholder; thus, we cannot assess payout sustainability quantitatively. EPS for the period is ¥90.13, suggesting capacity for distributions if policy and cash generation allow, but absent OCF and capex disclosure, FCF coverage cannot be determined. The strong balance sheet and low leverage provide flexibility, yet sustainable dividends depend on recurring cash earnings and capital needs. Policy outlook is therefore indeterminate from this data; monitoring official guidance and full-year cash flow statements will be key.

Risk Assessment

Business Risks:

• Margin compression risk from input cost inflation and pricing pressure in service contracts
• Customer concentration or contract renewal risk in key segments
• Operational execution risk in scaling while maintaining service quality
• Regulatory and reimbursement changes affecting healthcare-related revenues
• Labor availability and wage inflation impacting SG&A

Financial Risks:

• Limited visibility on cash conversion due to undisclosed OCF and capex
• Potential extraordinary items affecting bottom line volatility
• Asset turnover softness constraining ROE improvement
• Interest rate risk is minimal currently but could rise if leverage increases

Key Concerns:

• Cash flow statements and D&A are undisclosed, preventing validation of earnings quality and FCF
• Near-flat net income despite strong operating growth suggests below-the-line headwinds
• Equity ratio reported as 0.0% in summary is a placeholder; reliance on calculated ratios is necessary

Investment Implications

Key Takeaways:

• Topline growth (+8.7% YoY) coupled with stronger operating leverage (+21.1% YoY OI) signals improving core profitability
• Net income growth lagged due to taxes/non-operating effects, keeping ROE modest at 3.43%
• Balance sheet is very strong with an implied ~76% equity ratio and minimal interest burden
• Working capital and inventory management appear disciplined (≈21 inventory days)
• Cash flow quality and capital intensity remain key unknowns due to undisclosed OCF and D&A

Metrics to Watch:

• Operating cash flow and free cash flow in the full-year report
• Depreciation and capex to gauge capital intensity and maintenance needs
• Segment-level margins and contract renewal cadence
• Asset turnover trends and working capital days (inventory, receivables, payables)
• Below-the-line items (non-operating gains/losses, extraordinary items) and effective tax rate

Relative Positioning: Operationally improving with solid margins and strong balance sheet versus peers in asset-based service sectors, but currently hampered by limited cash flow disclosure and modest ROE.

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