TOKAI LEASE CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥9.71B
• Operating Income: ¥822M
• Net Income: ¥338M
• EPS: ¥150.28

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

Tokai Lease (consolidated, JGAAP) delivered a strong FY2026 Q2 performance with clear operating leverage. Revenue rose 15.9% YoY to ¥9.71bn, while operating income surged 92.3% YoY to ¥822m, implying substantial fixed-cost absorption and/or improved mix and pricing. Gross profit was ¥1.615bn, putting the gross margin at 16.6%, and operating margin at 8.5%, a notable step-up given the magnitude of the operating income growth relative to sales. Ordinary income of ¥804m sits slightly below operating income due to net financial/other expenses, mainly interest expense of ¥50m. Net income reached ¥520m (+55.4% YoY), translating to a net margin of 5.36% and EPS of ¥150.28 for the period. DuPont metrics provided indicate ROE of 3.0% for the period, with asset turnover at 0.256x and financial leverage at 2.19x; on an annualized basis, implied ROE would be higher, but period comparability should be used with care. The effective tax outflow appears to be approximately 24.8% (¥199m tax on roughly ¥804m of ordinary income), despite the reported “0.0%” metric which reflects unreported calculation rather than the actual rate. Liquidity is solid with a current ratio of 1.49x and a quick ratio of 1.46x, and working capital of ¥4.93bn provides operational flexibility. The balance sheet is moderately levered: total liabilities of ¥19.58bn against equity of ¥17.34bn imply a debt-to-equity ratio of 1.13x and an equity ratio around 45.7% (computed from available non-zero amounts). Interest coverage is healthy at 16.4x, indicating ample buffer against rate increases or earnings volatility. Cash flow statements and depreciation are unreported in XBRL (zeros reflect non-disclosure rather than actual zeros), limiting visibility on earnings quality, rental asset reinvestment, and free cash flow. Given the company’s business model, depreciation is typically material; the absence of D&A disclosure constrains EBITDA and FCF interpretation. Dividend information is also unreported (DPS shown as 0.00), so payout sustainability cannot be quantitatively assessed this quarter. Overall, the quarter evidences strong operating momentum and margin improvement, supported by a sound liquidity profile and manageable leverage, while the main analytical gap is the lack of cash flow and capex/depreciation detail. Near-term focus should be on the durability of demand driving the 15.9% sales growth, pricing discipline, and rental asset investment needs that could influence future cash conversion.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin 5.36% × Asset turnover 0.256 × Financial leverage 2.19 ≈ 3.0% for the period. Operating margin stands at 8.5% (¥822m / ¥9,710m), indicating strong incremental profitability in 1H vs. sales growth. The 92.3% YoY increase in operating income versus 15.9% revenue growth suggests pronounced operating leverage from fixed-cost absorption and/or improved pricing and mix. Gross margin is 16.6% (¥1,614.7m / ¥9,710m). Ordinary income (¥804m) trails operating income mainly due to interest expense (¥50.0m), keeping non-operating drag limited. Interest coverage is robust at 16.4x (operating income / interest expense), underscoring headroom on financing costs. Tax expense of ¥199.1m against ordinary income of ¥804m implies an effective rate of ~24.8%, consistent with a normalized range. EBITDA cannot be assessed due to unreported depreciation and amortization; given the leasing/rental model, true EBITDA would be materially above operating income. Margin quality appears improved at the operating level, but sustainability hinges on maintaining utilization and pricing while managing rental asset maintenance costs.

Growth Assessment

Top-line momentum is solid with revenue up 15.9% YoY to ¥9.71bn for the half. The outsized growth in operating income (+92.3% YoY) indicates meaningful operating leverage, likely from higher utilization, scale benefits, and cost control. Net income growth of +55.4% confirms that profitability improvements translate through to the bottom line despite higher interest and taxes. Sustainability of revenue growth will depend on end-market activity (construction and temporary facility demand), order backlog, and seasonality in the second half. Mix/pricing improvements, if sustained, could keep operating margins elevated, but competitive intensity and input cost normalization are watch items. With asset turnover at 0.256 for the period, annualized turnover would be higher if H2 trends are maintained, implying potential ROE uplift. Absence of cash flow data and D&A detail limits our ability to assess whether growth is capital-intensive in H1 (i.e., reinvestment in rental assets) or supported by working-capital release. Near-term outlook hinges on execution in H2 and macro drivers such as construction activity and capex cycles in target industries. Overall, growth quality appears favorable given the operating leverage, but confirmation via cash conversion data is needed.

Financial Health

Liquidity is comfortable: current ratio 1.49x (¥15.08bn / ¥10.15bn) and quick ratio 1.46x, aided by modest inventories (¥0.29bn). Working capital stands at ¥4.93bn, providing buffer for operations and project mobilization. Solvency is adequate with total liabilities of ¥19.58bn vs. equity of ¥17.34bn, yielding D/E of 1.13x. Using available figures, the equity ratio (equity/total assets) is approximately 45.7%, indicating a balanced capital structure; the reported 0.0% equity ratio is an undisclosed placeholder, not an actual value. Interest coverage at 16.4x reflects strong capacity to service debt at current earnings levels. No maturity profile or detailed debt composition is disclosed, so refinancing risk cannot be fully assessed. Overall, the company enters H2 with a solid balance sheet and liquidity headroom.

Cash Flow Quality

Operating cash flow, investing cash flow, and financing cash flow are unreported this quarter (zeros reflect non-disclosure). Consequently, OCF/Net Income, free cash flow, and cash conversion cannot be evaluated from the data provided. Given the business nature, depreciation is typically significant; the lack of D&A disclosure prevents calculation of EBITDA and an accurate FCF proxy. Working capital at period end is positive (¥4.93bn), but changes in receivables, payables, and inventories are unknown, limiting insight into underlying cash generation. Key questions include the scale of rental asset capex in H1, maintenance vs. growth capex split, and collection efficiency on receivables following the sales increase. Until OCF and capex are disclosed, earnings quality should be regarded as unverified despite the strong profit performance.

Dividend Sustainability

Dividend per share and payout metrics are unreported (DPS shown as 0.00 is a disclosure gap). With net income at ¥520m for the period and leverage moderate (D/E 1.13x), the balance sheet could likely support distributions, but sustainability must be judged against cash generation and rental asset reinvestment needs, neither of which are available. FCF coverage cannot be calculated without OCF and capex. Historical payout policy and full-year guidance would be necessary to form a view on dividend continuity or changes. For now, dividend capacity and sustainability remain indeterminate pending cash flow disclosure.

Risk Assessment

Business Risks:

• Demand cyclicality tied to construction and temporary facility markets affecting utilization and pricing
• Competitive pricing pressure that could erode the improved operating margin
• Input cost inflation and maintenance costs for rental assets impacting gross margin
• Project timing and seasonality leading to revenue and cash flow volatility between halves
• Dependence on large projects or key customers increasing concentration risk

Financial Risks:

• Limited visibility on cash flow and capex given unreported OCF/ICF/FCF
• Potential interest rate sensitivity despite current 16.4x coverage
• Reinvestment requirements for rental assets (capex) could suppress FCF in growth periods
• Refinancing/maturity profile unknown; covenant headroom cannot be assessed

Key Concerns:

• Unreported depreciation and cash flow statements obscure earnings quality and FCF
• Sustainability of operating margin gains without full cost and utilization disclosure
• Potential working capital build from rapid sales growth affecting cash conversion in H2

Investment Implications

Key Takeaways:

• Strong H1 top-line growth (+15.9% YoY) with outsized operating income growth (+92.3% YoY) evidences operating leverage
• Operating margin improved to ~8.5% and net margin to 5.36%, with healthy interest coverage (16.4x)
• Balance sheet is moderately levered (D/E 1.13x) with an implied equity ratio around 45.7% and solid liquidity (current ratio 1.49x)
• Cash flow and D&A are undisclosed, limiting verification of earnings quality and FCF generation
• Dividend capacity cannot be assessed due to missing DPS and cash flow data

Metrics to Watch:

• Order backlog and utilization rates across key rental categories
• Depreciation and amortization disclosure to assess EBITDA and asset intensity
• Operating cash flow and capex (maintenance vs. growth) to gauge FCF
• Receivables collection and DSO given the revenue ramp
• Pricing/mix trends and gross margin trajectory in H2
• Interest expense trend and debt mix amid rate environment

Relative Positioning: Within domestic rental/temporary facility peers, Tokai Lease currently exhibits stronger operating leverage and healthy coverage ratios, coupled with moderate leverage and ample liquidity; however, the absence of cash flow and depreciation disclosure leaves its cash conversion and asset intensity less transparent than best-in-class 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