Maruken Lease Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥12.78B
• Operating Income: ¥785M
• Net Income: ¥816M
• EPS: ¥260.30

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

Verdict: A mixed but overall positive FY2026 Q2—top-line growth and sharply higher ordinary/net income offset a slight operating margin squeeze and softer cash conversion. Revenue rose 13.7% YoY to 127.8, driven by stronger rental/lease activity, while operating income increased 9.0% YoY to 7.85. Ordinary income jumped 45.3% YoY to 11.68, aided by a sizable step-up in non-operating income of 4.31 versus modest non-operating expenses of 0.48. Net income surged 43.8% YoY to 8.25, lifting net margin to 6.5%. Gross margin was 18.2%; operating margin was approximately 6.1%. Operating margin compressed about 27 bps YoY (current ~6.14% vs prior ~6.41%), while net margin expanded roughly 135 bps thanks to non-operating tailwinds. The non-operating contribution is material (ordinary income materially above operating income), highlighting reliance on items outside core operations. Earnings quality is a watch-point: OCF/NI was 0.73x (below the 0.8 threshold), indicating weaker cash conversion versus accounting earnings. Liquidity is adequate with a current ratio around 1.5x and D/E at 1.13x, and interest coverage is strong at 20.7x. Capital efficiency is a concern: ROE is modest at 4.6% and ROIC is low at 2.5%, well below the 5% warning line. Depreciation of 1.61 against EBITDA of 9.46 indicates reasonable non-cash support, but working capital likely absorbed cash given OCF lagged NI. Implied FCF was positive (approximately 4.1) given capex of 1.95, but investing cash flow granularity is limited. The payout ratio is around 58.2%, seemingly within a sustainable band if cash conversion improves, though dividend datapoints are otherwise unreported. Balance sheet strength and ample working capital provide resilience against near-term volatility. Forward outlook hinges on sustaining revenue momentum, improving operating leverage, and reducing dependence on non-operating income. Focus areas: better cash conversion, ROIC uplift via asset productivity, and clarity on the nature and recurrence of non-operating income.

Profitability Analysis

ROE decomposition (DuPont): ROE 4.6% = Net Profit Margin 6.5% × Asset Turnover 0.333 × Financial Leverage 2.13x. The biggest swing factor this quarter is net profit margin, which expanded to 6.5% primarily due to elevated non-operating income (4.31) and modest non-operating expenses (0.48), lifting ordinary and net income. Operating margin was roughly 6.14%, down about 27 bps YoY (vs ~6.41% prior), as revenue grew faster than operating income (+13.7% vs +9.0%), indicating modest operating deleverage or mix effects. Asset turnover at 0.333 underscores a capital-intensive rental/lease asset base; this likely weighed on ROIC (2.5%) despite revenue growth. Financial leverage at 2.13x is moderate and not the main driver of ROE movement. Business reason: strong demand supported revenue, but cost pressures and/or mix (e.g., maintenance, logistics, labor) constrained operating margin; non-operating gains (including 0.27 in dividend income and other unspecified items) boosted bottom line. Sustainability: operating margin compression appears manageable but needs monitoring; the non-operating uplift may be partly one-time or volatile without detailed breakdown. Concerning trend: SG&A detail is unreported, but aggregate operating income growth lagging revenue growth suggests costs rose faster than desired. Priority: improve operating efficiency and asset utilization to lift asset turnover and ROIC.

Growth Assessment

Revenue growth of 13.7% YoY to 127.8 reflects healthy market demand in construction-related leasing/rental. Operating income grew 9.0% YoY to 7.85, trailing sales growth, implying limited operating leverage. Ordinary income rose 45.3% to 11.68 owing to higher non-operating income; net income rose 43.8% to 8.25, with EPS at 260.30 JPY. Net margin expanded to 6.5% from ~5.1% prior, while operating margin contracted by ~27 bps, indicating mix and cost dynamics. EBITDA of 9.46 provides buffer for interest and capex, but ROIC of 2.5% highlights underutilized capital or low pricing power. Near-term outlook depends on sustaining end-market activity, improving utilization rates, and tightening cost control. Without segment detail, the sustainability of current growth is moderately positive but exposed to macro/cycle sensitivity and potential normalization of non-operating items.

Financial Health

Liquidity: Current ratio 1.50x and quick ratio 1.50x are adequate (near the >1.5x benchmark). Working capital stands at 76.78, with cash and deposits at 26.27 and accounts receivable at 54.01. No warning on current ratio (<1.0) or D/E (>2.0). Solvency: D/E is 1.13x, within conservative range; interest coverage 20.66x indicates strong debt service capacity. Capital structure: Short-term loans 28.11 and long-term loans 36.97 (total loans ~65.08) are balanced against current assets of 230.55, suggesting low near-term maturity mismatch risk. Maturity mismatch: Current assets comfortably exceed current liabilities (230.55 vs 153.77). Off-balance sheet: None reported. Equity totals 180.42, aligning with leverage of 2.13x (Assets/Equity), confirming balance sheet consistency.

Cash Flow Quality

OCF was 6.03 versus net income of 8.25, yielding OCF/NI of 0.73x—below the 0.8 threshold and a potential quality flag. The shortfall likely reflects working capital absorption (e.g., receivables growth), though specific drivers are unreported. Capex was 1.95; implied Free Cash Flow ≈ 4.08 (OCF − Capex), indicating positive internal funding capacity despite weaker conversion. With interest expense of 0.38 and strong coverage, cash obligations appear manageable. No signs of aggressive working capital management can be confirmed due to limited disclosures, but the OCF/NI gap warrants monitoring for persistence across quarters. Sustainability: If revenue growth moderates and working capital normalizes, OCF/NI should improve; otherwise, persistent gaps could constrain dividend flexibility and reinvestment.

Dividend Sustainability

Payout ratio is approximately 58.2%, near the upper bound of a generally sustainable range (<60%), but other dividend metrics (DPS, total dividends paid) are unreported. Given implied positive FCF (~4.08) and modest interest burden, coverage appears tentatively adequate, contingent on stabilizing OCF. Balance sheet headroom (current ratio ~1.5x, D/E 1.13x) supports continuity. Key watch-points: OCF/NI improvement above 1.0x, capex trajectory against maintenance needs, and confirmation of dividend policy cadence given prior rebranding and capital allocation priorities.

Risk Assessment

Business Risks:

• Operating margin pressure as revenue growth outpaced operating income (+13.7% vs +9.0%), implying limited operating leverage.
• Low ROIC (2.5%) relative to capital intensity, indicating weak capital efficiency and potential return shortfall versus cost of capital.
• Dependence on non-operating income to lift earnings (ordinary income materially above operating income), with limited disclosure on components.
• End-market cyclicality in construction and infrastructure spending affecting utilization and pricing.
• Residual value and asset obsolescence risk on leased/rented equipment, especially under rapid technological or regulatory changes.

Financial Risks:

• OCF/NI at 0.73x signals weaker cash conversion, potentially stressing liquidity if sustained.
• Interest rate risk on floating-rate borrowings given short-term loans of 28.11 and total loans ~65.08.
• Working capital expansion risk (receivables 54.01) if customer terms lengthen or collections slow.
• Moderate leverage (D/E 1.13x) could limit flexibility if earnings soften.

Key Concerns:

• Sustainability and transparency of non-operating income (4.31) that materially boosted ordinary income.
• ROIC below 5% warning threshold, necessitating asset productivity improvements.
• Operating margin compression (~27 bps YoY) despite strong revenue growth.
• Data gaps (SG&A breakdown, investing CF details, dividend cash outlays) constrain visibility on cost structure and capital allocation.

Investment Implications

Key Takeaways:

• Top-line strength with double-digit YoY growth, but core margin slightly compressed.
• Bottom-line outperformance driven by non-operating income, boosting net margin and EPS.
• Earnings quality mixed: OCF trails NI (0.73x), though implied FCF remains positive after capex.
• Balance sheet solid with adequate liquidity and strong interest coverage.
• Capital efficiency weak (ROIC 2.5%); improving asset turnover and pricing/utilization is key.

Metrics to Watch:

• Operating margin trajectory and SG&A intensity versus revenue growth.
• OCF/NI ratio and working capital turns (especially receivables).
• Composition and recurrence of non-operating income.
• ROIC versus management targets; asset turnover improvement.
• Leverage (D/E), interest coverage, and capex discipline.
• Dividend policy disclosures and FCF coverage of payouts.

Relative Positioning: Within Japan’s equipment leasing/rental peer set, Maruken Lease shows healthy growth and strong coverage metrics but lags on capital efficiency (ROIC 2.5%) and cash conversion, with greater reliance on non-operating income than ideal. The balance sheet provides a cushion, but sustainable rerating likely requires better operating leverage and clearer cash generation.

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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