SAPPORO CLINICAL LABORATORY INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥10.24B
• Operating Income: ¥379M
• Net Income: ¥226M
• EPS: ¥80.40

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

Sapporo Clinical Laboratory Center (consolidated, JGAAP) delivered steady topline expansion in FY2026 Q2 with revenue of ¥10.238bn (+2.4% YoY), translating into outsized operating profit growth of +12.4% YoY to ¥379m, indicating positive operating leverage. Gross profit of ¥3.034bn implies a gross margin of 29.6%, consistent with a stable pricing/mix and cost discipline environment for a regional diagnostic services provider. Operating margin improved to 3.7%, and ordinary income of ¥389m slightly exceeded operating income, suggesting small non-operating tailwinds offsetting interest expense. Net income rose 12.8% YoY to ¥250m, with a net margin of 2.44%, reinforcing that cost controls and scale benefits outweighed modest revenue growth. DuPont decomposition yields ROE of 2.15% (Net margin 2.44% × Asset turnover 0.610 × Financial leverage 1.44), reflecting decent efficiency and a conservative balance sheet. Asset turnover at 0.61x is typical for an asset-light services model, albeit at the lower end versus nationwide peers that operate larger centralized labs. Equity stands at ¥11.643bn versus total assets of ¥16.786bn, implying an equity ratio of roughly 69.4% (company-reported equity ratio is unpopulated in the XBRL), demonstrating a very solid capital base. Liquidity is strong, with current ratio at 213% and quick ratio at 196%, backed by working capital of ¥3.515bn. Interest coverage is ample at ~110.5x on a modest interest expense base (¥3.43m), indicating negligible financial strain from debt. Cash flow statement items are unreported in this disclosure, so operating cash flow and free cash flow cannot be assessed; however, the balance sheet and income statement indicate low leverage and manageable capex needs typical for a regional lab network. Depreciation & amortization is also unreported, limiting EBITDA analysis and capex proxying; nonetheless, margins and ordinary income trends suggest no evident deterioration in earnings quality. Dividend information is not disclosed; combined with strong liquidity and low leverage, the company retains optionality for shareholder returns subject to policy. Overall, the quarter reflects stable demand, modest pricing/mix tailwinds, and disciplined cost management, delivering improved profitability on modest growth. Key constraints to the analysis are the absence of cash flow data, depreciation, and share count details in this report. Within these limits, the underlying performance appears healthy, with balance sheet strength providing resilience against reimbursement and volume volatility.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 2.44% (Net income ¥250m / Revenue ¥10,238m)
• asset_turnover: 0.610x (Revenue ¥10,238m / Total assets ¥16,786m)
• financial_leverage: 1.44x (Total assets ¥16,786m / Equity ¥11,643m)
• calculated_ROE: 2.15% (matches reported DuPont ROE) margin_quality:
• gross_margin: 29.6% (¥3,033.876m / ¥10,238m)
• operating_margin: 3.7% (¥379m / ¥10,238m), up with +12.4% YoY OI on +2.4% YoY revenue
• ordinary_margin: 3.8% (¥389m / ¥10,238m), slightly above OPM due to net non-operating income
• net_margin: 2.44% (¥250m / ¥10,238m) operating_leverage:
• revenue_growth_YoY: +2.4%
• operating_income_growth_YoY: +12.4%
• incremental_operating_margin_estimate: ≈17.5% (ΔOI ≈ ¥42m / ΔRev ≈ ¥238m), indicating favorable fixed-cost absorption and SG&A discipline

Growth Assessment

revenue_sustainability: Topline growth of +2.4% suggests stable test volumes and pricing in core clinical diagnostics. As a regional provider, growth likely reflects incremental contract wins and procedural volume normalization rather than large price increases. profit_quality: Gross margin at ~29.6% and rising OPM indicate improved mix or efficiency. Ordinary income modestly exceeds operating income despite interest costs, implying manageable non-operating items. Lack of D&A disclosure limits assessment of non-cash earnings components. outlook: Assuming stable reimbursement and hospital/clinic volumes in Hokkaido-Tohoku, mid-single-digit revenue growth is plausible. Operating leverage could persist if volumes expand without proportionate fixed cost increases. Key swing factors include reimbursement revisions, wage inflation for technical staff, and test mix shifts (e.g., specialty vs routine).

Financial Health

liquidity:

• current_assets: ¥6,636.1m
• current_liabilities: ¥3,121.1m
• current_ratio: 212.6%
• quick_ratio: 195.6% (quick assets ≈ ¥6,105.1m; inventories ¥531.0m)
• working_capital: ¥3,515.0m solvency:
• total_assets: ¥16,786m
• total_liabilities: ¥5,056.8m
• equity: ¥11,643m
• equity_ratio_estimated: ≈69.4% (Equity/Assets; reported item is unpopulated)
• interest_coverage: ≈110.5x (Operating income ¥379m / Interest expense ¥3.43m) capital_structure:
• debt_to_equity_proxy: 0.43x (using total liabilities/equity as a proxy due to lack of interest-bearing debt disclosure)
• commentary: Leverage appears conservative; interest burden is minimal, suggesting low interest-bearing debt.

Cash Flow Quality

earnings_quality: Cannot be fully assessed because operating, investing, and financing cash flows are unreported in this filing. Nevertheless, strong interest coverage and stable gross margins support the sustainability of earnings. free_cash_flow_analysis: FCF not derivable due to missing OCF and capex/D&A data. Clinical labs typically require ongoing, but manageable, capex for analyzers and IT; without OCF data, coverage of such capex cannot be quantified. working_capital: Inventories are modest (¥531.0m) relative to current assets; receivables and payables details are undisclosed. Given the 213% current ratio and 196% quick ratio, liquidity buffers are ample, but cash conversion cycle cannot be evaluated without OCF.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio are unreported; EPS is ¥80.40. With a net margin of 2.44% and strong equity base, the company has capacity for distributions in principle, subject to cash generation and policy. FCF_coverage: Unassessable; OCF and capex are undisclosed, so FCF and dividend coverage cannot be computed. policy_outlook: Given low leverage and high liquidity, the balance sheet can support a conservative dividend policy; however, absent disclosure on cash flows and explicit policy, visibility is limited.

Risk Assessment

Business Risks:

• Reimbursement pressure from national fee schedule revisions impacting test unit prices
• Normalization of pandemic-related testing volumes and mix headwinds
• Intensifying competition from nationwide players (e.g., SRL, BML, H.U. Group/LSI Medience) on price and service breadth
• Regional demand concentration in Hokkaido/Tohoku affecting volume resilience
• Labor cost inflation and technician shortages impacting margins and service quality
• Technology obsolescence requiring ongoing capex for analyzers, automation, and IT connectivity with hospitals
• Client concentration risk among major hospital groups and public institutions

Financial Risks:

• Limited visibility on cash generation due to unreported cash flow statements
• Potential working capital swings (receivables collection from medical institutions) affecting liquidity
• Reinvestment needs for equipment upgrades could raise capex in certain periods
• Interest rate risk is low given minimal interest expense, but not fully quantifiable without debt breakdown

Key Concerns:

• Absence of OCF/FCF and D&A data constrains assessment of earnings quality and capital intensity
• Sustaining operating leverage if revenue growth moderates
• Exposure to reimbursement cuts that could compress margins

Investment Implications

Key Takeaways:

• Steady revenue growth (+2.4% YoY) with outsized operating profit growth (+12.4% YoY) indicates favorable operating leverage
• Healthy gross margin (29.6%) and improved operating margin (3.7%) underscore cost discipline
• ROE at 2.15% reflects modest profitability but strong balance sheet (estimated equity ratio ≈69%)
• Liquidity is robust (current ratio 213%, quick ratio 196%); interest burden is minimal (coverage ~110x)
• Cash flow and dividend visibility are limited due to unreported OCF/FCF and DPS

Metrics to Watch:

• Volume and price/mix trends in routine vs specialty testing
• SG&A ratio and incremental margins as revenue grows
• Receivables days and OCF/Net income once disclosed
• Capex intensity and D&A trend (equipment renewal cycles)
• ROE trajectory via margin improvement and asset turnover
• Impact of reimbursement revisions on pricing and margins

Relative Positioning: A financially conservative, regionally focused clinical laboratory with solid liquidity and low leverage, exhibiting improving operating efficiency but lower absolute profitability metrics than large national 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