| Metric | Current Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue | ¥1168.4B | ¥1110.3B | +5.2% |
| Operating Income | ¥104.1B | ¥109.0B | -4.5% |
| Ordinary Income | ¥107.0B | ¥113.1B | -5.4% |
| Net Income | ¥74.2B | ¥80.3B | -7.6% |
| ROE | 11.4% | 10.8% | - |
For the cumulative Q2 results for the fiscal year ending March 2026, Revenue was ¥1168.4B (YoY +¥58.1B, +5.2%), Operating Income was ¥104.1B (YoY -¥4.9B, -4.5%), Ordinary Income was ¥107.0B (YoY -¥6.1B, -5.4%), and Net Income attributable to owners of the parent was ¥74.2B (YoY -¥6.1B, -7.6%). While revenue increased, higher selling, general and administrative expenses and depreciation led to declines in operating, ordinary, and net income — a revenue-up, profit-down outcome. Gross margin fell 60bp to 67.5% (prior year 68.1%), and SG&A ratio rose 30bp to 58.6% (prior year 58.3%), indicating cost pressures compressing profitability. ROE edged up to 11.4% from 11.3% the prior year, primarily due to equity reduction (share buybacks), which offset the decline in net profit margin through leverage effects.
Revenue: Revenue was ¥1168.4B (YoY +5.2%), achieving solid top-line growth. Segment disclosures are not provided; the company operates a single-segment Chinese cuisine restaurant chain, and expansion of the store network via new openings and steady performance at existing stores is estimated to have contributed to revenue growth. Gross margin was 67.5%, down 60bp from 68.1% a year earlier, with rising raw material and energy costs pressuring gross profit. Cost of goods sold was ¥379.2B (prior year ¥354.3B, +7.0%), rising faster than revenue growth, and gross profit was ¥789.2B (prior year ¥756.0B, +4.4%), lagging the revenue increase.
Profitability: Operating Income was ¥104.1B (YoY -4.5%). SG&A was ¥685.0B (prior year ¥646.9B, +5.9%), rising faster than revenue growth (+5.2%) and reversing operating leverage. Key components include advertising ¥12.5B (prior year ¥12.1B), packing & transportation ¥26.2B (prior year ¥25.6B), promotion ¥50.2B (prior year ¥49.6B), depreciation ¥26.0B (prior year ¥22.5B), and rent ¥47.6B (prior year ¥46.4B). The notable increase in depreciation (+15.6%) suggests continued investment in store equipment renewal. Ordinary Income was ¥107.0B (YoY -5.4%); non-operating income totaled ¥6.2B (dividends received ¥1.3B, interest income ¥0.1B) and non-operating expenses ¥3.3B (interest paid ¥0.4B), producing net non-operating income of ¥2.9B, which was insufficient to reverse operating profit declines. Extraordinary items were net -¥1.2B (extraordinary income ¥1.2B, extraordinary losses ¥2.4B), including impairment losses ¥0.8B and loss on disposal of fixed assets ¥1.6B, indicating continued one-time costs associated with store replacements and renovations. Profit before tax was ¥105.8B; after corporate taxes of ¥31.1B (effective tax rate 29.4%), Net Income was ¥74.2B (YoY -7.6%), concluding a revenue-up, profit-down result.
The group operates a single Chinese cuisine segment, so segment-level operating profit analysis is omitted.
Profitability: Operating margin was 8.9% (prior year 9.8%), down 93bp; net margin was 6.4% (prior year 7.2%), down 88bp. ROE was 11.4% (prior year 11.3%), a slight increase driven by equity reduction via share buybacks of ¥144.9B rather than an actual improvement in profitability. ROA rose to 8.7% (prior year 8.3%), mainly due to a decrease in total assets (primarily lower cash), contrasting with declining profit margins. Gross margin was 67.5% (prior year 68.1%) and SG&A ratio 58.6% (prior year 58.3%), reflecting cost pressure on profitability.
Cash Quality: Operating Cash Flow (OCF) was ¥107.1B, exceeding Net Income of ¥74.2B (OCF/NI = 1.44x), indicating strong cash backing for profits. Depreciation was ¥32.6B, inventory decreased slightly by ¥0.3B, trade receivables decreased ¥0.4B, and trade payables increased ¥0.8B, showing stable working capital; the accrual ratio was -3.8%, which is favorable. However, OCF was constrained relative to an OCF subtotal of ¥137.5B by increases in retirement benefit assets (-¥3.9B) and tax payments (-¥32.6B).
Investment Efficiency: Capital expenditures were ¥43.6B, 1.34x depreciation (¥32.6B), indicating continued growth investment. Free Cash Flow was ¥59.4B (OCF ¥107.1B - Investing CF ¥47.7B), ample to cover dividends of ¥30.0B.
Financial Soundness: Equity Ratio was 76.5% (prior year 76.8%), and current ratio was 191.2% (prior year 269.2%), indicating high soundness. Interest-bearing debt consists only of long-term borrowings of ¥10.0B, and Debt/EBITDA ratio is 0.07x, extremely low with minimal interest burden. Cash and deposits of ¥245.3B significantly exceed current liabilities of ¥156.1B, limiting short-term liquidity risk.
Operating Cash Flow was ¥107.1B (prior year ¥112.1B, -4.5%). Starting from profit before tax of ¥105.8B, depreciation ¥32.6B was the main positive adjustment, while increases in retirement benefit assets (-¥3.9B) and tax payments (-¥32.6B) were negative adjustments. Working capital movements were minor: trade receivables -¥0.4B, inventories -¥0.3B, trade payables +¥0.8B, and the accrual ratio of -3.8% is in a healthy range, indicating good cash conversion quality. Investing Cash Flow was -¥47.7B (prior year -¥45.7B), dominated by capital expenditures of -¥43.6B (prior year -¥41.8B) for store renewals and new investments. Loan advances -¥0.4B and collections ¥0.1B plus other investing activities -¥3.7B contributed to a continued growth investment posture. Financing Cash Flow was -¥195.4B (prior year -¥48.3B) with large outflows driven by share buybacks -¥144.9B, dividend payments -¥30.5B, and repayment of long-term borrowings -¥20.0B. Cash and deposits declined ¥135.9B from ¥381.2B at the beginning of the period to ¥245.3B at the end, led primarily by cash used for share buybacks as part of capital policy execution. Free Cash Flow of ¥59.4B sufficiently covers dividends of ¥30.5B, but the total shareholder return of ¥175.4B (dividends + share buybacks) was funded from cash balances; the company still holds ¥245.3B at period-end, preserving a substantial liquidity buffer.
Of Net Income ¥74.2B this period, core earnings were driven by Operating Income ¥104.1B and non-operating income ¥6.2B (dividends received ¥1.3B, etc.), offset by non-operating expenses ¥3.3B (interest paid ¥0.4B, etc.), resulting in Ordinary Income ¥107.0B, which indicates sustainable earning power. Extraordinary losses were net ¥2.4B (impairment losses ¥0.8B, loss on disposal of fixed assets ¥1.6B), and though the net extraordinary items were modest (net -¥1.2B), these are one-time costs associated with store replacement and renovation that have occurred repeatedly in the past and should be regarded as recurring operational items. Comprehensive income was ¥75.5B versus Net Income ¥74.2B, a difference of ¥1.3B composed of foreign currency translation adjustments ¥0.1B, valuation differences on available-for-sale securities -¥3.1B, and retirement benefit adjustments ¥3.7B, limited in magnitude and not indicating material distortion in earnings recognition. OCF ¥107.1B substantially exceeds Net Income (OCF/NI = 1.44x) and the accrual ratio of -3.8% is healthy, so there are no observed signs of earnings manipulation. Non-operating income is comprised of sustainable items such as dividends and interest income, and non-operating expenses remain within normal bounds; Ordinary Income ¥107.0B is judged to reflect sound core business profitability.
Full year guidance projects Revenue ¥1213.6B (YoY +3.9%), Operating Income ¥109.5B (YoY +5.2%), Ordinary Income ¥110.4B (YoY +3.1%), and Net Income attributable to owners of the parent ¥70.4B (YoY -5.1%). The cumulative Q2 progress rates against initial full-year forecasts are: Revenue 96.3%, Operating Income 95.1%, Ordinary Income 96.9%, and Net Income 105.4%, meaning over 90% of the full-year forecast was achieved by the first half and limited upside is expected in H2. The plan shows Operating Income growth (+5.2%) alongside a forecasted decline in Net Income (-5.1%), which is likely due to anticipated changes in extraordinary items and tax burden. Dividend guidance is annual ¥28 (interim ¥28, year-end ¥28 assumed); against projected full-year EPS of ¥135.09, the Payout Ratio is 20.7%, which appears low but considering the stock split (1 share → 3 shares effective October 1, 2024), on a pre-split basis this equates to an annual dividend of ¥84 equivalent, indicating a policy to maintain substantive dividend increases year-on-year. Revenue is expected to remain solid in H2, but assuming continued cost pressures (raw materials, labor, depreciation), operating margin improvement is expected to be modest.
Annual dividend is ¥56 (interim ¥28, year-end forecast ¥28). With Net Income ¥74.2B, dividend payments were ¥30.5B, implying a Payout Ratio of 37.1%, a sustainable level. Note the ordinary share split on October 1, 2024 (1→3); on a pre-split basis, this year’s dividend is equivalent to prior-year ¥75 vs current-year ¥84 equivalent (¥56 × 1.5), representing an effective increase. Share buybacks of ¥144.9B were conducted; combined with dividends of ¥30.5B, total shareholder returns were ¥175.4B. The Total Return Ratio is approximately 236%, temporarily high, and reflects a liquidity-driven capital efficiency measure based on abundant cash (opening balance ¥381.2B) and low debt (interest-bearing debt ¥10.0B only); it should be viewed as a tactical action rather than a sustained shareholder return policy. Free Cash Flow ¥59.4B covers dividends ¥30.5B by 1.95x, indicating a high sustainability of dividends. The full-year plan maintains a dividend of ¥28 (annual, post-split basis); with forecast EPS ¥135.09, the Payout Ratio of 20.7% is conservative, and even accounting for downside risk in H2, dividend funding appears secure.
Raw Material & Energy Cost Increase Risk: Gross margin fell to 67.5% from 68.1% (60bp decline), and cost of goods sold ratio rose to 32.5% (prior year 31.9%, +60bp). Ongoing upward pressure on raw material and utility costs could persistently compress profitability if price pass-through or menu redesign measures are insufficient. Raw material inventories are ¥5.2B (prior year ¥5.2B), flat, but rising purchase prices are pressuring earnings.
SG&A Ratio Increase Risk: SG&A was ¥685.0B (prior year ¥646.9B, +5.9%), outpacing revenue growth (+5.2%), and SG&A ratio rose to 58.6% (prior year 58.3%, +30bp). Notably, depreciation ¥26.0B (prior year ¥22.5B, +15.6%), rent ¥47.6B (prior year ¥46.4B, +2.6%), and promotion ¥50.2B (prior year ¥49.6B, +1.2%) increased. Continued store renewal investment alongside rising labor and advertising costs could entrench reverse operating leverage and further depress operating margin (currently 8.9%).
Asset Retirement Obligations and Ongoing Store Renewal Costs: Asset retirement obligations amount to ¥25.98B (≈13% of liabilities), which is relatively high; future cash outflows for restoration at store closures/renovations may occur. This period recorded loss on disposal of fixed assets ¥1.6B and impairment losses ¥0.8B, and disposals/impairments have occurred in prior periods as well. Although interest-bearing debt is low (long-term borrowings ¥10.0B, prior year ¥30.0B), if asset retirement obligations materialize concurrently with store renewal investments, Free Cash Flow could be pressured.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 8.9% | 4.6% (1.7%–8.2%) | +4.3pt |
| Net Margin | 6.4% | 3.3% (0.9%–5.8%) | +3.0pt |
The company’s operating and net margins significantly exceed the industry medians, placing it among the higher tier in retail.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 5.2% | 4.3% (2.2%–13.0%) | +0.9pt |
Revenue growth slightly exceeds the industry median, indicating a stable growth trajectory.
※ Source: Company compilation
Room for medium- to long-term reinvestment supported by stable demand and a strong financial base: Revenue grew +5.2%, cash on hand is ¥245.3B, interest-bearing debt is ¥10.0B (Debt/EBITDA=0.07x), and financial soundness is extremely high. Free Cash Flow ¥59.4B adequately covers dividends ¥30.5B. Equity Ratio 76.5% and current ratio 191.2% show ample liquidity and solvency, providing a basis to continue store expansion and renewal investment. Capital expenditures ¥43.6B (1.34x depreciation) indicate continued growth investment, laying the groundwork for medium- to long-term sales and efficiency improvements.
Short-term cost pressures and reversal of operating leverage: Gross margin declined 60bp and SG&A ratio increased 30bp, compressing operating margin by 93bp (9.8% → 8.9%). SG&A growth (+5.9%) outpaced revenue growth (+5.2%), causing reverse operating leverage, and rising raw material, labor, and depreciation costs are not yet offset by price pass-through or operational efficiency gains. The full-year forecast assumes Operating Income +5.2% recovery, but H2 improvements in price/mix and productivity will be key. Store renewal-related disposal and impairment (total ¥2.4B) are modest but recurring, and the visibility of asset retirement obligations ¥25.98B (≈13% of liabilities) warrants monitoring as a potential future cash flow pressure.
This report was auto-generated by AI analyzing XBRL financial statement data and is a financial analysis document. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on publicly available financial statements. Investment decisions are your own responsibility; please consult a professional advisor as needed.