Hikari Food Service Co. Ltd. (138A) AI Stock Analysis

• Market Cap: ¥2.88B
• Dividend Yield: 1.59%
• Average Volume (3M): 7.89K
• Price to Earnings (P/E): 28.1
• Beta (1Y): 0.28
• Revenue Growth: 11.33%
• EPS Growth: -21.04%
• Country: JP
• Employees: N/A
• Sector: Consumer Cyclical
• Sector Strength: 84
• Industry: Restaurants
• EPS (TTM): -15.37
• Shares Outstanding: 992,000
• 10 Day Avg. Volume: 3,790
• 30 Day Avg. Volume: 7,890
• PEG Ratio: 12.21
• Price to Book (P/B): 2.03
• Price to Sales (P/S): 0.93
• P/FCF Ratio: 58.43
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: N/A
• Price Target Upside: N/A
• Rating Consensus: N/A
• Number of Analyst Covering: 0
• EPS Forecast (FY): 211.7
• Revenue Forecast (FY): ¥3.80B

• Rating: 67 Neutral
• Price Target: ¥3,021.00 ▲(10.26% Upside)
• Action: Reiterated Date: 01/16/26
• Date: Action: Reiterated 01/16/26

The score is driven primarily by solid financial progress (strong growth and improved leverage) tempered by margin compression and uneven free-cash-flow conversion. Technicals are supportive with an established uptrend, while valuation is a modest headwind due to a higher P/E and only a small dividend yield.

Positive Factors

Sustained Revenue Expansion

Multi-year revenue expansion, including a marked jump in 2025, signals durable scale-up in core distribution channels and stronger contract visibility with restaurants and hotels. Persistent top-line growth supports margin recovery efforts and funds reinvestment for logistics and product breadth over the medium term.

Improving Capital Structure

Material deleveraging to ~0.63 and rising equity reduce financial risk and increase flexibility for strategic investments or working-capital needs. A more moderate leverage profile improves resilience to demand swings, lowers refinancing pressure, and supports steady credit access over the next several quarters.

High, Stable Gross Margins

Consistently elevated gross margins (~70%+) indicate structural product-level pricing power or favorable supply economics in core ingredients. This buffer supports profitability even when operating costs rise and provides room for reinvestment, promotional activity, or gradual margin restoration over time.

Negative Factors

Profit Margin Compression

Significant net and EBITDA margin compression suggests persistent cost pressure or aggressive reinvestment that has eroded earnings quality. If sustained, lower margins constrain free-cash-flow generation, limit buffer for debt reduction, and reduce capital available for growth or margin-restoring initiatives.

Volatile Free Cash Flow Conversion

Inconsistent FCF conversion—negative in 2024 and modest in 2025 with FCF just ~16% of net income—indicates working-capital intensity or capex absorption. Weak conversion undermines sustained debt paydown, limits investment firepower, and increases reliance on operating income stability to fund strategic needs.

Absolute Debt Burden Remains

Although leverage ratios improved, sizable absolute debt exposes the company to interest-cost variability and reduces strategic flexibility. Continued earnings and reliable cash conversion are required to further de-risk the balance sheet; failure to sustain cash flows could slow deleveraging and constrain growth investments.

Hikari Food Service Co. Ltd. Business Overview & Revenue Model

Company Description

Hikari Food Service Co Ltd is engaged in the restaurant business in Japan. It mainly provides standing bar-style izakaya restaurants. Some of its restaurants are, Daikoku, Fish Camellia, Kanayamaya Family, and Yakiniku Delux.

How the Company Makes Money

Hikari Food Service Co. Ltd. generates revenue primarily through the wholesale distribution of food products to various sectors, including the restaurant and hospitality industries. The company's revenue model includes direct sales to customers, often facilitated through long-term contracts that ensure consistent supply and pricing. Key revenue streams include bulk sales of perishable goods, frozen foods, and specialty items that cater to specific culinary needs. Additionally, Hikari may engage in partnerships with local farmers and food producers, enhancing its product offerings while potentially benefiting from favorable pricing structures. Seasonal promotions and value-added services, such as menu consultation and delivery logistics, also contribute to its earnings.

Hikari Food Service Co. Ltd. Financial Statement Overview

Summary

Strong multi-year revenue expansion and a much healthier balance sheet as leverage declined materially. Offsetting these positives, profitability has compressed versus the 2023 peak (lower net and EBITDA margins) and free cash flow has been volatile with weak cash conversion.

Income Statement

Revenue has expanded strongly over the last several years, culminating in a very large jump in 2025, showing clear scale-up momentum. Profitability, however, has become thinner versus the 2023 peak: net margin fell from ~9.0% (2023) to ~3.6% (2025) and EBITDA margin also stepped down, suggesting higher costs and/or reinvestment pressure. Gross margin remains consistently high and stable (~70%+), which is a key positive, but earnings quality looks less consistent given the margin compression and prior-year volatility.

Balance Sheet

Leverage has improved materially: debt relative to equity declined from very high levels in 2021–2022 (double-digit) to a more moderate ~0.63 in 2025, indicating a much healthier capital structure. Equity has grown significantly since 2023, and returns on equity are now in a more sustainable range (~7.8% in 2025) versus unusually high levels when the equity base was small. Main watch-out: total debt is still sizable in absolute terms, so continued earnings and cash generation need to support ongoing de-risking.

Cash Flow

Operating cash flow is positive and improved in 2025 versus 2024, which supports liquidity. That said, free cash flow has been volatile (negative in 2024, positive but modest in 2025), and cash conversion is not particularly strong: free cash flow is only ~16% of net income in 2025, implying capital spending and/or working-capital demands are absorbing cash. Overall, the business is generating cash, but consistency and conversion into durable free cash flow remain key areas to prove out.

Breakdown	TTM	Nov 2025	Nov 2024	Nov 2023	Nov 2022	Nov 2021
Income Statement
Total Revenue	1.43B	2.86B	2.57B	2.23B	1.68B	868.43M
Gross Profit	1.05B	2.10B	1.88B	1.61B	1.22B	608.17M
EBITDA	189.98M	286.83M	275.77M	342.24M	188.86M	148.44M
Net Income	88.38M	102.46M	100.33M	201.04M	62.88M	40.58M
Balance Sheet
Total Assets	2.48B	2.65B	2.41B	1.76B	1.87B	1.78B
Cash, Cash Equivalents and Short-Term Investments	1.31B	1.39B	1.32B	862.24M	935.04M	819.17M
Total Debt	729.80M	830.76M	749.02M	986.82M	1.34B	1.40B
Total Liabilities	1.18B	1.34B	1.16B	1.40B	1.71B	1.67B
Stockholders Equity	1.30B	1.31B	1.25B	363.89M	162.85M	104.98M
Cash Flow
Free Cash Flow	49.83M	45.50M	-32.62M	300.94M	197.24M	-147.97M
Operating Cash Flow	166.52M	290.25M	209.01M	373.05M	389.03M	28.69M
Investing Cash Flow	43.07M	23.46M	-306.29M	-83.33M	-327.34M	-284.71M
Financing Cash Flow	-59.63M	40.51M	526.96M	-362.52M	-55.82M	181.15M

Hikari Food Service Co. Ltd. Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 2740.00
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For JP:138A, the sentiment is Positive. The current price of 2740 is below the 20-day moving average (MA) of 2857.50, below the 50-day MA of 2784.70, and above the 200-day MA of 2466.15, indicating a bullish trend. The MACD of 27.54 indicates Negative momentum. The RSI at 60.02 is Neutral, neither overbought nor oversold. The STOCH value of 74.15 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for JP:138A.

Hikari Food Service Co. Ltd. Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
8181	75 Outperform	¥2.79B	6.53	―	1.33%	5.03%	129.14%
3077	72 Outperform	¥3.87B	11.04	―	―	6.16%	86.76%
138A	67 Neutral	¥2.88B	28.10	―	1.59%	11.33%	-21.04%
Sector *	61 Neutral	$18.38B	12.79	-2.54%	3.03%	1.52%	-15.83%
3358	57 Neutral	¥3.55B	50.80	―	―	3.85%	-59.79%
3067	51 Neutral	¥4.18B	65.84	―	―	-2.70%	98.30%
2762	46 Neutral	¥3.94B	-4.43	―	―	3.26%	4.62%