Chugai Mining Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥112.75B
• Operating Income: ¥798M
• Net Income: ¥811M
• EPS: ¥49.89

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

Chugai Mining Co., Ltd. (14910) reported FY2026 Q2 consolidated results under JGAAP showing strong top-line momentum but thin margins and weaker cash conversion. Revenue rose 58.0% year over year to ¥112.75bn, reflecting robust volume/price tailwinds likely tied to commodities and trading activity. Despite the large revenue increase, operating income grew only 18.0% to ¥0.80bn, implying notable margin dilution typical of an asset-light trading model. Gross profit reached ¥1.89bn, translating to a gross margin of 1.7%, which underscores structurally low spreads in the business mix. The operating margin was approximately 0.71% (¥798m/¥112,748m), while net income came in at ¥718m, down 11.4% YoY, as below-the-line items and a negative tax expense impacted the bottom line. Ordinary income was ¥722m, slightly above net income before the impact of a negative tax charge, indicating minimal non-operating drag from financing and other items. The effective tax rate appears at 0.0% due to a reported negative income tax of ¥187m, which likely reflects tax credits or timing items rather than a structural tax rate. DuPont analysis indicates ROE of 8.34%, driven by very high asset turnover of 5.744x, modest net margin of 0.64%, and financial leverage of 2.28x. EBITDA totaled ¥841m with an EBITDA margin of 0.7%, and interest coverage is strong at 89.7x (EBIT/interest), reflecting low interest burden relative to earnings. Liquidity is solid with a current ratio of 189.1% and a quick ratio of 154.6%, supported by working capital of ¥6.19bn. Capital structure appears moderate with debt-to-equity of 0.97x, and total equity of ¥8.61bn against total assets of ¥19.63bn. Operating cash flow was ¥262m, equating to an OCF/net income ratio of 0.36, signaling weak cash conversion likely due to working capital absorption amid rapid sales growth. Free cash flow cannot be precisely assessed because investing cash flow is unreported in the XBRL; thus FCF is not determinable from the provided data. The company paid no dividends (DPS ¥0.00) in the period, yielding a payout ratio of 0.0%, consistent with conserving resources for growth and working capital. Overall, the business demonstrates scale expansion and strong balance sheet liquidity, but profitability remains constrained by low trading margins and cash conversion volatility. Near-term focus should be on sustaining revenue while improving gross and operating margins, normalizing tax effects, and converting earnings to cash. Data limitations exist for several line items showing as zero due to non-disclosure or different account naming, and conclusions are based on the available non-zero data.

Profitability Analysis

ROE_decomposition: Reported ROE is 8.34%, decomposed as Net Profit Margin 0.64% x Asset Turnover 5.744x x Financial Leverage 2.28x. Value creation is primarily driven by very high asset turnover, while margins are thin and leverage is moderate. margin_quality: Gross margin is 1.7% (¥1,886m/¥112,748m), reflecting low spread trading. Operating margin is ~0.71% (¥798m/¥112,748m). Net margin is 0.64%. The negative tax expense (¥187m) inflated net income relative to pre-tax, implying underlying margin ex-tax effects is modest. D&A is minimal at ¥42.8m, supporting an asset-light model but limiting non-cash support for EBITDA. operating_leverage: Revenue grew 58.0% YoY while operating income rose 18.0% YoY, indicating negative operating leverage in the period as fixed cost absorption and/or reduced spreads diluted margins. The business appears more volume/turnover-driven than margin-accretive, limiting scalability of profits without spread improvement.

Growth Assessment

revenue_sustainability: The 58.0% YoY revenue increase suggests strong demand/price tailwinds, likely cyclical and commodity-linked. Sustainability hinges on commodity prices, trading volumes, and customer activity; such growth rates are unlikely to be linear. profit_quality: Operating income growth (+18.0% YoY) lagged revenue growth, implying spread compression and weaker operating leverage. Ordinary income (¥722m) close to operating income (¥798m) indicates limited non-operating drag, but net income was supported by a negative tax, reducing visibility on normalized profitability. outlook: Near term, revenues may remain elevated if commodity volatility persists, but margins could remain thin. Normalization of the tax line could reduce net income. Improving gross spreads, tighter expense control, and active working-capital management will be key to sustaining earnings growth.

Financial Health

liquidity: Current ratio 189.1% and quick ratio 154.6% indicate strong short-term liquidity. Working capital is ¥6,186.5m, supported by current assets of ¥13,126.5m versus current liabilities of ¥6,940.0m. solvency: Debt-to-equity is 0.97x, suggesting moderate leverage. Interest expense is low at ¥8.9m with EBIT/interest coverage of 89.7x, providing ample buffer. Total assets ¥19,628m and equity ¥8,612m imply financial leverage (A/E) of 2.28x. capital_structure: The balance sheet supports trading operations with meaningful current assets and moderate liabilities. Equity ratio is shown as 0.0% in the dataset but is not disclosed; based on total equity and assets, the implied equity ratio would be approximately 43.9% if measured conventionally (¥8,612m/¥19,628m).

Cash Flow Quality

earnings_quality: OCF of ¥262m is 0.36x net income of ¥718m, indicating weak cash conversion likely driven by working capital build amid rapid sales growth. EBITDA is ¥841m, but limited D&A means fewer non-cash add-backs to support OCF. FCF_analysis: Free cash flow cannot be reliably calculated because investing cash flows are unreported in the period. On an OCF-only basis, cash generation is positive but modest relative to earnings. working_capital: Inventory levels are ¥2,395.5m; with revenue growth, increases in receivables and inventory likely consumed cash. Monitoring receivables days, inventory turnover, and payables days will be crucial given the trading model’s sensitivity to working capital.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0.00 with a payout ratio of 0.0%. This is consistent with reinvestment and liquidity preservation in a working-capital-intensive trading environment. FCF_coverage: FCF coverage cannot be assessed because investing cash flow is not disclosed; OCF of ¥262m would cover only a modest dividend if one were paid, but current policy implies retention. policy_outlook: Given thin margins, volatile cash conversion, and growth-related working capital needs, maintaining a conservative dividend stance appears prudent until cash generation stabilizes and tax effects normalize.

Risk Assessment

Business Risks:

• Commodity price volatility impacting trading spreads and inventory valuations
• Customer and supplier concentration risk in a specialized trading/mining niche
• Foreign exchange exposure on imports/exports and commodity pricing
• Low margin structure increases sensitivity to volume shocks
• Operational execution risk in managing large working capital swings
• Potential mismatch between inventory costs and selling prices during rapid price moves

Financial Risks:

• Weak cash conversion (OCF/net income 0.36x) amid growth-driven working capital absorption
• Moderate leverage (D/E 0.97x) could tighten flexibility if spreads compress
• Tax normalization risk given negative tax this period supporting net income
• Refinancing/credit line dependency typical for trading businesses
• Interest rate and credit spread volatility affecting funding costs

Key Concerns:

• Sustainability of revenue growth with margin preservation
• Normalization of the tax line and its impact on bottom-line earnings
• Improvement in OCF relative to earnings via working capital discipline

Investment Implications

Key Takeaways:

• Top-line expanded 58.0% YoY to ¥112.75bn, but operating income grew only 18.0% YoY, indicating spread pressure.
• ROE of 8.34% is primarily driven by very high asset turnover (5.744x) rather than margin strength.
• Liquidity is solid (current ratio 189%, quick ratio 155%) with strong interest coverage (89.7x).
• Cash conversion is weak (OCF/net income 0.36x), likely due to working capital build.
• Negative tax (¥187m) supports net income; normalization could weigh on future net margins.

Metrics to Watch:

• Gross profit margin and operating margin trajectory
• OCF/net income ratio and free cash flow once investing CF is disclosed
• Inventory turnover and receivables days outstanding
• Leverage (D/E) and interest coverage under different spread scenarios
• Ordinary income vs. operating income to detect non-operating volatility
• Effective tax rate normalization

Relative Positioning: Within Japan’s metals/trading space, the company exhibits a classic asset-light, high-turnover, low-margin profile with moderate leverage and strong liquidity; performance is more sensitive to volume and spread management than to heavy fixed-cost operating leverage.

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
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