Nippon Dry-Chemical CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥26.60B
• Operating Income: ¥3.39B
• Net Income: ¥1.68B
• EPS: ¥326.41

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

Japan Dry Chemical (TSE:19090) delivered a robust FY2026 Q2 (cumulative) performance with clear operating leverage and sound balance sheet strength. Revenue rose 12.4% YoY to ¥26.6bn, demonstrating healthy demand in core fire protection and safety-related businesses. Operating income increased 54.0% YoY to ¥3.39bn, implying notable margin expansion on the back of scale benefits and cost discipline. Gross profit reached ¥6.05bn, producing a gross margin of 22.7%, while operating margin improved to 12.7%, a strong level for the industry at midyear. Ordinary income of ¥3.57bn exceeded operating income, indicating positive non-operating contributions despite interest expense of ¥57m. Net income grew 43.4% YoY to ¥2.19bn, with EPS at ¥326.41, evidencing solid bottom-line momentum. Cash generation was strong: operating cash flow was ¥5.31bn, translating to an OCF/Net Income ratio of 2.43x, which supports the quality of earnings. The balance sheet remains conservative with total assets of ¥52.55bn and total equity of ¥33.20bn, implying an equity ratio of roughly 63% based on disclosed balances (the reported 0.0% equity ratio appears to be an unreported placeholder). Liquidity is ample with a current ratio of 203% and a quick ratio of 182%, supporting project execution and procurement needs. Leverage appears moderate with a reported D/E of 0.62x and financial leverage of 1.58x from the DuPont set. Interest coverage is very strong at 59x, underscoring low financial risk. The DuPont-derived ROE is 6.59%, aided by an 8.22% net margin and an asset turnover of 0.506x for the period; there is room for improvement in asset efficiency. Effective tax rate based on disclosed income tax and ordinary income is approximately mid-teens, not 0% (the 0% likely reflects an unreported calculated field). Several items, including investing cash flows, cash balance, dividends, and share counts, are shown as zero and should be treated as undisclosed rather than actual zeros; this limits certain analyses (e.g., FCF and per-share capital metrics). Overall, the company exhibits improving profitability, excellent cash conversion, and a solid financial foundation entering the back half of the fiscal year.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 8.22%
• asset_turnover: 0.506
• financial_leverage: 1.58
• calculated_ROE: 6.59%
• commentary: ROE of 6.59% reflects improved margins but still modest asset turnover. Leverage is conservative, so future ROE gains will likely depend on sustaining higher operating margins and improving asset efficiency. margin_quality:
• gross_margin: 22.7%
• operating_margin: 12.7%
• EBITDA_margin: 14.1%
• drivers: ['Operating income growth (+54% YoY) outpaced revenue growth (+12.4% YoY), indicating effective cost control and operating leverage.', 'Ordinary income exceeded operating income, suggesting non-operating gains or financial income offsetting interest costs.']
• tax_rate_note: Income tax of ¥520m against ordinary income of ¥3,571m implies an effective tax rate around 14–15%, not 0%. operating_leverage:
• evidence: Operating margin expanded meaningfully alongside double-digit revenue growth.
• sustainability: Dependent on mix, execution in installation/services, and input cost stability; current trajectory supports continued leverage if demand stays firm.

Growth Assessment

revenue_sustainability:

• YoY_growth: 12.4%
• context: Suggests firm demand for fire protection systems and related services; backlog and order intake data would help confirm visibility. profit_quality:
• net_income_growth: 43.4% YoY
• OCF_to_NI: 2.43
• interpretation: Strong cash conversion supports the quality of reported earnings; low interest burden also contributes to profit resilience. outlook:
• near_term: Margin momentum appears favorable into H2 if project execution remains strong and cost environment is stable.
• medium_term: ROE improvement hinges on sustaining higher margins and better asset turnover via efficient working capital and balanced capex.

Financial Health

liquidity:

• current_ratio: 203.3%
• quick_ratio: 182.2%
• working_capital: ¥17,665,788,000
• interpretation: Ample liquidity for operations and procurement cycles; supports execution of large projects and potential seasonality. solvency:
• interest_coverage: 59.0x
• debt_to_equity: 0.62x
• equity_ratio_estimate: ≈63.2% (equity/total assets based on disclosed balances)
• interpretation: Low financial risk profile with substantial equity buffer and strong coverage. capital_structure:
• assets: ¥52,554,000,000
• liabilities: ¥20,421,721,000
• equity: ¥33,202,000,000
• commentary: Balance sheet capacity remains healthy for organic investments; net cash not determinable due to undisclosed cash and detailed debt data.

Cash Flow Quality

earnings_quality:

• OCF: ¥5,305,161,000
• net_income: ¥2,187,000,000
• OCF_to_NI_ratio: 2.43
• assessment: OCF comfortably exceeds net income, indicating strong cash earnings and disciplined working capital. FCF_analysis:
• free_cash_flow: Not derivable (investing cash flows/capex undisclosed; reported FCF=0 appears to be an undisclosed placeholder)
• capex_comment: Depreciation is ¥358m; absent capex disclosure, upkeep vs. growth investment cannot be assessed. working_capital:
• inventories: ¥3,609,683,000
• notes: ['Inventory appears modest relative to half-year revenue, implying good turnover.', 'Further detail on receivables and payables would clarify OCF drivers; results suggest favorable collection or milestone billings.']

Dividend Sustainability

payout_ratio_assessment: Payout ratio shown as 0.0% and DPS 0.00 likely reflect undisclosed data; no conclusion on current policy based solely on these placeholders. FCF_coverage: Cannot be assessed due to undisclosed investing cash flows and FCF. policy_outlook: Given strong OCF, balance sheet capacity appears supportive of potential shareholder returns, but confirmation requires actual DPS/FCF disclosures and stated policy.

Risk Assessment

Business Risks:

• Project timing and acceptance risk affecting revenue recognition and margins.
• Input cost fluctuations (materials, subcontracting) impacting gross margin.
• Competitive bidding pressure in fire protection/installation markets compressing pricing.
• Regulatory and building code changes influencing demand timing and required product specs.
• Supply chain constraints that could delay deliveries or installations.

Financial Risks:

• Limited visibility on cash and debt composition due to undisclosed cash flow items.
• Potential working capital swings in H2 tied to project milestones and receivable collections.
• Currency exposure on imported components if applicable.

Key Concerns:

• Lack of disclosed investing cash flows obscures capex and FCF trend.
• Interim asset turnover is modest, constraining ROE despite margin gains.
• Reliance on non-operating contributions to lift ordinary income may not be recurring.

Investment Implications

Key Takeaways:

• Strong top-line growth (+12.4% YoY) paired with outsized operating profit growth (+54.0% YoY).
• Material margin expansion to 12.7% operating margin indicates operating leverage.
• High-quality earnings with OCF/NI at 2.43x.
• Solid balance sheet with estimated ~63% equity ratio and 59x interest coverage.
• ROE at 6.59% improving but still constrained by asset turnover.

Metrics to Watch:

• Order intake and backlog to validate revenue visibility into H2.
• Capex and investing cash flows to determine FCF and reinvestment needs.
• Receivables and inventory turnover to sustain strong OCF.
• Gross and operating margin trajectory amid cost environment.
• Non-operating income components and sustainability.
• Effective tax rate normalization in H2.

Relative Positioning: Within Japan’s fire protection and building safety space, the company exhibits above-average liquidity and balance sheet strength, improving margins, and disciplined cash generation; ROE remains mid-single-digit at interim and could converge toward peers with continued margin execution and asset efficiency gains.

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