TAUNS Laboratories,Inc. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥2.37B
• Operating Income: ¥547M
• Net Income: ¥357M
• EPS: ¥3.47

Income Statement

Balance Sheet

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

Verdict: Weak FY2026 Q1 with sharp profit contraction and sub-par capital efficiency, partially cushioned by still-solid liquidity. Revenue fell 63.1% YoY to 23.68, and operating income dropped 85.4% YoY to 5.47, signaling significant demand and/or pricing pressure and operating deleverage. Ordinary income declined 86.5% YoY to 5.05, indicating limited support from non-operating items (non-op income 0.24 vs expenses 0.16). Net income plunged 86.7% YoY to 3.57, compressing returns and pushing ROE down to 2.3%. Current operating margin implied is 23.1% (5.47/23.68), but absent prior-period margin data, exact basis-point compression cannot be quantified; the magnitude of the operating income decline relative to revenue suggests substantial margin compression. Gross profit is reported at 48.11 vs revenue 23.68 (gross margin 203.2%), which is atypical under JGAAP presentation and likely reflects classification effects (e.g., inclusion of other operating income or netting of costs elsewhere); interpretation of gross margin should be cautious. Profit before tax is shown as 37.55, far above ordinary income (5.05), implying a large extraordinary item; however, the net income (3.57) and tax (10.59) figures do not reconcile to that PBT, pointing to disclosure or mapping issues in the period’s XBRL. Liquidity remains adequate with a current ratio of 162.4% and quick ratio of 130.5%, and interest coverage is strong at 34.67x, mitigating near-term financial stress. Leverage is moderate with D/E at 1.23x and short-term loans of 45.00 covered by cash of 92.67. ROIC is reported at 2.0%, well below the 7–8% target range and below the 5% warning threshold, highlighting weak capital efficiency in the quarter. Cash flow data are unreported; thus, earnings quality cannot be validated against operating cash flow, a key limitation. The calculated payout ratio is 809.5%, which appears unsustainably high and likely reflects depressed earnings rather than an extraordinary dividend, since DPS is unreported. Forward-looking, recovery hinges on revenue normalization and restoring operating leverage; without these, low ROIC and weak ROE will persist. The anomaly in gross margin and the P/L reconciliation gap around PBT vs NI suggest caution in interpreting line-item profitability for this quarter. Focus should be on the trajectory of sales, operating expense control, and clarity on any extraordinary items affecting PBT. Overall, defensive balance sheet, but weak top-line and low returns dominate the near-term narrative.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin 15.1% × Asset Turnover 0.061 × Financial Leverage 2.52x = ROE 2.3%. The most significant drag is Asset Turnover at 0.061, reflecting a sharp contraction in revenue relative to the asset base. Net Profit Margin appears elevated numerically because reported revenue is very low and net income includes non-recurring or classification effects; however, operating income fell much faster than sales (−85.4% vs −63.1%), indicating underlying margin compression at the operating level. Financial leverage at 2.52x is moderate and not the primary driver of ROE changes. Business rationale: the steep decline in sales likely created negative operating leverage (SG&A of 10.66 could not flex down enough), compressing operating margin and ordinary profitability; non-operating items were small (net +0.08), and apparent extraordinary item presentation issues complicate PBT/NI interpretation. Sustainability: the depressed asset turnover is likely cyclical or execution-related and could recover if sales normalize; however, margin pressure from fixed cost absorption may persist near-term without cost actions. Concerning trends: operating income contracted much more than revenue, pointing to unfavorable mix/pricing and/or inadequate SG&A flexibility; reported gross margin above 200% signals accounting classification noise, making gross-level trend analysis unreliable.

Growth Assessment

Revenue declined 63.1% YoY to 23.68, suggesting either severe demand weakness, a loss of a major customer/contract, product shipment timing, or business mix changes. Operating income fell 85.4% YoY to 5.47, indicating material operating deleverage. Ordinary income decreased 86.5% YoY, confirming weakness at the core profit level with limited offset from non-operating gains. Net income dropped 86.7% YoY to 3.57, reflecting compressed profitability and possible extraordinary factors. Given the scale of revenue decline, near-term growth visibility is low; recovery will depend on order intake stabilization and execution on cost control. With ROIC at 2.0%, current returns are below the cost of capital, implying value dilution unless margins and asset turnover improve. Outlook: watch for sequential revenue recovery, clarity on any extraordinary items affecting PBT, and management commentary on demand drivers and pricing.

Financial Health

Liquidity is adequate: Current Ratio 162.4% and Quick Ratio 130.5% exceed healthy benchmarks. No explicit warning triggers (Current Ratio < 1.0 or D/E > 2.0) are present; D/E is 1.23x, a moderate level. Maturity profile: Short-term loans of 45.00 are covered by cash and deposits of 92.67 and current assets of 154.77 against current liabilities of 95.30, indicating low near-term refinancing risk. Long-term loans total 88.09, contributing to total interest-bearing debt of at least 133.09 (sum of short and long-term loans). Net debt is approximately 40.4 (debt minus cash), implying some leverage but manageable given coverage (interest coverage 34.67x). Accounts receivable are small (2.48) relative to inventory (30.43), suggesting working capital is inventory-heavy. No off-balance sheet obligations are disclosed in the provided data.

Cash Flow Quality

Operating cash flow is unreported, so OCF/Net Income cannot be evaluated; earnings quality assessment is therefore limited. Free cash flow is unreported; sustainability of internal funding for capex and dividends cannot be confirmed. With NI depressed and payout ratio calculated at 809.5%, cash coverage for dividends would be a concern if such payout reflects cash distributions; however, DPS is unreported, and the ratio likely reflects very low earnings rather than elevated dividends. Working capital composition (high inventories) could be a source of cash release if normalized, but absent OCF detail, potential manipulation or timing effects cannot be assessed.

Dividend Sustainability

DPS is unreported; thus, we cannot compute cash payout or FCF coverage. The calculated payout ratio of 809.5% signals that, if dividends were paid at prior levels, they would not be covered by current earnings due to depressed NI. Without OCF and capex data, we cannot judge FCF coverage; given net debt and lower profits, a conservative stance would be expected until earnings recover. Policy outlook depends on management's capital allocation stance; maintaining dividends through a downturn would rely on balance sheet capacity and future profit visibility.

Risk Assessment

Business Risks:

• Severe revenue contraction (−63.1% YoY) indicating demand, mix, or competitive pressure risk
• Operating deleverage from fixed SG&A base (SG&A 10.66 vs low sales) pressuring margins
• Potential dependency on extraordinary items given PBT vs ordinary income gap
• Inventory-heavy working capital risking obsolescence and further margin pressure

Financial Risks:

• Low ROIC at 2.0% indicates returns below cost of capital
• Moderate leverage (D/E 1.23x) with net debt ~40.4 could constrain flexibility if earnings remain weak
• Dividend sustainability risk given calculated payout ratio of 809.5% amid depressed earnings
• Data gaps on OCF and capex obscure cash generation and funding needs

Key Concerns:

• Reported gross margin >200% suggests accounting classification anomalies; comparability risk
• Inconsistent P/L reconciliation (PBT 37.55 vs NI 3.57 and tax 10.59) raises data reliability concerns
• Weak asset turnover (0.061) dragging ROE to 2.3%
• Visibility on recovery path is low without order intake or backlog disclosure

Investment Implications

Key Takeaways:

• Top-line shock with −63.1% YoY revenue drop drove operating deleverage
• ROE 2.3% and ROIC 2.0% reflect weak capital efficiency
• Liquidity is sound (CR 162%, QR 131%), interest coverage robust (34.7x)
• Leverage moderate (D/E 1.23x) but net debt present (~40.4)
• Earnings quality and cash generation cannot be validated due to missing CF data
• Payout ratio appears unsustainably high relative to depressed earnings, though DPS is unreported
• Accounting presentation anomalies (gross margin, PBT reconciliation) warrant caution

Metrics to Watch:

• Sequential revenue and order trends
• Operating margin and SG&A control versus sales
• OCF/NI ratio once disclosed; working capital movements (inventory)
• Capex and FCF to gauge self-funding capacity
• Leverage trajectory (net debt) and interest coverage
• Any disclosed extraordinary gains/losses clarifying PBT vs NI gap
• ROIC progress back toward >5% and ideally 7–8%

Relative Positioning: Versus typical peers with stable mid-teens operating margins and ROIC near or above WACC, the company currently underperforms on growth and returns but maintains comparatively stronger short-term liquidity and interest coverage; overall positioning is defensive on balance sheet, challenged on profitability.

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