KANDA TSUSHINKI CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥3.03B
• Operating Income: ¥171M
• Net Income: ¥282M
• EPS: ¥99.66

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

Kanda Tsushinki (19920) reported FY2026 Q2 consolidated results under JGAAP showing revenue of ¥3,031 million, down 6.2% YoY, with gross profit of ¥1,008 million and gross margin of 33.3%. Operating income fell sharply to ¥171 million (−49.3% YoY), indicating significant operating deleverage and cost pressure despite a still-positive operating margin of about 5.6%. Ordinary income was ¥215 million and net income ¥227 million (−19.5% YoY), suggesting the presence of non-operating/extraordinary gains offsetting weaker operating performance and taxes. EBITDA was ¥198 million, implying a modest EBITDA margin of 6.5%, only slightly above the operating margin given limited D&A (¥26.6 million). DuPont metrics indicate ROE of 3.66%, driven by a net margin of 7.49%, low asset turnover of 0.326, and financial leverage of 1.50. The step-down in operating income versus a modest revenue contraction signals elevated operating leverage and/or mix-related gross margin pressure and opex rigidity. Cash generation was solid with operating cash flow of ¥480 million, about 2.1x net income, reflecting strong cash conversion largely from working capital movements rather than non-cash charges. The balance sheet appears conservative: total assets ¥9,285 million and total equity ¥6,195 million imply an equity ratio around 66.7%, despite the separately stated equity ratio field not being populated. Liquidity is strong with a current ratio of 244% and working capital of about ¥3,139 million; interest expense is minimal (¥1.37 million) with very high coverage at 124.7x. Financing cash flow was a net outflow of ¥338 million, likely reflecting debt repayments and/or lease outflows given zero reported dividends for the period. Dividend disclosures show DPS and payout ratio at 0, consistent with a conservative capital return stance or intra-year timing; with investing cash flows not disclosed, free cash flow cannot be conclusively assessed even though OCF was robust. Asset turnover remains low for the scale of equity, constraining ROE; improving utilization and project execution would meaningfully lift returns. The YoY decline in revenue alongside a disproportionate decline in operating profit suggests the need to monitor order timing, project mix, and cost control. While reported “zeros” appear for several line items (e.g., inventories, cash, investing CF, equity ratio), these should be treated as unreported rather than true zeros; analysis here relies on the disclosed non-zero figures and implied ratios. Overall, the company maintains strong liquidity and solvency, solid cash conversion, but faces near-term margin and operating leverage headwinds that suppress ROE.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 7.49%
• asset_turnover: 0.326
• financial_leverage: 1.5
• calculated_ROE: 3.66%
• interpretation: ROE is modest, constrained primarily by low asset turnover. Margin is positive but under pressure; leverage is conservative. margin_quality:
• gross_margin: 33.3%
• operating_margin: 5.6%
• EBITDA_margin: 6.5%
• observations: Operating margin compressed sharply YoY as operating income fell 49.3% on a 6.2% revenue decline, indicating deleverage and/or mix pressure. Limited D&A implies EBITDA uplift versus EBIT is small, so margin pressure is primarily operating rather than depreciation-driven. operating_leverage: High. A modest revenue contraction (−6.2% YoY) led to a disproportionate decline in operating income (−49.3% YoY), signaling significant fixed-cost absorption and/or cost rigidity.

Growth Assessment

revenue_sustainability: Revenue decreased to ¥3,031 million (−6.2% YoY), suggesting softer demand, project timing slippage, or mix changes. Sustainability depends on order intake, backlog conversion, and customer capex cycles. profit_quality: Net income of ¥227 million exceeds ordinary income, implying non-operating/extraordinary gains or favorable below-the-line items partly offset by income tax expense of ¥118 million. Core profitability weakened as evidenced by the larger drop in operating income. outlook: Near-term growth hinges on stabilizing volumes and improving project mix to restore gross margin. With low asset turnover (0.326), scaling revenue without commensurate asset growth would be the most effective way to enhance ROE.

Financial Health

liquidity:

• current_ratio: 244.3%
• quick_ratio: 244.3%
• working_capital: ¥3,139,004,000
• commentary: Strong liquidity and ample working capital cushion. Inventories were not disclosed, so quick ratio equals current ratio based on available data. solvency:
• debt_to_equity: 0.54x
• interest_coverage: 124.7x
• equity_ratio_implied: ≈66.7% (¥6,195m equity / ¥9,285m assets)
• commentary: Balance sheet appears conservatively financed with high implied equity ratio and negligible interest burden. capital_structure: Leverage is moderate to low with strong equity backing. Financing CF outflows (¥338m) suggest net repayments or lease payments rather than incremental borrowing.

Cash Flow Quality

earnings_quality: Strong. OCF of ¥480 million is 2.11x net income, supported by working capital inflows beyond modest non-cash D&A (¥26.6 million). FCF_analysis: Free cash flow cannot be robustly assessed as investing cash flows are not disclosed in this dataset; the reported 0 should be treated as unreported. On a proxy basis, OCF is healthy. working_capital: Positive swing implied; likely improved collections or timing of payables/receivables. Monitor sustainability, as cash conversion could normalize if timing reverses.

Dividend Sustainability

payout_ratio_assessment: Payout ratio shows 0% with DPS at 0, indicating no distributions in the period; not necessarily reflective of full-year policy. FCF_coverage: FCF coverage cannot be determined due to unreported investing CF. OCF alone would have provided capacity, but capital intensity needs confirmation. policy_outlook: Given conservative leverage and strong liquidity, the company has capacity, but the sharp EBIT decline suggests prudence. Expect a cautious stance until margin trajectory improves and capital needs are clarified.

Risk Assessment

Business Risks:

• Revenue timing and backlog conversion risk leading to volatility in quarterly results.
• Margin pressure from project mix, pricing, and fixed-cost absorption.
• Customer capex cyclicality in communications and systems-related markets.
• Execution risk on multi-project delivery and cost control.
• Dependence on non-operating/extraordinary items to offset core weakness.

Financial Risks:

• Operating leverage amplifying profit volatility on small revenue changes.
• Potential reversal of favorable working capital movements affecting OCF.
• Limited asset turnover constraining ROE.
• Visibility on cash, investing flows, and inventories is limited due to unreported items.

Key Concerns:

• Operating income down 49.3% YoY despite only a 6.2% revenue decline.
• Low asset turnover (0.326) suppressing ROE to 3.66%.
• Reliance on working capital for cash generation; sustainability uncertain.

Investment Implications

Key Takeaways:

• Revenue down 6.2% YoY to ¥3,031m; operating income down 49.3% YoY to ¥171m, indicating high operating leverage.
• Gross margin 33.3% remains sound but compressed at the operating level.
• ROE modest at 3.66% due to low asset turnover (0.326) despite conservative leverage (1.50x).
• OCF strong at ¥480m (2.11x net income), aided by working capital.
• Balance sheet conservative with implied equity ratio ~66.7% and interest coverage 124.7x.
• Dividend not paid in the period; capital allocation appears cautious amid margin pressure.

Metrics to Watch:

• Order intake, backlog, and book-to-bill to gauge revenue recovery.
• Gross and operating margin trends, including project mix and cost control.
• Asset turnover improvement (sales vs. asset base) to lift ROE.
• Working capital days (DSO/DPO) to assess sustainability of cash conversion.
• Investing cash flows and capex once disclosed to refine FCF and dividend capacity.
• Ordinary vs. net income gap to monitor non-operating/extraordinary impacts.

Relative Positioning: Financially conservative versus typical small-cap integrators with stronger liquidity and solvency, but currently weaker operating momentum and ROE due to low asset turnover and elevated 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
• 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
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