AUTOWAVE Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.64B
• Operating Income: ¥109M
• Net Income: ¥101M
• EPS: ¥7.04

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

Autowave (26660) reported FY2026 Q2 standalone results under JGAAP showing solid top-line growth and pronounced operating leverage. Revenue rose 14.1% YoY to ¥4,641m, with gross profit of ¥1,300.6m and a gross margin of 28.0%, indicating stable merchandise economics. Operating income increased 87.4% YoY to ¥109m, lifting the operating margin to 2.35% and demonstrating improved cost absorption. Ordinary income reached ¥175m, supported by low interest expense (¥6.2m) and strong coverage (17.6x), highlighting manageable financial costs. Net income was ¥101m, translating to a net margin of 2.18% and EPS of ¥7.04, with YoY growth of 50.2%. DuPont analysis shows ROE of 2.41% derived from a 2.18% net margin, 0.623x asset turnover, and 1.77x financial leverage, implying returns are primarily margin- and efficiency-driven rather than leverage-dependent. Balance sheet strength appears reasonable with total assets of ¥7,445m and total equity of ¥4,197m, giving a liabilities-to-equity ratio of 0.81x and suggesting moderate leverage. Liquidity is adequate but tight, with a current ratio of 108.5% and quick ratio of 71.1%, and working capital of ¥143.8m. Inventory of ¥630.4m represents a sizable share of current assets, requiring disciplined turnover management to maintain cash conversion. Operating cash flow was ¥65.9m, below net income (OCF/NI = 0.65), indicating cash earnings lagged accounting earnings likely due to working capital investment. EBITDA totaled ¥221.5m, implying an EBITDA margin of 4.8% and satisfactory coverage of modest interest outflows. The company reported no dividend (DPS ¥0), with a payout ratio of 0%, consistent with preserving cash under tight liquidity. Several items are unreported in XBRL (e.g., equity ratio, cash and equivalents, investing CF, outstanding shares), so caution is warranted in interpreting liquidity and per-share metrics. Overall, the quarter exhibits healthy revenue growth, margin expansion, and improved profitability, offset by weaker cash conversion and a narrow liquidity buffer. The outlook hinges on sustaining gross margin, controlling SG&A, and converting earnings to cash through inventory and receivables discipline.

Profitability Analysis

ROE of 2.41% reflects a 2.18% net margin, 0.623x asset turnover, and 1.77x leverage—returns are driven by core operations rather than balance sheet stretch. Operating margin of 2.35% improved meaningfully YoY given operating income growth (+87.4%) outpaced revenue (+14.1%), evidencing operating leverage and SG&A discipline. Gross margin at 28.0% suggests healthy merchandise pricing and mix; maintaining this level is critical for sustaining operating leverage. EBITDA margin of 4.8% provides a buffer for fixed costs but remains modest, typical for retail-like models; further scale could enhance operating efficiency. Ordinary margin of 3.77% exceeds operating margin due to non-operating contributions and low interest costs. Interest expense of ¥6.2m with 17.6x coverage indicates profitability is not significantly burdened by financing costs. Effective tax rate is not interpretable from the provided 0.0% metric; actual tax paid is ¥48.2m, so margin after tax reflects a normalizing burden. Overall profitability quality improved, but conversion to cash is lagging, suggesting some of the margin expansion is tied up in working capital.

Growth Assessment

Revenue growth of +14.1% YoY indicates solid demand momentum. Operating income growth of +87.4% YoY demonstrates strong operating leverage, implying improved expense efficiency and/or better gross margin management. Net income growth of +50.2% YoY confirms broader earnings improvement beyond operating line, with limited drag from financing costs. Sustainability depends on maintaining the 28.0% gross margin amid potential cost inflation and competitive pricing. The current asset turnover (0.623x on a period-end basis) is moderate; improving turnover, especially inventory, could support continued growth. Profit quality is mixed: accounting earnings improved sharply, but OCF at ¥65.9m (0.65x NI) suggests working capital consumption; normalizing inventory and receivables is key to sustaining growth. Outlook: continued top-line expansion with incremental margin gains appears feasible if cost discipline persists; however, cash conversion must catch up to support reinvestment without stressing liquidity.

Financial Health

Liquidity: current ratio 108.5% and quick ratio 71.1% indicate a narrow liquidity cushion; working capital of ¥143.8m is modest relative to revenue scale. Inventories of ¥630.4m represent 34.5% of current assets, making liquidity sensitive to turnover. Solvency: liabilities-to-equity is 0.81x, suggesting moderate leverage and a sound solvency profile. Interest burden is small (¥6.2m) with very strong coverage (17.6x), lowering near-term refinancing risk. Capital structure: assets ¥7,445m vs equity ¥4,197m imply 1.77x financial leverage; balance sheet reliance on debt and other liabilities appears controlled. Equity ratio was reported as 0.0% in the dataset, which is unreported rather than a true zero; recalculated equity/asset ratio is approximately 56.4%. Overall, solvency is solid, but liquidity management remains a focus area.

Cash Flow Quality

Earnings quality is tempered by weaker cash conversion: OCF of ¥65.9m compared to net income of ¥101.0m (OCF/NI = 0.65) points to working capital investment or timing effects. D&A of ¥112.5m underpins EBITDA of ¥221.5m; non-cash charges are meaningful but not excessive. Free cash flow cannot be reliably assessed because investing cash flow is unreported (shown as 0 by the dataset); thus reported FCF of 0 should not be interpreted as actual zero. Working capital: inventory balance is sizeable, and with revenue growth, it likely increased, contributing to the OCF shortfall; receivables/payables dynamics are not disclosed but are probable drivers. Financing CF of -¥142.8m suggests outflows (e.g., debt repayment or lease payments), not dividends given DPS is zero; absent cash balance disclosure, the funding mix for operations and investing is unclear. Overall, cash flow quality is fair but needs improvement through better working capital turnover.

Dividend Sustainability

Current DPS is ¥0 with a payout ratio of 0%, indicating no distribution. Given OCF trails net income and liquidity is tight, a conservative dividend stance aligns with preserving cash. FCF coverage is reported as 0.00x due to unreported investing cash flows; thus, true capacity for dividends cannot be determined from available data. With leverage moderate and interest costs low, future distributions would depend on sustained cash generation and working capital normalization. Policy outlook: absent explicit guidance, the prudent assumption is a continued emphasis on reinvestment and balance sheet resilience until cash conversion improves.

Risk Assessment

Business Risks:

• Demand volatility affecting discretionary auto-related consumption and services
• Gross margin pressure from competition, procurement costs, and mix
• Inventory obsolescence and markdown risk given sizable stock levels
• Execution risk in maintaining SG&A efficiency to preserve operating leverage
• Supplier concentration or logistics disruptions impacting availability and costs

Financial Risks:

• Tight liquidity (current ratio 108.5%, quick ratio 71.1%) heightens short-term cash management risk
• Cash conversion risk (OCF/NI 0.65) due to working capital build
• Limited visibility on cash balance and capex due to unreported cash and investing CF
• Potential refinancing or covenant sensitivity if financing outflows persist, despite low current interest burden

Key Concerns:

• Sustainability of margin expansion amid competitive pressures
• Inventory turnover and its impact on OCF
• Dependence on non-operating items for ordinary income versus core operating gains
• Data gaps (equity ratio, cash, investing CF, shares) constrain full assessment

Investment Implications

Key Takeaways:

• Strong operating leverage: revenue +14.1% YoY vs operating income +87.4% YoY
• Margins improved with gross margin at 28.0% and operating margin at 2.35%
• ROE 2.41% is modest, constrained by efficiency and limited leverage
• Liquidity buffer is thin; working capital management is critical
• Cash conversion lags earnings (OCF/NI 0.65), likely from inventory build
• Leverage moderate (D/E 0.81x) with robust interest coverage (17.6x)
• Dividend on hold (DPS ¥0), consistent with preserving liquidity amid cash conversion challenges

Metrics to Watch:

• OCF/Net income and cash conversion cycle (inventory and receivables turnover)
• Gross margin resilience and SG&A-to-sales ratio
• Operating margin progression and EBITDA margin
• Asset turnover (sales-to-assets) and ROE trajectory
• Actual equity ratio and cash balance disclosures in future filings
• Capex and investing cash flows once disclosed
• Financing cash flows and debt/lease repayment schedules

Relative Positioning: Within Japanese small-cap retail/aftermarket peers, Autowave exhibits improving operating leverage and moderate leverage but still modest ROE and tight liquidity; sustained cash conversion improvement would be needed to close the gap to higher-quality peers.

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