NIPPON PRIMEX INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥3.39B
• Operating Income: ¥196M
• Net Income: ¥168M
• EPS: ¥28.40

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

For FY2026 Q2 (cumulative), J-Primex reported revenue of ¥3,390 million, down 6.7% year over year, indicating a softer top line amid what appears to be a more challenging demand environment. Gross profit was ¥942 million, reflecting a gross margin of 27.8%, which is respectable for a distribution/solutions-oriented model but suggests limited pricing power as operating costs weighed on profitability. Operating income declined 33.4% YoY to ¥196 million, compressing the operating margin to approximately 5.8%, highlighting elevated operating leverage and/or higher SG&A relative to sales. Ordinary income of ¥233 million exceeded operating income, implying positive non-operating contributions (e.g., financial income or other non-core items) offsetting a portion of the operating decline. Net income was ¥149 million (−11.1% YoY), translating to a net margin of 4.4%, which is consistent with the provided DuPont net margin. The DuPont framework shows a calculated ROE of 1.86%, driven by a 4.4% net margin, asset turnover of 0.324x, and modest financial leverage of 1.31x, collectively indicating conservative balance sheet risk but also subdued return generation in this half. Liquidity is strong, with a current ratio of 414.6% and a quick ratio of 389.7%, reflecting ample current assets relative to short-term obligations. The balance sheet appears conservative: total liabilities of ¥2,482 million against total equity of ¥7,996 million imply a debt-to-equity of 0.31x and an equity ratio we estimate at roughly 76.5% (equity/assets), despite the reported 0.0% equity ratio field being unreported. Cash flow quality is solid, with operating cash flow (OCF) of ¥297 million at 1.99x net income, supporting the quality of earnings. EBITDA was ¥231 million and interest expense just ¥0.319 million, yielding very high interest coverage (~614x on EBIT basis), reinforcing low financial risk. The effective tax rate calculated from disclosed figures (income tax ¥67 million vs. pre-tax proxied by ordinary income ¥233 million) is about 28–29%, despite the 0.0% metric field (likely unreported). Working capital is substantial at ¥5,749 million, affording flexibility but also pointing to potential working capital intensity. Free cash flow cannot be assessed due to unreported investing cash flows and capex; reported FCF as zero reflects disclosure gaps rather than true zero. Dividend information (DPS and payout) shows zeros that appear unreported; EPS was ¥28.40 despite share count fields being zero, again indicating disclosure mismatches in certain XBRL tags. Overall, the company exhibits strong liquidity and solvency, but lower growth and compressed operating margins leading to a low interim ROE, with non-operating gains cushioning the P&L and cash generation supporting earnings quality.

Profitability Analysis

ROE decomposition (DuPont): Net margin 4.40% x asset turnover 0.324 x financial leverage 1.31 = ~1.86% ROE for the period. The net margin of 4.4% is moderate but pressured versus prior year given the 33.4% YoY drop in operating income on a 6.7% revenue decline. Gross margin stands at 27.8%, suggesting reasonable value-add at the gross level; however, operating margin (~5.8%) indicates SG&A absorption was more difficult amid lower sales, pointing to operating deleverage. EBITDA margin (6.8%) aligns with an asset-light cost structure but limited scalability during revenue softness. Ordinary income exceeded operating income (¥233m vs. ¥196m), so non-operating items supported profitability; reliance on such items can introduce variability. Interest burden is de minimis (interest expense ¥0.319m), so differences between ordinary and operating are not financing costs-related. Overall margin quality is mixed: gross profitability is stable, but operating margin compression and dependence on non-operating contributions reduce earnings resilience. Operating leverage appears high given the disproportionate fall in operating income versus revenue.

Growth Assessment

Revenue declined 6.7% YoY to ¥3,390 million, indicating a slowdown. The sharper 33.4% drop in operating income suggests negative operating leverage and/or cost pressures (e.g., fixed SG&A or inflation in indirect costs). Net income decreased 11.1% YoY, less than operating income due to supportive non-operating items. Revenue sustainability appears challenged in the near term without evidence of volume or price recovery; no segment or regional breakdowns were provided to assess mix. Profit quality is adequate given OCF at 1.99x net income, indicating accruals were not inflating earnings. Outlook hinges on margin stabilization via cost control and/or sales recovery; absent that, ROE is likely to remain subdued. With limited growth clarity from the provided data, near-term expectations should center on protecting margins and improving operating efficiency.

Financial Health

Liquidity: Current assets ¥7,576m vs. current liabilities ¥1,827m yield a current ratio of 414.6% and a quick ratio of 389.7%, indicating strong short-term solvency. Working capital is ¥5,749m, implying ample buffer. Solvency: Total liabilities ¥2,482m and total equity ¥7,996m result in debt-to-equity of 0.31x. Estimated equity ratio is ~76.5% (equity/assets = 7,996/10,456), notwithstanding the unreported equity ratio field. Interest coverage is extremely high (~614x EBIT/interest), reflecting minimal financial risk. Capital structure is conservative with low leverage and high equity capital, providing capacity to absorb earnings volatility.

Cash Flow Quality

Earnings quality is strong with OCF of ¥296.7m at 1.99x net income (¥149m), implying cash-conversion discipline and limited reliance on accruals in this period. EBITDA of ¥231.2m and low interest expense indicate that cash operating earnings comfortably cover financing costs. Free cash flow cannot be reliably computed due to unreported investing cash flows and capex; the reported FCF of 0 should be interpreted as data not disclosed, not economic zero. Working capital dynamics are not fully disclosed (no breakdown of receivables/payables changes), but the sizable absolute working capital base suggests that management of receivables and inventory (¥456m) is a key lever for sustaining cash conversion.

Dividend Sustainability

Dividend data fields show DPS 0.00 and payout 0.0%, which likely reflect non-disclosure in this interim dataset rather than an actual zero dividend; EPS is disclosed (¥28.40) but share counts are not, reinforcing the disclosure gap. Without confirmed DPS and capex/FCF, payout and FCF coverage cannot be precisely assessed. From a capacity standpoint, strong liquidity, conservative leverage, and OCF > net income indicate room to fund distributions if policy permits. However, given declining operating income and low interim ROE, management may prioritize reinvestment or balance sheet flexibility. Policy outlook cannot be inferred from the provided data; monitoring year-end guidance and historical payout behavior is necessary.

Risk Assessment

Business Risks:

• Revenue decline (−6.7% YoY) indicating potential demand softness or competitive pressure
• Operating deleverage leading to disproportionate profit declines versus sales
• Dependence on non-operating income to bridge operating shortfalls
• Working capital intensity, potentially exposing cash flows to receivables and inventory risks
• Margin pressure from input cost inflation or limited pricing power

Financial Risks:

• Low but non-zero leverage; refinancing risk appears minimal but not quantifiable due to missing cash balance disclosure
• Potential variability in non-operating items affecting ordinary income
• Free cash flow visibility limited due to unreported investing cash flows and capex

Key Concerns:

• Sustained operating margin compression if sales do not recover
• Insufficient visibility on capex and cash balance hampers FCF and liquidity assessment
• Low interim ROE (1.86%) signals subpar return generation absent a margin or turnover improvement

Investment Implications

Key Takeaways:

• Top line contracted 6.7% YoY; operating income fell 33.4%, evidencing high operating leverage
• Margins compressed to ~5.8% operating and 4.4% net, partly cushioned by non-operating income
• Balance sheet is strong: equity ratio estimated ~76.5%, D/E 0.31x, interest coverage ~614x
• Cash generation quality is good: OCF 1.99x net income
• FCF and dividend metrics are not assessable due to unreported investing and distribution data
• ROE is low at 1.86%, constrained by modest turnover and compressed margin

Metrics to Watch:

• Sales trajectory and order backlog/pipeline (to gauge revenue recovery)
• Operating margin and SG&A ratio (evidence of cost control and operating leverage normalization)
• Working capital turns (DSO/DIO/DPO) to sustain OCF
• Capex and investing cash flows (to determine true FCF)
• Composition of non-operating income/expenses (sustainability of ordinary income)
• Year-end dividend policy and payout guidance

Relative Positioning: Financially conservative with superior liquidity and low leverage versus many small-cap peers, but currently exhibiting weaker profit momentum and low ROE owing to negative operating leverage and limited asset turnover.

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