MIC Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥6.98B
• Operating Income: ¥811M
• Net Income: ¥555M
• EPS: ¥78.24

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

Verdict: A strong FY2026 Q2 with sharp profit growth and meaningful margin expansion, tempered by weaker operating cash conversion. Revenue rose 22.3% YoY to 69.78, while operating income surged 107.5% YoY to 8.11, demonstrating robust operating leverage. Ordinary income grew 105.0% YoY to 8.43, and net income climbed 110.0% YoY to 5.55, implying a net margin of about 8.0%. Using growth rates to approximate the prior period, operating margin expanded from roughly 6.9% to 11.6% (about +470 bps), and net margin improved from about 4.6% to 8.0% (about +330 bps). Gross margin printed at 22.3%, indicating decent pricing and/or mix despite cost of sales growth. Non-operating income was small at 0.25 with modest dividend income of 0.02, making results principally driven by core operations. Interest expense was negligible (0.01), and interest coverage was exceptionally strong at 977x, underscoring a low financial risk profile. Liquidity is ample with a current ratio of 259% and cash of 36.61 versus short-term loans of 3.01. Equity is solid at 86.37, equating to an equity ratio of about 79%, and D/E is a conservative 0.28x. ROE was 6.4% by DuPont, supported mainly by margin improvement rather than leverage, with low financial gearing (1.27x) and moderate asset turnover (0.639). However, operating cash flow of 2.25 covered only 41% of net income (OCF/NI 0.41x), flagging an earnings quality concern likely tied to working capital absorption (notably receivables at 18.97 with very low inventories). Capex was controlled at 0.61, implying positive FCF on an OCF minus capex basis (~1.64), but investing CF detail is unavailable. The calculated payout ratio is 35.2%, which appears manageable given cash on hand, though dividend cash outflows were not disclosed in the cash flow statement. There is a data inconsistency between reported profit before tax (4.10) and net income plus tax (5.55 + 1.45 = 7.00), suggesting classification/timing differences in non-operating or extraordinary items under JGAAP; this does not undermine the broad improvement trend but warrants monitoring. Forward-looking, sustained revenue momentum with disciplined SG&A will be key to maintaining the improved operating margin, while normalizing working capital to lift OCF/NI above 0.8 is the primary earnings quality catalyst.

Profitability Analysis

ROE decomposition (DuPont): ROE 6.4% = Net Profit Margin (~8.0%) × Asset Turnover (0.639) × Financial Leverage (1.27x). The largest contributor to YoY improvement is net margin expansion: estimated net margin rose from ~4.6% to ~8.0% (+~330 bps), driven by strong operating leverage as operating income grew 107.5% vs revenue +22.3%. Operating margin improved from ~6.9% to ~11.6% (+~470 bps), indicating SG&A efficiency: SG&A at 11.63 grew slower than gross profit (15.54) and revenue, yielding positive operating leverage. Asset turnover at 0.639 is moderate and likely stable; leverage at 1.27x is intentionally conservative and did not drive ROE. Business drivers: mix/pricing and cost discipline boosted gross-to-operating conversion; non-operating items were small and did not materially affect profitability. Sustainability assessment: margin gains appear partly structural (SG&A efficiency) but also benefit from strong revenue growth; if growth moderates, some operating leverage could reverse. Watch for SG&A growth re-accelerating above revenue; at present, the trend is favorable with no sign of expense overrun in the reported data.

Growth Assessment

Top-line growth of 22.3% YoY to 69.78 indicates healthy demand. Operating income growth of 107.5% far exceeded revenue, confirming strong operating leverage and cost control. Ordinary income (+105.0%) and net income (+110.0%) tracked operating performance, with minimal reliance on non-operating items (non-operating income 0.25). Estimated prior-period revenue was ~57.07 and operating income ~3.91, implying a step-change in operating margin to 11.6%. Growth quality is solid on the P&L but weaker on cash conversion: OCF of 2.25 vs NI of 5.55 (0.41x) suggests working capital absorption, likely receivable buildup consistent with sales growth. With capex at 0.61, OCF–capex implies positive FCF (~1.64), but full investing CF is unreported; thus headline FCF may differ. Outlook: If revenue momentum persists and SG&A discipline holds, operating margin can remain above prior-year levels; focus should shift to collections and billing cycles to normalize OCF. Near term, cash reserves (36.61) provide flexibility to support growth and shareholder returns while smoothing working capital swings.

Financial Health

Liquidity is strong: current ratio 259%, quick ratio 256%, and working capital 37.33. Cash and deposits of 36.61 comfortably exceed short-term loans of 3.01, indicating low near-term refinancing risk. Solvency is conservative with total liabilities 24.18 vs equity 86.37 (equity ratio ~79%) and D/E 0.28x. Interest burden is negligible (interest expense 0.01), and interest coverage is 977x, well above any warning thresholds. No explicit off-balance sheet obligations were reported; absence of disclosures limits visibility into leases/guarantees. Maturity mismatch risk appears low given high cash and low short-term debt.

Cash Flow Quality

OCF/Net Income is 0.41x (<0.8), flagging potential earnings quality and working capital pressure. The shortfall likely stems from receivables growth (AR 18.97) in a rising sales environment, while inventories are minimal (0.75), suggesting the issue is collections timing rather than stock build. Using capex as a proxy for investing needs, OCF–capex is positive (~1.64), supporting core cash generation; however, full investing CF is unreported, so true FCF cannot be confirmed. There are no explicit signs of aggressive working capital management (e.g., unusually low payables) in the limited data; accounts payable stands at 7.30. The priority is to lift OCF/NI toward or above 1.0 via improved billing/collections and contract terms.

Dividend Sustainability

The calculated payout ratio is 35.2%, within a generally sustainable range (<60%), but DPS and total dividend cash outflows were not disclosed. Based on NI of 5.55, implied dividends would be ~1.95 if the payout ratio is accurate; this would be covered 1.15x by OCF (2.25), suggesting adequate but not abundant coverage in the current half. Cash on hand (36.61) and low leverage provide an additional buffer. Without reported DPS and dividend payments in the cash flow statement, we assume a stable to modestly progressive policy is feasible if OCF normalizes; sustained OCF/NI <0.8 would challenge dividend growth.

Risk Assessment

Business Risks:

• Working capital risk: receivables buildup and slower cash conversion (OCF/NI 0.41x).
• Operating leverage sensitivity: margins could compress if revenue growth normalizes.
• Customer concentration/order timing risk typical for project-based businesses (not disclosed but plausible).
• Pricing/mix risk affecting gross margin (22.3% currently).

Financial Risks:

• Data inconsistency between PBT (4.10) and NI plus tax (7.00) suggests classification/timing volatility under JGAAP.
• Potential cash flow strain if collections lag while growth continues.
• Limited disclosure on long-term debt and lease obligations (unreported items).

Key Concerns:

• Earnings quality flagged by low OCF/NI (0.41x).
• Reliance on operating leverage for profit growth; sensitivity to cost creep in SG&A.
• Visibility gaps: several SG&A and investing CF items unreported, constraining analysis.

Investment Implications

Key Takeaways:

• Strong quarter: revenue +22.3% YoY, operating income +107.5% YoY, net income +110.0% YoY.
• Operating margin expanded to ~11.6% (+~470 bps est.), net margin to ~8.0% (+~330 bps est.).
• Balance sheet robust: equity ratio ~79%, D/E 0.28x, interest coverage 977x.
• Earnings quality is the main watchpoint: OCF/NI 0.41x indicates working capital pressure.
• Capex light (0.61) and cash rich (36.61) support flexibility for growth and dividends.

Metrics to Watch:

• OCF/Net Income and days sales outstanding (receivables trend).
• Operating margin sustainability vs revenue growth and SG&A trajectory.
• Cash balance relative to short-term debt and upcoming maturities.
• Effective tax rate consistency and reconciliation of PBT to tax and NI.
• Order backlog/book-to-bill (if disclosed) to gauge revenue visibility.

Relative Positioning: Within non-financial JGAAP filers, MIC shows above-average margin momentum and a conservative capital structure, but trails best-in-class peers on cash conversion this quarter due to working capital absorption.

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