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

MIC Co., Ltd. (single-entity, JGAAP) delivered a strong FY2026 Q2 performance with revenue of ¥6,978m, up 22.3% YoY, and operating income of ¥811m, up 107.5% YoY, indicating substantial operating leverage. Ordinary income rose to ¥843m, outpacing operating income and implying net non-operating gains or financial income contributions. Net income reached ¥555m, up 110.0% YoY, with EPS of 78.24 (share count not disclosed), translating to a reported net margin of 7.95%. DuPont ROE is 6.43%, driven by a net margin of 7.95%, asset turnover of 0.639x, and low leverage of 1.27x. Profitability metrics are solid: EBITDA of ¥923m and an EBITDA margin of 13.2% reflect disciplined cost control. The operating margin is approximately 11.6%, showing strong operating efficiency against the revenue base. Liquidity is robust, with a current ratio of 259% and a quick ratio of 256%, supported by modest inventories of ¥74m and ample working capital of ¥3,733m. The balance sheet is conservative: total assets of ¥10,927m, liabilities of ¥2,418m, and equity of ¥8,637m yield a debt-to-equity ratio of 0.28x and financial leverage of 1.27x. Interest expense is negligible at ¥0.83m, and interest coverage is extremely comfortable at 977x. Cash flow conversion is the key weak spot: operating cash flow (OCF) of ¥225m equates to 0.41x net income, indicating working capital build or timing effects despite strong earnings growth. Investing and cash balances are shown as zero, which likely reflects non-disclosure rather than actual zero values; therefore, free cash flow (FCF) cannot be reliably assessed from the provided data. Tax paid of ¥145m is disclosed, but the effective tax rate metric appears unavailable (reported as 0.0%), suggesting incomplete tax-rate disclosure despite tax cash outflow. Dividend data show DPS and payout at zero for the period, but given single-entity reporting and interim timing, this does not necessarily indicate the full-year policy. Overall, MIC demonstrates accelerating earnings with improving operating leverage and a defensive balance sheet, but the low OCF/NI ratio tempers the quality of earnings assessment for the half year. The company appears positioned to sustain profitability near term, provided growth remains healthy and working capital normalizes. Given data limitations (notably equity ratio, cash balance, investing CF, and share counts), conclusions on capital allocation and FCF durability should remain cautious. Monitoring the trajectory of working capital and the reconciliation from accounting profit to OCF will be critical in 2H.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin 7.95% × Asset turnover 0.639x × Financial leverage 1.27x = ROE 6.43%. The ROE profile is primarily driven by respectable margins rather than leverage, with conservative balance sheet gearing. Margin quality: EBITDA margin of 13.2% and operating margin around 11.6% suggest tight SG&A control and scale benefits; ordinary income exceeding operating income by ~¥32m indicates supportive non-operating items. Gross margin is cited at 22.3%; while the reported cost lines show some internal inconsistency with gross profit, we use the provided gross margin metric as the anchor. Operating leverage: revenue grew 22.3% YoY while operating income doubled (+107.5% YoY), indicating significant fixed-cost dilution and/or mix improvement. Financial expense burden is de minimis (interest expense ¥0.83m), with interest coverage of 977x, so net margin is not constrained by financing costs. Tax burden appears typical in cash terms (¥145m income tax), though the effective tax rate metric is not available; net margin of 7.95% remains healthy for a single-entity mid-sized Japanese firm.

Growth Assessment

Top-line momentum is strong with revenue up 22.3% YoY, suggesting healthy demand or share gains. Profit growth is substantially higher than sales growth (OP +107.5%, NI +110.0%), reflecting operating leverage and potential mix improvements or cost efficiencies. Ordinary income outpacing operating income implies incremental non-operating support, which may not be fully repeatable; core operating growth remains the primary driver. Sustainability: the magnitude of margin expansion may moderate as fixed-cost benefits normalize; maintaining double-digit operating margins will depend on continued sales momentum and disciplined cost management. Profit quality: the OCF/NI ratio of 0.41 indicates partial conversion in 1H, likely due to working capital investment (e.g., receivables build given low inventories). Without investing cash flow disclosure, we cannot assess whether growth is capex-light; however, modest D&A (¥112m) relative to operating income suggests limited capital intensity. Outlook: near-term growth appears favorable given current traction, but monitoring order backlog, customer concentration, and pricing discipline will be essential to gauge durability into 2H and FY close.

Financial Health

Liquidity is strong: current ratio 259.1% and quick ratio 255.9% reflect substantial liquid assets versus short-term obligations; inventories are modest at ¥75m, minimizing obsolescence risk. Working capital stands at ¥3,733m, providing operational flexibility. Solvency is solid with total liabilities of ¥2,418m against equity of ¥8,637m; debt-to-equity is 0.28x and financial leverage 1.27x, indicating conservative capital structure. Interest burden is minimal (¥0.83m), and coverage is extremely high (977x), lowering refinancing risk. Equity ratio is shown as 0.0% but appears undisclosed; using provided assets and equity, the implied equity ratio is approximately 79% (8,637/10,927), underscoring balance sheet strength. Cash and equivalents are undisclosed (shown as zero), limiting precise liquidity assessment; however, the high quick ratio suggests ample near-cash assets.

Cash Flow Quality

Earnings quality is mixed: despite strong reported profits, OCF of ¥225m equals 0.41x net income, indicating weaker cash conversion in the period, likely due to working capital absorption (receivables and/or payables timing; inventories are small). Free cash flow cannot be reliably determined because investing cash flow is undisclosed (shown as zero); thus, the reported FCF of zero should not be interpreted as an actual value. D&A (¥112m) is modest relative to EBITDA (¥923m), implying a low non-cash share of earnings and suggesting that cash conversion should improve absent sustained working capital drag. Working capital: high current and quick ratios, combined with low inventories, point to receivables and other current assets as the main drivers; monitoring DSO and payables terms will be key to validating cash realization. Overall, confirmatory trends would include normalization of OCF/NI toward ≥0.8 over the next periods.

Dividend Sustainability

Dividend data indicate DPS and payout ratio at 0.0% for the period, which may reflect interim timing or non-disclosure rather than a definitive full-year policy. With net income of ¥555m and a conservative balance sheet (implied equity ratio ~79%, D/E 0.28x), capacity for distributions exists from a solvency perspective. However, weak cash conversion in 1H (OCF/NI 0.41) argues for caution in assessing near-term distributable cash absent visibility on working capital normalization and investing needs. FCF coverage metrics are not interpretable due to undisclosed investing cash flows; thus, any payout analysis should be revisited when full-year cash flow statements are available. Policy outlook is uncertain in single-entity reporting; clarity on capital allocation priorities (growth investment vs. shareholder returns) and year-end DPS guidance would be informative.

Risk Assessment

Business Risks:

• Sustainability of elevated operating margins as scale benefits normalize
• Working capital intensity and receivables collection risk impacting cash conversion
• Dependence on non-operating income to support ordinary profit (if recurring items fade)
• Potential demand volatility affecting top-line growth after a strong 1H
• Pricing power and mix risk if competitive intensity increases
• Execution risk on cost control and operating leverage in 2H

Financial Risks:

• Low OCF/NI ratio (0.41) in the period, indicating earnings-to-cash slippage
• Limited disclosure on cash balances and investing cash flows impedes FCF visibility
• Concentration of assets in receivables/other current assets could elevate credit risk
• Tax rate uncertainty due to incomplete effective tax rate disclosure

Key Concerns:

• Cash flow conversion lagging earnings despite strong profitability
• Lack of investing CF and cash balance disclosure limits assessment of FCF and liquidity buffers
• Potential reversion of non-operating gains that lifted ordinary income above operating income

Investment Implications

Key Takeaways:

• Strong 1H with revenue +22.3% YoY and operating income +107.5% YoY demonstrates meaningful operating leverage
• ROE of 6.43% is margin-driven with conservative leverage (1.27x); room to improve via asset turnover and cash efficiency
• Balance sheet strength (implied equity ratio ~79%, D/E 0.28x) supports resilience
• Cash conversion is weak (OCF/NI 0.41), necessitating close monitoring of working capital dynamics
• Non-operating contributions boosted ordinary income; core operating earnings remain the key value driver

Metrics to Watch:

• OCF/Net income ratio and working capital trends (DSO/DPO)
• Operating margin sustainability and SG&A ratio
• Asset turnover progression and capex intensity (once investing CF disclosed)
• Ordinary-to-operating income gap (non-operating items volatility)
• Tax rate normalization and effective tax disclosures
• Year-end dividend policy guidance and payout intent

Relative Positioning: Versus typical TSE small/mid-cap peers, MIC shows stronger-than-average margin momentum and a more conservative balance sheet, but ROE at 6.4% is slightly below the 8–10% often seen in efficient peers; cash conversion currently trails peer norms, which weighs on quality until improved.

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