SHIKIBO LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥19.78B
• Operating Income: ¥628M
• Net Income: ¥345M
• EPS: ¥27.23

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

FY2026 Q2 was a modest beat on profitability with healthy cash conversion. Revenue rose 4.6% YoY to 197.8, while operating income increased 14.6% to 6.28 and net income grew 11.9% to 3.45. Operating margin improved to 3.17% and net margin to 1.74%, reflecting better operating leverage. By reverse-calculating prior-period levels, operating margin expanded by roughly 27 bps (from ~2.90% to 3.17%), and net margin expanded by about 11 bps (from ~1.63% to 1.74%). Ordinary income grew 17.5% YoY to 5.12, implying ordinary margin expansion of about 28 bps (from ~2.31% to 2.59%). Gross margin stands at 18.7%, supporting the margin improvement narrative, although YoY gross margin detail was not disclosed. Earnings quality is strong this quarter: OCF of 13.12 is 3.8x net income, indicating robust cash conversion and limited accrual risk. Interest expense (1.72) exceeded interest and dividend income (0.37), and non-operating expenses (2.57) outweighed non-operating income (1.40), weighing on ordinary profit versus operating profit. Leverage remains material with D/E at 1.42x, and interest coverage at 3.65x is adequate but below a comfort threshold of 5x for cyclical names. Liquidity is acceptable with a current ratio of 148.6% and a quick ratio of 114.9%, though just shy of the 1.5x ‘healthy’ benchmark for the current ratio. Capital efficiency remains a key weakness: ROE is 1.0% and ROIC is 0.8%, both well below cost of capital. Working capital appears well managed; inventories and receivables are covered by current liabilities, and OCF strength suggests no evident working-capital-driven earnings inflation. Implied free cash flow (OCF minus capex) is approximately 8.26, supporting flexibility for debt service and potential shareholder returns. The reported payout ratio of 185.7% appears elevated relative to earnings, but dividend cash out was not disclosed; reconcilement to reported distributions is therefore not possible. Forward-looking, sustaining margin gains will require continued SG&A discipline and cost pass-through amid input cost and FX fluctuations. With non-operating headwinds (interest burden) and very low ROIC, the focus must be on portfolio efficiency, capex discipline, and de-leveraging to lift returns.

Profitability Analysis

ROE (1.0%) decomposes into Net Profit Margin (1.7%) × Asset Turnover (0.233) × Financial Leverage (2.42x). The most notable change YoY appears in the margin component: operating margin rose from an estimated ~2.90% to 3.17% (+27 bps), and net margin from ~1.63% to 1.74% (+11 bps), outpacing the 4.6% revenue growth. Business drivers likely include better mix and SG&A efficiency, as operating income grew faster than sales, partially offset by higher net non-operating costs (interest burden). Asset turnover (0.233, on a half-year basis) looks broadly stable given limited change in sales versus a large fixed asset base (noncurrent assets 590.9), and financial leverage remains elevated at 2.42x (Assets/Equity = 849.1/350.94). The margin improvement seems incremental and potentially sustainable if input costs and FX remain manageable; however, sensitivity to financing costs and any demand softness could cap further expansion. Watch for any SG&A growth outpacing revenue; lack of SG&A breakdown limits depth of analysis, but absolute SG&A of 30.66 versus gross profit of 36.95 leaves a relatively thin operating spread.

Growth Assessment

Top-line growth of 4.6% is steady for a textile/industrial materials mix, with operating profit up 14.6% indicating positive operating leverage. Ordinary and net profit growth (+17.5% and +11.9%) confirm broader profitability improvement despite net non-operating headwinds. Revenue sustainability hinges on demand across textile, industrial, and life-science applications; no segment breakdown was disclosed. Given the low ROIC (0.8%), growth without capital discipline risks value dilution; focus should be on higher-margin products and asset-light initiatives. Outlook: modest revenue growth with cautious margin upside, contingent on input costs (cotton/chemicals/energy), FX, and pricing power. Non-operating drag from interest costs could temper ordinary income unless de-leveraging progresses.

Financial Health

Liquidity: Current ratio 148.6% and quick ratio 114.9% indicate adequate short-term coverage; no warning as Current Ratio > 1.0. Solvency: D/E at 1.42x is within the stated conservative upper bound (<1.5) but leaves less headroom; leverage is material. Interest coverage of 3.65x is acceptable but below a strong >5x threshold, highlighting sensitivity to rate moves or earnings dips. Maturity mismatch: Short-term loans (97.53) are covered by cash (60.69) and receivables (68.67), and current assets (258.2) comfortably exceed current liabilities (173.74), suggesting manageable refinancing risk. Noncurrent liabilities (324.41) are substantial; with noncurrent assets 590.9, asset backing is present, but low ROIC heightens impairment/repricing risk. Off-balance sheet obligations: not disclosed.

Cash Flow Quality

OCF/Net income is 3.80x, indicating strong earnings quality and favorable working capital dynamics. Implied FCF is approximately 8.26 (13.12 OCF minus 4.86 capex), sufficient for deleveraging and potential dividends; investing and financing CF details were limited, but financing CF of -5.57 suggests net debt service or distributions. No signs of aggressive working capital pull-forward are evident from the data; inventories (58.64) and receivables (68.67) appear proportionate to sales scale, though YoY deltas are unavailable. Sustainability: With interest burden and low ROIC, maintaining positive FCF will require ongoing capex discipline and preservation of cash conversion.

Dividend Sustainability

Reported calculated payout ratio of 185.7% is high relative to net income (3.45), implying distributions above earnings if accurate; however, dividends paid and DPS are unreported, limiting verification. On a cash basis, implied FCF of ~8.26 could cover a dividend of up to that magnitude while preserving leverage, but prudence suggests prioritizing deleveraging given interest coverage of 3.65x and D/E of 1.42x. Policy outlook: Absent disclosed guidance, expect a cautious stance; aligning payout closer to sustainable FCF and earnings would improve financial flexibility.

Risk Assessment

Business Risks:

• Input cost volatility (cotton, chemicals, energy) affecting gross margin
• Demand cyclicality in textiles/industrial materials leading to volume and price pressure
• Product mix shift risk if higher-margin segments underperform
• Operational concentration risk tied to large noncurrent asset base (capacity utilization)

Financial Risks:

• Interest rate and refinancing risk with short-term loans of 97.53 and interest coverage at 3.65x
• Leverage at D/E 1.42x amplifies earnings volatility and limits flexibility
• Non-operating drag (non-operating expenses 2.57 > income 1.40) suppresses ordinary profit
• Low ROIC (0.8%) raises risk of value dilution and potential impairment over time

Key Concerns:

• Very low capital efficiency (ROE 1.0%, ROIC 0.8%) despite adequate liquidity
• Dependence on maintaining SG&A discipline to sustain slim operating margin (3.17%)
• Limited disclosure (SG&A breakdown, investing CF, dividend cash out) obscures full risk picture

Investment Implications

Key Takeaways:

• Profit beat on margins: operating and net margins expanded by roughly 27 bps and 11 bps YoY
• Strong cash conversion (OCF/NI 3.8x) supports near-term flexibility
• Interest burden and leverage remain the main headwinds to ordinary income growth
• Capital efficiency is weak (ROIC 0.8%, ROE 1.0%); value creation requires asset efficiency gains
• Liquidity is adequate but not abundant; current ratio just under the 1.5x comfort benchmark

Metrics to Watch:

• Operating margin trajectory and SG&A discipline
• Interest coverage and pace of deleveraging
• Working capital turns (receivables and inventory vs sales)
• Capex intensity vs OCF to sustain positive FCF
• Any disclosed dividend policy updates vs earnings/FCF

Relative Positioning: Within Japan’s textile/industrial materials peer set, the company shows modest top-line growth and improving margins but lags on capital efficiency (ROIC/ROE) and maintains only moderate interest coverage; balance sheet leverage is manageable yet constraining compared to more asset-light 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