NITTO BOSEKI CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥57.41B
• Operating Income: ¥9.45B
• Net Income: ¥5.56B
• EPS: ¥188.94

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

Nittobo (31100) delivered a solid FY2026 Q2 (cumulative) performance under JGAAP on a consolidated basis, with both top-line growth and strong operating leverage. Revenue rose 8.2% YoY to ¥57.4bn, while operating income grew 28.7% YoY to ¥9.45bn, lifting the operating margin to approximately 16.5%. Net income increased 27.1% YoY to ¥6.88bn, translating to a net margin of 12.0% and EPS of ¥188.94. Profitability was supported by a healthy gross margin of 33.4% and an EBITDA margin of 23.2%, reflecting disciplined cost control and favorable mix/pricing. Ordinary income of ¥9.16bn and limited interest expense (¥255m) yielded a robust interest coverage ratio of 37.1x, underscoring a low financial burden. Operating cash flow was strong at ¥10.37bn, representing 1.51x net income and an OCF margin of about 18.1%, indicating high earnings-to-cash conversion. The balance sheet is conservative with total assets of ¥238.6bn and equity of ¥142.6bn, implying leverage of 1.67x (equity ratio approximately 59.7% by derivation) and total liabilities of ¥87.3bn (D/E around 0.61x). Liquidity is ample: current ratio 2.87x and quick ratio 2.54x, with working capital of ¥75.1bn. DuPont decomposition indicates ROE of 4.82%, driven by a healthy net margin and moderate leverage, partially offset by low asset turnover typical of a capital-intensive profile and the half-year reporting basis. The effective tax rate implied by disclosed amounts is approximately 23.3% (income tax ¥2.14bn versus ordinary/pre-tax income ¥9.16bn), despite a 0.0% figure appearing in the provided metrics, which is likely due to unreported or differently labeled data in the source. Investing cash flow is not disclosed (shown as zero), and cash/equivalents are also undisclosed, which constrains free cash flow and liquidity granularity. Financing cash outflow of ¥5.89bn suggests debt reduction and/or shareholder returns, though dividend/repurchase specifics are not available here. Overall, the company demonstrates improving profitability, solid cash generation, and a strong balance sheet. The sustainability of margin gains will depend on demand conditions, pricing power, input cost trends, and product mix in key businesses. With multiple datapoints showing as zero (unreported), conclusions are drawn from the available non-zero figures and derived ratios, and some metrics may be understated or incomplete.

Profitability Analysis

ROE is 4.82% per the DuPont breakdown: net margin 11.98% × asset turnover 0.241 × financial leverage 1.67. The net margin of 12.0% is strong for a materials/industrial portfolio and improved YoY alongside operating income growth (+28.7% vs revenue +8.2%), evidencing positive operating leverage. Gross margin stands at 33.4%, indicating effective cost management and/or improved product mix/pricing. Operating margin of ~16.5% (¥9.45bn/¥57.41bn) reflects efficiency gains and controlled SG&A. EBITDA margin of 23.2% and D&A of ¥3.85bn suggest a capital-intensive base with healthy earnings capacity before depreciation. Interest coverage at 37.1x (operating income/interest expense) confirms limited drag from financing costs on profitability. Ordinary margin is ~16.0% and net margin 12.0%, indicating limited non-operating headwinds. The relatively low asset turnover of 0.241 (period-to-date) likely reflects half-year sales versus period-end assets and the asset intensity of the business; turnover should be assessed on a full-year basis for a cleaner read. Margin quality looks solid given the strong OCF to net income ratio (1.51x), implying low accrual reliance.

Growth Assessment

Top-line expanded 8.2% YoY, supported by demand resilience and/or pricing in core businesses. Operating income grew 28.7% YoY, significantly outpacing revenue, demonstrating operating leverage and better cost absorption. Net income rose 27.1% YoY, broadly tracking operating growth despite normal taxation, indicating limited deterioration in non-operating items. The margin expansion across gross, operating, and net levels suggests structural improvements (mix, pricing, productivity) rather than one-off gains. Sustainability hinges on end-market demand (industrial, electronics, healthcare-related materials), input cost stability (energy, chemicals), and FX tailwinds. With asset turnover low on a half-year basis, incremental sales growth could further enhance ROE if margins hold. Lack of disclosure on segment and geographic breakdown limits visibility into the breadth of growth drivers and concentration risk. Forward outlook should monitor order trends, capacity utilization, and pricing power, as these factors drove the outsized operating profit increase in the period.

Financial Health

Balance sheet strength is high with equity of ¥142.6bn versus liabilities of ¥87.3bn, implying D/E of ~0.61x and an inferred equity ratio near 60% (despite the reported 0.0% field). Liquidity is robust: current ratio 2.87x and quick ratio 2.54x, supported by current assets of ¥115.3bn and moderate current liabilities of ¥40.1bn. Working capital of ¥75.1bn and modest inventories (¥13.2bn, ~11% of current assets) provide buffer against supply chain volatility. Interest expense is low at ¥255m, and interest coverage of 37.1x indicates minimal refinancing risk at current earnings levels. Ordinary income of ¥9.16bn versus tax of ¥2.14bn implies an effective tax rate around 23.3%, consistent with a normal domestic tax burden. Total assets of ¥238.6bn relative to revenue (half-year) imply a capital-intensive profile; solvency is nevertheless comfortable due to the sizeable equity base. The negative financing cash flow (¥5.89bn out) signals debt reduction and/or shareholder return, but details are not disclosed here.

Cash Flow Quality

Operating cash flow of ¥10.37bn exceeds net income of ¥6.88bn, yielding OCF/NI of 1.51x and indicating strong earnings quality with supportive working capital dynamics and non-cash charges (D&A ¥3.85bn). OCF margin is approximately 18.1% (OCF/Revenue), in line with the elevated operating margin. Free cash flow cannot be reliably computed because investing cash flow is undisclosed (shown as 0 in the feed); as such, the reported FCF of 0 should be treated as not available rather than zero. The sizable D&A versus capex is unknown, preventing a view on maintenance versus growth investment. Working capital appears well-managed given liquidity ratios and the OCF conversion, but inventory turns and receivable/payable days are not disclosed, limiting granularity. Overall, cash generation supports the reported profit quality, but absence of capex and cash balances constrains assessment of long-term reinvestment and cash flexibility.

Dividend Sustainability

Dividend data for the period are not disclosed (DPS shown as 0.00; payout ratio 0.0% reflects missing inputs). Financing outflows of ¥5.89bn could include dividends and/or debt repayment, but allocation is unspecified. Without capex disclosure and cash balance data, FCF coverage of dividends cannot be evaluated for this period (reported 0.00x is not meaningful). From a capacity perspective, strong OCF (¥10.37bn) and a solid balance sheet (D/E 0.61x, inferred equity ratio ~60%) suggest room for shareholder returns, contingent on reinvestment needs. Dividend policy outlook therefore remains unclear based on the provided dataset; investors should seek management guidance and historical payout behavior to assess sustainability.

Risk Assessment

Business Risks:

• Demand cyclicality in industrial, electronics, and construction-related end markets affecting volumes and pricing
• Input cost volatility (energy, chemicals, logistics) that can pressure margins if not fully passed through
• Product mix and pricing risk in specialty materials impacting gross margin sustainability
• FX fluctuations (notably USD/JPY and EUR/JPY) influencing export competitiveness and translation effects
• Supply chain disruptions impacting inventories and delivery schedules
• Technology and substitution risk in advanced materials applications

Financial Risks:

• Capital intensity and low asset turnover necessitating sustained utilization to support ROE
• Potential increase in interest costs if rates rise, though current coverage is strong
• Working capital swings that could dilute OCF conversion in a downturn
• Limited visibility on capex and cash balances due to unreported items, constraining liquidity assessment

Key Concerns:

• Lack of disclosure on investing cash flow and cash/equivalents limits free cash flow and liquidity analysis
• Equity ratio shown as 0.0% in the data feed conflicts with derived ~59.7%, indicating reporting label issues
• Dividend details are not available, obscuring shareholder return policy and sustainability

Investment Implications

Key Takeaways:

• Strong YoY profit growth with operating leverage: revenue +8.2%, operating income +28.7%, net income +27.1%
• Margins robust and improved: gross 33.4%, operating ~16.5%, EBITDA 23.2%, net 12.0%
• Healthy cash conversion: OCF ¥10.37bn (1.51x net income), OCF margin ~18%
• Conservative balance sheet: D/E ~0.61x, inferred equity ratio ~60%, strong liquidity (current 2.87x, quick 2.54x)
• ROE 4.82% driven by solid margins and moderate leverage but dampened by low asset turnover (half-year basis)

Metrics to Watch:

• Segment-level revenue and margin trends to gauge mix and pricing durability
• Capex and investing cash flows to assess FCF and growth investment intensity
• Order backlog, utilization, and inventory turns for demand visibility and working capital discipline
• Input cost indices (energy, chemicals) and FX rates for margin sensitivity
• Ordinary income vs. tax expense to confirm normalized effective tax rate (~23%)

Relative Positioning: Within Japan-listed materials/industrial peers, Nittobo appears to be executing well on margin expansion with solid cash conversion and a conservative balance sheet; ROE remains mid-single-digit given low asset turnover typical of capital-intensive models, leaving room for improvement via sustained growth and asset efficiency.

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