SHINDEN HIGHTEX CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥19.89B
• Operating Income: ¥425M
• Net Income: ¥173M
• EPS: ¥91.53

Income Statement

Balance Sheet

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: FY2026 Q2 was a weak quarter with top-line contraction and sharp profit compression, pressured by lower margins and higher non-operating costs. Revenue fell 7.8% YoY to 198.9, while operating income dropped 39.3% YoY to 4.25, indicating negative operating leverage. Gross profit was 15.38, yielding a gross margin of 7.7%; operating margin declined to 2.1%. Ordinary income fell 39.8% YoY to 2.54, and net income decreased 40.8% YoY to 1.72, with an effective tax rate of 36.9%. Interest expense was elevated at 1.50 versus non-operating income of 0.29 (mostly interest income 0.25), compressing ordinary profit. Based on YoY math, operating margin likely compressed by about 111 bps YoY (from ~3.25% to 2.14%). Ordinary margin compressed by roughly 68 bps (from ~1.96% to 1.28%), and net margin by about 49 bps (from ~1.35% to 0.86%). ROE deteriorated to a low 2.4% (DuPont: 0.9% net margin × 1.154x asset turnover × 2.36x leverage), with ROIC at 3.5%—below the 5% warning threshold. Earnings quality cannot be validated due to unreported cash flow figures, which is a key limitation this quarter. Liquidity remains adequate (current ratio 177.5%), but interest coverage is only 2.84x, indicating sensitivity to financing costs. Balance sheet shows reliance on short-term loans (59.55) offset by healthy cash (59.97) and receivables (70.36), moderating immediate refinancing risk. The calculated payout ratio of 153.4% suggests dividends are above earnings capacity this period, heightening sustainability concerns absent strong operating cash flow. Non-operating items were a net drag, and without equity-method gains or extraordinary support, bottom-line recovery hinges on margin repair. Forward-looking, recovery requires stabilization in end-demand and improved gross margin; interest cost control and disciplined working capital will be critical. Overall, the quarter underscores cyclical pressure and margin vulnerability, with capital efficiency below desired levels.

Profitability Analysis

ROE decomposition (DuPont): Net Profit Margin 0.9% × Asset Turnover 1.154 × Financial Leverage 2.36x = ROE 2.4%. The largest adverse change is in Net Profit Margin, given operating income fell 39.3% on a 7.8% revenue decline and non-operating expense headwinds. Business drivers: softer demand and/or product mix pressure compressed gross-to-operating spread; higher interest expense (1.50) further reduced ordinary profit. Sustainability: interest costs may persist given the sizeable short-term debt; margin pressure appears cyclical, but recovery depends on pricing, mix, and supplier terms—thus uncertain near term. Operating leverage is negative: SG&A (11.13) did not fall commensurately with gross profit, pushing operating margin to 2.14% (down ~111 bps YoY by inference). Watchpoints: if SG&A growth/minor decline outpaces revenue normalization, profitability could remain constrained.

Growth Assessment

Top-line declined 7.8% YoY to 198.9, indicating cyclical softness. Operating income declined 39.3% YoY to 4.25, significantly outpacing the revenue decline, implying weaker gross margin and/or lower supplier rebates. Ordinary income fell 39.8% YoY to 2.54 due to higher non-operating expenses (notably interest). Net income decreased 40.8% YoY to 1.72 with a 36.9% tax rate. Margin trajectory deteriorated across operating, ordinary, and net levels (estimated compressions: ~111 bps, ~68 bps, ~49 bps YoY, respectively). Absent reported OCF, growth quality is unverified; the revenue base appears sensitive to end-market cycles and FX. Outlook hinges on demand in core electronics/semiconductor end-markets and cost of funds; stabilization of gross margin and lower financing drag are prerequisites for profit recovery.

Financial Health

Liquidity is adequate with a current ratio of 177.5% and quick ratio of 177.5%. No warning for current ratio (<1.0) or D/E (>2.0); reported D/E is 1.36x, within tolerance but elevated versus conservative benchmarks. Short-term loans are 59.55 against cash of 59.97 and receivables of 70.36, limiting near-term maturity mismatch risk. Interest coverage is 2.84x (below the 5x comfort level), indicating sensitivity to rate increases or further earnings compression. Total liabilities are 99.19 versus equity of 73.13; leverage (assets/equity 2.36x) is moderate. Noncurrent liabilities are small (4.56), implying most funding is short-term. No off-balance sheet obligations are reported; data limitations preclude assessment of guarantees or commitments.

Cash Flow Quality

OCF and FCF are unreported, so earnings-to-cash conversion cannot be assessed; OCF/NI is not calculable. Working capital composition suggests reliance on receivables (70.36) with relatively lower payables (28.99), implying a funded cash conversion cycle—manageable given cash of 59.97 and short-term loans of 59.55. Without OCF, there is no evidence of working capital-driven earnings management, but the absence of data is a key limitation. Dividend and capex coverage cannot be evaluated; prudence is warranted given interest burden and thin margins.

Dividend Sustainability

The calculated payout ratio is 153.4%, which exceeds the <60% benchmark and surpasses current earnings capacity, flagging sustainability risk if maintained. DPS and total dividends are unreported, and FCF coverage is not calculable, limiting verification. With ROIC at 3.5% and interest coverage at 2.84x, internal funding capacity is constrained; sustaining an above-earnings payout would likely depend on balance sheet flexibility or a near-term profit rebound. Policy outlook likely tilts cautious unless profitability and cash generation improve.

Risk Assessment

Business Risks:

• Cyclical demand in electronics/semiconductor end-markets pressuring volumes and pricing
• Gross margin sensitivity to product mix and supplier rebate conditions
• FX volatility (USD/JPY) affecting import costs and pricing competitiveness
• Customer concentration risk typical for component trading (not disclosed but industry-common)

Financial Risks:

• Low interest coverage (2.84x) amid significant short-term borrowings (59.55)
• Dividend payout above earnings capacity (153.4%) increasing cash drain risk
• ROIC at 3.5% (<5% warning) indicating low capital efficiency
• Refinancing and rate risk due to short-term debt reliance

Key Concerns:

• Sustained margin compression with operating margin at 2.14%
• Non-operating drag from net interest costs despite modest interest income
• Data gaps in cash flow statements hindering assessment of earnings quality and FCF
• Potential lengthening of cash conversion cycle given receivables heavy working capital

Investment Implications

Key Takeaways:

• Revenue down 7.8% YoY with operating income down 39.3% indicates negative operating leverage
• Operating margin compressed to 2.14% (~111 bps YoY contraction by inference)
• ROE is low at 2.4% and ROIC at 3.5% falls below the 5% threshold
• Interest coverage at 2.84x and sizeable short-term debt heighten rate/refinancing sensitivity
• Calculated payout ratio of 153.4% appears unsustainably high absent stronger cash flows

Metrics to Watch:

• Gross margin trajectory and supplier rebate income
• Operating cash flow and OCF/NI ratio once disclosed
• Interest expense run-rate and debt tenor mix (short vs long-term)
• Receivables days and payables days (cash conversion cycle)
• FX rates (USD/JPY) and pricing pass-through
• Order backlog/book-to-bill in key end-markets

Relative Positioning: Versus domestic electronics component trading peers, profitability is thin and capital efficiency is below average (ROIC 3.5%), with higher sensitivity to financing costs; balance sheet liquidity is adequate, but margin recovery is required to improve competitiveness.

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
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