SHINDEN HIGHTEX CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥19.89B
• Operating Income: ¥425M
• Net Income: ¥292M
• 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

Shinden Hightex (3131) reported FY2026 Q2 consolidated results under JGAAP with revenue of ¥19.892bn, down 7.8% YoY, reflecting a softer demand environment and likely volume/mix pressure in its electronics/semiconductor distribution businesses. Gross profit was ¥1.862bn, implying a gross margin of 9.4%, a relatively thin spread consistent with trading/distribution models and suggesting limited pricing power in the current cycle. Operating income fell 39.3% YoY to ¥425m, compressing operating margin to 2.1%, indicative of negative operating leverage as fixed costs weighed on lower sales. Ordinary income was ¥254m, highlighting a meaningful financial expense drag; reported interest expense of ¥267.8m implies an interest coverage ratio of about 1.6x (Operating Income/Interest Expense), which is tight for a distributor. Net income was ¥172m (−40.8% YoY), with net margin at 0.86% and EPS at ¥91.53. The DuPont decomposition indicates ROE of 2.35%, driven by a modest net margin (0.86%), solid asset turnover (1.154x), and moderate leverage (assets/equity ≈ 2.36x). Balance sheet resilience remains adequate: total assets ¥17.232bn and total equity ¥7.313bn imply an equity ratio around 42.4% (despite the disclosed 0.0% likely being a placeholder), and working capital of ¥7.149bn supports liquidity through the cycle. The current ratio stands at 178%, signaling ample short-term coverage, although cash and inventories were not disclosed in this dataset, limiting granularity on liquidity buffers and inventory quality. The earnings profile suggests margin pressure and elevated financial costs are the key near-term constraints on profitability. Cash flow statements were not disclosed (all zeros), preventing direct assessment of operating cash flow conversion and free cash flow; as a trading company, working capital swings can materially affect OCF, so the lack of disclosure is a notable limitation. Depreciation is undisclosed (zero placeholder), so EBITDA and non-cash expense dynamics cannot be analyzed this quarter. Dividend data are also undisclosed; with EPS positive but ROE low, the board may prioritize balance sheet flexibility amid cyclical softness, though we cannot infer policy changes. Tax expense of ¥130m against net income suggests an effective tax rate around the low-40% range on a pre-tax basis, contradicting the 0.0% shown in the calculated metrics and reinforcing that some automated metrics reflect missing inputs. Overall, the print reflects cyclical headwinds with negative operating leverage and a heavier interest burden compressing ordinary profit, but liquidity and capitalization appear adequate to navigate the downturn. The outlook hinges on demand normalization in key end-markets, maintenance of gross spread, and tighter working capital discipline to protect cash generation.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 0.86% (¥172m / ¥19.892bn)
• asset_turnover: 1.154x (¥19.892bn / ¥17.232bn)
• financial_leverage: 2.36x (¥17.232bn / ¥7.313bn)
• calculated_ROE: 2.35% (matches provided DuPont ROE) margin_quality: Gross margin at 9.4% is thin but typical for a distributor; operating margin at 2.1% (¥425m / ¥19.892bn) indicates limited operating buffer. Net margin of 0.86% reflects pressure from financial costs and non-operating items. operating_leverage: Revenue declined 7.8% YoY while operating income fell 39.3% YoY, demonstrating negative operating leverage as fixed SG&A did not flex down proportionally.

Growth Assessment

revenue_sustainability: Topline contracted 7.8% YoY to ¥19.892bn, suggesting cyclical softness in end-market demand and potential ASP/mix headwinds in semiconductor and electronics components. profit_quality: Operating income contraction (-39.3% YoY) outpaced sales decline, pointing to weaker gross spread and/or a less flexible cost base. Interest expense further suppressed ordinary income, compressing bottom-line growth. outlook: Recovery depends on end-demand normalization (e.g., industrial, consumer electronics), stabilization of gross spreads, and improved utilization of fixed cost base. Without disclosure of backlog/orders, visibility remains limited.

Financial Health

liquidity: Current ratio 177.9% (current assets ¥16.330bn vs. current liabilities ¥9.181bn) and working capital ¥7.149bn indicate solid short-term coverage. Cash and inventories were not disclosed, limiting assessment of immediate liquidity and inventory risk. solvency: Total equity ¥7.313bn vs. total assets ¥17.232bn implies an equity ratio around 42.4% despite the disclosed 0.0%, and liabilities/equity ≈ 1.26x; capitalization is moderate. capital_structure: Interest expense ¥267.8m vs. operating income ¥425m yields 1.6x interest coverage, a tight cushion. Maintaining or reducing financial leverage would aid resilience if operating conditions remain soft.

Cash Flow Quality

earnings_quality: Cash flow statements were not disclosed (zeros indicate unreported), preventing OCF-to-net income analysis. With thin margins and meaningful interest expense, cash conversion will be sensitive to working capital. FCF_analysis: Free cash flow cannot be computed due to missing OCF and capex data. As a distributor, FCF is likely driven by inventory and receivables turns; absent disclosure, sustainability cannot be assessed. working_capital: Working capital stands at ¥7.149bn, providing a buffer. However, inventories and receivables details are unreported, obscuring turnover and potential obsolescence/credit risks.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are undisclosed (zeros are placeholders). With EPS at ¥91.53 and low ROE (2.35%), internal reinvestment and balance sheet protection may be prioritized in a weak cycle, but policy cannot be inferred. FCF_coverage: Not assessable due to missing OCF and capex data; FCF coverage ratio cannot be calculated. policy_outlook: No guidance disclosed here. Any payout decision likely contingent on H2 earnings recovery and cash generation given tighter interest coverage.

Risk Assessment

Business Risks:

• Cyclical demand in semiconductors and electronics components affecting volumes and pricing
• Gross margin compression due to competitive pricing and supplier terms
• Supply chain and lead-time volatility impacting availability and costs
• Customer concentration risk typical of specialized distribution
• FX exposure (USD-linked procurement) affecting gross spread if not hedged

Financial Risks:

• Tight interest coverage (1.6x) exposes earnings to rate and leverage changes
• Working capital intensity could absorb cash in a downturn
• Potential credit risk from customers in a weaker macro environment
• Lack of disclosed cash and inventories complicates liquidity assessment

Key Concerns:

• Negative operating leverage with operating income down 39.3% on a 7.8% sales decline
• High financial costs relative to operating profit
• Limited visibility on cash generation and inventory quality due to undisclosed cash flow and inventory data

Investment Implications

Key Takeaways:

• Revenue down 7.8% YoY to ¥19.892bn; operating income down 39.3% to ¥425m, demonstrating negative operating leverage
• Gross margin at 9.4% and operating margin at 2.1% underline a thin profit structure
• Interest burden significant (¥267.8m), with interest coverage at 1.6x
• ROE at 2.35% driven by low net margin, decent asset turnover (1.154x), and moderate leverage (2.36x)
• Balance sheet adequate with an implied equity ratio ~42.4% and working capital of ¥7.149bn
• Cash flow and dividend data not disclosed, limiting assessment of FCF and payout sustainability

Metrics to Watch:

• Order trends/book-to-bill and backlog (once disclosed)
• Gross margin trajectory and supplier rebate dynamics
• SG&A control and break-even sales level (operating leverage)
• Interest expense and net debt to equity (financing cost pressure)
• Operating cash flow, inventory and receivables days (cash conversion)
• Equity ratio and liquidity buffers (cash and committed facilities)
• FX exposure and hedging effectiveness on gross spread

Relative Positioning: Within Japanese electronics/semiconductor distribution peers, the company shows typical thin gross margins and working-capital-driven economics, but current period profitability is under more pressure than sales, and interest coverage is on the low side, suggesting a need for tighter cost and capital management until demand stabilizes.

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