Daitobo Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.92B
• Operating Income: ¥132M
• Net Income: ¥38M
• EPS: ¥1.06

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

Daito Wool Co., Ltd. (3202) reported FY2026 Q2 consolidated results under JGAAP showing a modest top-line contraction and notable profit pressure amid a heavy interest burden and capital-intensive profile. Revenue declined 4.0% year over year to ¥1,919 million, while operating income fell 22.9% to ¥132 million, indicating margin compression and/or reduced operating leverage on a lower sales base. Gross profit of ¥666 million implies a gross margin of 34.7%, which remains relatively healthy for a textile/materials-oriented business but did not fully translate to operating profit given elevated fixed costs. Ordinary income of ¥36 million highlights the drag from non-operating items—particularly interest expense of ¥102 million—leaving thin coverage on operating profit. Net income was ¥31 million (-17.1% YoY), with an extremely slim net margin of 1.62%. DuPont metrics reflect low asset turnover (0.095x on reported assets for the period) and thin net margin, partially offset by high financial leverage (4.13x), resulting in a low calculated ROE of 0.63%. Operating cash flow of ¥91.9 million exceeded net income (OCF/NI of 2.96x), suggesting reasonable earnings-to-cash conversion in the period, aided by non-cash charges (D&A of ¥243 million). However, Investing CF was undisclosed (reported as zero), preventing a clear view of maintenance versus growth capex and limiting assessment of true free cash flow. Liquidity appears adequate with a current ratio of 139.5% and quick ratio of 91.8%, though the latter points to a reliance on inventory (¥821 million; ~34% of current assets). Capital structure is highly leveraged with a debt-to-equity ratio of 3.09x and an implied equity ratio around 24% based on totals (reported equity ratio field shows 0.0%, likely undisclosed). Interest coverage is thin at roughly 1.3x on EBIT, constraining financial flexibility if operating trends weaken. The company paid no dividends (DPS ¥0; payout ratio 0%), which is prudent given leverage and uncertain FCF visibility. Overall, profitability quality is mixed: gross margin is solid, but high depreciation, interest costs, and low asset turnover pressure bottom-line returns. Given the data gaps (notably cash, investing CF, and share data), caution is warranted in interpreting capital allocation and per-share metrics. Near-term priorities appear to be stabilizing revenue, maintaining gross margin, and lowering financing costs to restore ordinary income and ROE.

Profitability Analysis

ROE_decomposition: Reported/calculated ROE is 0.63%, driven by Net Profit Margin 1.62% × Asset Turnover 0.095× × Financial Leverage 4.13×. Margin weakness and very low turnover are the primary drags; leverage is amplifying but cannot offset the low operating returns. margin_quality: Gross margin is 34.7% (¥666m/¥1,919m), indicative of acceptable product-level economics. Operating margin is 6.9% (¥132m/¥1,919m), compressed by SG&A and depreciation (D&A ¥243m equals 12.7% of revenue). Net margin of 1.62% reflects significant interest burden (¥102m). The spread between gross and operating margins suggests fixed cost intensity and limited operating efficiency at the current scale. operating_leverage: Operating income fell 22.9% on a 4.0% revenue decline, signaling negative operating leverage. The cost base appears relatively fixed, and a lower volume environment materially erodes operating profit. Improving utilization or cost flexibility is key to restoring leverage.

Growth Assessment

revenue_sustainability: Revenue decreased 4.0% YoY to ¥1,919m, pointing to soft demand or portfolio mix headwinds. With inventories at ¥821m (~34% of current assets), sales execution and inventory turnover will be critical to sustaining future revenue without discounting pressure. profit_quality: EBITDA margin is 19.6% (¥375m/¥1,919m), supported by high D&A, but EBIT margin contraction and thin ordinary income indicate that non-operating expenses dilute earnings quality. OCF/NI of 2.96× suggests acceptable conversion this period, but the high depreciation implies ongoing capital intensity that may weigh on structural profitability. outlook: Near-term growth hinges on stabilizing volumes and maintaining gross margin amid cost pass-through dynamics. Given weak interest coverage and leverage, expanding operating margin (through mix, pricing, or cost control) is more critical than pure top-line growth. Absent disclosure on capex, the visibility on capacity-led growth is limited.

Financial Health

liquidity: Current ratio 139.5% and quick ratio 91.8% indicate adequate short-term liquidity, though reliance on inventory is notable. Working capital stands at ¥680m (CA ¥2,403m minus CL ¥1,723m). Cash and equivalents were undisclosed. solvency: Total liabilities are ¥15,113m versus equity of ¥4,892m (D/E 3.09×). Implied equity ratio is approximately 24% (equity/total assets), while the reported equity ratio field shows 0.0% (likely undisclosed). Interest coverage of ~1.3× (EBIT/interest) is thin, leaving limited cushion against earnings volatility. capital_structure: Leverage is high, and financing costs (¥102m interest) materially constrain ordinary income (¥36m). Reducing debt or refinancing at lower rates would directly support profitability and risk tolerance.

Cash Flow Quality

earnings_quality: Operating CF of ¥91.9m vs. net income of ¥31m (OCF/NI 2.96×) suggests reasonable conversion, aided by non-cash D&A (¥243m). FCF_analysis: Investing CF is undisclosed (reported as zero), preventing calculation of true free cash flow and capex intensity. Given depreciation of ¥243m in the half, maintenance capex is likely material, implying that normalized FCF could be meaningfully below OCF. working_capital: Inventory of ¥821m is substantial relative to current assets, implying execution risk if demand softens. Without detailed WC breakdown, the specific drivers of OCF (receivables/payables movement) are unclear.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0 and payout ratio is 0%, consistent with prioritizing balance sheet resilience and reinvestment amid thin profitability and high leverage. FCF_coverage: FCF is undisclosed; hence, coverage cannot be assessed. Given interest burden and probable maintenance capex (implied by D&A), sustained distributions would likely require improved operating cash flow or deleveraging. policy_outlook: Reinstatement of dividends would likely depend on stabilizing EBIT, improving interest coverage beyond ~2×, and clearer positive FCF after capex. Current stance appears conservative and appropriate to conditions.

Risk Assessment

Business Risks:

• Demand softness leading to continued revenue decline (-4.0% YoY) and negative operating leverage
• Inventory build (¥821m) exposing the company to obsolescence or discounting risk
• Commodity/input cost volatility impacting gross margin sustainability
• Customer concentration or end-market cyclicality typical in textiles/materials
• Execution risk in cost control and pricing power

Financial Risks:

• High leverage (D/E 3.09×) and low interest coverage (~1.3×)
• Thin net margin (1.62%) leaving limited buffer for shocks
• Limited disclosure on investing cash flows and cash balance, reducing visibility on FCF and liquidity headroom
• Potential refinancing risk if credit conditions tighten

Key Concerns:

• Ordinary income (¥36m) heavily constrained by interest expense (¥102m)
• Operating income down 22.9% despite only a 4.0% sales decline
• Capex and cash position undisclosed, complicating solvency and FCF assessment

Investment Implications

Key Takeaways:

• Gross margin remains solid at 34.7%, but operating leverage turned negative
• Interest burden materially compresses ordinary and net income; coverage ~1.3× is thin
• OCF exceeded net income (2.96×), but true FCF is unclear without capex disclosure
• Leverage is high (D/E 3.09×); implied equity ratio ~24%
• Liquidity is adequate on a current basis, but quick ratio below 1.0x indicates dependence on inventory

Metrics to Watch:

• Operating margin and ordinary income trajectory
• Interest coverage ratio and effective borrowing costs
• Capex disclosures and Investing CF to gauge FCF
• Inventory levels and turnover days
• Revenue growth trends and price/mix versus volume

Relative Positioning: Within textile/material peers, the company shows mid-tier gross margins but weaker ordinary profitability due to higher leverage and interest costs; asset turnover is low, and return on equity is below peer averages absent improvements in operating efficiency or deleveraging.

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
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