THE NIHON SEIMA CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.21B
• Operating Income: ¥-22M
• Net Income: ¥604M
• EPS: ¥137.21

Income Statement

Balance Sheet

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

Nihon Seima Co., Ltd. (33060) reported FY2026 Q2 single-entity results under JGAAP with top-line softness and a notable divergence between core and bottom-line profitability. Revenue was ¥1,209 million, down 4.2% year over year, indicating demand pressure or volume/mix headwinds. Gross profit was ¥300 million, implying a gross margin of 24.8%, which suggests some resilience at the gross level despite the sales decline. Operating income turned to a loss of ¥22 million (operating margin −1.8%), pointing to negative operating leverage as fixed costs were not fully absorbed by the reduced sales base. Ordinary income was also negative at ¥21 million, reflecting that non-operating items did not offset core weakness and that interest expense (¥8.1 million) weighed on results. Despite this, net income surged to ¥604 million (+783.5% YoY), a magnitude inconsistent with operating trends and ordinary income, implying sizable extraordinary gains. Based on the reported tax expense of ¥230 million and ordinary loss of ¥21 million, we infer roughly ¥855 million in net extraordinary gains, which lifted the bottom line. As a result, DuPont metrics show a high net profit margin (49.96%) and ROE of 28.36%, but these are not reflective of underlying operations. Asset turnover was low at 0.292x, consistent with a small, asset-heavy profile relative to revenue. Financial leverage was moderate at 1.95x (Assets/Equity ≈ ¥4,145m/¥2,130m), contributing to ROE. Liquidity appears adequate with a current ratio of 120.6% and quick ratio of 101.5%, supported by working capital of ¥248 million. The balance sheet is conservatively capitalized with an estimated equity ratio around 51% (calculated from balances), though the reported equity ratio field shows 0% due to non-disclosure. Cash flow statements were not disclosed (zeros indicate unreported), limiting assessment of earnings-to-cash conversion and free cash flow durability. The company paid no dividend (DPS ¥0), consistent with uncertain core profitability and absent cash flow disclosure. Overall, fundamentals show pressured core earnings offset by one-time gains, a moderate liquidity buffer, and a solid capital base, but sustainability of profits remains the key question.

Profitability Analysis

ROE_decomposition: Reported ROE 28.36% = Net Margin 49.96% × Asset Turnover 0.292 × Financial Leverage 1.95. The elevated net margin is driven by inferred extraordinary gains (~¥855m), not core operations. Asset turnover is low (0.29x), and leverage is moderate. margin_quality: Gross margin of 24.8% (GP ¥300m on sales ¥1,209m) is reasonable, but operating margin is −1.8% (operating loss ¥22m), indicating SG&A/fixed costs outweigh gross profit at current volume. Ordinary income is negative, and interest expense (¥8.1m) erodes earnings capacity. The gap between operating loss and large net profit points to one-off items, reducing recurring margin quality. operating_leverage: A 4.2% YoY revenue decline drove a swing to operating loss, evidencing negative operating leverage and a relatively high fixed-cost base. Without volume recovery or cost restructuring, incremental earnings sensitivity to sales remains adverse.

Growth Assessment

revenue_sustainability: Revenue contracted 4.2% YoY to ¥1,209m. With low asset turnover (0.292x), growth likely requires either volume recovery or improved utilization; price/mix alone may be insufficient. No segment data disclosed to isolate drivers. profit_quality: Core profit quality is weak: operating and ordinary losses juxtaposed with strong net income imply reliance on extraordinary gains. Interest coverage is negative on an operating basis (−2.7x), underscoring limited recurring earnings power. outlook: Absent evidence of structural cost reduction or demand recovery, near-term profits depend on restoring operating margin to positive territory. The sustainability of FY2026 Q2 net income is low unless extraordinary gains recur, which is unlikely by nature. Monitoring sales trajectory and cost containment is essential.

Financial Health

liquidity: Current ratio 120.6%, quick ratio 101.5%, and working capital ¥248m suggest adequate short-term liquidity. Inventories ¥231m are meaningful relative to current assets, but quick ratio above 1.0 mitigates near-term liquidity risk. solvency: Total liabilities ¥1,448m vs equity ¥2,130m implies an estimated equity ratio of ~51.4% (computed) despite an undisclosed reported figure. Debt-to-equity 0.68x indicates moderate leverage. capital_structure: Interest expense of ¥8.1m with negative operating income yields negative interest coverage, highlighting a mismatch between financing costs and operating earnings in the period. Balance sheet capacity appears reasonable, but improving operating cash generation is needed to support interest and potential reinvestment.

Cash Flow Quality

earnings_quality: Cash flow data were not disclosed; OCF/Net income displays as 0.00 by default, not as an economic measure. Given net income was likely driven by one-off gains, earnings-to-cash conversion is uncertain and likely weak on a recurring basis. FCF_analysis: Free cash flow is undisclosed (reported as 0 due to non-reporting). With operating loss and unknown capex/D&A, we cannot quantify FCF, but the absence of D&A disclosure (0) suggests caution—capex needs may still exist even if not reported here. working_capital: Working capital is positive at ¥248m. Quick ratio of 101.5% implies receivables and cash-like assets roughly cover current liabilities ex-inventory, but actual cash position is undisclosed; collection efficiency and inventory turns cannot be assessed with available data.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0, with a nominal payout ratio of 0%. Given core losses, distributing dividends would be difficult without drawing on non-recurring gains or balance sheet. FCF_coverage: FCF coverage cannot be assessed (cash flows not disclosed). Without demonstrated OCF and with operating losses, sustainable coverage of any dividend would be questionable. policy_outlook: In light of negative operating and ordinary income and the one-off nature of net profit, maintaining a conservative dividend stance appears consistent with preserving liquidity until core profitability recovers.

Risk Assessment

Business Risks:

• Demand softness evidenced by 4.2% YoY revenue decline
• Negative operating leverage due to fixed-cost burden
• Reliance on extraordinary gains to achieve positive net income
• Low asset turnover (0.292x) limiting capital efficiency
• Product mix and raw material cost volatility potentially pressuring margins

Financial Risks:

• Negative operating income leading to negative interest coverage (−2.7x)
• Limited visibility on cash generation due to undisclosed cash flows
• Moderate leverage (D/E 0.68x) with need to service interest from weak operations
• Tight liquidity buffer if receivables collection or inventory turns deteriorate

Key Concerns:

• Sustainability of profitability absent extraordinary items (~¥855m inferred)
• Restoration of positive operating and ordinary income
• Working capital discipline and cash conversion in the absence of OCF disclosure

Investment Implications

Key Takeaways:

• Top-line declined 4.2% YoY to ¥1,209m; gross margin 24.8% but operating margin −1.8%
• Ordinary income −¥21m and interest expense ¥8.1m highlight weak recurring earnings
• Net income ¥604m is likely driven by ~¥855m in extraordinary gains; not recurring
• ROE 28.36% is inflated by one-off gains; core ROE is materially lower
• Liquidity is adequate (current 120.6%, quick 101.5%) and leverage moderate (D/E 0.68x)
• Cash flow data absent; earnings quality and FCF durability cannot be confirmed
• No dividend (DPS ¥0) aligns with weak core profitability

Metrics to Watch:

• Operating margin and SG&A ratio to sales
• Ordinary income excluding extraordinary items
• Operating cash flow and free cash flow once disclosed
• Interest coverage on an EBIT basis
• Revenue growth trajectory and order trends
• Inventory turns and receivables days
• Equity ratio and net debt evolution

Relative Positioning: Versus small-cap industrial peers, core profitability and interest coverage are weaker, while balance sheet capitalization and liquidity are moderate; overall returns appear dependent on non-recurring items rather than operating performance.

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