TOYOKOH Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.63B
• Operating Income: ¥413M
• Net Income: ¥345M
• EPS: ¥25.63

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

Verdict: A strong topline and operating profit beat, but cash conversion was weak and the profit structure relied heavily on other operating income. Revenue rose to 16.34 (億円), up 77.5% YoY, evidencing robust demand and/or successful project execution. Operating income surged to 4.13 (億円), +208.1% YoY, implying significant operating leverage and sizeable other operating income items. Ordinary income printed at 4.06 (億円), +238.8% YoY, while net income reached 3.45 (億円), +112.5% YoY, supported by a negative effective tax rate (-35.6%). Operating margin stands at ~25.3% (4.13/16.34), while gross margin is ~24.3% (3.96/16.34), indicating operating income exceeded gross profit due to sizable other operating income. Using YoY growth to infer last year’s margin, operating margin likely expanded by roughly 1,070 bps YoY (from ~14.6% to ~25.3%). EBITDA was 4.26 (億円), an EBITDA margin of ~26.1%, and interest coverage was very strong at ~71.7x. Balance sheet liquidity is solid with a current ratio of ~609% and cash of 20.90 (億円) versus long-term loans of 13.30 (億円), implying net cash. However, operating cash flow was -1.19 (億円), resulting in an OCF/Net Income ratio of -0.34x, a clear earnings quality flag. The negative tax rate suggests non-recurring tax credits or reversals that may not recur. There appears to be an internal inconsistency between ordinary income (4.06) and profit before tax (1.20), suggesting either classification differences or missing special items; we rely more on ordinary income and net income for trend assessment. ROE calculated via DuPont is 12.6%, supported by high margin and moderate leverage; ROIC is reported at 20.8%, well above management benchmarks. Forward-looking, sustaining the elevated operating margin will likely require recurring other operating income or further scale benefits, while cash conversion needs to improve as growth normalizes. Near-term priorities include stabilizing working capital, clarifying the composition of other operating income, and assessing the durability of tax benefits. Overall, performance is operationally strong but with mixed quality signals and limited disclosure on dividend policy.

Profitability Analysis

ROE decomposition (DuPont): ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 21.1% × 0.325 × 1.83 ≈ 12.6%. The largest driver vs typical small-cap baselines is the elevated net profit margin (21.1%), which benefitted from unusually high operating income relative to gross profit and a negative effective tax rate (-35.6%). Asset turnover of 0.325 is modest, reflecting a cash-heavy balance sheet and early-stage scale effects. Financial leverage at 1.83x (Assets/Equity) is moderate and not excessive. The most notable change YoY is margin expansion: operating income grew +208% vs revenue +77.5%, implying significant operating leverage and/or non-recurring other operating income. Business rationale: rapid revenue growth likely improved capacity utilization, while other operating income inflating operating profit above gross profit indicates subsidies, grants, reclassification gains, or reversal of provisions. Sustainability: margin uplift tied to other operating income and a negative tax rate is likely non-recurring; scale-driven efficiencies could persist but at lower levels. Watch for SG&A growth discipline; SG&A was 2.62 (億円), and given revenue growth, SG&A ratio likely fell, but we need continuity data to confirm.

Growth Assessment

Revenue growth of 77.5% YoY to 16.34 (億円) indicates strong demand momentum or successful project/order wins. Operating income +208.1% YoY to 4.13 (億円) shows powerful operating leverage; however, the fact that operating income exceeds gross profit suggests a meaningful non-core uplift. Non-operating impact is small net (-0.14 億円), so the core deviation is within operating items. Net income +112.5% YoY to 3.45 (億円) benefited from a negative effective tax rate; normalization of tax could reduce bottom-line growth. With asset turnover at 0.325, growth appears partially cash-backed but also working-capital intensive, as OCF was negative despite higher earnings. Sustainability hinges on: continued order inflow, margin retention after removing other operating income effects, and normalizing tax rates. Near-term outlook is cautiously constructive on topline, but profit quality may moderate as one-offs fade and cash conversion improves.

Financial Health

Liquidity is very strong: current ratio ~609% (current assets 28.23 vs current liabilities 4.63), quick ratio ~607%. No warning on current ratio (<1.0) or D/E (>2.0); D/E is ~0.68x, conservative. Cash and deposits of 20.90 (億円) exceed long-term loans of 13.30 (億円), implying net cash and ample liquidity buffer. Maturity mismatch risk appears low as current assets comfortably cover current liabilities; most debt is noncurrent (13.96 億円). Interest coverage is robust at ~71.7x, implying low refinancing stress. Off-balance sheet obligations are not reported; no visibility into leases/guarantees, so residual risk remains unassessed.

Cash Flow Quality

OCF/Net Income is -0.34x, below the 0.8 threshold, flagging earnings quality concerns this quarter. Likely drivers are working capital outflows tied to rapid growth (receivables build, project advances) and timing effects; inventories are minimal, so receivables and other current assets are the probable sources. Free cash flow is not fully reported; capex was modest at -0.34 (億円), so excluding WC, cash burn would be limited. Financing cash inflow of 7.31 (億円) funded operations/investments, but recurring reliance on financing is not ideal; sustainability requires OCF normalization. No clear signs of aggressive working capital manipulation from the limited disclosures, but we will monitor DSO trends and contract liabilities when disclosed.

Dividend Sustainability

Dividend data is unreported, so payout analysis is not calculable. On fundamentals, current earnings and low leverage could support a dividend, but negative OCF this period and reliance on other operating income argue for prudence. FCF coverage of dividends cannot be assessed; absent disclosure, we assume a conservative policy bias until cash conversion improves and profit mix normalizes.

Risk Assessment

Business Risks:

• Profitability reliance on other operating income that lifted operating profit above gross profit
• Potential normalization of negative effective tax rate, lowering net income
• Revenue concentration risk typical for smaller industrial/project businesses (customer/contract concentration not disclosed)
• Execution risk on rapid growth and project delivery timing impacting revenue recognition and cash
• Potential input cost volatility and pricing pass-through risk

Financial Risks:

• Negative operating cash flow despite higher earnings, indicating working capital strain
• Dependence on financing cash inflows this period (7.31 億円) to bridge cash needs
• Long-term debt of 13.30 (億円) introduces refinancing risk over time (maturity schedule undisclosed)
• Tax credit/reversal sustainability risk (effective tax -35.6%)

Key Concerns:

• Quality of earnings: OCF/NI -0.34x (below 0.8 threshold)
• Unusual P/L structure with operating income > gross profit, suggesting non-recurring components
• Inconsistency between ordinary income (4.06) and profit before tax (1.20), implying classification differences or missing special items
• Limited disclosure on dividend policy and SG&A breakdown

Investment Implications

Key Takeaways:

• Topline strength (+77.5% YoY) with substantial operating leverage (+208% YoY OI)
• Operating margin approximately 25.3%, up an estimated ~1,070 bps YoY
• ROE 12.6% and ROIC 20.8% indicate strong returns in the period
• Cash conversion is weak (OCF negative), lowering earnings quality
• Balance sheet liquidity is ample with net cash after debt
• Profit mix includes significant other operating income and negative taxes, potentially non-recurring

Metrics to Watch:

• OCF/Net Income and working capital movements (DSO, contract assets/liabilities)
• Breakdown of other operating income and any one-off gains
• Tax normalization trajectory and effective tax rate guidance
• Backlog/order intake and revenue visibility
• Debt maturity schedule and cost of debt
• SG&A growth vs revenue to confirm operating leverage quality

Relative Positioning: Versus typical small-cap industrial peers, トヨコー shows superior short-term profitability and returns but trails on cash conversion; liquidity and leverage are better-than-average, while earnings quality and disclosure depth are weaker due to reliance on non-recurring items.

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