J-MAX Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥23.60B
• Operating Income: ¥777M
• Net Income: ¥715M
• EPS: ¥60.28

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

FY2026 Q2 results show a modest top-line increase with improved operating execution but profitability remains constrained by financing costs and low capital efficiency. Revenue grew 5.9% YoY to 236.03, gross profit was 23.86, and operating income reached 7.77, translating to an operating margin of about 3.3%. Net income came in at 6.91, implying a net margin of 2.9% and an ROE of 3.7% (DuPont-consistent). Non-operating headwinds weighed on ordinary income (4.21) due mainly to interest expense of 2.93, partially offset by non-operating income of 0.55. EBITDA was 26.54 (11.2% margin), supported by sizable D&A of 18.77. Liquidity is tight but positive with a current ratio of 104.2% and quick ratio of 101.9%, leaving limited buffer against short-term obligations. Leverage is elevated (D/E 2.04x; Debt/EBITDA 6.76x), constraining financial flexibility and pressuring ordinary income via interest costs. Cash flow quality is strong this quarter: OCF of 29.28 is 4.24x net income, aided by EBITDA and likely working capital tailwinds, more than covering capex of 14.71. Total comprehensive income was negative at -10.09 despite positive net income, indicating sizable OCI losses (likely investment valuation or FX), which eroded equity. ROIC is weak at 2.2%, well below a 5% warning threshold, underscoring limited return on the current asset base. Margin trend versus prior year is not disclosed; therefore, basis point expansion/compression cannot be quantified, but operating margin appears thin relative to sector norms for metal/processing peers. Non-operating expense intensity (interest) is a clear drag on the translation from operating to ordinary/net income. Working capital and D&A-driven OCF strength suggests reported earnings are cash-backed this quarter. With financing cash outflows of -17.67, the company is de-risking slightly (net repayments), but balance sheet leverage remains a priority issue. Forward-looking, stabilizing interest costs, disciplined capex, and incremental top-line growth could sustain cash generation, but improving ROIC and reducing debt are necessary to enhance equity returns and resilience.

Profitability Analysis

ROE (3.7%) = Net Profit Margin (2.9%) × Asset Turnover (0.419x) × Financial Leverage (3.04x). The major constraints on ROE are the low net margin and subdued asset turnover; leverage is high and provides amplification but adds risk. The largest adverse component in practice is net margin pressure from interest costs: operating margin ~3.3% compresses to ordinary margin ~1.8% after non-operating items, with interest expense at 2.93 being the key driver. Business-wise, the company is operating on thin gross margins (10.1%) and facing a high cost of debt; while EBITDA margin (11.2%) is reasonable, D&A and interest narrow the bottom line. This mix is partly structural (industry pricing, cost base) and partly financial (capital structure and borrowing costs). Sustainability: absent deleveraging or lower interest rates, the net margin headwind from financing costs is likely to persist; operationally, maintaining EBITDA margin above 10% is plausible, but improving net margin requires cost discipline or price/mix gains. Watch for SG&A discipline: SG&A is 16.09 (6.8% of sales), which is acceptable given gross margin, but any SG&A growth outpacing revenue would quickly compress operating margin given the thin spread. Overall, ROE is being propped up by leverage rather than robust profitability or efficiency—an unsustainable quality of return if cash generation weakens.

Growth Assessment

Revenue increased 5.9% YoY to 236.03, indicating steady but not rapid growth. Operating income of 7.77 reflects some operating leverage, but the lack of YoY profit comps limits precision on incremental margins. Non-operating expenses (notably interest) limited translation of operating gains into ordinary and net income, with ordinary income at 4.21. EBITDA of 26.54 suggests core operations are generating cash, supported by D&A of 18.77. Given total comprehensive income of -10.09, equity value accretion is being offset by OCI volatility, which may stem from marketable securities or FX exposures. Growth sustainability will hinge on pricing power in a 10.1% gross margin environment and maintaining SG&A efficiency at ~6.8% of sales. With ROIC at 2.2%, incremental investment returns appear low; deploying capex more selectively or recycling capital may be needed to lift returns. Near-term outlook: moderate revenue growth with stable EBITDA margin is plausible; net income growth may lag unless interest burden falls or the company deleverages.

Financial Health

Liquidity is thin but above the warning threshold: current ratio 1.04 and quick ratio 1.02. Explicit warning: D/E at 2.04x exceeds 2.0, indicating high leverage. Short-term funding reliance is significant (short-term loans 105.78) relative to current assets (262.82) and cash (59.95); however, cash plus receivables (191.14) substantially exceed short-term loans, mitigating immediate rollover risk. Working capital is positive at 10.54, but the margin of safety is limited. Interest coverage at 2.65x is modest—adequate but below a comfortable >5x benchmark—leaving earnings sensitive to rate changes or profit dips. Noncurrent liabilities are 126.02, with long-term loans of 73.50, implying a meaningful maturity ladder; refinancing risk should be monitored. Total comprehensive loss (-10.09) reduced equity despite positive net income, underscoring market/FX sensitivity in equity. No off-balance sheet obligations were disclosed in the provided data.

Cash Flow Quality

OCF of 29.28 is 4.24x net income, signaling high earnings quality this quarter. OCF also exceeds operating income by 3.8x, supported by D&A (18.77) and likely favorable working capital movements. Using capex of 14.71 as a proxy, implied FCF is approximately 14.57 (OCF minus capex), acknowledging that full investing CF is unreported. Financing CF of -17.67 suggests net debt repayment or dividend outflow, consistent with a cautious stance on leverage; dividend cash outflow is unreported. OCF/NI well above 0.8 indicates no immediate quality concerns; however, sustainability depends on maintaining EBITDA and avoiding adverse working capital reversals. No clear signs of working capital manipulation are evident from the limited disclosure; inventories are low (5.64), and receivables are substantial (131.19), so collection discipline remains important.

Dividend Sustainability

Dividend amounts are unreported, but a calculated payout ratio of 6.9% indicates a low payout relative to net income, suggesting ample headroom in principle. With implied FCF (~14.6) exceeding this low payout level, coverage appears strong for a modest dividend, subject to confirmation of actual dividend cash flows. Given high leverage and low ROIC (2.2%), management may prioritize debt reduction over dividend increases. Policy outlook: stable or conservative dividends are more likely than aggressive hikes until leverage normalizes and ROIC improves. Data limitations (no DPS or total dividends paid disclosed) constrain precision.

Risk Assessment

Business Risks:

• Thin gross and operating margins (GPM 10.1%, OPM ~3.3%) reduce shock absorption capacity.
• Execution risk in maintaining SG&A efficiency (~6.8% of sales) amid cost inflation.
• Low ROIC (2.2%) indicating poor returns on incremental investment.
• OCI volatility evidenced by total comprehensive loss (-10.09) despite positive NI.

Financial Risks:

• High leverage (D/E 2.04x; Debt/EBITDA 6.76x) elevates refinancing and covenant risk.
• Interest burden (interest expense 2.93) compresses ordinary income; interest coverage only 2.65x.
• Tight liquidity (current ratio 1.04) increases sensitivity to working capital swings.
• Short-term debt concentration (short-term loans 105.78) raises rollover risk.

Key Concerns:

• Negative total comprehensive income eroding equity despite profitability.
• Dependence on favorable working capital to support strong OCF.
• Potential sensitivity to interest rate changes given leverage and coverage.
• Limited headroom for operational missteps due to thin margins.

Investment Implications

Key Takeaways:

• Revenue growth of 5.9% with EBITDA margin at 11.2% shows operational resilience.
• Net income margin (2.9%) and ROE (3.7%) are constrained by financing costs and low asset efficiency.
• OCF is strong at 29.28, comfortably covering capex of 14.71; cash earnings quality is high this quarter.
• Balance sheet leverage is elevated (D/E 2.04x), necessitating deleveraging to improve ordinary income and ROE.
• ROIC at 2.2% signals a need for portfolio pruning or higher-return projects.

Metrics to Watch:

• Operating margin and SG&A ratio versus revenue growth each quarter.
• Interest coverage and average borrowing rates to gauge non-operating drag.
• Working capital turns (receivable days) and cash conversion to confirm OCF sustainability.
• ROIC trend versus WACC to assess value creation.
• OCI components (securities valuation, FX) given the negative comprehensive income.

Relative Positioning: Versus domestic metal-processing/industrial small caps, J-MAX exhibits weaker capital efficiency (ROIC 2.2% vs peers mid-single-digit) and higher leverage, with comparable or slightly lower operating margins; its cash conversion this quarter is stronger than average, but sustainability hinges on working capital stability and 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
• 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