ALPHA Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥34.09B
• Operating Income: ¥-31M
• Net Income: ¥343M
• EPS: ¥44.94

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: FY2026 Q2 was weak at the operating level, with a small operating loss offset by non-operating gains to keep ordinary and net income in the black. Revenue declined 6.9% YoY to 340.89, and operating income fell to -0.31 (-72.0% YoY), indicating pressure on the core business. Gross profit was 47.24, but SG&A of 47.56 fully absorbed gross margin, resulting in an operating margin of roughly -0.1%. Ordinary income was supported by non-operating income of 4.72 against non-operating expenses of 2.02, yielding ordinary income of 2.38 (-51.1% YoY). Net income nonetheless increased 35.7% YoY to 4.31, helped by non-operating gains and possibly tax items, though the effective tax rate stands elevated at 44.3%. The net profit margin is thin at 1.3%, and ROE is low at 1.2%, reflecting subdued profitability and modest asset turnover (0.494x). Operating cash flow of 16.23 comfortably exceeded net income (OCF/NI 3.77x), signaling good cash conversion despite weak earnings. However, total comprehensive income was -5.10 due to negative other comprehensive items, likely securities valuation and/or FX translation losses. Margins: gross margin is 13.9%, operating margin about -0.1%, ordinary margin about 0.7%, and net margin 1.3%; YoY basis point changes cannot be precisely quantified due to lack of prior-period margin disclosure, but directionally operating margin compressed sharply into a loss. Interest coverage on an EBIT basis is negative (-0.18x), highlighting debt service risk if non-operating support wanes; EBITDA of 17.10 suggests cash earnings are stronger than EBIT implies. Liquidity is adequate with a current ratio of 142.3% and quick ratio of 133.7%, but short-term loans of 140.58 contribute to refinancing needs. Capital expenditures of 19.93 exceeded OCF, implying negative pre-dividend FCF of roughly -3.7 (OCF minus capex), which, coupled with a calculated payout ratio of 113.6%, raises sustainability questions if maintained. Balance sheet remains moderate with D/E of 0.94x and total equity of 356.07; yet Debt/EBITDA at 9.33x (as provided) points to elevated leverage on an earnings basis. Forward-looking, stabilizing core operations (pricing, mix, utilization) and protecting gross margin are key, while reliance on non-operating income (dividends/interest) and exposure to OCI volatility should be reduced. For an auto-related supplier, demand normalization at OEMs, FX, and input cost trends will be decisive into 2H. Monitoring whether SG&A can be flexed and whether cash conversion stays strong is critical to sustain dividends and investment. Overall, the quarter underscores fragile core profitability but acceptable liquidity and cash conversion, with elevated sensitivity to external income and financing conditions.

Profitability Analysis

ROE decomposition: 1.2% ROE = 1.3% Net Profit Margin × 0.494x Asset Turnover × 1.94x Financial Leverage. The weakest component is the net profit margin, given an operating loss and thin ordinary margin; asset turnover is sub-0.5x and leverage is moderate. The most material change vs YoY appears to be margin-related (operating income -72% YoY to a loss), indicating operating deleverage as gross profit could not cover SG&A. Business driver: revenue fell 6.9% YoY, while SG&A (47.56) approximately equaled gross profit (47.24), suggesting limited cost flexibility and fixed-cost absorption issues; non-operating income (4.72, including dividends 0.62 and interest 0.32) masked part of the operating weakness at the ordinary and net levels. Sustainability: the reliance on non-operating items is unlikely to be a durable earnings engine, and margin recovery will require either price/mix improvements, cost reduction, or volume normalization at OEM customers. Asset turnover at 0.494x reflects a capital-intensive profile with significant receivables (148.71) and intangibles (28.66); without revenue growth or asset optimization, it will not drive ROE meaningfully. Flags: SG&A intensity is high (SG&A/Gross Profit > 100%), indicating lack of operating leverage; absent YoY SG&A disclosure, we cannot prove SG&A growth exceeding revenue decline, but the relationship to gross profit is a concern. Effective tax rate of 44.3% further suppresses net margin; comprehensive loss (-5.10) indicates valuation volatility that does not affect ROE directly but affects equity and could pressure future capital allocation.

Growth Assessment

Revenue declined 6.9% YoY to 340.89, reflecting softer demand and/or pricing pressure, consistent with auto OEM production variability. Operating income deterioration to -0.31 (-72.0% YoY) indicates negative operating leverage, with fixed costs not flexing amid lower volumes. Ordinary income fell 51.1% YoY to 2.38, cushioned by non-operating gains (4.72), implying profit composition shifted away from core operations. Net income rose 35.7% YoY to 4.31 despite weaker operations, highlighting the outsized impact of non-operating items and/or tax effects; this is unlikely a quality improvement in recurring earnings. EBITDA of 17.10 (5.0% margin) suggests underlying cash earnings are present, but insufficient to deliver robust operating margin under the current cost structure. Forward outlook hinges on OEM production recovery, cost normalization (materials, logistics), and FX; stabilization of gross margin and SG&A discipline are essential. Given comprehensive loss and negative pre-dividend FCF (approx. -3.7), near-term growth investments may need prioritization/trade-offs unless OCF improves. No segment or order backlog detail is disclosed; thus, we cannot assess mix shifts or specific program ramps. Overall, revenue sustainability is uncertain near term; profit quality leans on non-operating items rather than core operating efficiency.

Financial Health

Liquidity is adequate: current ratio 142.3% and quick ratio 133.7% exceed minimum thresholds (no warning for CR<1.0). Working capital stands at 116.56. Short-term loans of 140.58 are significant but are supported by current assets of 392.35; cash and deposits are 101.64 and receivables are 148.71, mitigating near-term liquidity stress. Solvency: D/E is 0.94x, within conservative bounds (<1.5x), and total liabilities are 333.38 vs equity 356.07. However, interest coverage on an EBIT basis is -0.18x (warning), implying that, absent non-operating income, debt service capacity from operations is weak; on an EBITDA basis coverage would be healthier, but not disclosed here. Long-term loans are modest at 19.02, suggesting refinancing concentration in the short term; monitor maturity mismatch risk if credit conditions tighten. No off-balance sheet obligations are disclosed in the provided data. Comprehensive income was negative (-5.10), which erodes equity despite positive NI; sustained OCI losses could pressure capital ratios over time.

Cash Flow Quality

OCF was 16.23 versus net income 4.31, yielding OCF/NI of 3.77x, which is strong and indicates good cash conversion this period. Using OCF minus reported capex as a proxy, pre-dividend FCF is approximately -3.70 (16.23 - 19.93), implying investment outlays exceeded operating cash generation in the half. Investing CF details are unreported, so we cannot assess proceeds from asset sales or financial investments; therefore, true FCF is uncertain. Working capital appears to have contributed positively given OCF outpaced NI amid an operating loss, but the exact drivers (receivables, payables, inventory) are not disclosed; we see receivables (148.71) and inventories (23.67) levels that could reverse, posing a risk of OCF normalization lower. There is no clear sign of aggressive working capital manipulation from the limited data, but reliance on short-term financing (140.58) alongside negative pre-dividend FCF warrants caution. Financing CF was +9.20, indicating external funding support during the period. Overall cash earnings quality is better than accounting earnings, but sustainability depends on maintaining favorable working capital dynamics and improving operating margin.

Dividend Sustainability

The calculated payout ratio is 113.6%, which is above the conservative benchmark (<60%) and implies payouts exceed earnings; however, DPS and total dividends paid are unreported, so this figure likely reflects an estimate and should be treated cautiously. With pre-dividend FCF estimated at approximately -3.70 for the period (OCF 16.23 less capex 19.93), coverage of dividends from internally generated cash appears strained unless H2 cash flow improves or capex moderates. Balance sheet capacity exists (equity 356.07; D/E 0.94x), but continued negative FCF plus high payout would pressure leverage and flexibility. Policy outlook is unclear from disclosures; if the company targets stable dividends, it may need to balance payouts against the need to restore core profitability and fund investments. Higher reliance on non-operating income and financing CF to support payouts would be a risk to sustainability.

Risk Assessment

Business Risks:

• OEM demand volatility leading to negative operating leverage (revenue -6.9% YoY; operating loss).
• Cost inflation and limited SG&A flexibility (SG&A ≈ gross profit), pressuring operating margin.
• Product/program pricing pressure from automotive OEMs and potential customer concentration.
• FX fluctuations impacting export competitiveness and translation of overseas subsidiaries.
• Supply chain disruptions for components (e.g., semiconductors, materials) affecting volumes and costs.

Financial Risks:

• Debt service risk: EBIT interest coverage -0.18x (warning), sensitive to non-operating support.
• Elevated leverage on an earnings basis: Debt/EBITDA 9.33x as provided.
• Refinancing risk from sizeable short-term loans (140.58) despite adequate current assets.
• Negative pre-dividend FCF (~ -3.70) this period requiring financing inflows (+9.20).
• Comprehensive loss (-5.10) reducing equity through OCI volatility (securities/FX).

Key Concerns:

• Core profitability deterioration with reliance on non-operating income (non-operating income ratio 109.5%).
• High calculated payout ratio (113.6%) versus weak core earnings and negative pre-dividend FCF.
• Thin net margin (1.3%) and low ROE (1.2%) below cost of capital proxies.
• Data gaps (investing CF, dividends, segment detail) limit visibility into recurring vs one-off drivers.

Investment Implications

Key Takeaways:

• Core operations posted a small loss; earnings were saved by non-operating gains.
• Cash conversion was strong relative to NI (OCF/NI 3.77x), but capex drove negative pre-dividend FCF.
• Liquidity is acceptable (CR 142%, QR 134%), but EBIT coverage is negative and short-term borrowings are high.
• ROE is low (1.2%) due to thin margins and modest asset turnover; leverage is not the primary driver.
• Comprehensive loss indicates valuation/FX volatility affecting equity.
• Dividend sustainability is questionable if the >100% payout ratio is maintained without OCF improvement.

Metrics to Watch:

• Operating margin recovery (target: turn positive; monitor GP vs SG&A gap).
• OCF sustainability and working capital movements (AR and inventory turns).
• Capex trajectory versus OCF to restore positive FCF.
• Interest coverage improvement toward >2x on EBIT basis or >5x long-term.
• Short-term debt rollover and net debt/EBITDA trend.
• OCI volatility drivers (securities valuation, FX) and their impact on equity.

Relative Positioning: Versus domestic auto-parts peers, Alpha’s operating profitability lags this quarter (operating loss vs sector low-single-digit margins), while leverage is moderate on a balance sheet basis (D/E 0.94x) but elevated on an earnings basis (Debt/EBITDA >8x). Cash conversion is comparatively solid, yet dependence on non-operating income and negative pre-dividend FCF place it behind peers with stable operating cash flows and positive operating margins.

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