MIE Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥3.43B
• Operating Income: ¥284M
• Net Income: ¥182M
• EPS: ¥149.02

Income Statement

Balance Sheet

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 resilient but modest quarter—operating profit and bottom line edged up despite slightly lower sales, aided by margin discipline and manageable interest burden. Revenue was 34.34 (−0.8% YoY), while operating income increased to 2.84 (+4.9% YoY), ordinary income to 2.61 (+3.6% YoY), and net income to 1.79 (+2.1% YoY). Operating margin stood at 8.3% (2.84/34.34), up an estimated ~44 bps YoY based on reported growth differentials. Net margin was 5.2%, up roughly ~15 bps YoY by our back-solve, reflecting improved operating efficiency and stable taxes (effective tax rate 30.6%). Gross margin was 21.8%, indicating a decent spread despite flat demand. SG&A was 4.66, equating to 13.6% of sales; given revenue softness, cost control appears to have supported operating leverage. Non-operating income (0.09) was more than offset by non-operating expenses (0.32), primarily interest expense (0.24), but interest coverage remained strong at 11.9x. Liquidity is mixed: current ratio 1.48x is adequate, but quick ratio 0.94x flags reliance on inventory for short-term coverage. Leverage is on the higher side for a small-cap manufacturer (D/E 1.70x) and skewed to short-term loans (24.30), increasing refinancing sensitivity. Working capital is inventory-heavy (inventories 18.76 vs H1 sales 34.34), which could pressure cash conversion if demand softens further. ROE is 6.0% via low asset turnover (0.423) and moderate leverage (2.70x), while ROIC at 3.6% is below a typical 5% warning threshold—highlighting capital efficiency challenges. Earnings quality cannot be validated because operating cash flow was unreported; this is a key limitation this quarter. Dividend affordability appears conservative with a 13.5% payout ratio, but FCF coverage is unknown due to missing cash flow and capex data. Forward-looking, maintaining margin discipline, reducing short-term debt, and normalizing inventories will be key to sustaining profit resilience in a flattish demand backdrop. Overall, performance was slightly better than the sales trend would imply, but fundamental improvement requires higher asset turnover and clearer cash flow support.

Profitability Analysis

ROE decomposition (DuPont): ROE 6.0% = Net Profit Margin 5.2% × Asset Turnover 0.423 × Financial Leverage 2.70x. The weakest link is asset turnover (0.423), which suppresses ROE despite acceptable net margin. The largest effective driver this quarter versus the slight revenue decline appears to be modest margin expansion (operating margin ~8.3% vs ~7.8% implied last year), while leverage (2.70x) looks stable and the main compensating factor. Business explanation: slightly better gross spread and SG&A discipline offset lower sales, while non-operating drag from interest was contained. Sustainability: incremental operating margin gains could persist if input costs stay stable and mix remains favorable; however, benefits are modest and vulnerable to price competition or demand softness. Concerning trends: inventory intensity is high relative to H1 sales, which can weigh on turnover; interest costs remain a non-trivial drag (non-op expenses > non-op income); and leverage at 1.70x D/E reduces room for error if earnings soften.

Growth Assessment

Top line declined 0.8% YoY to 34.34, indicating flat-to-soft demand. Despite this, operating income rose 4.9% and net income 2.1%, implying positive operating leverage from cost control. Gross profit was 7.50, with a gross margin of 21.8%; this level is consistent with stable pricing and procurement, but we lack YoY gross margin to confirm the exact delta. SG&A at 4.66 (13.6% of sales) appears contained relative to the revenue trend. Non-operating balance remained a modest net expense due to interest (0.24). Outlook: with inventories elevated (18.76), growth sustainability hinges on converting stock to sales without discounting; otherwise margins could compress. Near term, expect stable-to-slightly better operating margins if input costs and mix hold, but top-line acceleration is not yet evident. Key swing factors: demand in end-markets tied to construction/industrial cycles, pricing power, and financing costs on short-term loans.

Financial Health

Liquidity: current ratio 1.48x (adequate) and quick ratio 0.94x (below the 1.0x comfort level) indicate reliance on inventories for short-term obligations. Solvency: D/E 1.70x is above the conservative benchmark (<1.5x) but below a high-risk threshold (>2.0x). No explicit warning for Current Ratio <1.0 or D/E >2.0 is triggered, but leverage is elevated. Maturity profile: short-term loans of 24.30 exceed cash (8.77) and accounts receivable (11.73), creating a refinancing/maturity mismatch risk that depends on inventory monetization (18.76) and lender support. Interest coverage is strong at 11.9x, suggesting current earnings comfortably service interest. Off-balance sheet obligations: none reported in the provided data.

Cash Flow Quality

OCF was unreported, so OCF/Net Income and FCF cannot be assessed—this is a core limitation. Earnings quality flags: none definitive from cash flow, but working capital composition raises caution—high inventories relative to H1 sales could imply future cash absorption if turnover slows. Interest expense (0.24) is meaningful but covered; still, rising rates or tighter credit could pressure OCF if working capital expands. Without capex data, we cannot judge maintenance vs growth spend; thus FCF sustainability for dividends and debt reduction remains uncertain.

Dividend Sustainability

The payout ratio is 13.5%, which is conservative and suggests room to maintain dividends on an earnings basis. However, FCF coverage is unknown due to missing OCF and capex data. Balance sheet leverage (D/E 1.70x) and short-term debt reliance increase the importance of cash generation for dividend safety. Policy outlook likely stable given low payout, provided earnings and liquidity remain intact; watch for any inventory-driven cash swings that could constrain distributions.

Risk Assessment

Business Risks:

• Demand softness evidenced by −0.8% YoY revenue and elevated inventories could lead to discounting and margin pressure.
• Pricing pressure in end markets (likely construction/industrial metals) could compress the 21.8% gross margin.
• Operational leverage risk if SG&A rises faster than sales in a flat revenue environment.

Financial Risks:

• Refinancing/maturity risk due to short-term loans of 24.30 vs cash + AR of 20.50 and quick ratio of 0.94x.
• Elevated leverage (D/E 1.70x) reduces flexibility amid potential earnings volatility.
• Interest rate risk: interest expense (0.24) is manageable now, but higher rates could erode ordinary profit.

Key Concerns:

• Low capital efficiency: ROIC 3.6% below the 5% warning threshold.
• Asset turnover at 0.423 is weak, dragging ROE despite moderate margins.
• Earnings quality opacity due to unreported OCF and capex, limiting FCF visibility.

Investment Implications

Key Takeaways:

• Resilient profitability: operating income +4.9% YoY despite −0.8% sales.
• Margins expanded modestly (operating margin ~8.3%, net margin 5.2%).
• Leverage is elevated (D/E 1.70x) and skewed to short-term borrowings.
• Inventory-heavy balance sheet could weigh on cash conversion.
• ROIC 3.6% flags capital efficiency issues; ROE 6.0% relies on leverage more than turnover.

Metrics to Watch:

• Operating cash flow and free cash flow once disclosed (OCF/NI > 1.0 target).
• Inventory turns and days on hand; trajectory of accounts receivable.
• Short-term debt rollover and interest costs; net debt movement.
• Gross and operating margin trend vs input costs and pricing.
• ROIC improvement toward >5% near term and >7% medium term.

Relative Positioning: Within small-cap Japanese industrial/manufacturing peers, profitability is middling with acceptable operating margin but below-average capital efficiency (ROIC 3.6%). Liquidity is adequate but less robust than peers with quick ratios above 1.0, and leverage is somewhat higher than conservative peer sets, making cash conversion and debt management more critical to sustain returns.

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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