Shinwa Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥9.90B
• Operating Income: ¥1.37B
• Net Income: ¥876M
• EPS: ¥64.39

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

Shinwa Co., Ltd. (TSE: 3447) delivered a strong FY2026 Q2 (cumulative) under IFRS, with clear operating leverage and margin expansion. Revenue grew 15.9% YoY to 99.02, while operating income rose 56.9% YoY to 13.67, lifting the operating margin to an estimated 13.8%. Gross profit increased to 22.37, implying a gross margin of 22.6%, up on improved mix and cost control. Net income reached 8.79 (+66.0% YoY), translating to an EPS of 64.39 JPY. DuPont decomposition shows a net margin of 8.9%, asset turnover of 0.317x, and financial leverage of 1.92x, yielding an ROE of 5.4% for the period. The equity ratio stands at a healthy 52.0%, indicating a solid capital base. Debt levels are meaningful but manageable, with disclosed short-term loans of 45.90 and long-term loans of 58.97; against equity of 162.53 this implies interest-bearing debt-to-equity of roughly 0.65x (the reported broad D/E is 0.87x, likely including additional liabilities). Cash generation lags earnings: operating cash flow (OCF) was 3.13, or 0.36x of net income, weighed by working capital needs. Free cash flow defined as OCF plus total investing cash flow was -32.93, driven by sizable investing outflows of -36.06 (capex -9.62 and other investments). Financing inflows of 32.96 (despite dividends of -2.23 and buybacks of -3.00) likely funded investment and supported liquidity, with period-end cash and equivalents at 29.09. The effective tax rate was 22.3%, consistent with domestic statutory levels after credits. Asset-efficiency indicators suggest working capital intensity (AR and inventory) likely constrained OCF despite earnings growth. Dividend-related disclosures are limited; the calculated payout ratio is 51.3%, while FCF coverage is negative given heavy investment. Overall profitability trends are positive, balance sheet strength is adequate, but cash conversion and investment funding warrant monitoring. Data gaps (ordinary income, interest expense, current liabilities, DPS) limit precision in interest coverage, liquidity, and dividend policy interpretation; all zeros in unreported fields should be treated as undisclosed, not zero.

Profitability Analysis

ROE_decomposition: ROE 5.4% = Net margin 8.9% × Asset turnover 0.317 × Financial leverage 1.92x. This reflects robust profitability in the period and modest asset utilization with moderate leverage. margin_quality: Gross margin 22.6% (22.37/99.02) and operating margin ~13.8% (13.67/99.02) indicate improved cost absorption and pricing/mix. EBITDA margin is 16.2% (EBITDA 16.06), consistent with an asset-heavy but efficient model. Effective tax rate is 22.3%, providing limited drag below EBIT. operating_leverage: Revenue +15.9% YoY versus operating income +56.9% YoY indicates strong operating leverage, with SG&A discipline (SG&A/revenue ~13.7%) and better fixed-cost absorption driving outsized EBIT growth. Continued scalability depends on sustaining volume and mix benefits.

Growth Assessment

revenue_sustainability: Top-line growth of 15.9% appears broad-based given margin expansion; however, lack of segment disclosure prevents attribution by product/region. Sustainability hinges on end-market demand (construction-related cycles) and pricing resilience. profit_quality: Earnings quality is mixed: margins expanded and net income grew 66.0% YoY, but OCF/NI at 0.36x signals working capital drag (AR and inventory build). Depreciation of 2.39 versus EBITDA of 16.06 supports cash earnings potential if working capital normalizes. outlook: Run-rate profitability suggests potential for double-digit ROE on an annualized basis if current margins persist, but working capital intensity and investment pace could dilute near-term cash conversion. Visibility would improve with order backlog and pipeline data (not disclosed).

Financial Health

liquidity: Current ratio and quick ratio are not calculable due to undisclosed current liabilities. Current assets are 98.77, including AR 44.10 and inventory 24.39, and cash & equivalents disclosed at period end is 29.09. Reported 'working capital' equals current assets and cannot be interpreted as CA–CL without CL. solvency: Total assets 312.72 vs equity 162.53 yield an equity ratio of 52.0%, a solid buffer. Loans total 104.87 (ST 45.90, LT 58.97). Based on loans vs equity, interest-bearing D/E is ~0.65x; the reported D/E of 0.87x likely reflects broader liabilities. capital_structure: Financial leverage (Assets/Equity) is 1.92x. Net debt estimated at ~75.8 (loans 104.87 minus cash 29.09), implying net debt/EBITDA of ~4.7x on the half-year figure; annualized EBITDA would halve this ratio to roughly mid-2x, highlighting sensitivity to periodization. Interest coverage is not calculable due to missing interest expense.

Cash Flow Quality

earnings_quality: OCF of 3.13 versus net income of 8.79 yields OCF/NI of 0.36x, indicating earnings not yet fully converting to cash, likely due to working capital absorption (AR 81 days; inventory 71 days; AP 46 days, all estimated on a half-year basis). FCF_analysis: Free cash flow defined as OCF + investing CF is -32.93, driven by -36.06 investing CF. Core FCF (OCF - capex) approximates -6.49, suggesting that beyond maintenance/growth capex, additional investments (about -26.4) were significant (e.g., long-term assets or financial investments). working_capital: Estimated half-year cash conversion cycle ~105 days (AR ~81, inventory ~71, AP ~46), consistent with cash tied in receivables/inventory. Improvement in collections and inventory turns would materially enhance OCF.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 51.3% based on reported earnings; DPS itself is undisclosed. With EPS at 64.39 JPY and average shares 13.66 million, the payout appears moderate relative to earnings capacity. FCF_coverage: FCF coverage is -7.30x using OCF + investing CF, indicating dividends are not covered when including all investments. On an OCF-only basis, cash dividends of 2.23 are covered ~1.4x, but share repurchases of 3.00 further strain internal funding. policy_outlook: Absent explicit dividend policy disclosure and DPS figures, sustainability depends on normalizing OCF and potentially moderating investment outflows. Given a 52% equity ratio and access to financing (net inflows this period), near-term capacity exists, but reliance on external funding is not a durable support for payouts.

Risk Assessment

Business Risks:

• Cyclical exposure to construction and infrastructure activity affecting order volumes and pricing
• Raw material price volatility (e.g., steel) impacting gross margins
• Project/customer concentration risk typical for industrial components
• Regulatory and safety standard changes affecting product requirements and costs
• Supply chain and logistics disruptions affecting lead times and inventory levels

Financial Risks:

• Working capital absorption depressing OCF relative to earnings
• Refinancing and interest rate risk given reliance on short- and long-term loans
• Negative free cash flow due to elevated investment outflows
• Potential covenant constraints (not disclosed) amid leverage and cash flow volatility
• Limited visibility on interest expense reduces clarity on interest coverage

Key Concerns:

• OCF/NI at 0.36x indicates weak cash conversion this half
• Large investing CF outflow (-36.06) driving negative FCF
• Dividend and buyback outlays amid negative FCF increase funding dependence
• Liquidity assessment constrained by undisclosed current liabilities and DPS data

Investment Implications

Key Takeaways:

• Strong operating leverage: revenue +15.9% YoY vs operating income +56.9% YoY with operating margin ~13.8%
• ROE at 5.4% for the period driven by 8.9% net margin and moderate leverage (1.92x)
• Cash conversion lagging: OCF/NI 0.36x and FCF -32.93 due to heavy investments
• Balance sheet resilient with 52% equity ratio; loans 104.87 against equity 162.53
• Net debt around 75.8 with period-end cash 29.09; financing inflows supported investments and shareholder returns

Metrics to Watch:

• Order backlog and booking trends (not disclosed) to gauge revenue sustainability
• AR days, inventory days, and CCC to track working capital normalization
• Net debt/EBITDA and interest coverage as rates and leverage evolve
• Capex and other investing outflows versus strategic initiatives and returns
• Operating margin and gross margin resilience amid input cost fluctuations
• Dividend policy disclosures (DPS, payout targets) and buyback intentions

Relative Positioning: Versus domestic small-cap industrial/material peers, Shinwa exhibits stronger near-term operating leverage and solid capitalization (52% equity ratio), offset by weaker cash conversion and heavier investment outflows this half.

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