SHOEI YAKUHIN CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥13.36B
• Operating Income: ¥240M
• Net Income: ¥242M
• EPS: ¥70.84

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: Solid top-line growth but margin compression and weak cash conversion led to a mixed FY2026 Q2 performance. Revenue rose 8.8% YoY to 133.63, demonstrating healthy demand and/or price pass-through. Despite higher gross profit of 10.80, operating income fell 22.1% YoY to 2.40, indicating cost pressure and negative operating leverage. Operating margin declined to roughly 1.8%, while ordinary income of 3.59 (−11.7% YoY) was supported by sizable non-operating income of 1.24, notably 0.77 from dividends. Net income decreased 14.3% YoY to 2.41, implying a net margin near 1.8%, with an effective tax rate of 32.8%. We estimate operating margin compressed by about 71 bps YoY (from ~2.51% to ~1.80%) as revenue growth outpaced operating profit. Non-operating income represented about half of operating income (~51%), cushioning ordinary profit but raising quality concerns if such income is non-recurring. Cash flow quality is weak: operating CF was -1.00 versus net income of 2.41 (OCF/NI -0.41x), suggesting working capital absorption or timing issues. Liquidity is adequate with a current ratio of 165%, and leverage is moderate with D/E around 0.89x and negligible interest burden. ROE stands at 2.6% (NPM 1.8% × AT 0.770 × leverage 1.89x), and ROIC at 2.0% is below a healthy 5% threshold, pointing to capital efficiency challenges. The balance sheet shows heavy reliance on receivables (71.82) and payables (61.17), typical of a distributor, and implies sensitivity to customer payment terms. Capex is minimal (0.03), so performance hinges on margin discipline and working capital management rather than investment cycles. Dividend capacity looks tight near-term given negative OCF, although the calculated payout ratio of 57.9% is nominally within a sustainable band. Forward-looking, stabilization of gross-to-operating margin conversion, reduction of working capital drag, and reliance on recurring operating earnings (vs dividends/interest) are key to improving quality of earnings. Overall, execution on cost control and pricing to defend margins, plus better collections, will be critical for H2.

Profitability Analysis

ROE decomposition: ROE 2.6% = Net Profit Margin 1.8% × Asset Turnover 0.770 × Financial Leverage 1.89x. The largest change driver YoY is margin deterioration, evidenced by operating income down 22.1% despite revenue up 8.8%. Business drivers: cost of sales increased faster than revenue or pricing/mix shifted toward lower-margin products; SG&A grew relative to gross profit (SG&A 8.39 vs GP 10.80), compressing operating margin to ~1.8%. Ordinary income was supported by non-operating income (1.24), mainly dividend income (0.77), which partially offset weaker core profitability. Sustainability: reliance on non-operating income is less controllable and may be volatile, so the current ordinary margin is not fully durable without operating margin recovery. Concerning trend: revenue growth outpacing operating profit indicates negative operating leverage; implicit SG&A intensity rose (OI down YoY), and the non-operating income ratio (~51%) is high for quality. Asset turnover at 0.77 is acceptable for a distributor but is likely constrained by elevated receivables; improving collections could lift AT and ROE. Financial leverage at 1.89x is moderate and not the main ROE driver.

Growth Assessment

Revenue grew 8.8% YoY to 133.63, likely reflecting steady demand and price pass-through in chemicals/distribution. However, operating income fell 22.1%, indicating growth was not profitable at the operating level due to cost of sales pressure and/or higher SG&A. Ordinary income declined 11.7% but benefited from dividend and interest income; net income fell 14.3%. Current growth quality is mixed: top-line is solid, but mix/pricing and cost control need improvement to translate into earnings. Outlook hinges on margin stabilization through pricing discipline and product mix upgrades, and on reducing working capital drag to convert earnings into cash. With minimal capex requirements (0.03), earnings growth will be driven chiefly by margin and working capital execution rather than capacity expansion.

Financial Health

Liquidity is sound: current ratio 165.4% and quick ratio 165.4% (inventories unreported but implied low) indicate ample short-term coverage. No explicit warning triggers (Current Ratio < 1.0 or D/E > 2.0) are met. Working capital is positive at 43.06, with receivables (71.82) and payables (61.17) dominating; maturity mismatch risk is moderate but manageable given cash and deposits of 11.89 and limited short-term loans (1.00). Solvency appears stable with D/E around 0.89x (based on total liabilities/equity) and negligible interest expense, yielding a very high interest coverage ratio. Off-balance sheet obligations are not disclosed; none identified in the data provided.

Cash Flow Quality

OCF/Net Income is -0.41x, flagging weak earnings quality this period; cash generation lagged accounting profits, likely due to receivables build or timing of payables. Free cash flow cannot be fully assessed as investing CF is unreported; capex was minimal at 0.03, so absent other investing flows, FCF would depend primarily on OCF. The divergence between OCF and NI suggests working capital absorption; monitoring receivables days and collection discipline is key. No overt signs of working capital manipulation are visible, but the size of receivables vs payables highlights execution risk on collections.

Dividend Sustainability

The calculated payout ratio is 57.9%, near the upper bound of typical sustainability thresholds (<60%). However, negative OCF in the period implies dividends were not covered by internal cash generation, pressuring near-term sustainability if this persists. FCF coverage is not calculable due to missing investing CF, but with minimal capex, sustained OCF recovery would likely restore coverage. Policy outlook: maintaining dividends at current levels likely requires better operating margin and improved cash conversion; reliance on non-operating income and financing CF (-6.33) to fund distributions is a risk if replicated.

Risk Assessment

Business Risks:

• Margin pressure from cost inflation and/or adverse product mix, as evidenced by operating income -22.1% YoY despite +8.8% revenue.
• Dependence on non-operating income (dividend and interest) to support ordinary income (~51% of operating income).
• Working capital intensity with large receivables (71.82) increasing cash conversion risk.
• Customer inventory adjustments and pricing competition typical in chemical distribution.

Financial Risks:

• Negative operating cash flow (-1.00) versus positive net income (2.41), indicating weak cash conversion.
• Capital efficiency risk: low ROIC at 2.0% (<5% benchmark) and ROE at 2.6%.
• Moderate leverage by liabilities/equity (0.89x), though funding cost risk is limited given negligible interest expense.
• Potential dividend funding via financing CF (-6.33) if cash generation does not improve.

Key Concerns:

• Sustained operating margin compression (estimated ~71 bps YoY).
• High receivables exposure and potential elongation of collection cycles.
• Volatility or non-recurrence of dividend income (0.77) that supports ordinary profit.
• Tax rate at 32.8% leaves limited net margin buffer.

Investment Implications

Key Takeaways:

• Top-line growth is healthy, but profit growth lags due to margin compression and higher cost intensity.
• Ordinary income is propped up by non-operating income; core earnings need to improve for quality.
• Cash conversion is weak this quarter; receivables management is a critical swing factor.
• Balance sheet liquidity is adequate and interest burden is negligible, reducing solvency risk.
• Capital efficiency is low (ROIC 2.0%, ROE 2.6%), necessitating better margin/asset turnover.

Metrics to Watch:

• Operating margin trajectory and SG&A intensity versus gross profit.
• Gross-to-operating profit conversion rate and non-operating income share of profit.
• OCF/Net Income and receivables days/outstanding.
• Asset turnover (currently 0.770) and ROIC (2.0%).
• Payout ratio versus cash coverage and any reliance on financing CF for dividends.

Relative Positioning: Within specialty chemicals distribution peers, the company shows competitive revenue growth but lags on operating margin resilience and cash conversion; liquidity is comfortable, leverage modest, but capital efficiency and earnings quality trail best-in-class distributors.

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