SHOEI YAKUHIN CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥13.36B
• Operating Income: ¥240M
• Net Income: ¥282M
• 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

Shoei Yakuhin Co., Ltd. (35370) reported FY2026 Q2 consolidated results under JGAAP showing top-line growth but margin pressure and weaker operating profitability. Revenue rose 8.8% year-on-year to ¥13.363 billion, while operating income declined 22.1% to ¥240 million, indicating cost pressure and/or an unfavorable mix. Gross profit was ¥1.049 billion, implying a gross margin of 7.9%, but the operating margin compressed to 1.8%, underscoring thin unit economics for a trading/distribution-heavy business model. Ordinary income of ¥359 million exceeded operating income by ¥119 million, suggesting meaningful non-operating gains offsetting core margin compression. Net income declined 14.3% to ¥241 million, translating to a net margin of 1.80% and EPS of ¥70.84 for the period. DuPont analysis shows ROE at 2.63%, driven by a 1.80% net margin, asset turnover of 0.77x, and financial leverage of 1.89x—signaling that low profitability is the main headwind rather than balance sheet structure. EBITDA was ¥246 million (1.8% margin), reflecting limited operating leverage and minimal depreciation (¥6.3 million), typical for a light-asset distributor. Operating cash flow was negative at ¥208 million despite positive earnings, pointing to a working capital build during the half-year; this is a key quality-of-earnings flag to monitor, though seasonality may be a factor. Financing cash flow was an outflow of ¥579 million, likely debt repayment or other financing uses, given dividend data were not disclosed in this dataset. Liquidity appears sound with current ratio at 164% and working capital of ¥4.23 billion, while solvency looks conservative with liabilities at 47% of assets and implied equity ratio near 53% (equity and assets are disclosed). Interest coverage is extremely high at about 1,579x due to negligible interest expense, lowering immediate refinancing risk. While the provided effective tax rate metric is shown as 0.0%, disclosed income tax expense of ¥125 million on a pre-tax proxy suggests a roughly mid-30% effective tax rate, consistent with a normal tax burden. Overall, the business is growing sales but faces margin compression and cash conversion challenges, partially cushioned by non-operating income. Data limitations exist—several items such as cash balances, inventories, investing cash flows, dividend amounts, and share counts are not disclosed in this dataset and appear as zeros. Our assessment focuses on the available non-zero disclosures and derived metrics, and conclusions should be revisited as fuller disclosures become available.

Profitability Analysis

ROE_decomposition: Reported ROE is 2.63%, decomposed into Net Margin 1.80% × Asset Turnover 0.77 × Financial Leverage 1.89. The principal constraint on ROE is the thin net margin; leverage is moderate and asset turnover is adequate for a trading/distribution model. margin_quality: Gross margin at 7.9% is modest and compatible with a chemicals/pharma raw materials distributor. Operating margin compressed to 1.8% with operating income down 22.1% YoY despite 8.8% revenue growth, indicating rising SG&A intensity and/or mix shift. Ordinary income exceeded operating income by ¥119 million, implying reliance on non-operating gains to sustain bottom line. operating_leverage: EBITDA margin is 1.8% and D&A is only ¥6.3 million, evidencing a light-asset base and limited fixed-cost leverage. Positive top-line growth did not translate into operating profit growth, suggesting negative operating leverage in the period due to cost inflation, pricing pressure, or product mix.

Growth Assessment

revenue_sustainability: Revenue grew 8.8% YoY to ¥13.363 billion, a solid top-line performance for a mid-scale distributor. Sustainability will hinge on customer demand in end-markets and the company’s ability to pass through input cost changes. profit_quality: Net margin at 1.80% is thin and increasingly dependent on non-operating contributions (ordinary income > operating income by ¥119 million). Operating income fell 22.1% YoY, highlighting pressure on core profitability. Estimated tax burden appears normal (c. mid-30%), so net profit quality is mostly affected by the mix of operating vs. non-operating income and cash conversion. outlook: With gross margins under pressure and OCF negative, near-term profit growth likely requires tighter SG&A control, pricing discipline, and working capital normalization. If non-operating gains normalize lower, ordinary income could converge toward operating income unless operating margins recover.

Financial Health

liquidity: Current assets ¥10.826 billion vs current liabilities ¥6.598 billion yields a current ratio of 164% and working capital of ¥4.228 billion. Quick ratio equals current ratio in this dataset due to undisclosed inventory, so interpret as an upper bound for immediate liquidity. solvency: Total liabilities ¥8.162 billion vs total equity ¥9.165 billion implies liabilities-to-assets of ~47% and an implied equity ratio of ~53% (despite a 0.0% placeholder in the dataset). Interest expense is minimal (¥0.152 million), with interest coverage of ~1,579x, signaling low near-term financial risk. capital_structure: Debt-to-equity shown as 0.89x uses total liabilities over equity; actual interest-bearing debt is not disclosed here. Leverage appears moderate and supportive of balance sheet resilience.

Cash Flow Quality

earnings_quality: OCF was -¥207.6 million versus net income of ¥241.0 million (OCF/NI = -0.86), indicating poor cash conversion for the half-year—likely from working capital build (receivables and/or inventory), seasonality, or timing of payables. FCF_analysis: Investing cash flow is undisclosed in this dataset (shown as 0). Free cash flow therefore cannot be reliably calculated despite the displayed 0. The negative OCF suggests FCF likely negative unless investing inflows occurred. working_capital: With revenue growth and thin margins, working capital discipline is critical. Receivable days and inventory levels are not disclosed here; nonetheless, the negative OCF suggests either higher receivables, larger inventory procurement ahead of demand, or shorter payables.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are shown as 0.00 and 0.0% in the dataset, indicating non-disclosure rather than confirmed zero. EPS is ¥70.84, suggesting the capacity for dividends exists, but actual policy for the period is not provided here. FCF_coverage: With OCF negative and investing CF undisclosed, FCF coverage of dividends cannot be assessed from this dataset. Any distribution would currently be uncovered by OCF for the half-year. policy_outlook: Given modest ROE (2.63%) and thin margins, management may prioritize balance sheet stability and working capital normalization. Absent clear policy disclosure, future payouts likely hinge on sustaining positive OCF and restoring operating margin.

Risk Assessment

Business Risks:

• Margin compression in a low-margin distribution model
• Inability to pass through input cost inflation to customers
• Customer concentration and credit risk typical of B2B distribution
• Supply chain and procurement volatility affecting gross margins
• FX exposure if imports/exports are material (non-operating gains sensitivity)
• Regulatory and quality compliance risks in pharmaceutical/chemical handling
• Competition-driven pricing pressure

Financial Risks:

• Negative operating cash flow despite positive earnings
• Reliance on non-operating income to support ordinary income
• Potential working capital overhang (receivables/inventory build)
• Limited disclosure on interest-bearing debt and cash balances
• Sensitivity of ROE to small margin changes due to thin profitability

Key Concerns:

• Operating income down 22.1% YoY despite 8.8% revenue growth
• OCF/Net income at -0.86 indicating weak cash conversion
• Very thin EBITDA margin at 1.8%, limiting buffer against shocks

Investment Implications

Key Takeaways:

• Top-line growth (+8.8% YoY) but core profitability under pressure
• ROE of 2.63% constrained by thin net margin; leverage moderate
• Ordinary income supported by non-operating gains (+¥119 million vs operating income)
• Liquidity adequate (current ratio ~164%); solvency conservative (implied equity ratio ~53%)
• Negative OCF highlights working capital and cash conversion as near-term priorities

Metrics to Watch:

• Gross and operating margin trajectory
• SG&A-to-sales ratio
• OCF/Net income and working capital days (AR, AP, inventory)
• Mix of operating vs. non-operating income in ordinary income
• Asset turnover and ROE progression
• Disclosure of cash, inventory, and dividend policy

Relative Positioning: Within Japan’s chemicals/pharma distribution space, the company exhibits competitive top-line growth but operates with thinner margins and lower ROE than typical mid-teens target levels; balance sheet strength is a support, but improved cash conversion and operating discipline are needed to close the gap.

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