SEIREN CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥80.98B
• Operating Income: ¥10.26B
• Net Income: ¥6.75B
• EPS: ¥135.78

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

Seiren Co., Ltd. (TSE:3569) delivered solid profitability in FY2026 Q2 (cumulative), with revenue of ¥80.98bn (+3.8% YoY) and operating income of ¥10.26bn (+24.8% YoY), indicating healthy margin expansion and operating leverage. Gross profit reached ¥21.12bn, translating to a gross margin of 26.1%, while operating margin improved to 12.7%, reflecting effective cost control and product mix/pricing discipline. Ordinary income of ¥10.92bn suggests a limited non-operating drag, and net income rose 18.8% YoY to ¥7.97bn, a net margin of 9.84%. Cash conversion appears robust: operating cash flow (OCF) was ¥8.86bn, yielding an OCF/net income ratio of 1.11, which supports earnings quality. The balance sheet is conservative with total assets of ¥198.73bn, liabilities of ¥55.34bn, and equity of ¥146.90bn, implying a debt-to-equity ratio of 0.38x and strong solvency. Liquidity is strong, with a current ratio of 3.14x and quick ratio of 2.74x, backed by sizeable working capital of ¥86.55bn. DuPont analysis shows ROE of 5.43%, driven by a 9.84% net margin, asset turnover of 0.408x, and modest financial leverage of 1.35x; the modest ROE reflects conservative leverage and moderate asset intensity. EBITDA was ¥13.19bn (16.3% margin), and interest coverage is ample at 77.7x, underscoring low financial risk. The reported effective tax rate shows as 0.0% due to data limitations, but based on disclosed income tax expense of ¥2.32bn and net income, the implied effective tax rate is approximately 22.6%. Inventory stands at ¥16.09bn; the quick ratio remains strong even after excluding inventories, implying healthy receivables and liquid assets despite cash not being disclosed. Dividend-related fields (DPS, payout ratio, FCF coverage) are shown as zero due to non-disclosure and should not be interpreted as no dividend. Investing cash flow and cash/equivalents were not reported, limiting free cash flow analysis and cash balance assessment. Overall, the company demonstrates improved operating profitability, sound cash generation from operations, and a solid financial position, albeit with incomplete disclosure in certain cash flow and equity ratio line items. Outlook hinges on sustainability of demand and cost normalization; margin resilience and cash conversion will be key to watch. Data limitations prevent a full view of capex intensity and dividend policy for the period.

Profitability Analysis

ROE of 5.43% decomposes into net profit margin 9.84% × asset turnover 0.408× × financial leverage 1.35×, indicating ROE is primarily margin-driven with moderate asset efficiency and conservative leverage. Gross margin is 26.1% and EBITDA margin 16.3%, with operating margin at 12.7% (¥10.26bn / ¥80.98bn). The significant outperformance of operating income growth (+24.8% YoY) versus revenue growth (+3.8% YoY) points to meaningful operating leverage and cost discipline (fixed-cost absorption and/or product mix improvements). Ordinary income exceeds operating income modestly, and interest expense is low (¥132m), creating a minimal financing drag. The spread between gross and operating margins (~13.4 pp) suggests well-controlled SG&A relative to sales. Net margin of 9.84% remains healthy after taxes and non-operating items, supporting cash-backed earnings. With asset turnover at 0.408x (using period-end assets), capital intensity still caps ROE despite margin gains; any further working capital efficiency or asset utilization improvements could lift returns.

Growth Assessment

Top-line grew 3.8% YoY to ¥80.98bn, a moderate pace consistent with steady demand conditions. Profit growth outpaced sales: operating income +24.8% YoY and net income +18.8% YoY, evidencing margin expansion and operating leverage. The quality of profits appears solid given OCF/net income of 1.11, indicating accruals are contained and earnings are translating into cash. EBITDA growth (implied by higher operating income and stable D&A at ¥2.94bn) supports improving underlying operations. Sustainability will depend on maintaining pricing/mix and cost normalization (materials, logistics, energy), as well as demand in core end-markets; given lack of segment disclosure here, we assume broad-based performance. The implied effective tax rate around 22.6% looks normalized in a Japanese context, supporting predictability of net income, though reported tax rate is not disclosed in the template. Near-term outlook is cautiously positive on margins and cash conversion, while top-line trajectory remains mid-single-digit absent evidence of accelerated demand or capacity expansion. Key watchpoints include inventory turns, order momentum, and cost pass-through.

Financial Health

Liquidity is strong: current assets ¥127.06bn vs current liabilities ¥40.51bn yields a current ratio of 3.14x; quick ratio is 2.74x after excluding inventories of ¥16.09bn, indicating ample near-term coverage. Working capital totals ¥86.55bn, providing operational flexibility. Solvency metrics are conservative: total liabilities ¥55.34bn vs equity ¥146.90bn gives a debt-to-equity ratio of 0.38x; financial leverage at 1.35× is modest. Interest coverage is very strong at 77.7x (EBITDA/interest), reflecting low financing burden. Equity ratio is shown as 0.0% due to non-disclosure; however, assets-to-equity (198.73/146.90) implies an equity ratio around 73.9%, reaffirming a solid capitalization. Overall balance sheet strength reduces refinancing and covenant risks and supports investment capacity, subject to undisclosed cash balance.

Cash Flow Quality

Operating cash flow of ¥8.86bn exceeds net income of ¥7.97bn (OCF/NI = 1.11), indicating good earnings quality and working capital discipline in the period. Depreciation & amortization is ¥2.94bn, consistent with tangible asset intensity and providing a non-cash buffer to earnings. Investing cash flow is not disclosed (shown as 0), preventing determination of capex and thus free cash flow; the reported FCF of 0 should be treated as not available. Financing cash flow was an outflow of ¥1.73bn, likely reflecting dividends, debt repayments, or share repurchases; details are not provided. Cash & equivalents are not disclosed (shown as 0), limiting assessment of immediate liquidity buffer. Working capital appears well managed given strong quick ratio and positive OCF; inventory of ¥16.09bn suggests manageable stock levels, but inventory turnover and receivables quality cannot be assessed without additional disclosures. Overall, cash conversion from earnings is solid, with incomplete data on investment outflows.

Dividend Sustainability

Dividend per share, payout ratio, and FCF coverage are shown as zero due to non-disclosure in this dataset and should not be interpreted as an absence of dividends. With net income of ¥7.97bn and strong OCF of ¥8.86bn, internal capacity to fund dividends appears supported in principle, but without capex data and actual dividend declarations we cannot assess coverage precisely. The balance sheet’s low leverage (D/E 0.38x) and strong liquidity are supportive of potential distributions, subject to capital allocation priorities (capex, R&D, M&A). Policy outlook cannot be inferred from the provided data; confirmation requires management guidance or historical policy disclosure.

Risk Assessment

Business Risks:

• Demand volatility in key end-markets impacting revenue growth and capacity utilization
• Input cost inflation (raw materials, energy, logistics) pressuring gross margins
• Foreign exchange fluctuations affecting export competitiveness and translation effects
• Product mix shifts and pricing pressure in competitive segments
• Supply chain disruptions that could elevate inventories or delay deliveries

Financial Risks:

• Incomplete disclosure on cash and investing cash flows obscures capex intensity and free cash flow
• Potential working capital swings that could weaken cash conversion despite reported OCF strength
• Interest rate normalization risks are low but could raise financing costs from current minimal levels
• Currency-related balance sheet exposures (if any) not visible from provided data

Key Concerns:

• ROE at 5.43% remains modest due to asset intensity and conservative leverage
• Lack of disclosed capex and cash balance limits visibility on free cash flow and liquidity buffer
• Dividend policy and payout sustainability cannot be verified from current data

Investment Implications

Key Takeaways:

• Margin-driven profit growth with operating income up 24.8% YoY on 3.8% revenue growth
• Healthy cash conversion with OCF/net income at 1.11
• Strong liquidity (current ratio 3.14x; quick ratio 2.74x) and conservative leverage (D/E 0.38x)
• ROE of 5.43% constrained by asset turnover (0.408x) and modest leverage (1.35x)
• Data gaps on investing cash flows, cash balance, and dividends limit full capital allocation analysis

Metrics to Watch:

• Operating margin and gross margin trajectory
• OCF to net income ratio and working capital turns (inventory and receivables days)
• Capex level and investing cash outflows to assess true free cash flow
• Revenue growth momentum and order backlog (if disclosed)
• Dividend declarations/payout guidance and net cash/debt position
• FX sensitivity and input cost trends

Relative Positioning: Within TSE-listed textile/advanced materials peers, Seiren appears conservatively capitalized with strong liquidity and improving operating margins, though capital efficiency (ROE) remains moderate due to asset intensity and modest leverage.

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