AuBEX CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥3.06B
• Operating Income: ¥351M
• Net Income: ¥302M
• EPS: ¥129.18

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

Ovex Co., Ltd. (TSE: 3583) delivered FY2026 Q2 consolidated results showing modest topline growth with clear margin compression and mixed earnings quality. Revenue rose 2.2% year over year to ¥3,056 million, while operating income declined 28.0% YoY to ¥351 million, indicating adverse operating leverage as costs outpaced sales. Despite the weaker operating result, net income increased 17.3% YoY to ¥354 million, lifting net profit margin to 11.58%, implying the period benefited from non-operating and/or below-the-line factors under JGAAP. Gross profit of ¥1,187.6 million implies a solid gross margin of 38.9%, but the operating margin contracted to 11.5%, highlighting SG&A inflation or higher energy/logistics costs that were not fully offset by pricing. Ordinary income was ¥350 million, close to operating income, suggesting limited net financial/other operating items in aggregate; however, the disconnect between tax expense (¥149.7 million) and the reported “effective tax rate” metric (0.0%) signals calculation anomalies or classification effects in the data feed. Cash generation was reasonably aligned with earnings: operating cash flow (OCF) of ¥312.6 million equates to an OCF/net income ratio of 0.88, slightly below 1.0, pointing to a modest working capital drag in the half. Free cash flow cannot be assessed because investing cash flows were not disclosed (items shown as zero are unreported, not actual zero). The balance sheet is conservatively positioned with total assets of ¥9,961 million and total equity of ¥6,952 million, yielding low leverage (liabilities/equity of 0.45x) and ample liquidity (current ratio 401.7%, quick ratio 387.1%). Working capital of ¥4,946 million provides a sizable buffer to navigate short-term volatility. DuPont analysis indicates ROE of 5.09% driven by a 3.55% ROA (11.58% net margin × 0.307 asset turnover) and modest financial leverage of 1.43x, suggesting returns are predominantly operational rather than leverage-driven. EBITDA was ¥486.3 million with an EBITDA margin of 15.9%, and interest coverage is very strong at 53.7x given minimal interest expense of ¥6.5 million. The company reported no dividends (DPS ¥0, payout 0%), consistent with a cautious stance amid margin pressure and uncertain capex needs not captured in the data. While inventories remain low (¥239.4 million) relative to current assets, the OCF underperformance vs. net income implies receivables timing or other working capital movements in 1H. Cash and cash equivalents were not reported, but the high quick ratio implies a healthy liquid asset base within current assets. Overall, Ovex maintains strong financial health and satisfactory cash conversion, but the deterioration in operating income despite revenue growth suggests cost pass-through and utilization remain key focus areas for 2H. Data limitations (notably investing cash flows, cash balance, equity ratio, and share count) temper precision, but the core picture is of a conservatively financed manufacturer facing near-term margin headwinds and relying on OCF discipline.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 11.58% (Net income ¥354m on revenue ¥3,056m)
• asset_turnover: 0.307x (per provided metric; implies annualized turnover pressure)
• financial_leverage: 1.43x (Assets ¥9,961m / Equity ¥6,952m)
• calculated_ROE: 5.09% (matches reported)
• ROA_implied: 3.55% (net margin × asset turnover) margin_quality: - Gross margin: 38.9% (¥1,187.6m/¥3,056m) indicates decent value-add in processing.
• Operating margin: 11.5% (¥351m/¥3,056m), down YoY given operating income -28% vs revenue +2.2%.
• Ordinary margin: 11.5% (¥350m/¥3,056m), close to operating margin, limited net non-operating drag.
• Net margin: 11.58% benefited from below-the-line items or tax effects; the rise in net income despite lower operating income suggests non-recurring or non-operating positives. operating_leverage: Negative in the period: small sales growth (+2.2% YoY) contrasted with a sizable operating income decline (-28.0% YoY), indicating fixed cost absorption issues, cost inflation (energy/chemicals), and/or higher SG&A not offset by pricing or mix.

Growth Assessment

revenue_sustainability: Revenue growth of +2.2% YoY to ¥3,056m appears modest; sustainability hinges on end-market demand (apparel/interior textiles) and ability to maintain order flow. Low inventory levels (¥239m) suggest lean operations, but order visibility is not disclosed. profit_quality: Profit growth at the net level (+17.3% YoY) contrasts with operating profit decline, implying reliance on non-operating/one-off factors. EBITDA margin at 15.9% is stable vs operating margin, but operating deleveraging indicates underlying margin pressure. outlook: Key swing factors for 2H include energy cost trends, pricing pass-through to customers, utilization rates, and potential normalization of working capital. If cost pressures ease and pricing sticks, operating margin could recover; otherwise, ROE may remain in the mid-single digits.

Financial Health

liquidity: Current ratio 401.7% and quick ratio 387.1% indicate very strong short-term liquidity. Working capital stands at ¥4,946m. Cash and cash equivalents were not disclosed, but the quick ratio implies a substantial liquid asset position. solvency: Debt-to-equity 0.45x (Total liabilities ¥3,135m / Equity ¥6,952m) denotes conservative leverage. Interest expense is low at ¥6.5m with interest coverage of 53.7x, suggesting minimal refinancing risk. capital_structure: Assets ¥9,961m funded 30-35% by liabilities and ~65-70% by equity (equity ratio not disclosed despite a reported 0.0%). Leverage of 1.43x is modest, leaving balance sheet flexibility for investment or temporary downturns.

Cash Flow Quality

earnings_quality: OCF/net income at 0.88 indicates mostly cash-backed earnings with a modest shortfall, likely due to working capital timing. D&A of ¥135.3m supports EBITDA-to-OCF conversion, but we cannot assess capex without investing cash flows. FCF_analysis: Free cash flow cannot be calculated because investing cash flow is unreported (shown as 0). Given D&A of ¥135m, maintenance capex is likely non-trivial in a machinery-intensive process industry; true FCF could be meaningfully below OCF. working_capital: Inventories are low (¥239m), implying potential receivables-driven OCF drag. The strong quick ratio suggests liquid current assets (cash/receivables) dominate, but specific movements among AR/AP/inventory were not disclosed.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0 and payout ratio 0.0%, indicating no dividend in the period. With net income of ¥354m and OCF of ¥313m, capacity exists, but the company appears to prioritize balance sheet strength and/or reinvestment. FCF_coverage: Not assessable due to unreported investing cash flows; OCF alone covered financing cash outflows of ¥391m only partially. policy_outlook: Absent explicit policy disclosure, continued prudence is likely amid margin pressure and capex needs typical for textile processing. A resumption or initiation of dividends would depend on sustained operating margin recovery and demonstrable positive FCF.

Risk Assessment

Business Risks:

• End-market cyclicality in apparel/interior demand affecting volumes and utilization.
• Energy and utility cost volatility impacting dyeing/finishing margins and steam/electricity expenses.
• Raw material and chemical price fluctuations with imperfect pass-through.
• Customer concentration risk typical in OEM/textile value chains.
• FX exposure on imported materials and equipment.
• Environmental and regulatory compliance costs related to wastewater treatment and emissions.
• Capacity utilization risk given high fixed-cost base and specialized equipment.
• Labor availability and wage inflation in regional manufacturing.

Financial Risks:

• Potential capex requirements not visible in the period due to unreported investing CF, which could pressure FCF.
• Working capital swings affecting OCF, particularly receivables collection timing.
• Limited disclosure on cash balances despite strong quick ratio.
• Potential reliance on non-operating items for net income resilience in the half.

Key Concerns:

• Operating income decline (-28% YoY) despite revenue growth suggests cost pass-through challenges.
• Inability to verify FCF and capex intensity due to missing investing CF data.
• Apparent inconsistency in the calculated effective tax rate versus reported tax expense, complicating normalized profitability analysis.

Investment Implications

Key Takeaways:

• Topline grew modestly (+2.2% YoY), but operating deleveraging compressed margins.
• Net income strength (+17.3% YoY) likely aided by non-operating/below-the-line factors under JGAAP.
• Balance sheet is strong: current ratio 402%, D/E 0.45x, interest coverage 53.7x.
• Cash conversion is decent (OCF/net income 0.88) but impacted by working capital.
• ROE of 5.09% is modest and primarily operational; leverage contribution is low.
• Dividend paused (DPS ¥0); capital allocation appears conservative pending clearer FCF.

Metrics to Watch:

• Operating margin trajectory and SG&A/energy cost trends.
• OCF vs. net income and working capital days (AR/AP/inventory turnover).
• Capex and investing cash flows to gauge true FCF and maintenance needs.
• Revenue momentum and order intake/utilization rates.
• Pricing power and pass-through lag to mitigate input volatility.
• ROE/ROA progression and asset turnover improvements.

Relative Positioning: Within Japanese textile processing peers, Ovex exhibits stronger-than-average balance sheet conservatism and liquidity, but current profitability momentum is under pressure; near-term performance hinges on cost normalization and utilization recovery.

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