MATSUOKA CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥34.83B
• Operating Income: ¥973M
• Net Income: ¥1.05B
• EPS: ¥116.95

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

Matsuoka Corporation (36110) reported FY2026 Q2 consolidated results under JGAAP showing resilient bottom-line performance despite a sharp contraction in core operating profit. Revenue declined modestly by 1.2% YoY to ¥34.83bn, while operating income fell 94.4% YoY to ¥0.97bn, indicating significant pressure at the operating level. In contrast, ordinary income rose to ¥2.54bn and net income increased 16.4% YoY to ¥1.22bn, highlighting substantial non-operating support during the period. Gross margin came in at 8.8% and operating margin at 2.8–2.9%, both consistent with a tight cost environment in contract apparel manufacturing. EBITDA was ¥2.07bn (5.9% margin), suggesting that cash earnings power exists but was not effectively converted into operating cash flow this half. Indeed, operating cash flow was only ¥0.13bn, yielding an OCF/Net Income ratio of 0.11, which points to working capital drag or timing effects. The DuPont decomposition shows ROE of 3.2% driven by a 3.5% net margin, 0.49x asset turnover, and 1.86x financial leverage—an overall subdued return profile. Liquidity remains solid with a current ratio of 210% and quick ratio of 191%, supported by sizeable working capital of ¥25.05bn. The balance sheet appears conservatively capitalized with total liabilities at ¥31.92bn and equity at ¥38.17bn (D/E 0.84x). Ordinary income materially exceeded operating income, implying roughly ¥1.57bn net non-operating gains; this non-recurring profile elevates earnings risk if such gains normalize. Interest coverage is adequate at 9.1x, reflecting manageable financial burden. The implied effective tax burden (based on reported income tax and net income) is c. 43%, though the provided effective tax rate metric was unreported. Dividend data (DPS, payout, FCF coverage) are unreported for this period, limiting visibility into shareholder returns policy. Cash and equivalents, investing cash flows, equity ratio, and share count were also unreported, constraining certain ratio analyses and per-share diagnostics beyond EPS. Overall, the quarter reflects weak operating profitability masked by strong non-operating items and soft cash conversion, with liquidity and solvency remaining supportive.

Profitability Analysis

ROE_decomposition: ROE 3.20% = Net Margin 3.50% × Asset Turnover 0.490 × Leverage 1.86. The low ROE primarily reflects thin margins and moderate asset turns; leverage is not the main driver. margin_quality: Gross margin 8.8% and operating margin ~2.8–2.9% indicate limited pricing power and cost pass-through pressure. Ordinary income margin ~7.3% far exceeds operating margin due to ~¥1.57bn net non-operating gains, reducing the quality/sustainability of headline profitability. operating_leverage: Operating income fell 94.4% YoY on a 1.2% revenue decline, implying significant negative operating leverage and/or one-off cost items. EBITDA margin at 5.9% versus operating margin ~2.9% suggests notable D&A load (¥1.09bn) and cost absorption issues.

Growth Assessment

revenue_sustainability: Revenue declined 1.2% YoY to ¥34.83bn, reflecting a soft demand backdrop or customer/order timing in apparel OEM/ODM. Absent new capacity or product mix upgrades, near-term top-line growth appears subdued. profit_quality: Net income grew 16.4% YoY to ¥1.22bn despite operating income collapsing to ¥0.97bn, indicating profit quality reliance on non-operating gains. Interest expense was ¥0.11bn and interest coverage remains 9.1x, but the scale of non-operating support is the key profit driver. outlook: If non-operating gains normalize, profitability may revert closer to operating trends. Margin recovery will hinge on cost normalization, utilization, and mix improvements. Revenue normalization with improved order intake could restore operating leverage, but visibility is limited.

Financial Health

liquidity: Current assets ¥47.72bn vs current liabilities ¥22.66bn yield a current ratio of 210.5% and quick ratio of 190.9%, indicating ample short-term liquidity. Working capital stands at ¥25.05bn. solvency: Total liabilities ¥31.92bn vs equity ¥38.17bn implies D/E of 0.84x, a moderate leverage position. Interest coverage at 9.1x suggests manageable debt service capacity. capital_structure: Assets ¥71.11bn funded 45% by liabilities and 55% by equity (based on totals). The reported equity ratio field is unreported; however, totals indicate a conservative capital base supporting operations.

Cash Flow Quality

earnings_quality: OCF/Net Income is 0.11 (¥0.13bn/¥1.22bn), signaling weak cash conversion and potential working capital investment or timing effects. EBITDA of ¥2.07bn vs OCF of ¥0.13bn underscores this gap. FCF_analysis: Investing cash flow and free cash flow are unreported, preventing a precise FCF assessment. Given low OCF, underlying FCF likely constrained absent asset sales or reduced capex. working_capital: Inventories are ¥4.46bn; with a high quick ratio, receivables or other current assets likely dominate. The weak OCF suggests receivable buildup or payment timing. Monitoring DSO/DPO and order seasonality is key.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio are unreported; the displayed 0% should not be interpreted as an actual payout. EPS is ¥116.95, but without declared DPS we cannot compute a payout rate. FCF_coverage: FCF coverage is unreported. With OCF at ¥0.13bn and unknown capex, visibility into dividend coverage is limited. policy_outlook: No data provided on dividend policy for the period. Sustainability would depend on normalization of operating profit and improved cash conversion rather than reliance on non-operating gains.

Risk Assessment

Business Risks:

• Apparel OEM/ODM demand volatility and order timing variability
• Cost inflation in labor/raw materials and pressure on pass-through to clients
• Client concentration risk typical for contract manufacturing
• FX fluctuations affecting input costs and non-operating items
• Geopolitical and supply chain disruptions impacting factories and logistics

Financial Risks:

• Weak cash conversion (OCF/NI 0.11) indicating working capital strain
• Earnings dependence on non-operating gains this quarter
• Potential interest rate risk despite current coverage (9.1x)
• Capex/refurbishment needs not visible due to unreported investing CF

Key Concerns:

• Sustainability of ordinary income uplift versus low operating profit base
• Negative operating leverage evidenced by 94.4% YoY decline in operating income
• Limited visibility on cash and FCF due to unreported items

Investment Implications

Key Takeaways:

• Core operating profitability is weak despite stable revenue
• Headline earnings are supported by sizable non-operating gains (~¥1.57bn)
• Cash conversion is soft; OCF significantly trails EBITDA and net income
• Balance sheet liquidity and leverage are comfortable, providing cushion
• ROE of 3.2% is below typical cost of equity, reflecting margin and turnover constraints

Metrics to Watch:

• Operating margin recovery and SG&A/COGS control
• Non-operating income components and sustainability
• OCF/NI and working capital metrics (DSO/DPO/inventory turns)
• Capex levels and investing cash flows when disclosed
• Order backlog, utilization rates, and revenue trajectory

Relative Positioning: Within Japan-listed apparel OEM/ODM peers, Matsuoka shows solid liquidity and moderate leverage but weaker operating profitability and cash conversion in this period; earnings defensiveness relies more on non-operating items than on core margin strength.

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
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