OHISHI SANGYO CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥11.54B
• Operating Income: ¥403M
• Net Income: ¥291M
• EPS: ¥37.36

Income Statement

Balance Sheet

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: a mixed FY2026 Q2—solid top-line resilience and stronger ordinary/operating margins, but net profit fell sharply due to non-recurring items and a high tax burden. Revenue grew 0.9% YoY to 115.38, demonstrating demand stability in core packaging lines despite a soft macro backdrop. Gross profit reached 22.36 and gross margin stood at 19.4%, indicating stable value-add after cost of sales of 93.02. SG&A was 18.32 (15.9% of sales), enabling operating income to rise 4.4% YoY to 4.03. Ordinary income rose 9.7% YoY to 5.15, supported by non-operating income of 1.51 (notably 0.27 dividends and 0.04 interest), with non-operating expenses of 0.39 and minimal interest burden (0.10). However, profit before tax of 4.47 was below ordinary income by 0.68, suggesting special losses that pressured the bottom line. Net income declined 34.2% YoY to 2.92, with net margin at 2.5% and an elevated effective tax rate of 34.9%. Margins: operating margin expanded by about 11 bps YoY (3.49% vs. ~3.38% prior), ordinary margin expanded about 35 bps (4.46% vs. ~4.11% prior), but net margin compressed roughly 135 bps (2.53% vs. ~3.88% prior) due to special losses and tax. Earnings quality is unclear as cash flow data were not disclosed; OCF/NI cannot be assessed. Balance sheet strength is a clear positive: current ratio 242.6%, quick ratio 222.4%, D/E 0.41x, cash and deposits of 72.28 comfortably exceed short-term loans (4.78). ROE calculates to 1.6% on DuPont (NPM 2.5%, AT 0.433, leverage 1.41x), constrained by low net margin; ROIC at 2.2% is below the 5% warning threshold. The non-operating result cushioned operating performance, but reliance on such items is not a durable earnings driver. Dividend sustainability appears stretched for the half: a calculated payout ratio of 214% signals reliance on balance sheet strength and the need for H2 recovery to normalize. Forward-looking, focus should be on normalization of special losses, maintaining SG&A discipline, stabilizing gross margins via procurement and price pass-through, and lifting ROIC through disciplined capex and mix improvement.

Profitability Analysis

ROE decomposition (DuPont): ROE 1.6% = Net Profit Margin (2.5%) × Asset Turnover (0.433) × Financial Leverage (1.41x). The biggest swing factor versus prior year is the net profit margin, which fell despite operating and ordinary margin expansion. Business driver: the gap between ordinary income (5.15) and profit before tax (4.47) indicates special losses (~0.68), and the effective tax rate was high at 34.9%, both depressing net margin. Operating dynamics were otherwise constructive: revenue +0.9% with operating income +4.4% implies slight operating leverage and better cost control (operating margin +~11 bps YoY to 3.49%). Ordinary margin improved more (+~35 bps to 4.46%) on higher non-operating income (1.51) and low financing costs (interest expense 0.10; interest coverage 40.3x). Sustainability: operating margin gains from SG&A discipline are more repeatable; non-operating contributions (dividends, other) are less controllable; special losses likely one-time but timing uncertain. Watch for any trend where SG&A growth outpaces revenue—this quarter, SG&A ratio was 15.9% and operating leverage was positive, not a concern yet.

Growth Assessment

Top-line growth of 0.9% YoY to 115.38 indicates stable demand; no segment breakdown was disclosed to attribute growth drivers. Operating income growth of 4.4% outpaced sales, reflecting modest mix/pricing and SG&A containment. Ordinary income growth of 9.7% benefited from non-operating income (+1.51), which is unlikely to be a structural growth driver. Net income fell 34.2% YoY due to special losses (ordinary-to-PBT delta of 0.68) and a high tax rate (34.9%), masking otherwise steady core performance. With gross margin at 19.4% and an improved operating margin (3.49%), near-term profit growth depends on maintaining procurement/price pass-through and avoiding further special losses. Outlook hinges on H2 seasonality and cost trends in raw materials and energy; absent special losses, net margin should revert closer to ordinary margin less normalized tax. No guidance or order backlog data were provided; therefore, sustainability beyond H2 cannot be precisely gauged.

Financial Health

Liquidity is strong: current ratio 242.6% and quick ratio 222.4%, with cash and deposits (72.28) far exceeding short-term loans (4.78) and covering a substantial portion of current liabilities (61.36). Solvency profile is conservative with D/E 0.41x and ample retained earnings of 179.89. Working capital is 87.51, and receivables plus cash (108.24) comfortably exceed current liabilities, minimizing maturity mismatch risk. No off-balance sheet commitments were disclosed in the provided data. There are no threshold warnings (Current Ratio well >1.0; D/E well <2.0). Interest coverage is robust at 40.3x, limiting refinancing risk in the current rate environment.

Cash Flow Quality

OCF, capex, and FCF were not reported, so OCF/Net Income and FCF coverage cannot be assessed. Earnings quality flags: the gap between ordinary income (5.15) and PBT (4.47) indicates special losses that reduced the conversion from operating/ordinary profits to net income. Working capital behavior cannot be evaluated without cash flow detail; no signs of manipulation can be inferred. Given the strong cash position (72.28) and low debt, near-term cash coverage for operations and dividends appears ample, but sustainability requires visibility on OCF and capex in H2.

Dividend Sustainability

Reported DPS was not disclosed, but the calculated payout ratio is 214%, implying dividends exceeded H1 net income. Without OCF/FCF data, true coverage cannot be computed; however, current cash reserves (72.28) and a strong balance sheet could temporarily support distributions. Sustainable policy would require either H2 earnings recovery (to normalize full-year payout) or recalibration of dividends to align with underlying FCF. Retained earnings (179.89) provide buffer, but ROIC at 2.2% argues for disciplined capital allocation to lift returns over distribution growth.

Risk Assessment

Business Risks:

• Raw material and energy price volatility impacting gross margin (paper/resin/chemicals exposure typical for packaging).
• Pricing power and pass-through risk with key customers in consumer and industrial packaging.
• Demand cyclicality in end-markets (food, beverages, daily goods, e-commerce corrugated), which can cap volume growth.
• Operational execution risk in cost control given slim operating margin (3.49%).

Financial Risks:

• Earnings volatility from special losses (ordinary-to-PBT delta of 0.68 this quarter).
• High effective tax rate (34.9%) depressing net margin and ROE.
• Low ROIC (2.2%) versus cost of capital, risking value dilution if capex is not tightly disciplined.
• Dependence on non-operating income to bolster ordinary profit (1.51 this period).

Key Concerns:

• Net margin compression (~135 bps YoY) despite better operating/ordinary margins, driven by non-recurring losses and tax.
• ROE at 1.6% constrained by low net margin; improving only if special losses subside and tax normalizes.
• Data gaps (no cash flow statement; no segment or SG&A breakdown), limiting visibility on earnings quality and investment needs.

Investment Implications

Key Takeaways:

• Core operations improved modestly (operating margin +~11 bps; ordinary margin +~35 bps).
• Net income fell 34.2% on special losses and a high tax rate; underlying ordinary earnings are firmer than the bottom line suggests.
• Balance sheet strength (current ratio 242.6%, net cash position) provides resilience.
• ROIC at 2.2% signals capital efficiency remains a structural issue to address.
• Dividend payout looks elevated for H1 (214% payout) and depends on H2 recovery or balance sheet support.

Metrics to Watch:

• Gross margin trajectory and raw material cost pass-through.
• SG&A ratio and operating leverage.
• Special losses vs. gains (ordinary to PBT bridge) and tax rate normalization.
• OCF and FCF once disclosed; capex intensity and returns (ROIC).
• Working capital turns (inventory and receivables) and asset turnover improvement.

Relative Positioning: Within Japanese mid-cap packaging peers, the company exhibits strong liquidity and low leverage but weaker capital efficiency (ROIC 2.2%) and thinner net margins; near-term earnings optics are pressured by one-off losses and tax rather than core deterioration.

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