Rasa Industries,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥22.70B
• Operating Income: ¥2.86B
• Net Income: ¥2.05B
• EPS: ¥262.06

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

Verdict: A solid FY2026 Q2 with strong profit recovery, driven by margin expansion and disciplined costs, supported by high-quality cash generation. Revenue grew 3.9% YoY to 226.98, while operating income surged 68.5% YoY to 28.60 and ordinary income rose 82.9% to 29.50. Net income more than doubled (+110.3% YoY) to 20.46, as operating leverage and modest non-operating gains (net +0.89) amplified bottom-line growth. Operating margin improved materially to 12.6% from an estimated 7.8% a year ago, implying roughly 483 bps expansion. Gross profit reached 53.46, translating to a gross margin of 23.6%, and EBITDA was 37.35 with a 16.5% margin, underscoring broader margin gains beyond one-time effects. Earnings quality is strong: OCF of 30.19 exceeded net income (OCF/NI 1.48x), indicating cash-backed earnings. Liquidity remains robust with a current ratio of 209% and quick ratio of 179%, and solvency is conservative with D/E at 0.58x and interest coverage at 46.1x. Working capital is ample (123.40) and accounts receivable of 114.40 are well supported by current liabilities of 112.99, reducing near-term refinancing risks. Despite the strong rebound, ROE is 6.9% and ROIC is 6.1%, signaling room to improve capital efficiency toward the 7–8% benchmark. Non-operating income is modest (2.57) and non-operating expenses (1.68) stayed contained, so the profit beat is predominantly operational. Tax burden was normalizing (effective tax rate 30.6%), suggesting limited tax-driven distortion. Capex was elevated at 20.00, but OCF coverage was adequate, implying positive implied FCF of about 10.19. The calculated payout ratio is 46.6%, which appears broadly compatible with cash generation in this half. Forward-looking, sustained cost discipline and pricing/mix should continue to support margins, but sensitivity to raw material and energy prices, FX, and downstream demand will shape the trajectory. Overall, the quarter signals healthier core profitability with solid cash backing and a balance sheet able to fund capex and dividends, though achieving higher ROIC remains a key medium-term objective.

Profitability Analysis

ROE decomposes as: Net Profit Margin (NPM) 9.0% × Asset Turnover (AT) 0.482 × Financial Leverage (FL) 1.58x = 6.9% ROE. The biggest change driver vs last year is the margin component: operating income grew 68.5% on just 3.9% revenue growth, implying sizable margin expansion and operating leverage. Estimated operating margin rose from ~7.8% (16.97/218.39) to 12.6%, a roughly 483 bps increase, indicating improved gross spread and/or lower overhead intensity. Business reasons likely include favorable pricing/mix in key product lines, easing input costs versus selling prices, and tight SG&A control. Given the magnitude of operating leverage on mild top-line growth, the improvement is partly cyclical and could normalize if raw material/energy costs or FX move adversely; however, the breadth of margin improvement (EBITDA and operating levels) suggests some structural efficiency gains. Watch for any reversal if SG&A or COGS re-inflate; with revenue up 3.9% and operating profit up 68.5%, cost growth ran well below revenue, a positive but potentially non-repeatable trend if investments in growth resume.

Growth Assessment

Top-line growth of 3.9% YoY is modest, but profit growth was outsized due to operating leverage and cost discipline. Ordinary income (+82.9%) and net income (+110.3%) outpaced operating income, aided by a small net non-operating gain (+0.89) and normalized taxes. EBITDA margin at 16.5% and operating margin at 12.6% show improved efficiency and pricing/mix. Sustainability hinges on maintaining price-cost spread; if raw materials or energy costs rise, margins could compress. With ROIC at 6.1%, incremental growth investments should focus on higher-return niches to move toward the 7–8% benchmark. Near term, the balance sheet can support growth capex without stressing leverage, while demand conditions in end markets will dictate revenue momentum.

Financial Health

Liquidity is strong: current ratio 209.2% and quick ratio 178.6% (both comfortably above benchmarks). No warning triggers (Current Ratio well >1.0; D/E 0.58x <2.0). Working capital of 123.40 and sizeable receivables (114.40) plus cash (45.91) provide coverage over short-term loans (43.82) and accounts payable (35.81), mitigating maturity mismatch risk. Total liabilities are 173.53 against total equity of 297.30, reflecting a conservative capital structure. Interest coverage is very strong at 46.13x, indicating ample buffer against rate or earnings volatility. No off-balance sheet obligations were disclosed in the provided data.

Cash Flow Quality

OCF/Net Income = 1.48x (>1.0), indicating high-quality earnings with solid cash conversion. With capex at 20.00 and OCF at 30.19, implied FCF approximates 10.19, suggesting the company can self-fund investments while maintaining dividends. Working capital appears manageable; receivables are high relative to payables, typical for process industries, but no signs of aggressive working capital release were indicated this quarter. Investing cash flow details are unreported, so other investment outflows/inflows (e.g., financial investments) could alter FCF; monitor when disclosed. Financing CF of -15.18 likely reflects dividend payments and net debt changes, consistent with a disciplined capital allocation stance.

Dividend Sustainability

The calculated payout ratio is 46.6%, within a generally sustainable range (<60%). Using net income of 20.46, implied dividends would be approximately 9.5 if the payout ratio is applied, which appears covered by implied FCF of ~10.19 (coverage ~1.1x). Liquidity and low leverage further support dividend stability through cycles. However, precise dividend amounts, timing, and policy details are unreported; confirm with company guidance. Sustainability depends on maintaining positive OCF after funding capex, and on margin resilience given input cost and FX volatility.

Risk Assessment

Business Risks:

• Raw material and energy price volatility potentially compressing margins
• Demand cyclicality in downstream customers (electronics/industrial materials exposure)
• Pricing power normalization after a strong margin quarter
• Execution risk on capex projects to lift ROIC above 7–8% target range

Financial Risks:

• Receivables concentration and collection timing affecting OCF
• FX fluctuation risk impacting import costs and export pricing
• Interest rate normalization modestly increasing financing costs (though coverage is strong)

Key Concerns:

• ROIC at 6.1% below 7–8% benchmark, suggesting capital efficiency improvement needed
• High sensitivity of operating profit to small revenue changes implies elevated operating leverage
• Limited disclosure on investing cash flows and SG&A breakdown restricts transparency on drivers

Investment Implications

Key Takeaways:

• Significant operating margin expansion to 12.6% drove profit outperformance
• OCF exceeded net income (1.48x), validating earnings quality
• Balance sheet remains conservative (D/E 0.58x; current ratio 209%)
• ROE at 6.9% and ROIC at 6.1% indicate room for capital efficiency improvements
• Implied FCF (~10.2) appears to cover implied dividends (~9.5) if payout ratio holds

Metrics to Watch:

• Operating margin trend and price-cost spread
• OCF versus net income and working capital movements (AR and inventory days)
• Capex execution and ROI to lift ROIC above 7–8%
• FX and energy/raw material cost indices
• Order visibility/end-market demand indicators

Relative Positioning: Within Japanese mid-cap materials/chemicals peers, the company now shows above-peer margin momentum with below-average leverage and solid cash conversion, but sits mid-pack on capital efficiency (ROIC/ROE) with clear upside if recent margin gains prove durable.

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