Rasa Industries,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥22.70B
• Operating Income: ¥2.86B
• Net Income: ¥973M
• 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

Rasa Kogyo (TSE:40220) delivered solid FY2026 Q2 results marked by modest top-line growth and sharp profit expansion. Revenue rose 3.9% YoY to ¥22.70bn, while operating income jumped 68.5% YoY to ¥2.86bn, indicating strong operating leverage and/or an improved price–mix. Gross profit reached ¥4.21bn with an 18.6% gross margin, and operating margin expanded to 12.6%, well above typical mid-cycle levels for basic materials/chemicals producers. Ordinary income of ¥2.95bn slightly exceeded operating income, implying small positive net non-operating contributions net of interest expense. Net income surged 110.3% YoY to ¥2.05bn, translating to a 9.01% net margin. DuPont ROE was 6.88%, built from a 9.01% net margin, 0.482x asset turnover, and 1.58x financial leverage, reflecting a conservative balance sheet and improved profitability. Liquidity is strong with a 214% current ratio and 182% quick ratio, and leverage is moderate with a 0.60x debt-to-equity ratio and an implied equity ratio of about 63% (equity/assets). Interest coverage is very comfortable at 45.4x (operating income/interest expense). Operating cash flow was ¥2.89bn, 1.41x net income, indicating good earnings-to-cash conversion. Depreciation of ¥0.94bn suggests a meaningful fixed asset base; however, investing cash flows were not disclosed, limiting free cash flow assessment. Financing cash flow was an outflow of ¥1.65bn, likely reflecting debt reduction and/or shareholder returns, but the breakdown is not available in the provided data. Dividend data were not disclosed for the period, and cash and equivalents were also not disclosed, constraining payout and liquidity cross-checks. The effective tax rate displayed as 0.0% appears to be a placeholder; using reported taxes and pretax income implies ~21–22%. Overall, the quarter shows resilient demand/pricing and disciplined cost control, leading to margin expansion and healthy cash generation. The capital structure remains conservative, providing resilience against end-market and input cost volatility. Key uncertainties are the sustainability of price/mix gains and the trajectory of capex and working capital, given missing investing and cash balance disclosures.

Profitability Analysis

DuPont ROE is 6.88%, decomposed as net margin 9.01% x asset turnover 0.482 x financial leverage 1.58. Net margin improved materially with operating margin at 12.6% (¥2.86bn OI on ¥22.70bn sales) versus modest revenue growth, signifying strong operating leverage and potential price/mix tailwinds. Gross margin stands at 18.6%, and EBITDA margin is 16.7% (¥3.80bn EBITDA), indicating limited non-cash distortion and reasonable cost discipline. Ordinary margin is 13.0% (¥2.95bn/¥22.70bn), slightly above operating margin due to small net non-operating gains despite ¥63m interest expense. Interest coverage of 45.4x underscores low financial burden; improvements are driven by core operations, not leverage. The gap between gross and operating margin (about 6.0pp) suggests SG&A and R&D absorption improved YoY. Given revenue growth of 3.9% and operating income growth of 68.5%, incremental margins were very high this quarter, pointing to fixed-cost dilution and/or favorable input cost dynamics; sustainability into H2 remains the key watchpoint. Asset turnover at 0.482x is typical for asset-intensive specialty/basic materials; rising turnover would be a lever for higher ROE if margins hold.

Growth Assessment

Top-line growth of 3.9% YoY to ¥22.70bn is modest, but profit growth is outsized, with operating income +68.5% and net income +110.3%. The divergence suggests strong pricing, mix, or yield management, and improved utilization rather than pure volume expansion. Ordinary income above operating income points to minor non-operating support, but the core driver is operating margin expansion. Depreciation of ¥0.94bn implies past or ongoing investment supporting capacity/efficiency, which may underpin medium-term competitiveness. Absent disclosure on order trends and backlog, revenue sustainability must be inferred from margins and OCF; the latter is healthy, which supports quality of earnings. If input cost normalization or energy price relief contributed this quarter, year-on-year comparatives could be less favorable in subsequent periods if costs reflate. Conversely, if pricing contracts have been reset, margin resilience could persist. With asset turnover at 0.482x, incremental growth could further leverage the cost base. Near-term outlook hinges on demand from key end-markets and raw material/energy cost trends; no explicit guidance is provided in the data.

Financial Health

Total assets are ¥47.08bn, equity ¥29.73bn, and liabilities ¥17.96bn, implying an equity ratio near 63% (computed) and financial leverage of 1.58x. The current ratio is 214% and quick ratio 182%, indicating ample short-term liquidity. Working capital is ¥12.58bn, supported by current assets of ¥23.58bn including ¥3.51bn inventories. Debt-to-equity is 0.60x based on total liabilities/equity, reflecting moderate balance-sheet risk. Interest expense is low at ¥63m relative to operating income ¥2.86bn, producing an interest coverage of 45.4x; refinancing risk is therefore limited in the near term. Ordinary income slightly exceeds operating income, suggesting no material drag from financial items. While the reported equity ratio field shows 0.0% (undisclosed), available balance sheet data indicate a robust solvency profile. Cash and equivalents were not disclosed, so absolute liquidity buffers cannot be verified despite strong current ratios derived from other currents.

Cash Flow Quality

Operating cash flow was ¥2.89bn versus net income of ¥2.05bn, yielding OCF/NI of 1.41x and indicating good earnings quality with positive working-capital dynamics and non-cash add-backs (e.g., ¥0.94bn depreciation). EBITDA of ¥3.80bn supports the cash conversion observed. Investing cash flows were not disclosed (0 indicates undisclosed), preventing a reliable free cash flow calculation; the provided FCF value of 0 should be treated as missing, not zero. Without capex disclosure, we cannot determine maintenance vs. growth spending or assess reinvestment intensity; depreciation suggests baseline maintenance capex could be material. Financing cash flow was an outflow of ¥1.65bn, likely reflecting debt repayment and/or shareholder distributions, but the absence of detail limits interpretation. Overall, cash generation from operations appears robust and comfortably covers interest (¥63m) and taxes (¥632m) in the period. Working capital appears well-managed given the liquidity ratios; however, period-end cash balances were not disclosed, so intra-period cash needs cannot be cross-checked.

Dividend Sustainability

Dividend per share and payout ratio were not disclosed for the period (values shown as 0 are placeholders). EPS was ¥262.06, implying roughly 7.8–7.9 million average shares outstanding (net income/EPS). Financing cash outflow suggests potential shareholder returns and/or debt reduction, but the breakdown is unavailable. With OCF of ¥2.89bn and a strong balance sheet (computed equity ratio ~63%), the capacity to pay dividends appears supported by earnings and liquidity; however, without capex and cash balance details, free cash flow coverage cannot be assessed. Policy outlook cannot be inferred from the provided data; investors should monitor management guidance on dividends and capital allocation in forthcoming disclosures.

Risk Assessment

Business Risks:

• Margin normalization risk if recent price/mix gains or input cost relief reverse
• Raw material and energy price volatility impacting gross margin
• Demand cyclicality in downstream end-markets influencing volumes and utilization
• Potential FX exposure affecting import costs and export pricing
• Operational risks from capacity utilization, maintenance, and supply chain reliability
• Regulatory and environmental compliance costs typical for chemicals/materials

Financial Risks:

• Limited visibility on cash and equivalents due to undisclosed cash balance
• Free cash flow uncertainty pending disclosure of investing cash flows and capex
• Working capital swings that could temporarily depress OCF in subsequent quarters
• Interest rate risk modest but present despite strong coverage
• Potential tax-rate variability (implied ~21–22% vs displayed 0% placeholder)

Key Concerns:

• Sustainability of the sharp operating margin expansion with only modest revenue growth
• Lack of investing cash flow and cash balance disclosure constrains FCF and liquidity analysis
• Potential re-inflation of raw material/energy costs pressuring margins in H2

Investment Implications

Key Takeaways:

• Strong quarter: revenue +3.9% YoY but operating income +68.5% YoY, indicating high operating leverage and improved mix
• Healthy profitability: operating margin 12.6%, net margin 9.01%, EBITDA margin 16.7%
• ROE at 6.88% with conservative leverage (financial leverage 1.58x) suggests scope for improvement if margins sustain
• Robust liquidity and solvency: current ratio 214%, quick ratio 182%, implied equity ratio ~63%
• Good cash conversion: OCF/NI 1.41x; interest coverage 45.4x
• Data gaps: investing CF, cash balance, DPS, and share counts not disclosed—limits FCF and payout analysis

Metrics to Watch:

• Operating margin trajectory and price/mix realization vs. input cost trends
• OCF to net income ratio and working capital turns (inventory and receivable days)
• Capex disclosure and investing cash flows to assess FCF and reinvestment needs
• Ordinary income composition (non-operating gains/losses) and interest expense
• Effective tax rate normalization
• Leverage and financing cash flows (debt repayment vs. shareholder returns)

Relative Positioning: Within Japanese chemicals/materials peers, the company exhibits stronger-than-average near-term margin expansion and robust liquidity, coupled with moderate leverage and solid cash conversion; however, incomplete disclosure on investing cash flows and dividends constrains a full comparison of free cash flow yield and capital return profile.

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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