ISHIHARA SANGYO KAISHA,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥76.46B
• Operating Income: ¥7.37B
• Net Income: ¥763M
• EPS: ¥147.66

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

Ishihara Sangyo (4028) delivered a sharp profit rebound in FY2026 Q2 on modest topline growth, with clear evidence of margin expansion and strong cash conversion. Revenue increased 2.6% YoY to ¥76.5bn, while operating income surged 177.8% YoY to ¥7.37bn, lifting the operating margin to 9.6%. Ordinary income reached ¥8.50bn (11.1% margin), implying contributions from non-operating items versus operating profit. Net income rose 676.9% YoY to ¥5.65bn, translating to a net margin of 7.39%. DuPont analysis indicates ROE of 4.82%, driven by a healthy net margin (7.39%), modest asset turnover (0.32x), and leverage of 2.04x. Liquidity remains strong: current ratio 3.32x and quick ratio 2.26x, supported by substantial working capital of ¥108.2bn. The balance sheet is sound with total equity of ¥117.2bn and total liabilities of ¥110.6bn, implying a computed equity ratio of about 49% despite the reported 0.0% placeholder. Interest coverage is robust at 20.3x, reflecting improved operating earnings relative to modest interest expense (¥363m). Operating cash flow was strong at ¥18.25bn, equating to 3.23x net income, underscoring high cash conversion and likely favorable working capital movements. Inventory stands at ¥49.25bn; given the sector’s cyclicality, inventory management will be key to sustaining cash quality. Reported depreciation, EBITDA, investing cash flow, and cash balance are zeros, which indicate undisclosed items rather than true zeros; as such, EBITDA-based metrics and free cash flow figures derived from these are not meaningful in this dataset. The reported effective tax rate of 0.0% is not reflective of the ¥1.58bn tax expense; versus ordinary income, the implied effective tax rate is roughly 18–19%. Revenue growth was modest, suggesting that the outsized profit rebound likely reflects cost normalization, pricing/mix improvement, or both. With leverage contained (debt-to-equity 0.94x) and ample liquidity, solvency risk appears low in the near term. Dividend data show DPS and payout ratio as zero (undisclosed); therefore, dividend capacity cannot be evaluated without capex and historical policy context. Overall, profitability momentum and cash generation improved materially, but sustainability depends on market conditions for key end-products and input costs. Data gaps (notably depreciation, capex/investing CF, and share data) limit deeper ratio diagnostics and per-share analysis.

Profitability Analysis

ROE_decomposition: ROE 4.82% = Net profit margin 7.39% × Asset turnover 0.320 × Financial leverage 2.04. This indicates earnings are primarily driven by margin recovery rather than asset intensity or leverage. margin_quality: Gross margin of 22.1% and operating margin of 9.6% reflect significant YoY expansion given operating income +177.8% on revenue +2.6%. Ordinary margin at 11.1% suggests incremental non-operating gains (e.g., FX, equity-method, or financial income). Net margin of 7.39% is healthy for a mid-cycle chemicals profile. The implied tax rate of ~18–19% (¥1.58bn tax vs. ¥8.50bn ordinary income) contradicts the placeholder 0.0% metric. operating_leverage: High operating leverage is evident: small revenue growth (+2.6%) translated into a large profit increase (+177.8% operating). This likely reflects cost normalization (raw materials/energy), improved product mix/pricing (e.g., pigments/agrochemicals), and disciplined SG&A.

Growth Assessment

revenue_sustainability: Topline growth of 2.6% YoY is modest; sustainability will hinge on demand in core segments and pricing discipline in cyclical products. The low asset turnover (0.32x) partly reflects using period-end assets against half-year revenue, so headline turnover understates full-year capacity utilization. profit_quality: Profit growth substantially outpaced revenue, implying normalization of input costs and improved spread. Interest coverage at 20.3x and OCF/NI at 3.23x support underlying earnings quality in the period. outlook: If cost tailwinds and pricing hold, margins can remain above prior-year levels; however, exposure to commodity inputs, FX, and global demand cycles introduces volatility to the margin trajectory.

Financial Health

liquidity: Current ratio 3.32x; quick ratio 2.26x; working capital ¥108.16bn. Inventory of ¥49.25bn is sizable but supported by ample liquidity. solvency: Computed equity ratio ~49% (¥117.20bn equity / ¥238.81bn assets). Debt-to-equity 0.94x and interest coverage 20.3x indicate manageable leverage and strong interest service capacity. capital_structure: Assets ¥238.81bn; liabilities ¥110.65bn; equity ¥117.20bn. Leverage (assets/equity) 2.04x is moderate for the sector. No granular debt maturity profile disclosed.

Cash Flow Quality

earnings_quality: OCF of ¥18.25bn vs. net income of ¥5.65bn (OCF/NI 3.23x) signals strong cash conversion, likely aided by working capital inflows or non-cash charges not itemized due to missing depreciation disclosure. FCF_analysis: Investing CF is undisclosed (reported as 0), so free cash flow cannot be reliably computed. The provided FCF of 0 should be treated as not meaningful given missing capex. working_capital: Inventories ¥49.25bn; current assets ¥154.83bn vs. current liabilities ¥46.67bn. The period’s strong OCF suggests favorable receivables/payables dynamics, but detailed WC drivers are not disclosed.

Dividend Sustainability

payout_ratio_assessment: Reported DPS and payout ratio are zeros (undisclosed). With net income of ¥5.65bn and strong OCF, capacity appears adequate in principle, but lack of depreciation/capex data prevents assessing true distributable FCF. FCF_coverage: Not assessable due to undisclosed investing cash flows and capex. The reported FCF coverage of 0.00x is not meaningful. policy_outlook: Without disclosed DPS or guidance, policy trajectory is unclear. Balance sheet strength and improving earnings support potential distributions, subject to capex needs and cyclical visibility.

Risk Assessment

Business Risks:

• Cyclical pricing and demand for core chemical products (e.g., pigments/agrochemicals).
• Raw material and energy cost volatility impacting spreads.
• Foreign exchange fluctuations (USD/JPY, EUR/JPY) affecting both input costs and export pricing.
• Competitive pressures from global producers, particularly in Asia.
• Regulatory and environmental compliance costs, including potential capex for emissions/waste treatment.
• Operational risks from plant outages or maintenance shutdowns.
• Customer concentration or channel destocking/restocking cycles affecting volumes.

Financial Risks:

• Working capital swings given large inventory base.
• Potential inventory valuation risk in downcycles.
• Refinancing and interest rate exposure despite currently strong coverage.
• Limited visibility on capex and off-balance liabilities (e.g., pensions) due to disclosure gaps.
• FX translation and transaction impacts on earnings and cash flow.

Key Concerns:

• Sustainability of margin recovery given modest revenue growth.
• Data limitations (depreciation, capex/investing CF, cash balance, share data) constraining full earnings quality assessment.
• High inventory requiring vigilant management if demand softens.

Investment Implications

Key Takeaways:

• Strong profit rebound: operating income +177.8% on revenue +2.6%.
• Healthy margins: gross 22.1%, operating 9.6%, ordinary 11.1%, net 7.39%.
• Robust cash conversion: OCF ¥18.25bn (3.23x net income).
• Solid balance sheet: computed equity ratio ~49%, debt-to-equity 0.94x.
• Ample liquidity: current ratio 3.32x; quick ratio 2.26x.
• Interest coverage strong at 20.3x, reducing near-term solvency risk.
• Dividend capacity cannot be judged due to undisclosed DPS and capex.

Metrics to Watch:

• Pricing and margin spreads in core product lines (e.g., pigments) vs. raw material and energy costs.
• Working capital metrics: inventory levels and days, receivables/payables turns.
• Capex and investing cash flows to gauge sustainable FCF and ROIC.
• Depreciation trends and EBITDA reconciliation once disclosed.
• FX sensitivity (USD/JPY) and non-operating income components affecting ordinary income.
• Asset turnover normalization as full-year revenue becomes available.

Relative Positioning: Within Japanese mid-cap chemicals, the company exhibits improving profitability and strong liquidity with moderate leverage; cash generation compares favorably near-term, but visibility on sustainable FCF and capital intensity lags peers with fuller disclosure.

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
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