NIHON PARKERIZING CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥64.73B
• Operating Income: ¥6.83B
• Net Income: ¥6.47B
• EPS: ¥50.50

Income Statement

Balance Sheet

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

Verdict: A mixed FY2026 Q2 with modest topline growth but compressed profitability and low capital efficiency, buffered by sizable non-operating income. Revenue rose 3.2% YoY to 647.34, while operating income declined 4.3% YoY to 68.29, indicating cost pressure despite growth. Gross profit reached 217.97, implying a gross margin of 33.7%. The operating margin was approximately 10.6% (68.29/647.34), down from an estimated 11.4% a year ago, signaling margin compression. Ordinary income was 88.42 (-0.7% YoY), as 25.47 of non-operating income partly offset weaker operations. Net income fell 4.0% YoY to 56.61, placing the net margin at roughly 8.8%. Based on the disclosed YoY rates, we estimate operating margin compressed by about 83 bps and net margin by about 65 bps. SG&A was 149.67, equating to a high 23.1% of sales, constraining operating leverage. Non-operating income is material at 37% of operating income, driven by dividend income (4.46) and interest income (4.30), with the remainder likely FX or other financial gains. The balance sheet is exceptionally liquid and conservative: current ratio 410%, cash and deposits 690.68 versus current liabilities 306.50, and minimal financial debt. ROE is low at 2.6% and ROIC is 3.2%, below the typical cost of capital, flagging capital efficiency as the main structural issue. The effective tax rate was 30.1%, within a normal range. Earnings quality cannot be validated as operating cash flow was unreported, so OCF/NI and FCF coverage are indeterminable. A calculated payout ratio of 117.1% suggests dividend strain unless H2 earnings or cash flow significantly improve; DPS itself was not disclosed. Forward-looking, near-term results will hinge on restoring operating margin via better cost control and sustaining core demand, while managing reliance on non-operating income. With ample cash and negligible leverage, financial risk is low, but margin discipline and ROIC improvement are essential to lift shareholder returns. The quarter underscores resilience in revenue and ordinary income, but the core profitability engine needs tuning.

Profitability Analysis

ROE decomposition (DuPont): ROE ≈ Net Profit Margin (8.8%) × Asset Turnover (0.248) × Financial Leverage (1.20x) = 2.6%. The largest driver of weakness is low asset turnover combined with subdued operating margin that compresses net margin. Business reason: SG&A intensity (23.1% of sales) and weaker operating leverage (OI -4.3% vs sales +3.2%) pressured the operating line; non-operating gains cushioned ordinary income but do not aid ROE via core returns. Non-operating income ratio of 45.0% to ordinary income metrics highlights dependency on financial items (dividends, interest, likely FX), not core operations. Sustainability: Margin headwinds from SG&A are ongoing unless costs are realigned; non-operating gains can be volatile and are not guaranteed. Concerning trend: Cost growth implicitly outpaced gross profit growth, as gross margin held at 33.7% but operating margin declined; SG&A at 23.1% of sales is elevated and appears to have risen relative to revenue.

Growth Assessment

Revenue grew 3.2% YoY to 647.34, indicating steady demand. Operating income declined 4.3% YoY to 68.29, indicating negative operating leverage despite higher sales. Ordinary income was resilient (-0.7% YoY) due to a strong non-operating contribution of 25.47 (dividends 4.46, interest 4.30, other). Net income fell 4.0% to 56.61, with the net margin at 8.8%. The growth mix skews away from core operations toward financial income this quarter, reducing quality of growth. Without cash flow disclosure, we cannot validate whether growth was supported by underlying cash generation. Outlook hinges on SG&A discipline, pricing power, and stabilization in non-operating items (e.g., FX, financial income). Near-term growth sustainability is moderate but dependent on improving core margin rather than further non-operating tailwinds.

Financial Health

Liquidity is very strong: current ratio 410.4% and quick ratio 398.6%, with cash and deposits of 690.68 exceeding total current liabilities of 306.50 by a wide margin. No warning on current ratio (<1.0) or leverage, as the reported D/E is 0.20x and loan balances are minimal (short-term 2.04, long-term 2.50). Interest coverage is exceptionally high at 853.6x, reflecting negligible interest burden. Maturity mismatch risk is low: ample cash and accounts receivable (422.48) against modest payables (143.89) and very small short-term loans. Noncurrent liabilities are modest at 135.35 versus total equity of 2,172.83. Investment securities of 397.72 represent a sizable portion of assets, introducing market valuation risk but not immediate liquidity stress. No off-balance sheet obligations were reported in the data provided.

Cash Flow Quality

Operating, investing, and financing cash flows were not disclosed, so OCF/Net Income, FCF, and FCF coverage cannot be calculated. We therefore cannot test earnings quality via cash conversion; OCF/NI may be a risk flag by absence, but not conclusive. Working capital indicators from the balance sheet look conservative (cash-rich, low inventories at 36.21, and payables well covered by receivables and cash), reducing the likelihood of aggressive working capital pulls, but this cannot substitute for direct OCF evidence. Dividend capacity and capex affordability cannot be assessed without cash flow and capex data.

Dividend Sustainability

The calculated payout ratio stands at 117.1%, suggesting potential overdistribution relative to current earnings if this reflects actual DPS; however, DPS and total dividends paid were not disclosed. Without OCF and capex data, FCF coverage is indeterminable. Given low leverage and a large cash balance, the company could maintain dividends near term, but sustainability over the medium term would require either stronger earnings in H2 or better cash generation. Policy outlook cannot be inferred from the data provided; monitor management guidance and full-year payout intentions.

Risk Assessment

Business Risks:

• Operating margin compression amid elevated SG&A (23.1% of sales)
• Dependence on non-operating income (25.47) to support ordinary income, which may be volatile
• End-market demand sensitivity in key customer industries (e.g., automotive, electronics, industrial equipment)
• Potential raw material and energy cost inflation pressuring gross-to-operating spread

Financial Risks:

• Low ROIC at 3.2% (<5% warning), indicating capital inefficiency
• Large investment securities balance (397.72) exposes P/L and equity to market valuation swings
• Dividend payout ratio calculated at 117.1% implies possible cash distribution strain if cash flows are weak
• FX exposure reflected in non-operating items could swing earnings

Key Concerns:

• ROE at 2.6% and asset turnover at 0.248 indicate subdued efficiency
• Operating margin down ~83 bps YoY despite higher revenue
• Earnings quality unverified due to missing OCF and capex data
• Reliance on financial income over core operational improvement

Investment Implications

Key Takeaways:

• Topline growth (+3.2% YoY) but negative operating leverage (OI -4.3% YoY)
• Operating margin around 10.6%, down ~83 bps YoY; SG&A at 23.1% of sales
• Ordinary income resilient due to 25.47 in non-operating gains
• Net margin 8.8%; ROE 2.6% and ROIC 3.2% highlight capital efficiency gap
• Balance sheet strength (current ratio 410%, high cash, minimal debt) limits financial risk
• Dividend sustainability questionable with a 117% calculated payout and no OCF data

Metrics to Watch:

• Operating margin and SG&A-to-sales ratio
• Composition and volatility of non-operating income (dividends, interest, FX/others)
• ROIC and asset turnover progression
• OCF/Net Income and FCF once disclosed
• Working capital trends (receivables, payables) and cash balance trajectory
• Effective tax rate stability and any one-off gains/losses

Relative Positioning: Within Japanese chemical/surface-treatment peers, the company exhibits superior balance sheet conservatism but lags on capital efficiency (ROIC 3.2%) and shows greater dependence on non-operating income to sustain ordinary earnings; near-term equity story hinges on restoring operating leverage while maintaining cost control.

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